III. Need for Further Legislative Remedies

A. Parties' Position

PG&E claims that legislation is necessary and appropriate to resolve this issue, and to ensure that cities and counties are not harmed by DWR's stepping into the shoes of the utilities to meet their net short positions. PG&E believes that in the interim until this issue is addressed by the Legislature, however, the Commission should not require the utilities to remit funds to cities and counties that is not due and owing under state franchise fee law.

SCE does not believe that legislation is necessary to resolve the franchise fee issue. SDG&E believes that one clarification of the law may be appropriate. In the event that a separate DWR bond charge line-item appears on the customers bill - not bundled with an energy charge line-item as is done today - the separate DWR bond charge line-item should be subject to the Municipal Surcharge. The charge is a financing cost of providing energy - i.e., a charge that would reasonably be part of the commodity charge an ESP might impose on its customers. Under this reasoning, SDG&E explains, the bond charge would be added to the DWR commodity charge and form the basis for the Municipal Surcharge. SDG&E believes the responsibility for pursuing legislative clarification should fall to local government, if they believe it necessary, in cooperation with DWR and the utilities.

The Cities argue that if this Commission authorizes PG&E to collect franchise fees, the appropriate means to mount any challenge to the collection would be via appeal of the Commission's order, not a collateral attack via state court or elsewhere. Moreover, the Cities believe that any diminution of franchise fee payments due to this circumstance will almost certainly result in litigation against the utilities on behalf of customers complaining of discriminatory rates and on behalf of municipalities.

B. Discussion

In view of the provision we adopt in this order for municipalities to be compensated for DWR sales based on the applicable municipal surcharge provisions as discussed above, we find no need to pursue further legislative action on this issue. If any municipality or other party believes that further legislative remedies are warranted or desirable to define or clarify the municipalities legal rights to compensation related to DWR sales under AB1X, they are free to pursue such actions as they deem appropriate.