PU Code § 369 reads as follows:
"The Commission shall establish an effective mechanism that ensures recovery of transition costs referred to in Sections 367, 368, 375, and 376, and subject to the conditions in Sections 371 to 374, inclusive, from all existing and future consumers in the service territory in which the utility provided electricity services as of December 20, 1995; provided, that the costs shall not be recoverable for new customer load or incremental load of an existing customer where the load is being met through a direct transaction and the transaction does not otherwise require the use of transmission or distribution facilities owned by the utility. However, the obligation to pay the competition transition charges cannot be avoided by the formation of a local publicly owned electrical corporation on or after December 20, 1995, or by annexation of any portion of an electrical corporation’s service area by an existing local publicly owned electric utility.
"This section shall not apply to service taken under tariffs, contracts, or rate schedules that are on file, accepted, or approved by the Federal Energy Regulatory Commission, unless otherwise authorized by the Federal Energy Regulatory Commission."
This last sentence has been the subject of some dispute. PG&E discussed what it characterized as a "common" instance of departing load supply arrangement as that where a customer is able to take increased deliveries of power from the Western Area Power Administration (Western), under a Contract 2948-A arrangement, with the exceptions that Western power delivered to Bay Area Rapid Transit (BART) pursuant to § 701.8 and Western deliveries to the University of California( UC) Davis at the contractual level in effect on May 31, 1996 are exempt from CTC, pursuant to PU Code § 374(b) and (c). FEA and Sonoma County object strongly to this treatment and state that § 369 prohibits the application of CTC to federal government customers of Western without specific approval by FERC.
FEA states that these are long-standing electricity supply arrangements and are presently and will continue to be in the future executed exclusively pursuant to contracts filed with and approved by FERC; that § 369 mandates that CTC imposed in connection with FERC jurisdictional matters must be authorized by FERC; and that therefore, PG&E may not impose such CTC without FERC approval.
PG&E argues that the last sentence in § 369 is merely a "savings" clause, which recognizes FERC’s jurisdiction over wholesale power transactions and transmission services, i.e., that transition costs can be collected in the form of a FERC rate only if FERC authorizes the utility to do so. PG&E further asserts that this understanding was quite clear and understood by the parties participating in the lengthy discussions and negotiations that led to language adopted in AB 1890, including § 369. PG&E argues that because specific language singles out two particular Western customers, BART and UC Davis, in § 374 (b) and (c), there can be no extension of such particular exemptions to other Western customers. Indeed, if such was the intent, there would have been no reason for § 374 to reference BART and UC Davis. Finally, PG&E contends that because the FEA and Sonoma County were not involved in the drafting process, they have little basis on which to offer their alternative reading of § 369.
PG&E states that taken to the extreme, FEA’s reasoning could lead to the conclusion that § 369 would prohibit all transition cost recovery, since all electric consumers in California will be receiving transmission services upon implementation of the ISO tariff that will be subject to tariffs, contracts, or rate schedules that are on file, accepted, or approved by FERC.
FEA contends that it is not suggesting that it was the Legislature’s intent to exempt all customers switching from PG&E service to Western supply service provided under Contract 2948-A. FEA states that § 369 is not intended to exempt any user from the CTC, but that any CTC that is imposed in connection with FERC-jurisdictional matters must be authorized by FERC. FEA asserts that § 374(b) and (c) provide BART and UC Davis with absolute exemptions, so that they will not be subject to CTC. Finally, FEA argues that there is a fundamental difference between the implication of taking new services under FERC tariffs after December 20, 1995 and taking FERC jurisdictional service for as much as 30 years prior to this date. That is, FEA recognizes that a customer who was taking PG&E service subject to CPUC jurisdiction prior to December 20, 1995, and then displaced that service with third-party generation which was wheeled to the customer under a FERC-jurisdictional tariff, may certainly be subjected to CTC under this Commission’s jurisdiction. This is consistent with § 369. However, FEA contends this Commission does not have jurisdiction to impose CTC on customers who have been taking service under a FERC-jurisdictional contract for several years prior to the Preferred Policy Decision, when those customers increase their delivery of Western power, even if that increase is after the date of the Preferred Policy Decision, since that contract allows customers to change the mix of power delivered by PG&E and Western. Finally, FEA states that there is no authority that would support the assertion that the ability to interpret statutory language requires active involvement in the process of drafting that language.
Sonoma County also receives its allocation of federal power under Contract 2948-A and subsidiary agreements, which, it alleges, are part of a complex, integrated power supply and transmission arrangement that benefits Western, Sonoma, and PG&E, the benefits of which have been determined both by Federal agencies and in court. The contracts for the subsidiary arrangements are also on file with FERC. These contracts all specifically contemplate that PG&E will deliver increases in Western allocations to those retail and wholesale customers of Western without compensation for purportedly displacing PG&E sales.
Similar to FEA’s argument, Sonoma County believes its right to this exemption is distinguishable from the average PG&E retail customer that might in the future receive FERC-regulated transmission service for an alternative source of power supply, because Sonoma County’s right to purchase the Western allocation derives from federal law. In addition, Sonoma County contends that Contract 2948-A involves more than just transmission service to a potentially infinite group of retail customers; the interrelationship of the power supply, support, transmission, and other arrangements of Contract 2948-A results in a limitation on Western’s ability to provide service to any other than a select group of customers, whose eligibility for service depends on federal law and federal regulation. Moreover, the amount of energy and capacity available for sale is limited to a coincident customer demand of 1152 MW.
Sonoma County agrees with FEA’s assessment of the BART and UC Davis exemptions and suggests that such language must be interpreted as a direct reaffirmation of the Legislature’s intentions in § 701.8, in which BART is allowed to reduce its electricity cost through the purchase and delivery of preference power and § 374(c) which also references an existing relationship. Sonoma County also disputes PG&E’s statutory interpretation, stating that trusting "PG&E’s interpretation of the language because ‘PG&E was there and others were not’ sheds little light on how to apply the language actually written into the statute…. " (Sonoma County’s Brief, p. 25.) Sonoma County therefore requests that we ensure that PG&E include terms and conditions in its tariffs which recognize that PG&E will not collect a CTC from retail customers with respect to loads served with an allocation from the Western under Contract 2948-A.
PG&E points out the public policy interest in ensuring the principle of nonbypassability. The utilities want the CTC to be nonbypassable to reduce the risk that they will not be able to recover as much transition costs as possible during the rate freeze period. Ratepayers (residential, commercial, and industrial) want CTC to be nonbypassable to end the rate freeze as soon as possible and to avoid shifting of transition cost responsibility. PG&E contends that the last sentence of § 369 does not extinguish the obligation to pay CTC, but recognizes that PG&E may use the FERC transmission delivery tariff or contract used by the consumer as a mechanism for collection of CTC only if FERC authorizes it.
PG&E further contends that the critical factor is that PG&E is not attempting to collect the CTC through a surcharge on service taken under FERC tariffs and would not impose CTC on Western (but on the customer) and would not result in establishment of CTCs that would be included in Contract 2948-A, and therefore does not set FERC rates. According to PG&E, the CTC will be charged under a tariff that applies to retail customers that are subject to this Commission’s jurisdiction by virtue of their partial status as a PG&E retail customer. PG&E further asserts that it is not a party to the sales agreement between Western and its customers and those Western-customer agreements are not on file with FERC because Western is not subject to FERC jurisdiction and FERC does not have jurisdiction over sales of power at retail.
The Farm Bureau, CIU et al., and Edison support PG&E’s position and state that there is no reason to assume that § 369 exempts these Western allocations from the CTC. The Farm Bureau suggests that AB 1890 does not provide for an exemption within § 369, but that the remedy may lie in legislative relief.
We have addressed analogous situations in D.96-11-041:
"No exemption seems necessary. An important point here is that the reduction in load is not permanent, but is part of normal and continuing variation in the federal deliveries and residual PG&E service. . . . these customers do not fall within the definition of departing load, since they continue to be PG&E customers under the same arrangements that governed their service from PG&E before December 20, 1995, and any reductions in load that fall within the existing arrangements are not ‘subsequently served with electricity from a source other than PG&E.’ This conclusion may not apply if the existing arrangements were altered in a way that reduced service from PG&E and substituted service from another source." (D.96-11-041, mimeo. at pp. 15-16.)
No exemption is necessary in PG&E’s tariffs, because the definition of departing load does not apply to Western customers who are merely shifting their allocation of federal preference load and PG&E load in a manner contemplated under the existing contract. While no exemption is necessary in this instance, PG&E should clarify the tariff language included in its Preliminary Statement to further define "departing load" in accordance with this decision. While as a matter of public policy, we believe that to the extent possible transition cost responsibility should be subject to as few exemptions as possible, FEA and Sonoma have raised important jurisdictional concerns. Under the scenarios described, Western customers are exempt from CTC. According to a plain reading of § 369, FERC must authorize a CTC mechanism as it applies to service taken under contracts, tariffs, or rate schedules that are on file, accepted, or approved by FERC. Therefore, this Commission cannot authorize a CTC for this service. However, a customer outside of these specific federal preference power contractual agreements or other similar agreements covered by § 369, who was taking PG&E service subject to CPUC jurisdiction prior to December 20, 1995 and then displaced that PG&E service with third-party generation, which is wheeled to that customer under a FERC-jurisdictional tariff, will be subject to CTC. In addition, to the extent that a CTC is imposed by FERC, we intend to develop a process to adequately account for these funds to offset transition cost recovery and to make any necessary adjustments to the firewall memorandum accounts.
In comments to the proposed decisions, PG&E requests that we clarify the standards for applying the provisions of § 369, including how CTC should be applied to, for example, new Western customers, existing customers at new sites, customers that resell Western power, military base closures, departing customers, Western customers that buy from someone else, and customers served under other FERC-jurisdictional contracts. We do not intend to provide a definitive list of which contracts are or are not subject to the provisions of § 369. We expect that parties should be able to apply the provisions of the law. To the extent that there are disputes that cannot be resolved through the dispute resolution process discussed herein, parties have the opportunity to file complaints or the Motion for Evaluation of Departing Load Statement, described below. Specific comments on this issue have been filed by the City and County of San Francisco. Pursuant to Rule 77.4, we will not address new factual assertions brought before us at this time. These facts, as noted by the City and County of San Francisco, are not part of the record and these issues are not before us as part of this proceeding.
We take this opportunity to further clarify that interpretational arguments amounting to: "We were there and therefore, only we know the Legislature’s intent" will not be accepted. The Legislature could certainly have drafted the language included in § 369 to ensure that limited purposes and special considerations would be accommodated. Obviously, the Legislature did not do so.