III. Discussion

We conclude that PG&E's interpretation of D.03-02-032 and of the pertinent statutory language regarding the method of remittances of municipal surcharge fees to individual municipalities is improper. D.03-02-032 determined that for purposes of meeting their franchise obligations to municipalities associated with DWR power, the utilities were to make remittances in the form of municipal surcharges under the provisions of Code Sections 6352-6354.1, rather than "franchise fees" under Sections 6000-6302.

In seeking to implement D.03-02-032, PG&E focused on language in Section 6353(d) which bases the surcharge factor on the most recent commission determination of franchise fees for the "energy transporter" (i.e., the utility acting on behalf of DWR):

". . .the franchise fee factor plus any franchise fee surcharge authorized for the energy transporter as approved by the commission in the energy transporter's most recent proceeding in which those factors and surcharges were set." (Section 6353 (d), emphasis added.)

PG&E thus proposed to apply the most recent Commission adopted franchise fee percentage from its 1999 GRC Decision to calculate the municipal surcharge on DWR power to be paid to municipal entities, applied uniformly to all of its franchisor municipalities. Under PG&E's approach, the uniform factor would be applied irrespective of the terms of any individual franchise agreements and the contractual franchise fee percentage explicitly stated therein.

We conclude that while PG&E is correct in its interpretation with respect to calculating the total revenues collected from customers that is attributable to the municipal surcharge obligation, PG&E is incorrect with respect to the calculation of remittances due to each individual municipality. The provisions of the municipal surcharge do not change the rights of municipalities to receive revenues at the same level that apply under the provisions of franchise fees. As stated in Section 6352(d): "Nothing in this chapter shall in any way affect the rights of parties to existing franchise agreements executed pursuant to this division that are in force on the effective date of this chapter."

Accordingly, PG&E's proposed method would unduly deprive municipalities of remittances to which they are entitled under the statutes. PG&E shall be required to remit municipal surcharge revenues in accordance with the remittance requirements specified in each respective franchise agreement on a consistent basis with the remittance method already being utilized by SCE and SDG&E. Rather than simply applying a weighted average remittance rate to every municipality, PG&E shall remit surcharge fees to each municipality utilizing the same percentage factor that is specified in the specific franchise agreement applicable to the franchisor municipality in question. PG&E shall not simply apply a uniform average factor to all municipalities based on its 1999 GRC. Such an approach as contemplated by PG&E violates the statutory provisions of Section 6350 governing the municipal surcharge that specify that the surcharge will "replace, but not increase, franchise fees that would have been collected..."

By using a simple average remittance rate, PG&E would necessarily remit municipal surcharges that exceed the comparable franchise fees for some municipalities and fees that fall short for others. The proper application of the statute should provide the same level of remittances to the municipality as they would have received under the franchise fee formula. By adopting this approach, each of the three utilities shall both collect and remit municipal surcharges on a consistent basis.

The correction in PG&E's remittance methodology as adopted in this order addresses the concerns raised by various municipalities relating to their receipt of proper levels of municipal surcharges relating to DWR revenues. Accordingly, we conclude that no further rounds of comments or workshops are necessary to resolve issues relating to PG&E's prospective municipal remittances. Likewise, no further workshops are necessary to address the issue of retroactive calculations or adjustments to prior period municipal surcharge fees.

The correction in remittance methodology ordered in this decision applies to PG&E's remittances for the years 2003 and forward. If PG&E used the proper remittance methodology prior to the issuance of D.03-02-032 on a consistent basis with that used by SCE and SDG&E, municipalities may have already received the proper level of municipal surcharge remittances from PG&E for years prior to 2003. Thus, there may be no need for PG&E to recalculate any past remittances to municipalities for periods prior to 2003 as a result of this order.