VIII. Ratemaking

In the application, PG&E explains that historically, license and lease revenues have been credited to the benefit of ratepayers for general rate case purposes. With electric industry restructuring, jurisdiction for rates and services over PG&E's transmission system now rests with FERC. Thus, revenues for license or lease of FERC jurisdictional property are subject to FERC accounting and ratemaking rather than CPUC authority. In contrast, revenues from the license or lease of distribution facilities are subject to Commission jurisdiction.

PG&E now requests that it be allowed to apply the same accounting and ratemaking treatment for revenues received under this Master Agreement as it uses under its interim revenue-sharing mechanism for "non-tariffed products and services" (NTP&S).⁸ If approved, PG&E would split net revenues 50/50 between ratepayers and shareholders rather than crediting all revenues to ratepayers based on historical practice.

In its protest, ORA recommends that the Commission deny PG&E's request to deviate from the current revenue-sharing rules for revenues from this Master Agreement. ORA reasons that because the service provided under the Master Agreement qualifies as an "existing" NTP&S rather than a "new" one, the interim mechanism allowing 50/50 net revenue sharing does not apply. Under current ratemaking for "existing" NTP&S, all revenues from this agreement would be included in PG&E's Other Operating Revenue and reflected in the company's next general rate case. ORA states that PG&E has offered no compelling reason to deviate from D.99-04-021 and extend the mechanism to an existing NTP&S.

PG&E acknowledges that the service provided under the Agreement qualifies as an "existing" NTP&S rather than a "new" one.⁹ Therefore, the interim revenue sharing mechanism adopted in D.99-04-021 would not automatically apply. Nevertheless, PG&E believes that a 50/50 net revenue sharing for revenues related to lease of transmission and distribution property is "fairer than the present methodology and is supported by Commission precedent."¹⁰ PG&E reasons that because FERC has allowed, on an interim basis, 50/50 sharing of revenues for use of electric transmission facilities, net revenues from distribution facilities should also be shared 50/50. In support of its position, PG&E cites a 1997 Commission order involving Southern California Edison (Edison) that allowed 50/50 sharing of lease revenues for one lease pending adoption of generally applicable sharing mechanism. PG&E suggests that 50/50 sharing of net revenues from both new and existing NTP&S provides a better incentive for PG&E to negotiate sensible and lucrative license agreements.

PG&E does not persuade us to deviate from D.99-04-021. In that decision, we adopted PG&E's proposal for 50/50 sharing applicable only to new NTP&S. We did so on an interim basis while we examined a permanent revenue sharing mechanism for PG&E in another proceeding. We will consider revenue sharing issues for PG&E in A.00-09-002 and we do not wish to prejudge that case by applying a new revenue sharing mechanism for an existing NTP&S here.¹¹ PG&E's arguments regarding treatment of Edison lease revenues are not directly applicable since the sharing arrangements we ultimately adopted for Edison involve further distinctions of "active" and "passive" products and services and a direct comparison is not appropriate. We will require PG&E to credit revenues obtained under this Master Agreement from the license or lease of Commission jurisdictional property to the benefit of ratepayers.