PG&E Charges Ahead With Special Fee
By Leslie Albrecht, Merced Sun-Star, Calif.
Jul. 12–Last month, thousands of Merced Irrigation District electric customers got an unwelcome surprise in their mailboxes: a bill from Pacific Gas and Electric Co.
Even though these MID customers have never received electricity service from PG&E, the utility is allowed to charge them an average of $9 a month for at least the next three years.
The bills have outraged consumers — about 300 attended a town hall meeting on the issue in May. They’ve also confused people. Deciphering the bills, known as New Municipal Departing Load charges, is a headache-inducing crash course in California’s energy regulation policies.
The following questions and answers are meant to provide readers with basic information about the bills. Some of the questions were submitted by readers.
Q: Why am I being billed for these charges?
A: The short answer is that the California Public Utilities Commission ruled that PG&E can — or must, depending on your point of view — collect the charges. The PUC is the state agency that regulates California’s privately owned electric, gas and water utilities, as well as telecommunications and railroads. The PUC’s decisions are handed down by a five-member panel appointed by the governor.
If a private utility company such as PG&E wants to raise its rates, the PUC must approve the raise. Publicly-owned utilities such as Merced Irrigation District aren’t regulated by the PUC.
Q: How did we get here?
A: It’s been a long road. The public utilities and PG&E have battled for years over these charges; now they have become a reality. The story starts in 1996, when the Legislature deregulated California’s power industry. That opened the energy market to competition.
In 2000, California experienced a power crisis. The cost of power soared, so did demand. To meet the need for power, private utilities like PG&E bought more and more power at higher and higher rates. But they couldn’t charge their customers more money to offset those costs, because the state had capped the rates utilities could bill. As a result, PG&E filed for bankruptcy. At the same time, the state Department of Water Resources stepped in to buy power to keep the lights on in California.
In the wake of the power crisis, the PUC began sorting out how the costs PG&E and the state had incurred during the crisis would be paid. PG&E argued that because state law demands they must serve every customer in their service area, they installed infrastructure and bought long-term power contracts in anticipation of serving future customers.
But in places like Merced and Modesto, where customers can choose to take power from public utilities, not all of PG&E’s potential customers materialized. PG&E said its existing customers shouldn’t be forced to bear costs the company incurred preparing for customers that ended up choosing a public utility. They asked the PUC for permission to charge electric customers who don’t take service from PG&E.
Public utilities like MID disagreed with that theory. "MID and others, like nearby Modesto ID, have been providing electricity for years," said MID officials in a statement. "Merced ID’s position is that PG&E knows this and should plan that some customers or developers will choose Merced ID. In fact, the record developed in the PUC proceedings shows that PG&E did plan that Merced ID and other public power providers would serve customers."
The PUC sided with PG&E. Merced Irrigation District and other public utilities fought the decision, filing appeals with the California Supreme Court. The court denied those appeals without explanation. That was the public utilities’ last shot at stopping the charges.
Q: What are the charges for? Where does the money go?
A: The breakdown goes like this: 72 percent of the money goes directly to the state Department of Water Resources to repay costs incurred when it bought power during the energy crisis. For these funds, PG&E is essentially acting as a middleman, collecting money on behalf of the state. PG&E asked that the public utilities serve this function, but the PUC denied this request, said PG&E spokeswoman Nicole Tam.
The remaining 28 percent goes to PG&E. Of that money, 25 percent is called a Competition Transition Charge. It covers the cost of long-term power contracts PG&E bought before the 1996 restructuring of the state’s energy markets, when competition was allowed. The other three percent is called the Nuclear Decommissioning Charge. That money will be used when PG&E’s nuclear power plants are taken out of service and their sites are restored.
Q: Why didn’t MID warn its customers about these charges?
A: The New Municipal Departing Load charges affect customers in new developments, where PG&E and MID competed head-to-head for customers.
When developers signed contracts with MID to provide power to new subdivisions, a clause in the agreement notified developers that they could be subject to the PG&E fees. But what developers do with that information is up to them, said Vanessa Lara, public benefits and major accounts manager with Merced Irrigation District. "We feel we’re doing our part by informing the developer," said Lara. "These aren’t our charges. It needs to fall on PG&E to give notice."
Q: How are the amounts of the fees calculated?
A: The fees are retroactive. They go back to either July 2003, or the date the customer started service with a public utility, whichever is later.
The bill is determined by multiplying the hours of energy consumed over that period by the amount of each fee. (Each fee has its own rate. For example, the Nuclear Decommissioning Charge is $0.00027 per kilowatt hour.)
Q: How long will I have to pay this bill?
A: The various fees that make up the charges carry different expiration dates. PG&E has said it plans to bill people over the next three years at least. However, the Competition Transition Charge has no expiration date and the Department of Water Resources charge expires in 2022.
Q: There’s a mistake on my bill. What should I do?
A: Check your billing statement from PG&E carefully. Make sure your name and the date you started service with a publicly owned utility (probably Merced Irrigation District) are correct. If you see a mistake, you must notify PG&E in writing within 20 days after you get your first bill. In your letter, state the basis for your disagreement.
Send it to:
PG&E Correspondence Management — NMDL
P.O. Box 997315
Sacramento, CA 95899-9900
Q: If I’m a PG&E gas customer, can PG&E shut off my gas if I don’t pay my New Municipal Departing Load bill?
A: Right now, no. But according to MID attorneys, the Public Utilities Commission has said that if PG&E has trouble collecting the NMDL charges, the Commission may reconsider allowing PG&E to shut off a customer’s gas.
Q: Will my credit rating be hurt if I don’t pay the PG&E bill?
A: That’s still unknown. PG&E does send gas and electric accounts in arrears to collection agencies. But PG&E spokeswoman Nicole Tam said she doesn’t yet know if PG&E will do the same for delinquent NMDL charges. "This has not been done before, so it would be extremely premature to speculate on that," said Tam. After a few months of collecting the charges, PG&E will report back to the PUC, then seek guidance from the PUC on what to do if the bills aren’t being paid on time, said Tam.
Jeff Stoddard, a senior credit counselor with ByDesign Financial Solutions, said consumers who choose not to pay the bills should feel fairly confident that their credit won’t be affected long-term. Yes, PG&E reports delinquent gas and electric accounts to credit bureaus, but the people paying the New Municipal Departing Load charges are not actually PG&E customers, said Stoddard. It’s debatable whether PG&E can legally ding the credit ratings of people who aren’t receiving services from PG&E, said Stoddard.
But customers who don’t pay the bills should keep an eye on the situation, said Stoddard. They should check their credit report 90 days after they get the first NMDL bill — that’s usually when delinquent bills get reported to credit bureaus. You can do this easily — and for free — at annualcreditreports.com. If you see the unpaid NMDL charges on your credit report, dispute it immediately, said Stoddard. This is easy to do online in about five minutes. The three major credit bureaus do thorough investigations of disputes.
Stoddard says consumers who don’t pay the NMDL charges have a good chance of winning such disputes. "Because these people are not PG&E customers they can make a good case that they don’t owe them," said Stoddard. "When (the credit bureaus) find out they’re not PG&E customers I would say they would take the customers’ side."
Stoddard added that because the amount of money customers are being charged is relatively small, not paying the bills won’t seriously damage your credit score.
Q: I think this bill is unfair and I don’t plan to pay it. What do I do?
A: If you object to the bill, notify PG&E in writing as soon as possible. The deadline is 20 days after you get your first bill. Send the letter to:
PG&E Correspondence Management — NMDL
P.O. Box 997315
Sacramento, CA 95899-9900
Ken Robbins, an attorney for MID, said he can’t advise consumers on whether to pay their bills or not, but cautioned that filing a written complaint about the bill is an important step. "If you have an appeal right and you don’t use it, that’s one more argument the other side uses to show that you owe the bill," said Robbins.
If consumers don’t notify PG&E that they object to the bill, PG&E will assume the customer agrees with the bill and accepts the charges. Failure to dispute the bill could be used against you later if the matter ends up in court.
PG&E is allowed to file lawsuits against customers who don’t pay the bills, but the company doesn’t know yet whether it will pursue that option, said PG&E spokeswoman Nicole Tam.
Q: I’m angry. Who can I complain to?
A: The Public Utilities Commission Public Advisor’s Office. Mailing address: CPUC Public Advisor, 505 Van Ness Ave., Room 2103, San Francisco, CA 94102; or call (866) 849-8390 or (415) 703-2074; or e-mail public.advisor@cpuc.ca.gov.
MID officials are also encouraging people to contact state Sen. Jeff Denham, R-Merced, and Assemblywoman Cathleen Galgiani, D-Stockton. They’ve said they’ll work on legislation that could help customers.
Q: Will the complaining do anything?
A: It could. MID officials are hopeful that if enough people complain to the PUC, the commission could reverse its decision. Other options for changing the situation include legislation or a class- action lawsuit.
Q: I’ve heard other public utilities are paying the NMDL charges on behalf of some of their customers. Is MID considering doing this?
A: About five years ago, Turlock Irrigation District bought a 225-square-mile section of territory on the west side of its service area from PG&E. As a condition of the sale, the PUC mandated that TID must pay the NMDL fees. Customers in the west side area pay the lower TID rates, plus a facilities charge. That charge repays those New Municipal Departing Load fees and the costs associated with purchasing the area from PG&E. The facilities charge that west side customers pay means existing customers don’t bear the financial burden of the territory purchase, said Steve Boyd, TID assistant general manager of consumer services. Customers served in the original service area don’t pay the charge.
Merced Irrigation District isn’t considering a similar arrangement. "MID and PG&E are competitors," said MID officials in a written statement. "The (NMDL) charges are not related in any way to Merced ID’s costs of providing service to its customers."
Q: How many people are affected by these charges? A: The New Municipal Departing Load charges are being billed to 5,587 Merced Irrigation District customers, 2,495 Modesto Irrigation District customers and 678 customers of Hercules Municipal Utility.
Merced and Modesto are some of the only areas where PG&E competes head-to-head with public utilities for customers in new territory that hasn’t been served before. Right now other publicly owned utilities are in negotiation with other private utilities about these types of charges, but none have been billed yet, said Tam.
Reporter Leslie Albrecht can be reached at (209) 385-2484 or lalbrecht@mercedsun-star.com.
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Copyright (c) 2008, Merced Sun-Star, Calif.
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