ALJ/TRP/avs DRAFT Agenda ID # 1628

Ratesetting

2/13/2003 Item 2

Decision _______________________

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Southern California Edison Company (E333-E) for Authority to Institute a Rate Stabilization Plan with a Rate Increase and End of Rate Freeze Tariffs.	Application 00-11-038 (Filed November 16, 2000)
Emergency Application of Pacific Gas and Electric Company to Adopt a Rage Stabilization Plan. (U 39 E)	Application 00-11-056 (Filed November 22, 2000)
Petition of THE UTILITY REFORM NETWORK for Modification of Resolution E-3527.	Application 00-10-028 (Filed October 17, 2000)

OPINION ON MUNICIPAL FEES RELATING TO ELECTRICITY SALES
BY CALIFORNIA DEPARTMENT OF WATER RESOURCES

TABLE OF CONTENTS

TITLE Page

OPINION ON MUNICIPAL FEES RELATING TO ELECTRICITY SALES BY CALIFORNIA DEPARTMENT OF WATER RESOURCES 22

I. Background 22

II. Municipalities' Rights to Franchise Fees and Municipal Surcharges 33

A. Positions of Parties 33

B. Discussion 99

III. Need for Further Legislative Remedies 1515

A. Parties' Position 1515

B. Discussion 1616

IV. Ratemaking Considerations 1616

A. Background 1616

B. Parties' Positions 1717

C. Discussion 1919

V. Comments on Draft Decision 2121

OPINION ON MUNICIPAL FEES RELATING TO ELECTRICITY SALES
BY CALIFORNIA DEPARTMENT OF WATER RESOURCES

I. Background

This decision resolves issues regarding the collection and remittance of franchise fees in connection with electric power sales of the California Department of Water Resources (DWR) pursuant to Assembly Bill (AB) 1 of the First Extraordinary Session (Stats. 2001, Ch. 4), hereafter referred to as AB1X. We address this issue pursuant to Decision (D.) 02-02-052, in which we allocated the DWR revenue requirement among customers in the service territories of the major electric investor-owned utilities (IOUs): Pacific Gas & Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E).

As prescribed under Public Utilities Code Sections 6000- 6302, municipalities grant franchises to IOUs to use public rights-of-way to construct and maintain the physical facilities necessary for the IOUs to provide gas and electric service to customers. The IOUs are authorized to locate facilities on public property in exchange for the payment of a franchise fee. During the course of the DWR revenue requirement proceeding, however, a dispute arose involving the question of whether, or on what basis, franchise fees may be assessed, collected, and remitted to municipalities for electric power sales made by DWR to customers pursuant to AB1X.

Issues in dispute include what are the legal rights of municipalities to be paid franchise fees on DWR power sales, and what are the legal obligations of DWR to collect and/or remit franchise fees associated with its power sales. There are also unresolved questions as to the IOUs' obligations to remit franchise fees to municipalities on DWR power sales, and the extent to which current IOU retail rates already include (or should include) a provision for such franchise fees. In D.02-02-052, we did not reach a final resolution of these questions, but directed the assigned Administrative Law Judge (ALJ) to take further comments on the pertinent legal and factual issues as a basis for further Commission action.

In accordance with the directive in D.02-02-052, an ALJ's ruling was issued on April 3, 2002, soliciting comments on the above-referenced issues. Comments were filed by PG&E, SDG&E, and SCE. Various parties representing local government interests also filed comments. These included the City of San Diego and the City and County of San Francisco (CCSF). CCSF is joined in its comments by the following cities: Berkeley, Davis, San Leandro, and Sunnyvale. The County of Los Angeles filed separate comments. The mayors and municipal administrators of various cities, although not parties to the proceeding, sent letters to the ALJ in support of the comments of the parties representing municipal interests.¹ DWR is not a formal party to the proceeding, but submitted a memorandum to the Commission, served on parties, expressing its views on the subject. The filed comments form the record for the conclusions we reach in this order.