8. Assignment of Proceeding
Geoffrey Brown is the Assigned Commissioner and Myra J. Prestidge is the assigned Administrative Law Judge in this proceeding.
1. MOD is an irrigation district organized under California law that may transmit, distribute, lease and sell electricity to customers, with certain limitations specified by law.
2. The Legislature enacted § 9610 effective January 1, 2001, through the adoption of AB 2638.
3. Under § 9610, PG&E may no longer serve retail electric distribution customers in the Mountain House Area effective January 1, 2001.
4. MOD assumed responsibility for serving electric distribution customers in the Mountain House Area effective January 1, 2001.
5. As of January 1, 2001, MOD did not have the necessary facilities to serve retail electric distribution customers in the Mountain House Area.
6. As of January 1, 2001, PG&E no longer needed the distribution facilities sold to MOD to serve its customers.
7. PG&E's license and lease of certain distribution facilities and space on wood transmission poles will not interfere with PG&E's ability to adequately serve its remaining customers at reasonable rates.
8. The compensation received by PG&E from MOD under the license/lease, the purchase and sale agreement, and the wood pole lease is reasonable.
9. The license/lease, sale agreement, and wood pole lease adequately protect PG&E from liability based on these transactions.
10. MOD is a Lead Agency for the project under CEQA.
11. The Commission is a Responsible Agency for the project under CEQA.
12. On December 17, 2002, MOD presented its findings that the project was categorically exempt from CEQA review under CEQA Guidelines Sections 15301, 15303, and 15311 to the MOD Board of Directors, who subsequently exercised its discretionary authority and approved the project under Resolution No. 2002-186.
13. As a Responsible Agency, the Commission finds that MOD's environmental documents are adequate for our decision-making purposes.
14. Lease revenues fall within an existing non-tariffed products and services category under the applicable PG&E advice letter.
15. It is reasonable for PG&E to credit MOD's payment of half of the cost of removing any stranded facilities upon the expiration of the license/lease to the depreciation reserve to reduce ratebase.
16. Applying the facts presented in this case, the wood transmission poles, on which PG&E has leased space to MOD for its distribution assets, are electric transmission property.
17. PG&E's sale of distribution assets to MOD falls within Redding II for ratemaking purposes because: a) PG&E is selling certain distribution facilities in the Mountain House Area to a public agency, MOD, b) the sale of these distribution facilities is a partial liquidation of PG&E's operating system in the area, c) the distribution facilities have previously been included in PG&E's ratebase, and d) PG&E's sale of the distribution facilities to MOD is concurrent with PG&E's relief from its obligation to serve electric distribution customers in the Mountain House Area.
18. The Commission wishes to consider the allocation of PG&E's gain on sale between shareholders and ratepayers on a broad, policy basis in the upcoming gain on sale rulemaking.
19. MOD is an established, financially solvent irrigation district and has an A plus bond rating from two rating agencies, Standard and Poor's and Fitch.
20. It is unlikely that MOD will default on its contractual obligations to pay PG&E for NBCs on behalf of customers whose electric distribution service was transferred to MOD pursuant to § 9610.
21. ORA has presented no evidence to show that MOD is likely to default on its obligations to pay NBCs on behalf of departing customers or has defaulted on a similar obligation in the past.
22. ORA's proposed mitigation measures, which would have involved: requiring PG&E to place a portion of its gain on sale in holding accounts to be utilized if MOD were to default on its obligation to pay NBCs on behalf of departing customers; holding PG&E jointly and severally liable with MOD for payment of the NBCs; or requiring MOD to agree to ongoing Commission jurisdiction for the purpose of enforcing MOD's contractual obligation to pay NBCs, are unnecessary to protect PG&E ratepayers from potentially adverse financial effects of this transaction.
23. The amount of the NBCs to be paid by MOD may vary annually.
24. PG&E's proposed methodology for calculating NBCs to be paid by MOD on behalf of departing customers and proposed calculations of these amounts require further clarification through an advice letter to be filed by PG&E and an annual true-up.
25. PG&E and MOD needed to quickly implement the license/lease agreement in January 2001, because MOD did not have the necessary electric distribution facilities to serve customers in the Mountain House Area pursuant to § 9610.
26. The entry of PG&E and MOD into a license of certain electric distribution facilities, pending our approval of this application, did not circumvent environmental review in this case.
27. Our approval of the license/lease, sale agreement, and wood pole lease will eliminate the need for MOD to construct duplicative facilities in the Mountain House Area at public expense.
28. Approval of the license/lease, sale agreement, and wood pole lease are in the public interest.
1. In a § 851 proceeding, the public utility bears the overall burden of proof that the proposed transaction is in the public interest and will not interfere with the right of the public to adequate service at reasonable rates, but ORA bears the burden of producing evidence in support of its affirmative recommendations.
2. Approval of the license/lease, sale agreement and wood pole lease is in the public interest.
3. We adopt MOD's determination that the project is categorically exempt from environmental review under CEQA.
4. PG&E should treat revenues received from license/lease of distribution facilities to MOD as OOR.
5. PG&E should allocate revenues received from the lease of space on wooden transmission poles to MOD according to FERC ratemaking principles.
IT IS ORDERED that:
1. The license and lease agreement, the purchase and sale agreement, and the wood pole lease agreement by and between Pacific Gas and Electric Company (PG&E) and Modesto Irrigation District (MOD) are approved.
2. PG&E shall treat revenues received from the license/lease of electric distribution facilities to MOD as Other Operating Revenue.
3. PG&E shall allocate revenues received from the lease of space on wood transmission poles to MOD according to applicable Federal Energy Regulatory Commission ratemaking principles.
4. Our determination regarding the allocation of PG&E's gain resulting from the sale of distribution facilities to MOD is deferred to a gain on sale rulemaking, so that we may address these issues on a broad policy level.
5. PG&E shall file an advice letter that clarifies its calculations and methodologies for determining the annual amount to be paid by MOD for nonbypassible charges (NBCs) on behalf of customers whose electric distribution service was transferred to MOD pursuant to Pub. Util. Code § 9610 (departing customers) and addresses the calculation and payment of any applicable cost responsibility surcharges for municipal departing load imposed by Decision 03-07-028, with the Commission Energy Division no later than 90 days after the effective date of this decision.
6. PG&E shall annually file an advice letter that contains the proposed calculations and methodologies used to determine the amount of NBCs to be paid by MOD for that year at least 90 days before the due date for MOD's payment of the NBCs for approval by the Commission Energy Division.
7. If MOD defaults on its contractual obligations to pay NBCs on behalf of departing customers, PG&E shall promptly enforce this obligation through the dispute resolution process set forth in the license/lease agreement.
8. Application 03-02-005 is closed.
This order is effective today.
Dated , at San Francisco, California.
