PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
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ENERGY DIVISION RESOLUTION E-3757
MARCH 6, 2002
Tariff Rule 20-B Issues: (1) Utility Advice Letters Are Denied; (2) Underground Conversion Fund Shall Pay For The Removal Costs Of The Existing Facilities In An Overhead Electric Line To Underground Electric Line Conversion Project; (3) Customer Payments To Utilities For Removal Of Poles And Facilities Shall Be Returned To Customers With Interest.
By Southern California Edison Company (Edison) Advice Letter 1539-E filed April 30, 2001, Pacific Gas & Electric Company (PG&E) Advice Letter 2134-E filed July 10, 2001, and San Diego Gas & Electric Company (SDG&E) Advice Letter 1354-E filed August 1, 2001.
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SUMMARY
This Resolution: (1) denies authority requested by electric utilities Edison, PG&E, and SDG&E to have applicants for Tariff Rule 20-B undergrounding projects pay for removal of poles and facilities; (2) orders electric utilities to charge pole removal costs to their underground conversion program budgeted allocations; and (3) orders utilities to identify and repay applicants all such charges with interest to date.
BACKGROUND
Edison filed its Advice Letter 1539-E on April 30, 2001. The revised tariff sheets would require customers who request and receive undergrounding of overhead electric service under its Tariff Rule 20-B to pay separately for removing old overhead facilities including poles, wires, transformers, and switches. For reasons similar to Edison's, PG&E filed A.L. 2134-E on July 10, 2001, and SDG&E filed A.L. 1354-E, on August 1, 2001.
From 1968 to 1997, PG&E and SDG&E had paid for the removal of overhead poles and facilities using their Tariff Rule 20-B underground conversion budgeted allocations, and Edison did so until 1999.
In the last several years all three utilities changed internal policies and required applicants to pay for the removal of the poles and facilities. The utilities contend that the removal of poles and facilities represents from 5% to 20% of the total cost of conversion.
The utilities changed these policies without Commission authority; however, in a complaint case last year, the Commission directed Edison in Decision 01-03-051, to refund to Barratt American the $33,700 Barratt paid Edison to remove poles and facilities.
The instant advice letters request treatment opposite to the Barratt decision; namely to formalize utility charges for facilities removal in Rule 20-B conversions.
NOTICE
Notice of Edison's Advice Letter 1539-E, PG&E's Advice Letter 2134-E, and SDG&E's Advice Letter 1354-E was made by publication in the Commission's Daily Calendar on May 2, 2001, July 13, 2001, and August 3, 2001, respectively. Edison, PG&E, and SDG&E state that a copy of the Advice Letter was mailed and distributed in accordance with Section III-G of General Order 96-A.
PROTESTS
Edison's Advice Letter 1539-E, PG&E's Advice Letter 2134-E, and SDG&E's Advice Letter 1354-E were all protested.
With respect to Edison's AL 1539-E:
On May 16, 2001, G. A. Krause & Associates (Krause) filed a timely protest in Edison's advice letter. The protest was that this letter would discourage usage of underground conversion in Edison's Tariff Rule 20-B.
On May 18, 2001, the California Building Industry Association (CBIA) made a timely protest of Edison's advice letter. CBIA stated in their letter that the advice letter shifts more financial responsibility for electric underground conversions to applicants, which discourages discretionary electric utility facility undergrounding and increases project costs where undergrounding is required by local government for new development.
On May 22, 2001, Utility Design, Inc protested Edison's advice letter with an untimely protest based on inappropriate use of an advice letter filing instead of bringing the matter to public hearing and decision-making processes. It notes that Commission Decision 01-03-051 found that Edison violated Tariff Rule 20-B by charging for pole removal and facilities removal costs without prior Commission approval and that because of that decision, SCE must stop charging applicants.
On May 23, 2001, Edison replied to the protest comments by Krause. "SCE believes that it is appropriate to charge these pole removal costs to the applicant/property owners who have requested and received the benefit of the underground facilities, rather than to impose the costs on the general ratepayers, including those who receive no underground service at all. Krause also states in its protest that SCE is now requiring Rule 20-B applicants to bear the cost of cable removal. This is a fallacy since in overhead conversions there is no cable involved."
On May 25, 2001, Krause filed a response to SCE's protest response of May 23, 2001. In that response, it stated, "...In D. 73078, the Commission ordered the utilities to implement a uniform Rule 20, the purpose being to encourage the relocation of electric and telephone facilities underground. In accordance with the Commission's order, SCE, PG&E and SDG&E implemented uniform policies - but also included removal costs. And it was only very recently that the three utilities stumbled on a new interpretation that raised applicant's costs and decreased the number of conversion projects. Basic economics dictate that raising the cost of a desired action decreases the action. Unless the Commission no longer believes conversions are in the public's interest, the advice filing should be denied."
On May 31, 2001, Edison filed a response to the May 22, 2001 protest of Utility Design, Inc. to SCE's Advice Letter 1539-E. SCE states, "...Advice Letter1539-E is not an attempt to avoid the Rule 20 Order Instituting Rule making (R.00-01-005) dated January 6, 2000. SCE had instituted the practice of charging applicants for removal of existing overhead facilities in advance of the R.00-01-005 proceeding. This practice did not become an issue until Case 00-07-054 was filed with the Commission and resulted in D. 01-03-051 dated March 27, 2001. SCE agrees that the R.00-01-005 proceeding is the proper forum for parties such as UDI to raise any opposition to SCE's application of Rule 20 provisions, which already include charging applicants for removal of existing overhead facilities. In Advice Letter1539-E, SCE is merely adding clarifying tariff language regarding the practice of charging applicants for removal of existing overhead facilities pursuant to the above statement in D.01-03-051."
On June 5, 2001, Edison filed a reply to Krause's response of May 25, 2001. SCE states, "When the utilities discovered that Rule 20-B was being applied incorrectly, they changed their practices. As (Commission) D. 01-03-051 points out, SCE should have filed an advice letter before doing so. As recommended by the Commission in that Decision, SCE filed Advice Letter 1539-E to make its practice of charging pole removal costs clear and known to both the Commission and potential applicants."
On August 30, 2001, John T. Nunes, Jr. filed an untimely protest to Edison's advice letter. This protest alleges Edison's charges to the assessment districts for removing overhead facilities in its administration of Tariff Rule 20-B were improper and jeopardize survival of Edison's Rule 20-B program.
On September 10, 2001, Edison filed a response to the protest of Nunes and Associates, stating that it believes it is appropriate to charge pole removal costs to the applicant, rather than to impose these costs on the general body of ratepayers.
With respect to PG&E's AL 2134-E:
Pacific Gas and Electric Company filed Advice Letter 2134-E on July 10, 2001.
On July 25, 2001, Utility Design, Inc. protested PG&E's A.L. 2134-E "... because it is an inappropriate vehicle with which to make the changes sought by PG&E. PG&E is obviously trying to circumvent the Commission's hearing and decision-making processes through this filing."
On July 30, 2001, James D. Squeri of Goodin, MacBride, Squeri, Ritchie & Day, LLP, on behalf of the California Building Industry Association stated that CBIA "...protests Advice Letter 2134-E since it (1) increases project costs where underground is required by local government for new development, and (2) shifts more financial responsibility for electric underground conversions to applicants which discourages discretionary electric utility facility undergrounding." ... "Most, if not all cities and counties require undergrounding existing overhead lines as a condition for new development. This benefits the development and those using adjacent streets or living in the adjacent areas. The added cost, including additional CIAC Tax, proposed by PG&E will increase the cost of new housing and business development." ... "...Rule 20-B was discussed in R.00-01-005 workshops as PG&E's option for applicants and customers that desired undergrounding when Rule 20A allocations were inadequate or unavailable. This change would add more costs, including additional CIAC Tax, to the already expensive Rule 20-B jobs, and will kill many proposed discretionary undergrounding projects, including assessment districts, that are desired by most, if not all, policymakers in California."
On August 1, 2001, PG&E filed its Response to Protest from Utility Design, Inc. of Advice Letter 2134-E, stating that "PG&E disagrees with Utility Design, Inc that the Commission's R.00-01-005 is the appropriate venue for the review of the Rule 20-B clarifications being requested."
Further, on August 7, 2001, in its Response to Protest from the California Building Industry Association, PG&E states that "...PG&E's addition of new language to Rule 20, section B.2.c., clarifies that the cost of converting overhead lines to underground includes the cost to remove the existing overhead system. Customers who request and receive undergrounding of electric service facilities, for whatever reason, under the provisions of Rule 20.B must pay the resulting costs for the existing overhead facilities..."
With respect to SDG&E's AL 1354-E:
San Diego Gas & Electric Company filed Advice Letter 1354-E on August 1, 2001, to clarify its Tariff Rule 20-B explaining that applicants are paying the cost for removal of facilities and poles.
On August 21, 2001, Goodin, MacBride, Squeri, Ritchie & Day, LLP, CBIA filed an untimely protest of SDG&E Advice Letter 1354-E repeating much of the language in its July 30, 2001 protest to the PG&E Advice Letter, and concluding, "SDG&E should either file an application seeking the requested authority or seek to move these issues to an existing rulemaking, e.g. R.00-01-005, if it wishes to pursue a change in Rule 20. It will be properly served on the parties interested in the underground issues and subject to the appropriate analysis, hearings, findings and a decision based on a factual record."
On August 29, 2001, SDG&E filed a response to the August 21, 2001 California Building Industry Association's protest to A.L. 1354-E: "In protesting SDG&E's advice letter, CBIA's motive is clear- to shift costs, which its members (many of whom are large, well-financed developers) would otherwise be responsible for, to SDG&E's other customers (most of whom are residential customers). The Commission should reject CBIA's transparent attempt to avoid cost responsibility, and approve SDG&E's Advice Letter 1354-E as filed."
DISCUSSION
The costs for pole removal were assumed by the utilities under Commission Decision 73078, effective January 1968, and their application of Tariff Rule 20-B was unchanged in this respect for approximately 30 years. The utilities then changed their application of Tariff Rule 20-B without Commission authority, and now base their new applications of Rule 20-B on their new interpretation of the following language appearing in the current Rule 20:
B. In circumstances other than those covered by A above, PG&E will replace its existing overhead electric facilities with underground electric facilities along public streets and roads or other locations mutually agreed upon when requested by an applicant or applicants when all of the following conditions are met:
1. a. All ...
2. The applicant has:
a. Furnished ...
b. Transferred ...
c. Paid a nonrefundable sum equal to the excess, if any, of the estimated costs, of completing the underground system and building a new equivalent overhead system.
3. The area to be undergrounded includes both sides of a street for at least one block or 600 feet, whichever is the lesser, and all existing overhead communication and electric distribution facilities within the area will be removed.
Between 1997 and 1999, based on the tariff language above taken from D.73078, Appendix D, utilities decided Rule 20-B applicants should start bearing the costs of removals when converting to underground electric service
The utilities also state that their new interpretation is consistent with conclusions in Commission Decision 94-12-026, effective July 1995. In that decision the Commission moved some of the costs of line extensions in new construction to the applicant for new service and away from all ratepayers. However, overhead line conversion of existing facilities to underground is not new construction and the Commission did not consider this issue or rule on it in D. 94-12-026.
The utilities further state in their advice letter discussions, that their interpretation of Rule 20-B appears valid according to recent Commission Decision 01-03-051, Barratt American, Inc, Complainant vs. Southern California Edison Company, Defendant, dated March 27, 2001. Here also, the utility rationale is not persuasive, because the Commission states in the Summary to that Decision:
"If a utility for 30 years interprets its tariff to give a substantial credit to customers for conversion from overhead to underground facilities, may the utility without the approval of this Commission reinterpret its tariff to take that credit away? On the facts and circumstances of this case, we (the Commission) determine that the answer is no."
That decision finds that SCE's Tariff Rule 20 governs the undergrounding work at issue, and that SCE did not seek Commission approval for its change in practice regarding pole removal costs. It concludes that G.O. 96-A requires prior Commission approval of any change in a condition or classification resulting in a more restrictive condition or an increase in a tariff schedule, and that Barratt American has established a prima facie violation by SCE of G.O. 96-A, and it orders a refund of $33, 700 to Barratt American.
While the Commission, in Barratt American, did direct the utilities to file and serve advice letters on this issue, the Commission is not bound to grant the request in return for their compliance with process. In fact, nothing the utilities have provided in these advice letters causes us to reconsider our Barratt American Decision D.01-03-051. The conversion process for Rule 20-B would be impeded by this extra charge. D. 73078 encourages the conversion program to be stimulated by tariff language that would not place all burden on the applicants.
The League of California Cities, and members of the cities and counties attending ED-sponsored workshops and subsequent public participation hearings regarding undergrounding policies, OIR 00-01-005, provided testimony that requiring a separate charge for facilities removal would reinterpret the tariff and utility policy in effect from 1968 to 1997. Discussion during the workshops called for more help in encouraging and stimulating the conversion process. Passing additional costs on to the applicants, as the utilities propose, would discourage underground conversion.
As was found and ordered in D. 01-03-051, PG&E, Edison, and SDG&E should now not only cease current practices, but also identify and refund with interest all charges collected for pole, line, and facilities removal costs.
The PG&E, Edison, and SDG&E advice letters should be denied.
COMMENTS
Public Utilities Code section 311(g)(1) provides that this resolution must be served on all parties and subject to at least 30 days public review and comment prior to a vote of the Commission. Section 311(g)(2) provides that this 30-day period may be reduced or waived upon the stipulation of all parties in the proceeding.
The 30-day comment period for the draft of this resolution was neither waived nor reduced. Accordingly, this draft resolution was mailed to parties for comments, and will be placed on the Commission's agenda no earlier than 30 days from the date of mailing.
FINDINGS
1. This Commission Resolution denies giving authority to the three major public utilities to order customers to pay for the costs of removing overhead facilities in a Tariff Rule 20-B conversion project.
2. This Commission finds that Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company should file advice letters within one month of the effective date of this Order ordering that the underground conversion fund pay for the cost of the removal of overhead facilities as ordered in Tariff Rule 20-B.
3. This Commission Resolution finds that Pacific Gas and Electric Company, Southern California Edison Company, and San Diego & Electric Company shall identify and refund to all of their customers with interest all monies paid for the removal of overhead poles, lines, and facilities in order to encourage growth in undergrounding the conversion of utility facilities.
THEREFORE IT IS ORDERED THAT:
1. The requests of Pacific Gas and Electric Company (Advice Letter 2134-E, filed April 30, 2001), Southern California Edison Company (Advice Letter 1539-E filed April 30, 2001), and San Diego Gas & Electric Company (Advice Letter 1354-E filed August 1, 2001) are all denied.
2. These aforementioned utilities should file advice letters that propose to add language to their Rule 20-B tariffs, to indicate that the costs of removal of the overhead poles, lines, and facilities are the responsibility of the utility and will be paid by the utility from the underground conversion fund.
3. All charges for pole, line, and equipment removal from customers requesting undergrounding of overhead electric service shall be identified and returned to such customers with interest. The interest payments should be based on the prime interest lending rate plus 2% and should begin from the time the customers affected by Tariff Rule 20-B service started paying for the removal of overhead poles, lines and facilities.
This Resolution is effective today.
I certify that the foregoing resolution was duly introduced, passed and adopted at a conference of the Public Utilities Commission of the State of California held on March 6, 2002; the following Commissioners voting favorably thereon:
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WESLEY M. FRANKLIN
Executive Director
