9. Assignment of Proceeding
Geoffrey Brown is the assigned Commissioner, and Myra J. Prestidge is the assigned Administrative Law Judge in this proceeding.
1. TID is an irrigation district organized under California law that owns and operates an electric distribution and transmission system and provides electric service to customers in parts of Merced, Stanislaus and Tuolumne Counties.
2. The service area agreement transfers the Westside Zone and the Don Pedro South Shore Zone from PG&E's service area to TID's service area.
3. During the 25 year period of the new service area agreement, with certain exceptions, PG&E, TID, and their affiliates cannot serve retail electric customers in each others' service areas or build, own, lease, operate, control, acquire, extend or connect any substation, transmission, or distribution facilities in each others' service areas for the purpose of serving retail customers.
4. The service area agreement will prevent the duplication of electric distribution facilities, the waste of manpower and materials, and the resulting economic loss that could otherwise result if PG&E, TID, PID and WPA could all potentially serve customers in the Westside Zone, and will promote the more efficient and economical provision of electric distribution service in the area by allocating certain service areas to PG&E and TID.
5. The service area agreement limits the right of PG&E and TID to provide certain "core distribution services" to other persons or entities serving retail electric customers in each others' service areas, but permits PG&E and TID to provide other types of services, such as those often performed by consultants, without limitation.
6. The service area agreement permits PG&E and TID to perform materials management and recordkeeping and two of the following four "core distribution services" to an established local utility within its boundaries or outside of its boundaries if that utility has a defined expansion area in PG&E's or TID's service area: (a) engineering and estimating, (b) operations and maintenance, (c) planning and engineering, and (d) construction.
7. The service area agreement does not restrict the provision of mutual aid by PG&E or TID.
8. The Commission previously suspended the right to enter into new direct access contracts or to verify new agreements for direct access, effective September 20, 2001.
9. In D.02-03-055, the Commission adopted standards to implement the suspension of direct access, which allowed limited exceptions for customers who have entered into direct access contracts before September 20, 2001.
10. D.02-03-055 permits customers who had entered into direct access contracts before September 20, 2001 to change from one E&P to another and allows the assignment of direct access contracts under certain circumstances.
11. The provisions of the asset sale agreement regarding final meter reads by PG&E, PG&E's sale of replacement parts to TID, TID's payment of amounts that would otherwise be owed by departing customers for NBCs in effect before the closing date and under PG&E energy efficiency program contracts, special facilities contracts, and PG&E's refund of line extension deposits are reasonable.
12. For the purposes of allocating PG&E's gain resulting from the sale of transmission assets to TID, this case falls within the four corners of Redding II.
13. PG&E's request to waive amounts owed by departing customers under energy efficiency contracts is denied to avoid shifting these costs to remaining ratepayers.
14. TID's contractual obligation to pay PG&E up to $500,000 for amounts otherwise owed by departing customers under energy efficiency program contracts will most likely cover the full amount owed to PG&E under these contracts by departing customers.
15. It is unlikely that TID will default on its contractual obligations to pay PG&E for NBCs established before the closing date and amounts due under energy efficiency program contracts on behalf of departing customers.
16. ORA's proposed mitigation measures, which would have required PG&E to place a portion of its gain on sale in holding accounts to be utilized if TID were to default on its obligation to pay certain NBCs on behalf of departing customers and to compensate remaining ratepayers for PG&E's waiver of amounts owed by departing customers under energy efficiency contracts, are unnecessary to protect PG&E ratepayers from potentially adverse financial effects of this transaction.
17. Lease revenues from the Patterson and Salado substation leases fall within an existing non-tariffed products and services (NTP&S) category under PG&E Advice Letter 2603 G/1741E.
18. The asset sale agreement and other transaction documents do not provide for the payment of any applicable NBCs or cost responsibility surcharges (CRS) established after the closing date by PG&E, its ratepayers, departing customers, customers, or TID.
19. PG&E's proposed methodology for calculating NBCs to be paid by TID on behalf of departing customers and PG&E's calculation of these amounts do not represent the total liability of TID, PG&E, PG&E ratepayers or departing customers for NBCs.
20. PG&E's proposed methodology for calculating NBCs to be paid by TID on behalf of departing customers and proposed calculations of these amounts require further clarification through an advice letter to be filed by PG&E.
21. The asset sale agreement, the installment sales agreement, the electrical lines assignment and assumption agreement, and the Patterson and Salado substation leases will not interfere with PG&E's ability to serve its remaining customers at reasonable rates.
22. TID has a strong record of providing good service to customers and will be able to provide adequate electric distribution service to customers in the Westside Zone and the Don Pedro South Shore Zone at reasonable rates.
23. The price for the assets sold by PG&E to TID based on RCNLD is reasonable.
24. The provisions of the tolling and mutual release agreement are reasonable and will eliminate potential claims between PG&E and TID under the 1953 Agreement.
25. The provisions of the closing agreement are reasonable and provide an adequate means for PG&E and TID to resolve any disputes under the asset transfer agreements without costly litigation.
26. TID is the Lead Agency for the project under CEQA.
27. On July 31, 2001, TID approved a mitigated negative declaration and a mitigation monitoring plan for the project pursuant to Resolution 2000-61.
28. The Commission is a Responsible Agency for the project under CEQA.
29. As a Responsible Agency, the Commission finds that TID reasonably concluded that the project, as mitigated, will have no significant environmental effects and that no additional mitigation measures or consideration of alternatives are required.
1. The service area agreement between PG&E and TID is in the best interests of PG&E and the State of California and serves the public interest.
2. Under California law, there is a strong legislative policy in favor of service area agreements between electric corporations and districts to avoid duplication of electric distribution facilities and services, waste of materials, waste of manpower, and the resulting economic loss and to promote more efficient and economic methods of distributing electric power and energy.
3. The service area agreement's restrictions on PG&E's and TID's provisions of "core distribution services" to other persons or entities providing electric service in each other's service areas do not prevent the formation of new local utilities or violate any legal duty of PG&E or TID to provide these services.
4. Before deleting territory from its service area, PG&E must obtain relief from its obligation to serve customers in the area from the Commission.
5. PG&E must obtain advance Commission approval of any amendments to the service area agreement, including changes to its service area, or any superseding agreements.
6. The service area agreement is a contract between PG&E and TID, which may properly be interpreted and enforced by the California courts.
7. The Commission has only limited jurisdiction to adjudicate complaints brought against TID.
8. PG&E, TID, PID, and WPA may provide direct access to customers only as permitted by state law and Commission decisions.
9. The asset sale agreement, the installment sales agreement, the private line assumption agreement, and the Patterson and Salado substation leases, the closing agreement and the tolling and mutual release agreement serve the public interest.
10. The mitigated negative declaration and mitigation monitoring plan adopted by TID are adequate for the Commission's decision-making purposes as a Responsible Agency under CEQA.
11. In a Section 851 proceeding, the public utility bears the overall burden of proof that the proposed transaction is in the public interest and will not interfere with the right of the public to adequate service at reasonable rates, but ORA bears the burden of producing evidence in support of its affirmative recommendations.
12. Under Redding II, since ORA's proposed mitigation measures are rejected, PG&E's gain resulting from the sale of distribution assets to TID should be allocated to PG&E's shareholders.
13. PG&E's gain resulting from the sale of transmission assets to TID should be allocated between shareholders and ratepayers according to the applicable FERC authority.
14. PG&E should treat revenues received from the Patterson and Salado substation leases as OOR, pursuant to PG&E Advice Letter 2603-G/1741-E, Category T.C. 4.
15. TID's agreement to pay NBCs established before the closing date on behalf of departing customers does not fully satisfy the obligation of PG&E, its ratepayers and departing customers to pay additional NBCs or CRS adopted after the closing date.
16. Departing customers may be held responsible for payment of their fair share of applicable NBCs or CRS established after the closing date, as may be required by state law or Commission decision, to avoid shifting these costs to remaining ratepayers.
IT IS ORDERED that:
1. The proposed service area agreement between Pacific Gas and Electric Company (PG&E) and the Turlock Irrigation District (TID), attached as Exhibit B to the application, is approved, subject to the paragraphs below.
2. PG&E shall amend the service area agreement to require advance Commission approval of any amendments, including changes to its service territory, and any superseding agreements; to delete the provisions regarding Commission adjudication of future disputes; to provide that PG&E, TID, the Patterson Irrigation District, and the Westside Power Authority may provide direct access only as permitted by state law and Commission decisions to clarify TID's responsibility for payment of nonbypassable charges; and to clarify language related to PG&E's provision of direct access because non-utility electric service providers (ESPs) generally provide direct access. PG&E shall file a copy of the amended service area agreement by advice letter within 60 days of this order.
3. PG&E is relieved of its obligation to serve electric distribution customers in the Westside Zone and the Don Pedro South Shore Zone, effective on the closing date of the asset sale agreement.
4. The asset sale agreement, attached as Exhibit A to the application, including its provisions regarding special facility agreements, the refunding of line extension deposits, the sale of replacement parts by PG&E and TID, and the method for PG&E's final customer meter reads in the Westside Zone, is approved, subject to paragraph 5 below.
5. PG&E and TID shall amend Section 4.4 of the asset sale agreement to provide that PG&E and TID may provide direct access to customers only as authorized by Commission decisions and state law, and to clarify language in Section 4.4 which refers to the provision of direct access by PG&E.
6. .
7. PG&E's request for authorization to waive amounts owed by departing customers under energy efficiency program contracts is denied.
8. ORA's proposal that PG&E be required to place part of its gain on sale in a holding account to compensate remaining PG&E ratepayers for PG&E's waiver of amounts owed under energy efficiency contracts and the loss of a lower energy load is denied.
9. ORA's proposal that PG&E be required to place part of its gain on sale in a holding account to be utilized if TID defaults on its obligations to pay certain NBCs on behalf of departing customers in order to protect PG&E ratepayers from potentially adverse financial effects of this transaction, is denied.
10. If TID defaults on its contractual obligations to pay NBCs established before the closing date on behalf of departing customers, or as balances owed by departing customers under energy efficiency program contracts up to a total amount of $500,000, PG&E shall enforce these obligations through the dispute resolution process set forth in the closing agreement.
11. PG&E's gain resulting from the sale of distribution assets to TID shall be allocated to PG&E shareholders pursuant to Redding II.
12. PG&E's gain resulting from the sale of tranmission assets to TID shall be allocated between shareholders and ratepayers pursuant to applicable FERC authority.
13. PG&E shall treat revenues received from the Patterson and Salado Substation leases as Other Operating Revenue.
14. PG&E's request for approval of its proposed methodology for calculating NBCs to be paid by TID on behalf of departing customers and its proposed calculations for these charges as representative of the total amount owed by PG&E and its customers for NBCs is denied.
15. PG&E's request for a determination that its ratepayers and departing customers will be subject to the cost responsibility surcharges (CRS) presently under submission in Rulemaking (R.) 02-01-011 only if CRS are imposed and made nonbypassible by the closing date is denied.
16. Departing customers shall be responsible for their fair share of any applicable NBCs or CRS established after the closing date, to the extent required by state law or Commission decision.
17. PG&E shall submit a revised statement of its methodology for calculating NBCs to be paid by TID on behalf of departing customers and any additional NBCs or CRS which have been imposed after the closing date to be paid by departing customers, along with revised calculations to the Commission Energy Division by advice letter no later than 90 days after the effective date of this decision.
18. The installment sales agreement (attached as Exhibit G to the application), the private electrical lines assignment and assumption agreement (attached as Exhibit H to the application), the Patterson and Salado substation leases (attached as Exhibits D and E to the application, respectively), the tolling and mutual release agreement (attached as Exhibit F to the application) and the closing agreement (attached as Exhibit C to the application) are approved.
19. This order shall take effect immediately so that PG&E may expeditiously transfer its facilities in the Westside Zone to TID and TID may begin serving customers in the Westside Zone and the Don Pedro South Shore Zone.
20. Application 02-01-012 is closed.
This order is effective today.
Dated , at San Francisco, California.
