Background
Consistent with the restructuring of the state's electricity industry ordered by Assembly Bill (AB) 1890, the Commission authorized PG&E to issue up to $3.5 billion in RRBs to allow PG&E to recover its transition costs1 and provide a 10% reduction in electric bills to residential and small commercial customers. These customers repay the RRBs through an additional charge2 on their bills. Under the terms of the RRB transaction, PG&E collects and remits all RRB revenues directly to the bond holders. (D.97-09-055.)
In exchange for the right to use public streets and roads, city and county governments require public utilities to pay franchise fees. Generally, the fees are ½% or 1%, but in some instances are 2% of the utility's gross receipts, depending on the contract. Therefore, PG&E is required to pay franchise fees on the RRB revenues it transmits to the bond holders.
1 AB 1890 generally defines transition costs as the costs of generation-related assets and obligations.
2 These charges are called fixed transition amount (FTA) charges (Pub. Util. Code § 841(a)).
