FERC on Thursday denied Pacific Gas and Electric’s request for rehearing in a case that has pitted the utility against the city and county of San Francisco for more than 18 years over PG&E’s application of its wholesale distribution tariff (WDT) to the municipal customers of San Francisco’s public utility (EL15-3-005, EL5-704-027).

The utility, the San Francisco Public Utilities Commission (SFPUC), operates a hydroelectric power project in the Hetch Hetchy Valley, near Yosemite National Park, and owns transmission lines that bring power from the Sierra Nevada to San Francisco.

It supplies electricity to schools, public housing tenants, libraries and municipal departments using the distribution system PG&E owns and operates in San Francisco — making the publicly owned utility both a customer and competitor of PG&E.

Since 2014, San Francisco has argued to FERC that PG&E has unreasonably denied distribution service to many of its 2,200 metered interconnection points under section 212(h) of the Federal Power Act.

The section prohibits mandatory retail wheeling such as forcing PG&E to deliver another utility’s power through its distribution lines. But it exempts cities and counties where “such entity was providing electric service to such ultimate consumer on the date of enactment of this subsection [Oct. 24, 1992].”

A FERC administrative law judge issued an initial decision in November 2016 that supported San Francisco’s argument. It cited the commission’s orders under Suffolk County Electric Agency (96 FERC ¶ 61,349) from November 2001. In that line of decisions, known as Suffolk I-IV, FERC said section 212(h) grandfathered classes of customers, not individual customers at specific delivery points.

“The Commission’s orders and opinions … support San Francisco’s argument that grandfathering applies to the class of customers that was eligible to receive wholesale distribution service on October 24, 1992, regardless of where in the city those customers may be located now or in the future,” the ALJ wrote. The judge defined the “class” of customers in the case as all “municipal public purpose load” in San Francisco.

PG&E, in contrast, contended that only “points of delivery” that existed prior to Oct. 24, 1992, could be grandfathered under its WDT. Customers that had relocated since that time were ineligible, it said.

FERC Overturned

In a November 2019 order, FERC disagreed with the ALJ’s decision. It found the Suffolk precedent inapplicable and said PG&E had not unreasonably denied service to some of San Francisco’s end users.

“The commission explained that San Francisco’s ‘class of customer’ approach would entitle all municipal public purpose load as designated by San Francisco that was eligible to receive wholesale distribution service on October 24, 1992,” FERC explained in Thursday’s order. “Ultimately, the commission concluded … that PG&E’s point of delivery approach to determining which San Francisco customers qualify for service under the WDT was just.”

The D.C. Circuit Court of Appeals reversed FERC’s decision in January 2022. It found that FERC’s interpretation of section 212(h) and PG&E’s tariff were too narrow, and its “attempts to defend its interpretation [were] unpersuasive.”

“That the tariff references ‘points of delivery’ does not necessarily imply that only specific points of delivery may be grandfathered, and those references to ‘points of delivery’ do not change the fact that the tariff expressly references the criteria of Section 212(h)(2),” it said.

The court criticized FERC’s orders in the case as demonstrating a “troubling pattern of inattentiveness to potential anticompetitive effects of PG&E’s administration of its open-access tariff.” Faced with claims that PG&E was refusing service to San Francisco customers, FERC “fell short of meeting its duty to ensure that rules or practices affecting wholesale rates are just and reasonable,” it said.

The appeals court sent the case back to FERC on remand. (See San Francisco Wins Against PG&E, FERC in DC Circuit.)

FERC issued a new decision in October that followed the court’s direction and agreed with San Francisco that its precedent did not limit grandfathering to a fixed location.

“The commission concluded that San Francisco’s loads within the customer classes served on October 24, 1992, are entitled to grandfathered service under the WDT, granted the complaint filed by San Francisco, and directed PG&E to submit revised WDT provisions,” FERC noted Thursday.

PG&E requested a rehearing.

PG&E Denied

In its request, “PG&E argues that the commission in the order on remand exceeded [its] authority in FPA section 212(h),” FERC noted. “PG&E urges the commission to set aside Suffolk County because, according to PG&E, the Suffolk County customer-class approach to grandfathering is inconsistent with the plain language of the statute, the intent of the statute in its legislative history, and the concept of grandfathering.”

PG&E also contended that “even assuming Suffolk County is valid and applicable precedent, the commission in the order on remand failed to address the potential for harmonizing PG&E’s proposed delivery-point methodology with the Suffolk County customer-class approach.”

FERC rejected PG&E’s arguments.

“PG&E asserts that the ‘customer-class approach’ can be reconciled with grandfathering based on points of delivery to provide service to a specific type of customer within a defined service area, because limiting grandfathering eligibility does not conflict with the text or intent of section 212(h),” FERC said.

But “in the order on remand, and as further discussed here, the commission has defined a coherent class of San Francisco customers eligible for grandfathering,” FERC said. “As the D.C. Circuit explained, the WDT ‘allows grandfathering of a customer San Francisco served under the prior interconnection agreement even though the customer seeks [WDT] service at a new delivery point.’

“Consistent with Suffolk County, eligibility under FPA section 212(h) therefore extends not only to the customers who were actually receiving service on October 24, 1992, but also to all subsequently interconnected customers of the same class.”

Second Case

In its January 2022 decision, cited above, the D.C. Circuit reversed FERC in a second case involving PG&E’s provision of distribution service in San Francisco.

In that case, the city and county contested PG&E’s refusal to provide lower-voltage secondary service to many sites within the city. PG&E instead offered to connect higher-voltage primary service, which requires the installation of transformers and carries higher fixed costs for ratepayers.

The city argued that the practice violated PG&E’s WDT.

The court remanded the matter back to FERC after overturning the commission’s unanimous 2020 decision rejecting San Francisco’s complaint.

In December, FERC ordered settlement judge procedures for the then three-year-old dispute. (See Settlement Hearing Ordered for PG&E, SF Distribution Dispute.)