HomeMy WebLinkAbout07/01/1997, C-9 - PG&E ACCELERATED DEPRECIATION OF DIABLO CANYON POWER PLANT council
j acEnaa Report 9
CITY OF SAN LUIS 0 B I S P 0
FROM: John Dunn,City Administrative Officer
Prepared By: Bonnie Gawk City Clerk
SUBJECT: PG&E Accelerated Depreciation of Diablo Canyon Power Plant
CAO RECOMMENDATION
Adopt a Resolution in support of San Luis Obispo County and San Luis Coastal Schools' effort to
obtain relief from loss of property tax revenue as a consequence of electric utility restructuring.
DISCUSSION
A discussion was held at the June 5'h Joint City Councils meeting to consider the impact on cities, the
County and area school districts of PG&E's accelerated depreciation of the Diablo Canyon power plant.
The action of the joint body was to recommend that each individual city consider a resolution in support
of efforts by the County and School District to obtain relief from the loss of property tax due to the
restructuring of electrical utilities in California.
Attached are a letter and information packet from County Administrator Robert Hendrix which detail
some likely effects on local agencies of electric utility restructuring.
FISCAL IMPACT
While adoption of a resolution of support will have no direct fiscal impact for the City, the attached
documentation illustrates the complex fiscal implications that the accelerated depreciation of Diablo
Canyon has for local agencies within San Luis Obispo County.
ATTACHMENTS
• Resolution
• Letter from San Luis Obispo County Administrator
• Background information related to electric utility restructuring
C9-/
RESOLUTION NO. (1997 Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO IN
SUPPORT OF SAN LUSI OBISPO COUNTY AND SAN LUIS COASTAL SCHOOLS'
EFFORTS TO OBTAIN RELIEF FROM DAMAGING LOSS OF PROPERTY TAX
REVENUE AS AN UNINTENDED CONSEQUENCE OF ELECTRIC UTILITY
RESTRUCTURING IN CALIFORNIA
WHEREAS,the State of California Public Utilities Commission has ordered the restructuring of
the electric utility industry in California;and
WHEREAS, the State of California has voted into law Senate Bill 1890, which provides for
restructuring the electric utility industry in California;and
WHEREAS, the California Public Utilities Commission has approved Pacific Gas and Electric
Company's accelerating depreciation on the Diablo Canyon Nuclear Generating Facility; and
WHEREAS, one unintended effect on this area will be to significantly reduce the amount of
property taxes received by San Luis Coastal Schools,county govemment,harbor district and the library,
without regard to the impacts on the community as a result of the property tax loss;and
WHEREAS,the proposed reductions will have a far larger per capita impact in San Luis Obispo
County than anywhere else in the State because of the concentration of pacific Gas and Electric
Company assets in this county;and
WHEREAS, such reductions will be contrary to the agreement of mutual support between
Pacific Gas and Electric Company and the citizens of San Luis Obispo County concerning the siting of
the Diablo Canyon Nuclear Facility in this county;now,therefore,
BE IT RESOLVED, that the City Council of the City of San Luis Obispo hereby supports the
effort of San Luis Coastal Schools and San Luis Obispo County to protect the community from such a
serious and damaging loss of tax revenue as a result of electric utility restructuring.
Upon motion of seconded by ,and
on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of . 1997.
ATTEST: Mayor Allen Settle
City Clerk
APPROVED AS TO FORM:
Ddu e2 (',La MVV-0
f 6t City Att6mey
Off
County of San Luis Obispo
COUNTY GOVERNMENT CENTER,RM.370■SAN LUIS OBISPO,CALIFORNIA 93408■(805)781-5011
June 6, 1997
OFFICE OF THE
COUN rY.kDMDtiISTRATOR
A. K. (Pete) Dougall, Mayor
City of Arroyo Grande
P.O. Box 550
Arroyo Grande, CA 93421
Dear Mayor Dougall and Councilmembers:
Thank you for the opportunity to provide some background on the County's efforts
related to electric utility restructuring. As matters presently stand, the effects of
restructuring in San Luis Obispo County are in stark contrast to the rest of the State.
The following are my comments from the meeting Thursday evening.
Comments to Joint Cities Meeting - June 5, 1997
What is electric utility restruaturing?
Electric utility restructuring is concerned with the way prices are set for electricity and
who is allowed to compete in the sale and distribution of electricity.
Electric utilities have been a monopoly. Levels of investment decided by the California
Public Utilities Commission (CPUC) based on forecast demand. Utilities were
guaranteed,a fair return on their investment. Electricity rates were set by the CPUC at a
level to assure a fair return to the utilities on their investment in production and
distribution facilities. Diablo Canyon is an exception to this policy in that its rates were
based upon the performance of the plant rather than strictly on cost of investment.
Restructuring will require the utilities to compete in the sale and distribution of
electricity. Prices will be established by market forces.
69-9
Pete Dougall, Mayor
Page 2
June 6, 1997
The utilities argued that they should be allowed to get back the investments they made
under the old rules (cost based rate making) since they were assured of a fair return
under the old rules. They also argue that to the extent that they invested in facilities
that are not competitive in the new era, they should be able to recover funds invested in
those facilities as well. Diablo Canyon and Morro Bay are facilities that fit this
definition. Such facilities have been termed "stranded assets". A mechanism to help the
utilities recover these investments has been included in restructuring legislation.
What does depreciation have to do with electric utility restructuring?
Depreciation is the mechanism that will be used by the utilities to recover the funds
invested in the stranded asset facilities. The way this works is that rates will continue to
be set or managed for a while. The rates will be set high enough to provide the money to
offset the depreciation. This will be continuing for a limited amount of time about four
years in order for this to work, the full amount of investment must then be recovered
within the four years. That is why depreciation will be accelerated.
How are these "extra" costs paid for?
Two things will happen under restructuring. There will be a mandated reduction in rates
and there will be a gradual transition to market pricing for electricity.
Since costs in the short term will be the same or higher than they are now, a gap exists
between the mandated reduced rates and the amount of money needed to offset
accelerated depreciation and continuing costs. The State has arranged to sell bonds to
fund this gap. These bonds will then be paid off over ten years. Through a surcharge on
the market rates.
9-7
Pete Dougall, Mayor
Page 3
June 6, 1997
Why would depreciation af'ed the taxes going to local agencies?
The reason that depreciation affects the property taxes is that the taxes are based on
market value of the asset. Book value, or depreciated value are among the types of
information used to set values for property tax purposes.
The depreciated values will decline much faster when depreciation is accelerated even
though the practical value and life of the asset is not affected. The State Board of
Equalization determines the value of such properties for tax purposes and the State
Board of Equalization decides on the level of tax and its allocation around the state.
"y is this a special problem for San Luis Obispo?
What makes this county unique in the state is that we have a tremendous relative
amount of utility (PG&E) assets in our county. This very large amount of assets
corresponds to a very significant amount of unitary property tax. A large share of which
is a part of financing in the county. In other words, a lot of our property tax in this
county comes from the unitary (or utility) roll.
Accelerating depreciation will reduce those taxes at a very rapid rate. In fact, no other
area in the state is affected so severely. Our estimate of the impact is $61.2 million over
the remaining life of the power plant. PG&E does not disagree with this estimate.
What has been done so far?
The county along with the school district have been pursuing several remedies for the
problem. First we have been and continue to work at the CPUC to get relief for this
county built into the fabric of restructuring. (We have lost the first round).
�9-s
Pete Dougall, Mayor
Page 4
June 6, 1997
We continue to work with our local legislators and those directly involved in forming
legislation for the restructuring effort to get our problem addressed in that way.
And third, we are working at the national level since the nature and form of electric
utility restructuring is a matter of continuing national debate. And, within that debate
the issue of impacts on local government is a matter of discussion as well.
What can the cities do about the problem?
The cities can certainly help symbolically by adopting a resolution that indicates support
for the County's efforts. A resolution has been prepared that commemorates such a
position. I hope you will seriously consider the resolution.
I hope this information is helpful to you. Please let me know if you would like
something further.
Sincerely,
Robert E. Hendrix, County Administrator
X96
1950
County of San Luis Obispo I
COUNTY GOvERNMENT CENTER,RM.370■SAN LUIS OBISPO.CALIFORNIA 93408■(805)781-5011
.j
August 12, 1996
OFFICE OF THE
COUNTY ADMINISTRATOR
ITEMS RELATED TO ELECTRIC UTILITY RESTRUCTURING
I. San Francisco Chronicle -May 22, 1996 "A Fiscal Meltdown'
2. Governing Magazine - July, 1996 "Electrical Storm"
3. SLO County Release -May 24, 1996 "County Steps Up Protest Against PG&E Plan"
4. SLO County-May 30, 1996 "Impacts of Electric Industry Restructuring on the County
of San Luis Obispo"
5. PG&E Investor Relations - January 1996 "Electric Utility Restructuring"
6. Public Utilities Commission -May 1, 1996 "Protest of the County of San Luis Obispo to
Application No. 96-03-054" [by PG&E]
7. Public Utilities Commission -May 31, 1996 "Motion of Toward Utility Rate
Normalization, The Division of Ratepayer Advocates, and the County of San Luis Obispo
for an Order Instituting Investigation to Review Alternative Diablo Canyon Pricing and
Electric Rate Freeze Mechanisms for Pacific Gas and Electric Company"
.§an;Francisco V-4ronlcle.
DUSIMEMM
J
unanow
.F SEAL
I MELTDOVVN
II
Power plant's
* PG8 E proposed
depreciation — to accelerate the
depraeiation.ef
would be the oiablo
Canyon nuclear
power plant
a big blow to (left);
, r
employees
San Luis Obispo 1 +, (below)worked
inside the Diablo
Canyon plant,
t which sift in San
Luis Obispo
County
.t
Y.
_ _ __ __ _ worasvra_u mneoearra
By Jonathan Maralatf f speeding the depreciation of Diablo Can- -
es.a:ar. yon,lomted In the county on a remote mr o too
coastal site.to become a more competi- s
an Lois Obispo County faces a Live seller of eleetrie power. Somas. CALIFORNIA
fiscal meltdown due to plans When a company Invests In a Capital ;. .aObir
by PacificGasssandElectricCo. assets-uehas a power plant.It"depreei- n.a<b eaY.nR.ld
toslash the value of its Diablo ata"or deducts a portion of the cost ev- Santa.
Canyon nuclear power plant cry year from revenues.This reduces ' aa.balo
PG&E is by far that county'$largest .the campanysearnings.taxes and-the - a
source of property taxes.in the current "book value of the asseL 'pO Lb.A
fiscal yeacit will pay f3'f1miDion;said PG&E was planning to write off the
County Adniinistrajcrl bHendrix. remaining f32 billion book valueoLDia +Diablo Canyon U
That covers most o[San Luis Coanal blo Canyon through 2016.Under its cur nutlem reactor
U1-- 'School District's expenses and rent pian,it would write off a grater - O, o.
t rounty's discretionary budget amt each yearreducing its book val-
oun , +�.. a
it g police,fire,libraries and other ue to near mo by the end of 2001-15 POOrrt Oisen
basic services. yatsahad of schedule. ■Operator:PG&E MEXICO
But the county could lose nearly$10 Once the plant Is fully depreciated, Y Po"r:2,200 go-ala,
milbon a year under a plan PG&E re- PG&Ecouid lower its electricity rates ®Sort-up date..5/81(ulrit 1).3166 Jura 2)
Gently filed with the California Public - -
utilities Commission.PG&E proposed PG&E Pape DSCoI.I rx oraclt W.,nc l /�
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Sze
7j
M.
itg C. Eled]IC I)O%Vel- COStN (tile Cen( piej-,,'
kilowatt-hour ;ICY-OSS thetheborder ill
9011, but tilt' 11111-C CidiF0111ill M011011(1Ii(-%
WG&E. Southern Calif0lilla I"(11S011 iLlid
Sall Dicgo G;Is I\- Electric) charge most
CUNtOlIM'S 10 tillICS that 11111CII to gellet-
ilte. transmit and dchvel cluctricitv to
hollies and businesses.
Z To.
Lust December. the Califbinia Public
-V; Utility Commission voted 3-2 to break Lip
ve
its till .0illit utility monopolies and
o the whole state to lower-cost power.
Under the commission's plan. the era of
.Mretail Lollipetition %%ill begin officially in
Calirbillia on fanuary 1, 1998. When it
collies. SMS Stanley' Hulett, ;I former
PUC president, "everybod%'s going to
Save, because the price of generating
electricity is e0ing to go down.- Hulett
predicts that pu%%er CLIStOlIlLM %41
L
SMIC bem-cell 10 and 15 percent in tilt,
fit w %t first feNvalafter det-c-tilatioll Occurs
just bN billLfAillill'-' I'M the IWSt (611S, and
5anothei 2 iti.;cent, per kilowatt-hour f'0I
111MIN thal.
Bill It ISII'l to IIV(11.litt-SO eiLSV. ill
C:Jililnlia or Li dsc. Wall fe(lend
and state Ivpilitton consent. L.S. utilities
W. have sunk SiW billion into their white-
elephant otICIL-ar 1.ZC1Iel-iLtIllc' plillltS Mid
11101le\-losim, power purchase contracts.
tr utilitx shart-1101del-S (1011"I X%Wlt to albSOd)
thosc slialidt-d" costs. and in the ncxt
colllpctiti%c 111arkvIllack.. 1-cunihitol's don't
S(Vill ill(Illit'd ll,foIL't tilt-ill It). If dl(.'1)1-tCL'
of po%kcl dity, diaNticalk. SoIllebo(k. 1,
still will"to 11a\c to pan'oil all that debt.
And C%t 11 11. •L, I Ill]( It t'\l)VLtS. tilt
IINIoIIIL-1 cilim, ;t
thcre's the qtwtion of hat happens to
ti 10SC Xt IM.ler not \L':'% sac%%.%. 01 jUSI I till
11 I)M-' indust ries duskilt illc
lltilih(". tilt ICII T111,11(atcd
4. IcIl bdimil totd,: _('I ,luck \%ith hiji( I
bills to (mc: the nn,takcs tli.it tilt. com.
pallics alld thio _incrollit-lit mclsvcls
committed L nder CitliI611IMS Ill!%% "S111--
vivaI-ol,-tIIc-IillL-Sl" approach. says Ken
N-IcEIdo\%-nv% of Constmici Action in
Cheill)l t1hill tIlC IC>C:;Il I)KAVC-1 tpanv. them sell power directly to big ill(ILISNIVS Cidilonlia. I)i--' (311 companic.N aild Inanti-
Foilr vears o, C011gress
ito -cj the and other retail customers. The% want facturelb Will reap Cstl) bil" -ItVlll�lls 'Wild(' lit('
l
\%;'\ fol 11111("I'tilath-d C01III);L1I1C5 ;IL-c('S% ll()( oIlk, to the 10119-dist;IIIC.U gT-idS I'C:St Of its should C011111 oil IM\ill.14 11101V
Mth c1licit-111
la.,-nwd -t-nt-ral illplants bill 10 OIL' I)OICS itIld Wil-CS ;tI01111 Ill(' tililli%%t-
I I should f'ol vvaIS to winc.
to SvIl power I(, wholt'sall, rusk duels at streets and highways of vil-tualk twcl-y
brags r ill 1(, , I In, %( 111 the Ft-dvial c(111111111116 ill thecinintiv. ill-W .11, th, I'll]," k III,_, Ic'h'd 11:
it. 1-\ 1.11111,1N,mll [Illcd ';IlifOlnu is dt-IjAill"*Iio\% io take ili;tt ill, h'-.111 b. Wrl 1.
comps 11loIN illost bc- filial step. and there po�%vlllll icamills j1i1j till
lit.1111' IT
11) tim tilt- District. Plaxall lilt I I'll 1,It INvOccoill-
Till"wo 111.11 Ill.. 1);I\ pmwl compallics $18 billion ;t %rail, Imm. IINE., 1-1 ill, oI pom-1 .11 it,
1.1 (,11% lum. I m III', 111c cuuulr\%idc ."Al illc t-k-ollolliv has beco %addl'-d b\ PillSbITIV. LR 11W. In ILIIII.
\m% to l(A ears 50 percent ithove tll(7 liatiullal ;[\(,I- gco aml I'll nlJn,t 1.11 sus
• .1111, mw GOVERNING 21
I I I l /•,t
i to I(•:IIitr Thal in (lit- powcr business.
'
C _� ' �' �� ,� / �� ! `. = public(all ht•(•h(.:gx•r flim priy:dr. I\4•%%�
y '' >8 g PACIFIGGAS
• : ! d lurk C:ou nior Crur,l' I.. I'al ki, a con-
' f' AND ELE
!'
scriali" liraLlc• ntblicui. ,%:illsCOMPANY
g
i
the Slat(. In fal;r• rnc•r IAnI" Isl:utd Lig,ld-
f �� �i im_ (;o., tic• rnnrlrhalcd utilih• scith tile•
i � 4, • _ nation•. hiL'hc,t r;tic•s Ilial sc:n•cs Nc•cc i
York Cit%>uburbs.
Nc xy I I:uupshiro is beginning its expx r-
1a}
f. f. •. inxnl syith rchtil lower cingxailion this
./s PG&E headquarters in
San Francisco:Northern Sliirilii(•I'•allio%%iii,more than 160)0 busi-
•�� g California's giant utility won't mess mel rrsidCntial C•Ilxt(1111(•1'S to chcxtSc
�/. disappear,but it won't be unung as noun as 29 c•neigy m:u'krlim,
what it has been in the past.
limns that pl:ui CIlealx•r alll'ntatiycs to (hl'
j[ lulkv rates that the imcStor crwnCd i'ublic
•r= "r— ment in the troubled Mahlo Se•ryic•c Co. of \'c•cy Ilanipshire noxc
Canyon nuclear power plait( but it ch:ugcs. The \ccy Ifunpshire Icgislaturr
also must pay anextra SbWmillion llapc•s to catond the "retail syhcc•lim,
0 to$lbillionayear inalxws-market option to elcrhicih e•onsunxers ccithin
costs for power from solar. %%incl- the;talc h, 144
mill and other alternative energy
pWits that federal and state re ula- rhfnHIMu(t i1 inin,SoIlle\khat Ilia(.
tions ordered it to purchase•. The dclibrr.tcb Last lull, Cm unlor
state utilities Commission Ltctnrl'(I to`Pct(• \\ il.un . adininish;ttiuii
tomers. Electric power comprises 70 per- those obligations into the rates P(:&I': hit., helix•d brokci ., c,n„pron iw that South-
cent of the plant's operating costs. A 15 been changing Pruadr and all its other(.us- cni C:aliforiiia Lchson negotiated%%till lbC
percent reduction in the price of power turners. If Pixxitir or aiiy other cusGanc•r Californi;i \l;uuiLtcturrrs Association ;mid
would save the company three-quarters defects- PG&E say's the deli•clur sbntil(I such In, n dtl,tI Ied pocccr custom c r> as
of million dollars a year. pay a special Chevron. Ford Motor Co. and tla• cont-
So while California debates dereg;ula- bution toward cox-cling the utilitc•, utas- putcl chill Linn. in Silicon \;tll(•s. l ndl'r
tion. Prtpdr has been looking for a xray to sive sti.ncled-ost bill. "x111 tial cyc ll'auk- the coiig)Iontisc. l;u,_e ejI%tonrcrs using at
get out of papio? PG&E's high rates.This ingfor is a le(-el playing field"%%foil(.('(a\li IVilSt S niegacyatts of electricity kill be
year, through it complicated arrangement slinis down to get ready form:ukl'troinpc- ail(. Io hu, it nrst cc:u direct((. from
with \I(xlesto. it Grund one. The \I(xlesto tition. says Shawn E. Ctxipe r. the linos ndcpc ndrnl priccrr provide rs \II cos.
Disttict%%illbuyrIC(ITI IN atChe:giWhole- mtanaeer. Iia' political resourc,.s. \\', 'cc Ioii❑•n cciil In , li_lhly liar (Iirl-cl .Ituc'%
sale lutes hunt I)estec Power Seniots,an played fairl\ under die rah%. but nnc% the h% 21)(1.; \Il-. „bile. Cithloi iiia "ill
independent marketing first m%ned by tsune is ch;ut_tit, nbtnidic the tlncc phases of ,cls ice--
Docy Chemical. Then it «ill deliver it to The whole dispute forosliadoc(s Ihc _rneralmn Ir.unnussiun and diaribu-
die Pittsburggts plant dirouglt it substation nucneuyenng that commissions and Ic,is- tion—that til- c e rticaly intc,rdc(I utili-
that Mixlesto has purchased fiom Prixidr. lators can expect in man- plac'e's as they til, nose pmt idc ;is it package to Al Ihc
To make :dl this possible. the Pittsburg shake up the once-conifortabh• but nocc- conunuiiitirN ni Ihcir territories. In t1Lc
ON Council sp c•ificlly granted Mmlesto cumbersome regulatory strimun. that future lbrrr „ill hr a c•cntral poc(ct
a frutchise to compete with PG&E inside protects power conipaniC'S Holm conyn•h- l-�cicuc,,.• c,hrn _vociatois can wai k,i
thcCaN lwun(l:uics. tion. In sonic states, lite turmoil of com- rlcclrtcilc .mid co.lont r. can bol- pocyc'r
Once it has it foot in the door, the petition is forcing unexpected nws(.s. ;ts California utililir, ccill still bo :till(. to
-Modesto district could build Ix)wer lines longtime piiyatiuetion enthusiasts coral- operate 10(id prnccr (listtibution scstcnu.
along Pittsburg streets to sell cheaper
p onver diiouglxait the cih•. (lie City gov-
ernment itself,)it,vs PG&i $1.2 niiilion :t THE PRICE OF POWER
Year fin. electiicih, including S3OU.000 to
run its municipal SLWage trt.ittnent plant. Average cost per kilowatt-hour in cents, 1994
After the\I(xiesto dead tune along, PC:&E M Publicly owned srstem Investor-ii ed system Cooperatives
showed sudden interest in negotiating it
better dt-id. "I believe that Competitive 8.8 7.8 7.9 7.4
fi)lxx- in tic clec•tric•ih' Market arc plainly 5.7 e.L .�..
dc:siiablc Irons till-(vn>unx•rs standpxtint. stj
till'cih•;dooms•\ prtK'I:druS, uuahle Io stop -.•; s - {y
Ilinudf from c'huckliugcyit] dc•ligiit.
Ifow flexible K:&E, <nn afford to Ix. is Residential Commercial Industrial
i'llod er(luc:son. Not onls•is(hl-coinlxury
stciclksl xwth dl'bl limn its$5 billion invesl-
22 GOVERNING .Lily144G .. .,.
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inhealthandaidingthemintheeventofanaccideotorillness.Forinformation,give us- call, ,
a1180D99•AFLAC(1•RDD9923iLl:You'll
find Hearecontinaallyroikingtomake sureour
dieaf4whosuffecmedical setbacks concentrate on this oneimportant thoughtjust Get Better.
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I
POWER PROVIDER a UTILITY INCOME
Number of electric utilities,1994 Electric utility revenues in billions,1994
d0\yu :I nnunicipalii,tion propoxal.
FOI l(Kal go.enuu(,nls that dont \\;all
Pub1:aro.m syct ml- to nut a municipal plant but dont w:nit If)
2,01s Ila\ 11wi IIIIIIII ride Ila an 111\(-sloI'-11\\II d S199.7
ntilit., till(. is ;it II-:est one other hill lll.11l
option a\ailahk'.'I IIc•} can tIV(\md(•uulifi_ w:-P.aicly gra rot.
525.7
\ IIIc utilil\', power lines :old meters, then
(rcatnlg a 'urtnli-lite" thal could inn
r"ar.'°°'QInetL x10 249 stsema lower-cost Ilower' ftTnn wholesale genw;l- Federal au elteacks rmpe t1w,raema
$1.7 516.0
tolti. In die suburbs of Washington, I).(:..
Sauromeacan e:aPubis(Pm r assonatlon the tilll:dl clh•Uf falls Church. \`II�.'lll Ll. i, SwrCe _?•aan VuZe.Po l nsslmaoon
cOnsidwing it variation of dial. It \vont., to
owned giants: They enjo\ tax-exempt Like over\'il-pilia Power b; Lights nlcten. (Irr(gnlation and colllpc•tition. PG&i;
fin:utcing and preferential access to feller- then force the utility to deliver cheaper exetvloc%i insist thal til(- colnpall\ \\ill
ally subsidized hydropower,:m(1 Ute\-dont Ix)wer Ute city could huv for its resident, eidetic.allyl the shnnl its it Ican distihu-
have to pay stockholder (IM(lends. Many Or a govenunent could bring together Gun machine rvad\ to take on all conl-
of Ulenl :dso reslxmd to Ixlliffrd pressure it consortium of snl:dl-scale power users pctitors. Collie local _o\erntllent official,
by keeping residential rates lo\c and to form :1 combined pool \\iUl Ute sin\\ think lila (Isn't k00%% IIo\\
imlx)sing a surcharge on inclustr\. Some and buying power to negotiate better comlxtiti\c•the.•II be in 2(IU5, says Ban-
hig mutucilrals have run into finial id tlnu- rates. In California, fornner utilih• con- nernl;ul. the RLkd.le city nemagcr. "but
I bles of their o\vn after costly nuclear power missioner Hulett is w•orldng With a con- PG&E \\ill ha\c .it(c'Ns to the sante
I in\estnents. On the other hand, Fitch suiting fine founded by a fornler South- cheap Ila\\cr as e\CIMo(: (,k(,. one(,
investors Service rates the lacksonville ens Cal Edison president that offers to str,oldvd(0,:,,114•p,lld oil "
t Electric Audiority in Florida its Ule most broker deals fill snnall businesses, apart- \\e ll' •u l_ 10 it"'. soul(, cn,lona•r,.
connpetidveutilityindie entire countly. ment owners, farmers or other similar that, \en .i\,u. K.&E \iec Pre,i(Ic it
groups that cant too that on their owl '111.n.rl (:o •a(.r a(LIIII. fill[ d(M Il tilt
Relatiyely few of the municip:ds \\ill Hulett also has been working on a similar road. \ce it _nor; Irl _air \oil(• .(s \\ell
have die desire or th(. rCsources to arrangement that would find better r.oc, \\, Cao I ;•!!II up .01;1 I(..1,(, C.(Illin
compete in market, outside the fill- city and count\ governments in lh1• Oill bu,1r., " Is \'•t,lbli,hcll
communities they serve But sonic of San Francisco Bae region. L(x:d go\cni- _intimd , f11 O,kcal. \\here tic
them. like the Modesto li n'anion Dis- nu•nts thcrc no\\ pay PG&E S1S0 nlilLlul 1,l, 111 h (,. !1I1Icr111_ .1 s\\Itt'll b- cheap
t-i(t, see deregulation as it chance to it ,\e;u r fuelectric• po\yet' at ofb(c,. \lodcSto 1"L\\el-. 111,- 1,(;&[: office 11.1,expand into lueoativc•1,e\\ Ienitolies. S(1w;jt!e t'(-atincot plants and other I II\ Ion_br1 n:.._lll ac'r1 IIIc Qwl-1 from cit\
Besides die Prcvurdeal\\nth Pitlsbur_. and Count\ facilities. Because utillilt h.dl \o III.:: c,id(.r:l• (..111 (II) dwif go\.
\lo(lesto IMS Ile't•n n(,_utiatul_ to e\te'nd usualk bill ..1(h Installation wp;uat, 1, , 111114111 II':•elr,s. It o.1\ the ck (111( lull
its pu\%cr lines into OAd.Ilc. HI\crbank Ihesc _rnrminelll, ha\c been ,tuck \\;;h uI Inn1'.I,\ ;'\•1 I'G,vl II:I, Iold !nlnut I
,old t\.o adur ne:u-b\ ,mall I(MON \.hrr(. rates of 10.(.rill\ if more a kilo\\,Ilt-hour ]).if 1c.ldcr, '':.:I. \\b.l It r h:qlp(.o, II \\III
businesses want it chtaprl .dtcncttcc to \\ell abo\(- M1.11 Iargc indlistial , Il,-nor
PG&E. Until dercguLllioo goes into briers alre.ul\ cnju\. But ""ken III. k(,epul_ It '1,1,, m I\Lal'a. loo'-' L, thele
effect. PG&E has no ohllgation to let usage file\ hay.. there should be Lull\ Is 0110 CuSNIIII r lett Bill wll IIIc offi(C be
\'Indestl use tilt• distribution lines the siLll)IC reductions available t) th('ul •,o 01it'II ;u nl_!C lin ci\I, _roup nlrrtuig,
conipany has running through triose c<ml- conipetitne markets. Hulett say's. Ill(. \\;I\ it .•.I\\;t\ hu s , • Will ,t shnnnc(I-
Illunttes. So N'lodc• to loaf proposed Ihl'rl' is allothel ,Id(•to this('(till. I !!l! 111\\11. 111Y It:'-:J111(kd I'( lel'. Itl.11l11.I111 du'
\t'inging its o\\1, \%IIC• .loll_ tele (boll(, lies pin fro lrrt\ la\(., :(rid flanchisc It, , 1rl\ ,I r\Icl • II II.I1
poles on l the ollicSade of IIIc Street. to loc:d go\rnuornts based nn the r.lt," krl n �Ii11'ur: 1n111t'1111r1 a, :I luolcctcd
.AVC'd rather not 141\V duI)IIURe hncs .. life\(h:u.gc. In San fuse,fill exannpiv.olii. Inonopok ILat 1,(htii,Oil to uua_Inc
says Oakdale City Manages Bruce Ban- cials calculate that the city alight s,nr pits )ur_ tall\\ .In t \,.'11 nu)rc pitiolul
ne1111;m. 'But if nlajonr\ of pcople in tovu S500,000 to S2 million it year on Il: (-p:ualloll t PG&I: ,ilk 1,r Shuts(11,\.11 il:
\yould switch.-Ile believes. "because municipal electric hill in a c•onlpetlt\c Li-\tar-old pot%cr pl.wt just onl,Idt- of
\IOdeStO's Ides look so;ittmcli.c. bu•ving SyStcul. But if (:lccticil\ r:t(•� icll Io\\II '1'(,,. _Cl clln ll,rlil i\c 1.11t 1...,;n,
In other places, industrial corpora- 25pereent• it:dsocould lose$121111111011,( \.1.110 thecit (:h:unb(,rol'(:ooh
tions are pressuring lo('al governments ye:u in Lacs an(I fi:nchise fees calculated mere(• exceuti\e \I( ll 'Sidcnt, hull \.r
to go into the power business its it \ray as a percentage ill the utilit's local r(,\- tko (Ion( \\.ant to II I'Gc\F Is ;I Inaaul
of saying the conlpau. looney. TllC enues. Asa \%;I\ of solving this sort of rnq,luv(.I \Ill'llill'1 \\1kN1]. Ib(,(,d\ :dGn-
James River Coll). Ilan hct•n urging til(, problem. rbc \Indrslo (negation I)i,trll t 1,r\ .Igo,'. I riot ilii 1 ll(.opll'all for tile(.
N IwoI rIf I);u'lin_Ion. tion 11 1 (:anomia. h, ULN ull 'II 61 l),I Ii ttsl)III lot] I:I IT.:I It 11,1\\1nl\ I'(.,\I
culIII :1 (.il\-o\\'Ill•d lit l ill\ 11) brill_ III \;dl('\'(1)IIIIIIIII IIIIt',a Ill14111l•1 11.11 It'llII,1.nmol lin•1,l ( .11lln.
(I1(apel power fior Its Dixit. (:up planl rate to kelp mnina'ip,l wwnu,, ill\ 111.1 Ili' .II .: „1\ lnuli.urlrnl:d It \1 hill
Last wintci. Anchor (au> ('011tallll•I Perhaps Illy bi_grst ollucriaint o1 .111 \\fill .o 1:01, I1 .Il ,I.lk, . hr .ail, it \
(14.6ded Io cfo>c if \c\\ 1'.1w\ facllil\ Ifnwe\cr. i, %dein \\III li.ippcll 111 P(:(\f lilt IIIIIN it' . ' if, III 1 ',;,Inlr .Ill\ \\:I\ \\r
of cz Al c'r(Iwou 'I'o\\n,lull \olvis turned ;(fill tic ollwl \\orll .d r.ill 14,1). 1 :!.:rtrlrt;;), I l,loull1 U
24 GOVERNING .1111, 11196
/!�'-/�
_ � 3
Comily of' San blis Obispo
COUNTY GOVERNMEN-T CENTER. 101 :370• SAN LUIS OBISPO.CALIFORNIA 93-IDS•(SUa) 781-501l �
C{ L
OFFICE OF TIIE
PRESS RELEASE COUNT) ADMINISTRATOR
May 24, I996
CONTACT: Bob Hendrix, County Administrator (805) 781-5011
Jim Lindholm, County Counsel (805) 781-5400
FOR IMMEDIATE RELEASE
COUNTY STEP. UP PROTEST AGAINST PG&E PLAN
San Luis Obispo, CA - The County of San Luis Obispo filed additional information with the
Slate Public Unities (Commission toclay, further strengthening the County's protest against
Pacific Gas & Electric's attempts to drastically reduce their property tax payments for Diablo
Canyon Nuclear Facility, near San Luis Obispo. The dispute involves payments the giant
lifilitv legally owes Tilt, County which are vital to school, police, fire:. and other high priority
1)102mmz }ended fror; lix-al prolwty tax revenues. It also re�:ulted from P(.,\F retx%ued
Icfus;lls to meet wlih the Comity to discuss resolution of the Issue:.
The expanded in(omtation was sent to better inform the PUC of the special situation that
exists in San I.Uis 0hiSp0 County in advance of a public PUC workshop next friday. May 31,
in San Francisco, to discuss PG&E's restructuring transition costs. The C'ount's filing details
several ways in which San Luis Obispo arca residents could become unintentional casualties
of PG&E's` restn,cturing plans:
• Diablo Canyon imposes severe limitations on the future use of prime coastal property,
even if PC;&C were to abandon the site.
• I�1C' ( (11:P1:\' t'\;k'Ilen('ed �I"I11}I•�:illl. lllh't11111k'lltiit;' I ;' t�l� dllrl!1:: Iht' � tc':Ir� (`I
Construction anti ass(Xaated dcmonstratnms, Security ISSLIC.S. pl:illlllll!„ e'li., icquired to
oe.��/�
begin operation at Diablo Canyon, in exchange for PG&L-'s mutual promises of
support and cooperation, frequently referred to as the "moral conipact." Part of that
compact was the commitment that economic and other benefits to the community
would continue far into the future.
• The presence of Diablo Canyon imposes risks and will continue to require extensive
services from the County and other local agencies, whether or not PG&E remains on
the site.
• The potential loss of property tax revenues equates to approximately 50 percent of the
County's discretionary funding base, calculated using the 1995-96 fiscal year. These
funds are used to finance police, fire, road maintenance and public health services.
• The proposal would lead to significant loss of funding for school districts and other
agencies within the county.
• The proposal violates the separate written legal settlement reached in 1992 to
recognize the extraordinary relationship between PG&E and San Luis Obispo County,
and the resulting obligation PG&E accepted to operate at Diablo Canyon.
PG&E has proposed accelerating depreciation of its real properly assets to help reduce costs
and become more competitive. The utility's plan, if implemented, would allow the utility to
escape tax payments for PG&E facilities throughout the 48 counties where PG&E serves
more than 12 million people. But the proposal has a wildly disproportionate effect in tiny
San Luis Obispo County, where PG&E would realize nearly one-fifth percent of its
anticipated savings at the expense of ordy 236,000 of its customers, almost entirely due to the
taxes it would not have to pay for Diablo Canyon.
"We continue to hope that PG&E will sit down at the table and work with us to find a
solution which allows both the County artd PG&E to continue serving the people of San Luis
Obispo County," says Supervisor Bud Laurent, Chairman of the Board of Supervisors. "We
consider PG&E a good partner in this community, but they have a moral and legal obligation
to help us identify a way to more equitably share the pain of restnicturing among all of the
areas serviced by PG&E.
--E:NI)--
IMPACTS OF ELECTRIC INDUSTRY RESTRUCTURING
ON THE COUNTY OF SAN LUIS OBISPO
May 30, 1996
J. The County agreed to accept the burdens of Diablo Canyon Nuclear Power Plant ("Diablo")
in exchange for increased property tax revenues.
A. Increased public safety requirements due to the risk of catastrophic event occurring at
Diablo.
B. Transportation safeguards for removing spent fuel from Diablo.
C. Restrictions on future development of the Diablo property.
D. Increasing infrastructure demand from the presence of Diablo which residential
property taxes cannot alone provide.
II. PG&E's accelerated depreciation proposal in A.96-03-054 for Diablo has potentially severe
consequences for the County.
A. Potential tax revenue loss equals $3.3 million to the County and 56.3 million to the
County schools and other agencies for a total 59.6 million, with attendant significant
reductions in county services and education.
B. The County's position is that the current Tax Settlement Agreement with PG&E and
the State Board of Equalization controls the tax revenue stream until 2002. The
accelerated depreciation proposal cannot be used to alter the terms of the Tax
Settlement Agreement.
C. In the years beyond the term of the Tax Settlement Agreement, PG&E should be
required to continue to mitigate the impacts of Diablo-on the County.
1. PG&E will not object to any consideration given by the Commission to this
compensation issue.
2. The Commission may recognize the requirements of the County to maintain
essential services as pan of its decision in this proceeding.
a. The Commission's desire to mitigate effects on the major California
utilities of the transition to a free market should apply to the counties
and other affected agencies.
b. In the EIR, the Commission must also evaluate the economic and
social impacts and their physical effects Created as a result of
accelerated depreciation and shutting down Diablo.
III. The County requests the Commission to act to preserve PG&E's contribution to rile County in
A.96-03-54.
ELECTRIC INDUSTRY RESTRUCTURING
Company'..Pacific Gas and ElecIrIc
On December 20, 1995, IIIc California Public Utilities Commission (CI'U(:) adopted an order liar electric inclusin
restructuring, Ilya three-t,•t,o vote. The ordcr contemplates (1) the]InlrltaneOtS implentcntaion Of;i Wholesale
power exchange and direct access Cor certain customers which would be able to contract directly%%ith po%a•r
generation proviclers, beginning in 1995,with direct access pleased in for all customers by 2003; (2) establishment of an
Independent S%-.tem Operator(ISO) to manage and control the tansnnission system;and (3) recover of utilities'transition
costs through a surcharge,or competition transition charge ((M), to be imposed on all customers taking retail electric
service as of December 20, 1995. Kee elements of the order arc further described below
Market Structure,
Transition t
Independent System Operator(ISO) I • Provide.,for the collection of transition cost,through a
• Requires P(;&E to de%•c•lop a proposal to the R-clend i non-bvp;tssabic CTC.
Energy Regulatory Commission 0-717P :) for the creation
of tine ISO. .after appri x.ils front tilt• FERC and rile • 1'he(:I C%,ould include the above marker pm ii,m of ilt(-
C;PLIC. PCM:will turn over ronu'ul.but not owne•nttip. I undt-piteiawd book value of a uuilitv's fossil tuclt-tl
of its IlallNIIIIS 011 MNIC-111 to ahoy ISO. The ISO would I garncraliun plant, regulatory asst Is.and tilt-:ibov(• mai kcl
ront'ul the po%%er disp:nrh and uanvnissiun scstc•nt;utd portion of(•xisting purchase oblig.nions fur Greer:niuit.
provide- talismissiun %vr%ie(•on:r non-disa'imin;uor%' H(ltulin�for OualifvinG Facilities (()F) and nurlt-icr
Imsis. j power plant st-;dt-rx•nas.
Wholesale Power Exchange(Exchange) I \auation of abotr niarkvt generation risco:,ronnacts
• Requires PG&E to prepare a joint proposal with Small. an(I commitments (other than OF eontrniunavn5) fir
Cro California Eclison (SCE).San Diego Gas incl Electric purposes of determining(lie(7. C.shall not increase rales
(SllG\1:) and other int•rt-sit-d parties fur Ile•creation of hevood rhe rut-I«l•cls ill cffec't as nl.)auu:u% I. 1946.
the tach:ut�c.which would neutagc•bids fru'ent-1g) and '
set flw nrar•!trt t'Icario;pritI%:Iod tht-n stib+uil its \n lurch.r:urunnd:ukm of(:1•(:will Ix•allowa•d alio
deliver srht-du)t- 14)rho Ilii?Inc dispatch. Ihu•ing oho 200:: old rollcction trill by comp:clerl by 2005.wid: tilt
live,e:u'a:rnsi1iou per6,d to dirccI access, PG&E wunll I cx,opnon of<.fC arising 1'ruw t•xisting LE contracts. 01:
Iw ie( uirt•d t., bid all i:.�r:te talion our hn into :ht• i
1 I C r(:(osis uool 1 hr coilc,cic(1 fir lilt-(:curator of thee'
I'.s(haw.,anti lm r; 11.1"po%,er for its eusion:ers Tool a spa rive connaru.
;hr Ext-kangc.
Customer Choice
• 1, 1:,world vol Iiuut- [op]o%ill(-diariIII!till Icnrn
Iios I 'l ht-•ordcr fi
conrms Iha; the CPU(:would continue to
I'•,r al I custonrcrs,as well as Imwt-r prudurtiun:end i honer rt-.amu!:tar'eommitncnts regarding IIIc•rc•cu%'c•ry of' I
pox nrenrt•nt luncaiorrs for thost•e:utumcrs(hoosiut to i not It-alpowercows.
take bundled st-rvirt-114)111 I'(:\'1':. I .
• Transition ousts assoeiatcd%%itIt Diablo(anvun would be
• tiaarting _jann;u•v I, 144ti.a rrpresc•ncui%'c•s(•I(•clion of I rat(ilia cd as IIIc dilrelet e bee-t•en tilt• ri-6svit Diablo
rnsanntt•rs from each ru<unucr',vup would ht-able. I svlilvowto price and the niai ke•t prices is dvtvrmined br
inlivicloalk or in all aggret;.ne.;o pal lieipare in the•first i the• I`.xrlr:utge pl ice. illi%calculation will be pa•rfor,ncd
phase of direct;t(-cess which would last one vc:u:with the I over the It-III) of ale Sculenx•na or until ta11>iri(in rust
bal:u ct.of arsdnnt-r%pbast-d in u)dirc•cl;icrc•ss o%•c•r a I recuvt ty is ronrplcted.
lift-tear tamiliun period.
• The ISO woold schedule power front til(•i l:mu on.a must
Market Power take basis•consistent with Elle Diablo tt•ulenrcnt.
• Rccluires PG&E to file a plan to voluntarily divest Itself of Tilt-(:III;(:orders PGK1:to file an application within 100
u [crit :i0 pc•rce•nt of ils lilssil generating assets. A I days%,lilt a proposal fir'pricing Diablo(_mvun gvocra-
modest fin:uuial inc'enaivc is propuse(l to cnrurage this tion al nr,u'kc•t prices by 2003 and fir completing
voluntary diveslittrre•. rccuvery of Diablo Canton CTC:by 2005 while assuring
ou ovt•r:dl late increase ot•er jams:ty 1, 1996,levels. The
• Direc'IS P(;&+ Io fill-I onunents oil the Ie;j%ibilit,tinting CP( C rt-quire•s that at Icast one o1 the altc•ru:uives
and cunse•qucnc'cs of a Torpor it•restructuring to presc•nt'd in PGfiE's proposal shall be similar to a recent
Sepm:uc ids ope•tations and assets between generation. CPUC decision concerning nate recover'for the San
u:nxmission and dist'ibulion funcaiuns. Onofre Nuclear Generating Station (SONGS).
PG&E Investor Relations
77 Beale Street BBC,P.O.Baa 770000
San Francisco,CA 94177 t
415973.3007 FAX 415973.5022
V
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORN' L
Application to Modify Diablo Canyon ) tiIAY Z - 1996
Pricing and Adopt a Customer Electric )
Rate Freeze in Compliance with -
Decision 95-12-063 ) Application IVo. 96-03-0 4
}
PROTEST OF THE COUNTY OF SAN LUIS OBISPO
TO APPLICATION APPLICATIO NOS-03 054-03 054
GOODIN, MACBRIDE, SQUERI
SCHLOTZ & RITCHIE, LLP
James D. Squeri
Diane I. Fellman
505 Sansome Street, Suite 900
San Francisco, California 94111
Telephone: (415) 392-7900
Facsimile: (415) 398-4321
Attorneys for THE COUNTY
Date: May 1, 1996 OF SAN LUIS OBISPO
C-f-19
TABLE OF CONMNTS
PAGE
PROTEST OF THE COUNTY OF SAN LUIS OBISPO
TO APPLICATION NO. 46-03-054
Table of Contents
I• INTRODUCTION . . . . . . .
II• COMPLIANCE WITH RULE 44
III. STATEMENT OF THE COUNTY'S INTEREST
3
IV. GROUNDS FOR PROTEST
V. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-i-
C'-9�o
. :. •r dU 1�G 'JO. ao Ca_\ 41.J J]9 •v_i rJJ1D JA
7
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
Application of PACIFIC GAS AND j
ELECTRIC COMPANY to Modify )
Diablo Canyon Pricing and Adopt ) No. 96-03-054
a Customer Electric Rate Freeze )
in Compliance with D. 95-12-063 . )
MOTION OF TOWARD UTILITY RATE NORMALIZATION,
THE DIVISION OF RATEPAYER ADVOCATES,
AND THE COUNTY OF SAN LUIS OBISPO
FOR AN ORDER INSTITUTING INVESTIGATION
TO REVIEW ALTERNATIVE DIABLO CANYON PRICING
AND ELECTRIC RATE FREEZE MECHANISMS
FOR PACIFIC GAS AND ELECTRIC COMPANY
May 31, 1996
TOWARD UTILITY RATE
NORMALIZATION
625 Pols{ Street, #403
San Francisco, CA 94102
(415) 929-8876 (Phone)
z (415) 929-1132 (Fax)
Robert Finkelstein
Staff Attorney
C7 r�/
U v."U4.N0 :« .•.y;,.5 r.i_\ <1.i 3J1 ti-115 Jit
r ' X003
JOINT MOTION FOR AN ORDER INSTITUTING INVESTIGATION
Toward Utility Rate Normalization (TURN) , the Division of
Ratepayer Advocates (DRA) , and the County of San Luis Obispo
(hereinafter referred to jointly as Moving Parties) ' hereby
request that the California Public Utilities Commission
(Commission) institute an investigation into alternative Diablo
Canyon pricing and electric rate freeze proposals for Pacific Gas
and Electric Company (PG&E) , and consolidate that investigation
with the utility' s application in this proceeding. The Moving
Parties seek to have such an investigation serve as the
procedural forum within which alternatives or refinements to
PG&E's Diablo pricing and electric rate freeze proposals may be
considered without any undue limitation that might arise were the
forum strictly defined by the bounds of the utility' s
application.
Rule 14 of the Commission' s Rules of Practice and Procedure
describes the Commission' s authority to institute an
investigation when such a proceedincr is appropriate.2 2zn recent
years the Commission has as a matter of course opened and
'TURN has been authorized by the other joining parties to
sign end ,submit this pleading on their behalf .
2Rule 14 states, in relevant part : "The Commission may at
any time institute investigations on its own motion. Orders
instituting investigation shall indicate the nature of the
matters to be investigated, and will be served upon the person or
entity being investigated. "
Rule 55 provides that " rp] roceedings involving related
questions of law or fact may be consolidated. ,,
1
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consolidated such investigations with an i.n.dividual utility' s
general rate case . The Commission has long recognized the value
of creating an opportunity for itself to investigate issues
concerning aspects of the utility' s operations which may lie
outside the scope of the GRC application.3 The Commission has
also recognized that an investigation can serve a useful purpose
in non-GRC proceedings. In April of 1994, an investigation was
ordered in conjunction with the performance based ratemaking
(PBR) application of Southern California Edison Company (Edison)
There TURN filed a similar motion seeking an investigation in
order to ensure that alternatives to the utility' s proposed PPR
mechanism would be fully considered. In its order instituting
that investication, the Commission stated, "This oil simply
signals to all parties that we are interested in hearing all
Options and the Commission will ultimately chart the course which
best fulfills its constitutional and statutory mandates . " oil
94-04-003 , p. 2 .
The scope of PG&E' s proposals for modifying Diablo Canyon
pricing and for establishing a rate freeze is such that a
companion investigation is warranted. The utility' s application
makes clear that these proposals are the linchpin for PG&E' s
plans €or implementing the Commission' s restructuring policies .
Indeed, the first sentence of the introduction to the Application
describes the interrelationship of the proposals with
restructuring. The new Diablo pricing mechanism was specifically
3See, for example, D. 91-12-076, P . 4 [Edison TY 1992 `GRC]
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called for in the Commission's restructuring poi; cy decisior_ . 4
PG&E characterizes its rate freeze proposal as assuring "that
PG&E' s electric rates do not increase above 1996 levels in effect
during the transition to industry restructuring, ,, consistent
with the Commission' s directive in that same decision that rates
will not rise above their January 1, 1996 levels ever_ while the
costs of stranded investment are being recovered through a
Competitive Transition Charge (CTC) . Application, P. 2 .
PG&E goes on to state that it
considers Commission adoption of this customer electric
rate freeze proposal to be linked inextricably with the
modified Diablo Canyon pricing proposed in this
application. Therefore, in the event that the
Commission is unable to adopt the customer electric
rate freeze, PG&E would withdraw its Proposal to price
Diablo Canyon similar to SONGS, and instead propose the
alternative modification of Diablo Canyon pricing (] .
Application, p. 8 . This alternative modification would have PG&E
recover the value of the full stream of Diablo-related revenues
over the expected life of the plant , with the above-market costs
Of Diablo-generated electricity being afforded cTc treatment .
From PG&E' s perspective, should Diablo recovery conflict with the
rate cap provision of the restructuring decision, the rate cap
would need to give way to full utilit
a ' y CTC recovery.
Application, pp. 10-11 .
The Moving parties believe that there a number of
alternative approaches to achieving PG&E' s stated goal of
4D. 95-12-063 , as modified by D. 96-01-0091 Ordering Paragraph
P.
3
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ensuring the financial integrity of the utilitvs without
embracing the details of the proposal set forth in the company' s
application. While the Moving Parties have not had an
Opportunity to examine PG&E' s primary proposal in sufficient
detail to have developed a . formal and fully fleshed-out proposal,
it seems rather obvious that the package could be improved from
the perspective of consumers should it be made to include rate
reductions rather than a rate freeze, or earlier termination of
CTC recovery. If the Commission limits its consideration_ of
proposals to the primary and alternative set forth in PG&E' s
application, the opportunity for considering such improvements
could be unduly restricted or lost altogether. Given the
importance of the issues at stake here, the Commission should
take reasonable steps to ensure that all parties have the
Opportunity to present proposals on Diablo pricing and con-current
rate reductions . An oil would serve as the procedural vehicle
for considering recommendations that would serve to either
improve or refine PG&E' s proposal , but might be characterized by
the utility as going beyond the scope of the relief requested in
A. 96-03-054 .
The Moving Parties' call for an 011 is not in any way an
attempt to delay the Commission' s review of this proceeding.
There is no reason why a companion investigation could not
5Or, as stated on p . 3 , "assure that PG&E has a reasonable
Opportunity to recover all its utility generation transitior .
costs as well as its costs of providing necessary customer
services over this transition period. "
4
i L r .): %
proceed on the same schedule that is ultimatelv adopted for
PG&E' s application, much like the 011 issued as a companion piece
to the utility' s GRC application. The Commission should address
any fears of unwanted delay by simply making clear that it
expects the OII to follow the same procedural schedule as is
ultimately adopted for the associated application.
In conclusion, the Moving Parties respectfully move the
Commission to issue an Order Initiating Investigation into
modifications to Diablo Canyon pricing and associated rate
recovery issues . PG&E should be made a respondent to this
investigation, and the proceeding should be formally consolidated
with A. 96-03-054 and heard on a consolidated evidentiary record.
Respectfully submitted,
May 31, 1996 TOWARD UTILITY RATE NORMALIZATION
By:
obert Finkelstein
Staff Attorney
On Behalf of TURN, DRA and the
County of San Luis Obispo
5
vvi cot V 1V:Ji "OU* 772 7329 CTY OF MORRO BAY 2001/001
L., cy of Morro Bay
MORRO BAY, CALIFORNIA 93442
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MEMORANDUM MEETING AGENDA
DATE 2 9 7 ITEM #
To: Honorable Mayors
Re: Joint Cities resolution regarding PG&E
From: Cathy Novak
Date: June 23, 1997
I was contacted by PG & E regarding the language contained in our proposed resolution.
They would like us to amend the resolution. I have been provided with a copy of the
proposed changes as well as you by now,Pm sure.
At this point in time, I do not wish to deviate from our original resolution without the
benefit of discussion from the rest of the Mayors. I see no need to push this resolution
through our Councils. With that in mind, I would like to see all of us hold off until we
have a chance to meet in August and discuss this item further.
Please let me know what your feelings are on this matter.
Regards, EVI' m
D DIR31 N DNlRE CHIEF DIRCath Novak LICE CHFY EC DIRMayor, City of Morro Bay IL DIRERS DIP
[IRIE�CEIVED
7 3 1997
TY COUNCIL
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