6. Ancillary Agreements to the TDPUD Settlement: Discussion

As mentioned in Section 3, Joint Applicants' settlement with TDPUD requires Commission approval of the two ancillary agreements filed as exhibits to A.10-04-032, the Fringe Agreement (Ex. A to that application) and the Reliability Support Agreement (Ex. B). TDPUD initially filed a protest to the transfer application, claiming that it would be harmed by the proposed transfer unless steps were taken to avoid that harm. Joint Applicants and TDPUD reached a settlement that resolved TDPUD's concerns and the two ancillary agreements implement that settlement. DRA does not specifically contest either agreement.

6.1. Fringe Agreement

The Fringe Agreement memorializes certain informal, cooperative arrangements between TDPUD and Sierra that have permitted them to serve customers located on or near the border of their contiguous service territories without building uneconomic and duplicative electric distribution facilities. The cooperation has been and continues to be necessary given the terrain and the location of the service territory boundary, which bisects certain roads and residential neighborhoods. The Fringe Agreement obligates Sierra to assign its rights and responsibilities to CalPeco upon the closing of the proposed transaction. The agreement also memorializes Sierra's, and subsequently CalPeco's, right to rate recovery from those fringe customers served by the California-jurisdictional utility. Since these costs are included within Sierra's revenue requirement calculations at present, the Fringe Agreement will not change revenue requirement.

6.2. Reliability Support Agreement

The Reliability Support Agreement obligates CalPeco, upon closing, to continue to participate in the arrangement that Sierra and TDPUD have negotiated to provide their customers with an alternative path for delivery of electric power, should backup be needed because of an outage on either utility's primary delivery paths. A.10-04-032 describes, in detail, the physical configuration and specific facilities involved. The agreement provides that neither entity will charge for use of any of its distribution facilities for backup delivery. Joint Applicants explain: "It is anticipated that the circumstances in which the use of either of these backup facilities under the [Reliability Support Agreement] will be provided will be rare and largely the result of unpredictable line outages."⁵⁸ As with the Distribution Capacity Agreement discussed in Section 5.10, approval of the Reliability Support Agreement relies upon a Commission determination that local distribution facilities are involved (see Appendix 4 to today's decision).

6.3. Conclusion

Each agreement essentially memorializes the status quo and permits CalPeco to stand in the shoes of Sierra vis a vis TDPUD, to the mutual benefit of both CalPeco and TDPUD. Joint Applicants have established good reason for the authority sought by A.10-04-032. Accordingly, that application should be approved, as more particularly set out in the Ordering Paragraphs of today's decision.

⁵⁸ A.10-04-032 at 8.