V. Assignment of Proceeding

Loretta M. Lynch and Geoffrey F. Brown are the Assigned Commissioners and Thomas R. Pulsifer is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. In D.03-02-032, the Commission determined that each of the IOUs shall bear responsibility for making remittances to municipalities for DWR revenues under the provisions of the municipal surcharge set forth in Pub. Util. Code §§ 6350 et seq.

2. In response to questions raised by PG&E concerning how to determine the proper amounts to be remitted to each municipality in compliance with D.03-02-032, a workshop was held.

3. If prior to 2003, PG&E calculated and made its municipal surcharge payments pursuant to D.02-02-052, which adopted the SCE/SDG&E method on an interim basis, no retroactive adjustment for remittances to municipalities may be necessary.

4. After issuance of D.03-02-032, PG&E employed a different method for determining the level of municipal surcharge fees applicable to 2003 revenues due to individual municipalities relating to DWR revenues; PG&E's method was inconsistent with the methodology used by SCE and SDG&E.

5. PG&E's proposed approach for remittances is simply to apply the Commission adopted surcharge percentage from its 1999 GRC Decision to calculate and remit the municipal surcharge fee on DWR power to be paid to each municipal entity.

6. Section 6352(d) states, "Nothing in this chapter shall in any way affect the rights of the parties to existing franchise agreements executed pursuant to this division that are in force on the effective date of this chapter."

7. PG&E's proposed remittance methodology for municipal fees due pursuant to D.03-02-032 would affect the rights of municipal parties to individual franchise agreements by increasing the fees otherwise due to some municipalities while reducing the fees due to others.

8. Municipal surcharge payments for 2003 will not be due from PG&E until early 2004.

9. PG&E agrees to employ whatever method the Commission directs be used for the municipal surcharge payment due in 2004.

Conclusions of Law

1. The method proposed by PG&E for determining the level of municipal surcharge fees due to individual municipalities pursuant to D.03-02-032 is improper and does not comply with the statutory provisions of Section 6350.

2. Remittance of municipal surcharge fees based on a weighted average factor developed in PG&E's last general rate case would be inconsistent with Section 6350 governing the municipal surcharge, specifying that the surcharge will "replace, but not increase, franchise fees that would have been collected..."

3. PG&E should calculate and remit municipal surcharge fees due to individual municipalities for 2003 and subsequent years pursuant to D.03-02-032 on a consistent basis with the approach already being used by SCE and SDG&E and by applying the specific franchise factor called for under the applicable franchise agreement for each individual municipality.

4. No retroactive calculation may be necessary for remittances paid by PG&E to municipalities attributable to DWR revenues for years prior to 2003 if PG&E calculated and remitted using the appropriate remittance method for those prior periods.

5. No further workshops or other filings are necessary for PG&E to implement the necessary corrections to its accounting and cash disbursement systems in order to comply with this order.

ORDER

IT IS ORDERED that:

1. Pacific Gas & Electric Company (PG&E) shall implement necessary corrections to its accounting and disbursement systems to calculate and remit municipal surcharge fees to each municipality pursuant to Decision 03-02-032 for 2003 and subsequent years based upon the prescribed rates called for in the respective franchise agreement applicable to each municipality, and on a basis consistent with the remittance methodology already being employed by Southern California Edison Company and San Diego Gas & Electric Company.

2. No retroactive calculations may be necessary for remittances of municipal surcharge fees paid by PG&E to municipalities attributable to DWR revenues shall be made for years prior to 2003 if PG&E calculated and remitted using the appropriate remittance method for those periods.

This order is effective today.

Dated October 16, 2003, at San Francisco, California.

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