III. Tariff Rules Governing the Conversion of Overhead Lines to Underground Lines

The current undergrounding program was instituted by the Commission in 1967 and consists of two parts. The first part, under Tariff Rules 15 and 16, requires new subdivisions (and those that were already undergrounded) to provide underground service for all new connections. The utilities, both electric and telephone, then bear the costs of cables, switches, and transformer, and developers bear other costs. Parties can seek an exemption from these rules by petitioning the Commission.

The second part of the program governs both when and where a utility may remove overhead lines and replace them with new underground service, and who shall bear the cost of the conversion. The ratepayers' current share of the cost of conversion appears to be between $130 and $180 million annually. At this current rate of expenditure, it could take many decades to underground the entire state's distribution system.

Underground conversion has been undertaken by the electric and telephone companies under the jurisdiction of the Commission. Pacific Gas and Electric Company's (PG&E)⁴ Conversion Tariff, Rule 20, is the vehicle for the implementation of the underground conversion programs. Rule 20 dictates three levels, A, B, and C, of ratepayer funding for the projects.⁵

Rule	Ratepayer Contribution6 Through Utility Rates	Contribution of Customer Receiving Undergrounding
20A	80% plus	cost from street to residence
20B	20%	80%
20C	de minimus	100%

In summary, under Rule 20C, any electric customer may convert to undergrounding as long as it reimburses the utility for all costs, less the estimated net salvage value and depreciation of the replaced overhead facilities. The customer must make a non-refundable advance to the utility equal to the cost of the underground facilities, less the estimated net salvage value and depreciation of the replaced overhead facilities.

Rule 20B provides limited ratepayer funding for the cost of an equivalent overhead system, and any work on overhead facilities, but the balance of the costs, including cables, conduits, transformers, and structures, must be paid by the customer requesting undergrounding. Rule 20B projects must 1) be agreed to by all property owners served by the overhead lines; 2) include both sides of the street; and 3) extend for a minimum footage. Additionally, the lines must be along public streets and roads or other locations mutually agreed upon.

Under Rule 20A, however, the utility ratepayers bear most of the costs of the undergrounding conversion. Rule 20A funds are only available when undergrounding is "in the public interest" for one or more of the following reasons:

a. Such undergrounding will avoid or eliminate an unusual heavy concentration of overhead electric facilities;

b. The street or road or right-of-way is extensively used by the general public and carries a heavy volume of pedestrian or vehicular traffic ; and

c. The street or road or right-of-way adjoins or passes through a civic area or public recreation area or an area of unusual scenic interest to the general public.

The determination of "general public interest" under these criteria is made by the local government, after holding public hearings, in consultation with the electric utility. Given the allocation of costs under Rule 20A and the delineation of serving the public interest, it should be of no surprise, that the demand for the Rule 20A funds is high and the potential for controversy is great.