2. Discussion

The pertinent statutes, case law, and final Commission decisions uniformly hold that PPP surcharges are nonbypassable and cannot be discounted.7 Four statutes are involved in deciding the PPP surcharge issues: AB 2054 enacted in 1991 providing for economic development programs in § 740.4; AB 1890 enacted in 1996 providing, in pertinent parts, for PPP surcharges in §§ 381 and 382; AB 995 enacted in 2000 providing for electric PPP surcharges through 2012 in §§ 399-399.9; and AB 1002 enacted in 2000 providing for natural gas PPP surcharges in §§ 890-899.

We begin our review by referring to established principles of statutory interpretation. In analyzing different statutes which may cover the same subject, to the extent they conflict on any element, the Commission should strive to harmonize them by resolving any conflict with later enactments superseding earlier ones and more specific provisions taking precedence over more general ones. (See, Collection Bureau of San Jose v. Rumsey (2000) 24 Cal.4th 301, 310.) We summarized these principles recently:

We look to the well-organized principles of statutory construction. The California Supreme Court has stated: "To interpret statutory language, the courts must ascertain the intent of the legislature so as to effectuate the purpose of the law." (California Teachers Assn. v. Governing Bd. Of Rialto United School Dis. (1997) 14 Cal.4th 627, 632.) In determining the legislature's intent, they are to "scrutinize the actual words of the statute giving them a plain and common sense meaning." (People v. Vallodoli (1996) 13 Cal.4th 590, 597.) "In construing a statute, a court may consider the consequences that would follow from a particular construction and will not readily imply an unreasonable legislative purpose. Therefore, a practical construction is preferred." (California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1147.) "In analyzing statutory language, we seek to give meaning to every word and phrase in the statute to accomplish a result consistent with the legislative purpose. ... " (Harris v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142, 1159.) (D.03-09-021 at mimeo., p. 63; D.01-11-031; D.04-04-020.)

We must therefore review the applicable code sections and determine the Legislature's intent from their plain words. We are to seek a reasonable and practical interpretation that accomplishes the Legislature's goals.

The objectives of the PPP surcharge go to the core of providing basic electricity and natural gas service in California. "Both the CPUC and the Legislature have recognized that electricity is an essential commodity. (Pub. Util. Code §§ 330(r), 391(a); D.97-10-087, p. 41; D.97-05-040, p. 49.) As an essential commodity that `is of utmost importance to the safety, health, and welfare of the states' citizenry,' we intend to ensure that every residential energy consumer in California be able to afford the cost of electricity and natural gas." (D.99-10-065, 3 CPUC 3d 150, 185.) The Legislature's purpose in requiring all of the utilities' customers to pay nonbypassable PPP surcharges was to ensure funding for these essential public purpose programs. (See, Pub. Util. Code §§ 381(a), 382(a) and (b), 399(c) and (e), 399.4, 399.6, 399.7, 399.8, 399.9, 739.1(f), and 890(a), (b), and (e).)

The Coalition argues that the most equitable manner to fund the PPP is to have all customers contribute on an equal-cents-per-unit basis. The Coalition asserts that the risk to the funding and, by extension, the programs and the consumers and communities served by those programs, is that once this allocation is abandoned in favor of one that allows some customers to pay lesser amounts, there are only two possible outcomes - the funding level is reduced or the remaining customers pay more.

Once one large customer is allowed a discounted PPP surcharge, others will follow suit. Confidential information provided by SoCalGas, DRA, and TURN, shows that numerous customers are seeking discounted rates. Large industrial and commercial customers need to merely threaten to leave the state and provide statistics showing California energy customers pay more for social programs than neighboring states, and they could be granted a long-term contract that will exempt them from paying their full share of CARE and other program costs. Once the loophole is opened, it will only continue growing and growing until there is a sub-class of the largest customers paying less than all other customers for valuable social programs. There is a very real risk of losing a funding source for these programs - fewer and fewer customers paying higher and higher portions of the costs, until this funding source is depleted. That is precisely why we recommended to the Legislature a nonbypassable surcharge on all retail sales of electricity to fund these programs. Otherwise, in a competitive market, they may not be sustainable. (See D.95-12-063, 64 CPUC 2d 1 at 69.)8

The plain language of §§ 381 and 399.8 confirms that the Commission is prohibited from discounting or exempting electric customers from the PPP surcharge. The specific language provides in § 381(a) that: "To ensure that funding for the programs described in subdivision (b) and section 382 are not commingled with other revenues, the Commission shall require each electrical corporation to identify a separate rate component to collect the revenues used to fund these programs. The rate component shall be a nonbypassable element of the local distribution service and collected on the basis of usage." Pub. Util. Code § 381(a). (Emphasis added.)

Section 891(b) identified the programs, which would be funded by the nonbypassable charges as: (1) energy efficiency and conservation activities; (2) public interest research and development, and (3) new and emerging renewable resource technologies. Section 382(a) identified the additional programs, which would be funded by the nonbypassable charges as the LIEE and CARE programs.

Section 399.8(b)(1) provides that "Every customer of an electrical corporation, shall pay a nonbypassable system benefits charge authorized pursuant to this article. The system benefits charge shall fund energy efficiency, renewable energy, and research, development and demonstration." (Emphasis added.) And section 399.8(c)(1) states: "The commission shall require each electrical corporation to identify a separate rate component to collect revenues to fund energy efficiency, renewable energy, and research ... through January 1, 2012. The rate component shall be a nonbypassable element of the local distribution service and collected on the basis of usage." (Emphasis added.)

The term "nonbypassable" has been consistently interpreted by this Commission and state courts as meaning no exceptions. The California Supreme Court has recently affirmed that the term "nonbypassable" means that the surcharge has "to be paid to the utility whether the consumer bought power from the utility, [or] from a generator. ... " (Southern California Edison Co. v. Peevey (2003) 31 Cal.4th 781 at 788.) This Supreme Court case is consistent with Commission decisions finding that no exemptions exist to the electric PPP surcharge because, simply stated, no exemptions are set forth in the statute. (See D.99-10-058, 3 CPUC 3d 72, 81.9) A customer is not entitled to an exemption from this charge even if a customer opts to buy its energy from a non-utility source. In D.03-07-030, we reaffirmed that in addition to "the nonbypassable charges that were part of R.02-01-011, DA customers are still responsible for other charges, including Public Purpose Program Charge, Nuclear Decommissioning Charge and Trust Transfer Amount (TTA) for DA customers under 20 kW." (D.03-07-030 at mimeo., p. 5.)

The PPP surcharge has been deemed so important that customers must still pay this surcharge even when customers leave the distribution system by relying upon "distributed generation." "California law dictates that exiting the public electric network does not end a customer's responsibility to provide financial support for public purpose programs. In particular, Pub. Util. Code §§ 381-382 make low-income and certain other public interest programs `nonbypassable.' As implemented, customers departing for distributed generation must continue to pay for these programs, thereby avoiding unwarranted cost shifts to other ratepayers." (See D.03-02-068, mimeo., p. 45). Again, the term "nonbypassable" is interpreted as meaning no exceptions.

The statutory term "nonbypassable" has been consistently interpreted by this Commission to mean "nondiscountable." In D.97-09-047, 75 CPUC 2d 349 at 353, we said "Discounting of either the CTC or the public purpose program charge is precluded by AB 1890 which specifies that these charges are nonbypassable and must be recovered from all customers. ... we are statutorily required to ensure that both the CTC and public benefit programs charge components of the energy bill are collected on a nonbypassable basis. This precludes any discounting of these elements." (Id. at 359.) (Emphasis added.)

In Resolution E-3650, 2000 Cal. PUC LEXIS 424 at *74, Finding No. 39, we said "AB 1890 and Commission decisions require that utility rates be unbundled into their respective components and that the utilities are legally precluded from discounting the energy, public purpose, or competitive transition charge portion of their bills."

2.1. Applicability of § 740.4

Section 740.4 authorizes discounts to encourage economic development.

740.4.(a) The commission shall authorize public utilities to engage in programs to encourage economic development.

***

We emphasize that § 740.4(h) requires the Commission to allow recovery through rates of expenses and rate discounts supporting economic development programs to the extent that ratepayers "derive a benefit from those programs."

The Coalition argues that § 740.4 is a general provision that has been superseded by more specific ones. The utilities argue that the Coalition is wrong to dismiss the importance of § 740.4. They say that § 740.4 is precisely applicable to the Commission's actions in D.05-09-018. It is the controlling statutory provision that authorizes the Commission's actions in approving economic development programs and rates, and speaks specifically to the conditions under which rate discounts are to be allowed. The fact that this provision predates the other statutory provisions at issue here, shapes how those later provisions are to be read, not the reverse. PG&E cites the established principle of law that "it is not to be presumed that the legislature in the enactment of statutes intends to overthrow long-established principles of law unless that intention is made clearly to appear either by express declaration or by necessary implication." (Regency Outdoor Advertising v. City of Los Angeles, 2006 Cal. LEXIS 9499, *35 (2006); Torres v. Automobile Club of Southern California, 15 Cal. 4th 771, 779 (1997).) PG&E concludes that given the long-established policy of California to allow rate discounts, the subsequent statutory provisions creating new charges would thus need to expressly declare that the discounting of such charges should not be allowed or it must be the statutes' necessary implications. PG&E believes none of the statutes makes such an express declaration, nor is it the necessary implication that such statutes must be read in such a way.

The Coalition in reply cites another well-established principle relied on in a case where the Commission rejected a request by the Bay Area Rapid Transit for exemption from PPP surcharges. The Commission found the PPP surcharges resulted from specific provisions which cannot be avoided. We explained: "It is a well established rule of statutory construction that a specific provision relating to a particular subject will take precedence over a more general provision, even if that general provision could be construed broadly to include that subject." (D.99-10-058, 3 CPUC 3d 72 at 83, citing, San Francisco Taxpayers Assn. v. Board of Supervisors (1992) 2 Cal.4th 571, 577; Rose v. State of California (1942) 19 Cal.2d 713, 723-724.)

We agree with the Coalition. The specific provisions relating to the public purpose programs - statutory language that states they are nonbypassable - must take precedence over the more general discount language of § 740.4.

Our holding in no way diminishes the salutary objective of § 740.4. We can still approve rate discounts to attract and retain business. We can discount other portions of the rate: distribution and generation; we can modify tariff requirements; but we cannot discount nonbypassable charges (nor any other components of service prohibited by law). We note that SCE and PG&E in their original application in A.04-04-008 and A.04-06-018 did not propose discounting nonbypassable charges.

2.2. The Gas Public Purpose Program Surcharge

We kept SoCalGas' A.05-10-010 open to consider whether the G-PPPS can be discounted. Comments were filed by SoCalGas, SCE, PG&E, CMTA, Merced Irrigation District, and the Coalition. The only issue is whether the G-PPPS can be discounted, and all parties agree that the G-PPPS cannot be discounted.

No party argued that the Commission has authority to discount the Guardian-PPPS. To the contrary, they either explicitly or implicitly said that the Commission cannot discount the G-PPPS. PG&E stated that "the Commission is not permitted to discount the G-PPPS"10 and "the G-PPPS constitutes a tax that the Commission does not have legal authority to discount."11 PG&E further stated, "while the Commission has no authority to discount G-PPPS for a single customer, the Commission is vested with the authority to set G-PPPS rates by customer class."12

Even SoCalGas, the applicant in A.05-10-010, reversed its position that the Commission can discount the G-PPPS. In its initial application filed on October 7, 2005, SoCalGas wanted Commission approval for a "Five-year declining discount to the Public Purpose Program Surcharge."13 However, in its comments in this rehearing, SoCalGas no longer requests that the Commission provide Guardian Industries with a discount to the G-PPPS. Instead, SoCalGas states that "it is clear that the discretion under § 890 to set the amount of the surcharge applicable to individual customer classes rests squarely with the Commission."14

PG&E agrees with the Coalition that the Commission has no authority to approve a single-customer discount of G-PPPS. PG&E argues that the G-PPPS constitutes a tax. It says Assembly Bill (AB) 1002 (§ 890 et seq.) -- the genesis of G-PPPS -- was a tax equity measure to collect funds from entities that were taking service from interstate pipelines, rather than from the California utilities. Gas consumed by customers who are exempt from taxation under the United States Constitution or the California Constitution also are exempt from paying G-PPPS. G-PPPS funds are remitted to the California Board of Equalization (BOE) and deposited in the State Treasury. The BOE treats G-PPPS as an excise tax. In short, PG&E asserts no party has disputed that AB 1002 was specifically enacted as a tax; as a tax, the Commission has no authority to approve a single-customer discount of G-PPPS.

PG&E points out that while the Commission has no authority to discount G-PPPS for a single customer, the Commission is vested with the authority to set G-PPPS rates by customer class. (Pub. Util. Code § 890(e) [The Commission shall annually establish a surcharge rate for each class of customer for the service territory of each public utility gas corporation.]) Other parties acknowledge this authority. For example, CMTA argues that:

[T]he Commission has discretion under Section 890(e) to determine how to allocate PPP costs among various classes of consumers. The Commission also has discretion to create a class of customers comprised of customers such as Guardian Industries taking service under a long-term service agreement with approved rate discounts. For this class, the Commission could establish a lower surcharge rate that would accommodate most of the rate discount authorized by the Commission. (CMTA, Comments, page 2.)

SoCalGas supports the creation of a new customer class for end-use customers that would otherwise leave California and consequently provide no contribution to public purpose programs or to any fixed costs. It argues that the discretion under § 890 to set the amount of the surcharge applicable to individual customer classes rests with the Commission. Approval of a competitive G-PPPS rate for customers such as Guardian that would otherwise relocate out-of-state and make no contribution to these costs is entirely in keeping with § 890's objective of distributing the cost of social programs and maximizing the contribution toward these costs.

The Coalition opposes creating a separate subclass. Regardless, it argues that the Commission cannot set G-PPPS class rates in this proceeding, because the parties have not been given notice, a chance to gather facts, provide testimony, or conduct hearings. We agree with the Coalition that we cannot define the parameters of a new subclass to receive a lower G-PPPS in this proceeding. It is beyond the scope of the rehearings and there is no record on which to construct the subclass. But we do wish to note some practical problems should there be an application to create a subclass.

One proposal is that the class should consist of "similarly-situated customers." Similarly situated customers are those "that would otherwise relocate out-of-state and make no contribution to these costs." (SoCalGas Opening Comments, page 5.) Another proposal is that an end-user getting the discount must show that "it contributes to the California economy by providing jobs, purchasing from California based suppliers, and contributing sales and property taxes." (PG&E Opening Comments, page 6.) Every business in California meets PG&E's standard. As to SoCalGas' standard, because many states do not have the public purpose programs that California has, any business could argue that the G-PPPS is a burden relative to other states and threaten an exodus. Such classification is very broad and probably includes the entire current noncore industrial class, if not more.

We conclude that we do not have the authority to discount the G-PPPS, but we do have the authority to create a new class of customers. However, the record in this proceeding is devoid of evidence to create a new customer class.

In A.05-10-010, SoCalGas sought approval of a long-term discount gas transportation agreement with Guardian. Discounting the G-PPPS was a central issue. We found that the bypass threat involved in A.05-10-010 was imminent, and that a discount from SoCalGas' otherwise applicable tariff was needed to prevent Guardian from relocating out-of-state. Rather than specifically discounting the G-PPPS, we authorized a discount that was the dollar equivalent of the discount proposed by SoCalGas and ordered SoCalGas to establish a memorandum account to track the payments made by Guardian and the shortfall from the otherwise applicable tariff.

Because the issue was so important, we ordered that A.05-10-010 remain open to consider whether the Guardian PPPS can be discounted, and we directed the presiding ALJ to request comments from interested parties regarding Commission authority to discount the G-PPPS.

We voiced our concerns:

No party disputed the need for a discount rate to prevent Guardian from relocating its business out-of-state. However, given the conflict between the legislative demand to protect the PPPS and the legislative demand to encourage economic development ... we are reluctant to resolve the jurisdictional issue raised by DRA on a record limited to one utility and one customer. This issue affects all other gas utilities in the State, especially PG&E, and all large gas users, who should be given the opportunity to be heard. Therefore, we will bifurcate this application. We will authorize a rate discount equivalent to the discount proposed by SoCalGas and Guardian, but we will not allocate that discount to the component parts of the rate. That allocation will be made in phase two of this application where we shall invite input from a broader class of interested parties. Should we decide that we should not discount the PPPS, we are prepared, in this application, to discount the transportation rate below marginal costs. Regardless of our ultimate choice, neither SoCalGas nor the PPPS will be adversely affected because § 740.4(h) provides that any shortfall of revenue will be recovered from all ratepayers. (D.06-04-002, mimeo., pp. 8-9.)

PG&E observes that for customers such as Guardian, the Commission could authorize a discount to the transportation rate to below long run marginal costs (LRMC) rather than modifying the current G-PPPS rate. However, SoCalGas notes it is unaware of any Commission precedent supporting the discounting of the transportation rate below LRMC in a given year. Applying the discount entirely to the transportation rate component, rather than at least in part to the G-PPPS, will not address the underlying problem of excessive surcharge amounts being included in utility rates and will serve only to send inappropriate price signals to the market.

We have received and considered the comments. As we have found that we cannot discount the G-PPPS, we must modify D.06-04-002 to clarify its holding. Because we have already approved the Guardian discount in a decision where we said we would discount the transportation rate below marginal costs, we are left with no alternative but to approve the SoCalGas-Guardian Long-Term Gas Transportation Agreement and order SoCalGas to allocate the discount to the transportation rate, fixed charges, and fees.

2.3. D.06-05-042 Issues and Answers

In our rehearing decision D.06-05-042, we asked the parties to comment on a variety of issues connected to discounting rates. The parties have responded as discussed above, and based on those responses we resolve the issues as follows:

1. Is it necessary to exclude some or all nonbypassable charges from the floor price in order to provide the level of EDR discounts adopted in D.05-09-018?

No. It is unlawful to exclude nonbypassable charges from the price floor. Based on the evidence submitted during the hearing, the discounts can be applied to the distribution and generation rate components to achieve the level of discounts adopted in D.05-09-018. Any calculation of a rate discount is customer-specific and beyond the scope of this proceeding.

2. Can the Commission discount any nonbypassable charges?

No. All nonbypassable charges are nondiscountable.

3. For each individual nonbypassable charge, address whether exemptions or exceptions for EDR customers are permissible under the applicable statutes and Commission decisions.

PPP surcharge: No exemptions or exceptions for EDR customers are permissible under applicable statutes and Commission decisions.

DWR charges: The Commission cannot exempt EDR customers from the payment of the DWR power charge and bond charge. The language of § 366.2(d)(1) is clear on this point. "It is the intention of the Legislature that each retail end-use customer that has purchased power from an electrical corporation on or after February 1, 2001, should bear a fair share of the Department of Water Resources' electricity purchase costs, as well as electricity purchase contract obligations ... . It is further the intent of the Legislature to prevent any shifting of recoverable costs between customers." (Pub. Util. Code § 366.2(d)(1).) The statute gives us authority to make the "determination of what the `fair share' should be."15

CTC charge: The Commission is not authorized to exempt EDR customers from the CTC charge or to discount the CTC charge under § 740.4.

"PG&E is only allowed to discount the distribution component of a customer's bill. PG&E is not allowed to discount the energy, CTC, public purpose program charge, or transmission components ... . Discounting of either the CTC or the public purpose program charge is precluded by AB 1890 which specifies that these charges are nonbypassable and must be recovered from all customers." (D.97-09-047, 75 CPUC 2d 349 at 353.)

Nuclear Decommissioning Charge: The nuclear decommissioning charge set forth in § 379 is nonbypassable. Section 379 provides, in pertinent part, that the "Nuclear decommissioning costs ... shall be recovered as a nonbypassable charge until the time as the costs are fully recovered. (Pub. Util. Code § 379, emphasis added.)

4. What nonbypassable charges are subject to exception upon a Commission finding that there will be no cost shifting?

None.

a. Parties advocating exception from payment of such nonbypassable charges must submit a showing to demonstrate why cost shifting would not occur (e.g., does customer retention in fact produce benefits that would offset any shifting of costs to other customer classes?

Exceptions from the payment of nonbypassable charges are precluded by law.

b. Do any of the benefits of retaining EDR customers accrue to shareholders? If so, how should this be considered when determining cost-shifting?

In 2000, the Commission noted the strategic competitive advantages associated with attracting new customers. (Resolution E-3654, 2000 Cal. PUC LEXIS 420, Findings 14, 18, and 19.) EDR discounts benefit shareholders by maintaining or increasing customer base and market share. EDR price advantages assist utility efforts to compete for customers at the borders of their service territories, for example against irrigation districts that might serve existing utility customers. EDR discounts help promote alliances with local business communities, which could assist utility political efforts, for example opposition to municipalization initiatives. Shareholders as well as ratepayers obtain the benefits of the EDR customers. The consideration of benefits accruing to shareholders should result in some allocation of costs to the utility, but this record does not support a finding of a particular percent.

5. Can EDR program levels under Decision 05-09-018 be achieved by applying the discount to bill components other than nonbypassable charges? Are there any statutory restrictions to applying the EDR discount to the other bill components?

The EDR discounts approved in D.05-09-018 can be achieved by applying the discounts to the distribution and generation rate components. There are no statutory restrictions to applying the EDR discount to the other bill components.

a. What would be the resulting allocation of program costs?

Section 740.4(h) allocates the shortfall to the ratepayers, but we are not prohibited from allocating some of the costs of any undercollection to the shareholders.

b. Would applying the discount to the other bill components (e.g., distribution and transmission) result in zero or negative margin to those charges? If so, by how much (expressed as a percentage)? How should this shortfall be allocated among the remaining customer classes?

Based on the evidence presented in this proceeding, discounts could be applied to the distribution, transportation, and generation component of a rate without impacting marginal costs. However, in D.06-04-002 we permitted a discount which was less than LRMC. This record is not adequate to determine the extent of the negative margin. The shortfall was allocated to the ratepayers. (D.06-04-002, mimeo., p. 10.) This allocation is not necessarily an exclusive ratepayer burden. We have the discretion to allocate all, or some portion, of the shortfall to shareholders, depending on the facts of a particular application.

c. What benefits accrue to remaining customers that offset any shortfalls?

1) Approval of a discount could prevent the out-of-state relocation of a California employer and would preserve jobs. State and local communities gain from the economic growth generated by business activity, low unemployment, and maintenance of stable tax bases.

2) The amount that the retained business will pay are funds that would not otherwise be collected and will not be collected if the business elects to leave California.

2.4. Modification of D.05-09-018

The operative section of D.05-09-018 that concerns us is the Amended Proposal that sets forth the conditions for receiving the EDR rate and the conditions for determining the EDR rate. The entire Amended Proposal is:

The Findings of Fact of D.05-09-018 need no modification, but Conclusion of Law 2:

should be stricken.

We modify the Amended Proposal by changing the description of Floor Pricing and Marginal Costs by removing the stricken language. The new language is:

Limit the discount to ensure revenue does not fall below floor price, which consists of transmission charges, public purpose program (PPP) charges, nuclear decommissioning (ND) charges, DWR Bond charges, Competition Transition Charge (CTC), marginal costs for transmission, distribution, and, if a bundled-service customer, marginal costs for generation. Floor price to be based on customer-specific marginal costs, up to the OAT. Unit marginal costs to be established at beginning of customer contract.

We strike Conclusion of Law 2 in D.05-09-018 and replace it with a new Conclusion of Law approving the Joint Proposal as modified by this decision. In D.06-05-042, we recognized the need to modify the rate structure approved in D.05-09-018 to conform that rate structure to the law, should we determine that PPP surcharges could not be discounted. Ordering Paragraph 5 of D.06-05-042 found that "EDR charges under D.05-09-018 shall continue, subject to adjustment pending conclusion of the limited rehearing." (D.06-05-042, mimeo., at page 11.) Our authority is based on § 1736, which provides, "If, after rehearing and a consideration of all the facts, ... the commission is of the opinion that the original order or decision or any part thereof is in any respect unjust or unwarranted, or should be changed, the commission may abrogate, change, or modify it." (Pub. Util. Code § 1736.)

With respect to the specific customers that may be impacted by any resulting rate change, SCE claims that parties have acted in good faith reliance on the rate structure approved in D.05-09-018 and, as such, those executed contracts should not be disturbed. The Coalition points out that SCE's EDR contract contains a specific provision advising customers that rates therein are subject to change by the Commission. "This Agreement shall at all times be subject to such changes or modification by the Commission as said Commission may, from time to time, direct in the exercise of its jurisdiction." (SCE Form 14-758, Advice Letter 1918-A, effective Oct. 3, 2005.) While we agree with SCE that parties acted in good faith when they relied on D.05-09-018, we conclude that they had ample notice that the rate structures approved therein were subject to change.

Outstanding contracts will be modified to include all nonbypassable charges in the floor price on a going-forward basis. This means that for outstanding contracts where the current rate is more than the sum of the public purpose program charges, nuclear decommissioning charges, DWR Bond charges, and the Competition Transition Charge, no change in rate is necessary. If the negotiated rate of any outstanding EDR contract is insufficient to fully fund the nonbypassable components, the rate will increase to cover the difference. For the outstanding contracts, the past amounts paid to the IOUs will be reallocated so that NBC's are paid first, and the discounts applied to the distribution and generation components. If the past amounts paid are insufficient to cover the NBCs, then shareholders will make up the shortfall. For outstanding contracts, if, after reallocation to cover all NBCs, past amounts paid result in a negative margin, it will be recovered from ratepayers.

2.5. Modification of D.06-04-002

In D.06-04-002 we ordered that the application was to remain open to consider whether the G-PPPS can be discounted and, after receiving comments, allocate the discount among its component parts. (D.06-04-002, Conclusions of Law 2 and 3.) Having decided that we cannot discount the G-PPPS, we allocate the discount to the transportation rate, fixed charges, and fees. Any shortfall should be recovered from the ratepayers.

D.06-04-002 is modified to add the following Findings of Fact:

7 The phrase "nonbypassable and cannot be discounted"is is a redundancy (also, a tautology). "Nonbypassable" means "cannot be discounted." Perhaps the Legislature should have footnoted each time it enacted "nonbypassable" with the phrase "and we mean it."

8 An additional consequence is that large customers who do not get the discount will pay higher rates, thus actually subsidizing their competitors.

9 "In this case, we must construe § 374 within the context of AB 1890 and the intent of electrical restructuring ... Sections 379, 381, and 382 were added to the Pub. Util. Code at the same time as § 374(b) - all as part of AB 1890. They impose nonbypassable charges on all electric customers, regardless of whether they take service in a bundled or unbundled manner. On their face, they provide for no exceptions to this general rule ... " (D.99-10-058, 3 CPUC 3d 72, 81.)

10 PG&E's Opening Comments, page 2.

11 Id. at 5.

12 Id. at 6.

13 Application of Southern California Gas Company for Approval of a Long-Term Gas Transportation Agreement with Guardian Industries, A.05-10-010, page 3.

14 SoCalGas' Opening Comments, page 5.

15 D.03-05-039, 2003 Cal. PUC LEXIS 307, *10.

16 The Amended Proposal is almost identical to the Joint Proposal of the utilities except that some language has been stricken from and added to the Joint Proposal. The stricken language has been left in the tables but has a line through it while the added language has been underlined.

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