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1% Surcharge for PG&E Electricity and Gas Franchise

On January 20, 1958, the City Council granted Pacific Gas and Electric Company (“PG&E”) franchises to use, transmit, and distribute gas and electricity within the City of Bakersfield.  The term of each franchise was for a period of 50 years. Therefore the franchises were to expire in 2008.  The franchise provides for payments to the City by PG&E for use of City right of way to provide electricity and gas service as provided by state law (state constitution and 1937 Act) and city charter.  The franchise payments are made consistent with state law and are typically based on the gross annual receipts from the sale of electricity and gas within the limits of the franchise.  These payments are for PG&E’s use of the public right of way within the City, which typically is in or along our streets and roadways.

The City negotiated the renewal of the electric and gas franchises with PG&E during 2008 and the City Council approved their renewal on November 5, 2008.  As part of the renewal, the language and terms of the franchise were modernized to reflect current practices and requirements of utility franchisees and achieving the best utility franchise terms available.

Most cities within PG&E’s service area receive 1% of gross receipts with indeterminate terms for both their electricity and gas franchises.  Additionally, there have been several franchise renewals by cities approved by the California Public Utilities Commission (CPUC) which included an additional local surcharge beyond the typical 1%. Staff met with representatives of PG&E and discussed matching the franchise terms similar to those received by other cities and other recent renewals.  They indicated their willingness to match the 1% franchise rate for electricity and gas with an indeterminate term similar to what other cities receive.

PG&E also agreed as part of the franchise renewal to have a 1% surcharge similar to those enacted by other cities as part of their recent franchise renewals.  The additional 1% surcharge agreed to by PG&E required approval by the California Public Utilities Commission (CPUC).  PG&E filed an advice letter before the Commission on December 18, 2008.  The CPUC approved the 1% franchise surcharge request on January 21, 2009.

When the City Council approved the PG&E franchise renewal they designated the new revenue from the 1% surcharge for gas and electricity and the additional ½% revenue for the electricity franchise to only be used for roads programs.