ALJ/TRP/sid Mailed 10/17/2003

Decision 03-10-040 October 16, 2003

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Southern California Edison Company (E333-E) for Authority to Institute a Rate Stabilization Plan with a Rate Increase and End of Rate Freeze Tariffs.	Application 00-11-038 (Filed November 16, 2000)
Emergency Application of Pacific Gas and Electric Company to Adopt a Rate Stabilization Plan. (U 39 E)	Application 00-11-056 (Filed November 22, 2000)
Petition of THE UTILITY REFORM NETWORK for Modification of Resolution E-3527.	Application 00-10-028 (Filed October 17, 2000)

OPINION ON MUNICIPAL FEE REMITTANCE METHODOLOGY

RELATING TO ELECTRICITY SALES BY

CALIFORNIA DEPARTMENT OF WATER RESOURCES

I. Background

This decision resolves issues regarding the collection and remittance of municipal surcharge fees in connection with electric power sales of the California Department of Water Resources (DWR) pursuant to Assembly Bill (AB) 1 of the First Extraordinary Session (Stats. 2001, Ch. 4), hereafter referred to as AB1X. In Decision (D.) 03-02-032, we addressed issues relating to the manner in which municipalities are to be compensated associated with revenues attributable to DWR-supplied power. We required in D.03-02-032 that the investor-owned utilities (i.e., Pacific Gas & Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E)) continue to remit funds to the municipalities for DWR sales as prescribed in D.02-02-052, but clarified that such remittances are properly classified as municipal surcharges under the provisions of Code Sections 6352-6354.1, rather than "franchise fees" under Sections 6000-6302.

D.02-02-052 allocated the DWR revenue requirement among customers in the service territories of the IOUs. During the course of those proceedings, however, a dispute arose involving whether, or on what basis, franchise fees may be assessed, collected, and remitted to municipalities for electric power sales made by DWR to customers pursuant to AB1X. D.02-02-052 directed the assigned Administrative Law Judge (ALJ) to take comments on these issues as a basis for further Commission action.

An ALJ's ruling, issued on April 3, 2002, solicited comments on the above-referenced issues. After review and deliberation of comments received, the Commission issued D.03-02-032. In D.03-02-032, we ordered the utilities to treat DWR like other third-party suppliers and to use the municipal surcharge approach specified in Pub. Util. Code §§ 6352-6354.1 for calculating the fees to be collected and remitted to municipalities. In D.03-02-032, we noted that PG&E had raised questions as to whether amounts it previously remitted to municipalities based on DWR sales revenues represented the correct amounts due. PG&E claimed that it did not have enough information based on the requirements of D.03-02-032 to calculate the correct municipal surcharge remittance amount due to each municipality. Because PG&E could not verify if it had made the proper remittances for its past obligations to each municipality, we reserved judgment in D.03-02-032 concerning the extent to which PG&E may need to recalculate surcharge revenues related to past collections of DWR revenues.

In D.03-02-032, we granted PG&E's request for a workshop to discuss technical issues regarding the calculation of proper remittances of surcharges to municipalities for electric power sales by DWR. Because the workshop issues identified by PG&E were specific to it, SCE and SDG&E were not required to participate in the workshop

In addition to parties to this proceeding, notice of the workshop was served on affected municipalities. The workshop was held on April 15, 2003. The workshop also addressed issues as to the method PG&E was using to make prospective remittances of municipal surcharges related to DWR revenues. Based on its interpretation of Pub. Util. Code § 6353(d),¹ PG&E proposed to calculate and remit municipal surcharges relating to DWR power by multiplying the franchise fee percentage factor adopted from its last General Rate Case by DWR revenues. During the workshop process, it was noted that there might be inconsistencies between PG&E's proposed remittance calculation and that implemented by SCE and SDG&E based on differing interpretations of the applicable statutory provisions.

PG&E filed and served a written status report on the results of the workshop on May 2, 2003. In addition to the service list of this proceeding, PG&E was directed to serve a copy of its workshop report on municipalities within its service area.

An ALJ ruling issued on May 29, 2003 provided parties, as well as affected municipalities, notice and opportunity to comment on the workshop report. In addition to parties on the service list, the ruling was mailed to municipalities that were previously notified regarding the workshop with an opportunity for their review and comment.

In particular, comments were solicited on what obligations, if any, PG&E has to determine and remit and/or refund additional municipal fees for periods prior to 2003 based upon the use of the prospective 2003 methodology. To the extent any parties believe that additional information is needed to resolve outstanding issues, they should specify what additional information is needed and what process they would propose to produce that information.

In addition, parties were to address the issue of uniformity and consistency among the utilities in the methodology and process for applying the applicable statutes for calculating and remitting municipal surcharge fees. To the extent there are differences in calculation or remittance methodologies among the utilities, or differences in interpretation of the statutes as to collection and remittance of fees, parties were to address what revisions are warranted in order to bring each of the utilities into uniform compliance with applicable statutory provisions as discussed in D.03-02-032. Parties should address whether the utilities should be required to recalculate prior remittances to municipalities based upon a determination of the adopted prospective remittance methodology prescribed in D.03-02-032.