-----Original Message-----
From: Phillip Marler
Sent: Wednesday, April 20, 2005 11:57 AM
To: Rick Kirkwood; 'Matt Rexroad'; Jeff Monroe; 'Dave Flory'; 'Artemio Pimentel'
Cc: 'Neal'; 'JWM8@pge.com'; 'jsmith@dailydemocrat.com'
Subject: RE: PG&E In The Community

Dear Council Members,

What is wrong and misleading with John Mabry’s e-mail (and I am copying John on this response); is that he is trying to infer that PG&E will quit paying these franchise fees and property taxes once SMUD annexation is complete. PG&E will continue to pay a good amount of these.

PG&E pays franchise fees for electric and gas to the City of Woodland as well as Davis, West Sac and ALL of Yolo County. PG&E will continue to pay gas franchise fees to Woodland and the rest. The gas franchise fees in Woodland amount to about 40% of the franchise fees paid.

Further PG&E will continue to pay property taxes on the property that they own. For example, in West Sacramento, PG&E has a large bill processing complex. I understand it processes the bills for much of the Western United States. PG&E will continue to operate that facility and pay those property taxes. Ironically, they will likely be receiving cheaper and more reliable SMUD power to operate it. Should PG&E decide to move that function from West Sac into PG&E territory (a difficult business decision), then some other business will come in and occupy it and continue paying property taxes to West Sacramento and Yolo County.

Likewise, the PG&E corporation yard on West Street here in Woodland will continue to pay property taxes to the City and County. I would assume that even after SMUD annexation, PG&E will continue to operate that corporation yard to serve not only the gas systems in our city but also the areas immediately west of Woodland that will still be in PG&E territory. And if they choose to discontinue using that property, the new owner will then be paying the property taxes. It is unlikely that SMUD would acquire that property.

Recognize also that Yolo County is 1,000 square miles with PG&E facilities threaded throughout it. The Annexation area is only 190 square miles – less than 20 percent of the county. PG&E will continue to pay property taxes to the County on that remaining 80% as well as the franchise fees there too. John Mabry’s assertion that all this property tax will be lost is misleading.

The R.W. Beck report demonstrates a great likelihood of an 8 percent savings in cost of electricity. SMUD staff has essentially validated that figure. Recognize that the 8 percent savings has these lost franchise fees and property taxes built into the equation. The City/County representative and SMUD are developing strategies that will keep the City’s general funds whole once we do quit receiving the electric franchise fees and the taxes from the property that SMUD actually acquires.

The City Council unanimously approved the protest to the CPUC of PG&E’s plan to deploy those AMI meters and in so doing have joined Yolo County and Davis (and tonight West Sacramento). You were correct in recognizing that this would only add millions of wasted dollars to the acquisition of PG&E’s system. It is disappointing to receive letters from PG&E chastising you for failure to do due diligence (letter to Vice Mayor Flory from John Newman April 19, 2005) and for accusing you of making uninformed decisions. I find such comments insulting.

Phillip L. Marler
Assistant City Manager
City of Woodland
300 First Street
Woodland, CA 95695
office: 530 661-5805 cell: 530 681-8507 fax: 530 661-5813 
phillip.marler@cityofwoodland.org

<<Yolo 2005 Franchise Fees.doc>>

FOR IMMEDIATE RELEASE: April 19, 2005

CONTACT: PG&E News Department (415) 973-5930

PACIFIC GAS AND ELECTRIC COMPANY COMPLETES $124.4 MILLION IN FRANCHISE FEE PAYMENTS TO LOCAL GOVERNMENTS

Cities of Davis, Woodland, West Sacramento and Yolo County receive over $1.9 million

SAN FRANCISCO -- Pacific Gas and Electric Company today announced it has made its 2004 franchise fee and franchise fee surcharge payments totaling more than $124.4 million to the 292 California cities and counties in which it operates, including payments of $487,034.30 to the city of Davis, $631,983.16 to the city of West Sacramento, $403,490.67.16 to the city of Woodland and $381,048.14 to Yolo County. The 2004 payments are comprised of $45.3 million for gas and $79.1 million for electric service franchises and surcharges.

“As tight budgets further impact local governments, Pacific Gas and Electric Company continues to meet its financial commitment to pay its fair share of franchise fees to cities and counties,” said Dan Richard, PG&E’s Senior Vice President of Governmental Relations. “PG&E’s payment of franchise fees, property taxes, and other taxes and fees provide a stable revenue source to support the many important services – police and fire protection, education, public health, and environmental services – residents expect from their local governments.”

A franchise fee is based on a percentage of gross customer receipts received by Pacific Gas and Electric Company and is paid to cities and counties for the right to use public streets to run gas and electric service. The franchise fee surcharge is based on a percentage of the transportation and energy costs to customers choosing to buy their energy from third parties. PG&E serves as the collection agent for the surcharges and passes the amounts on to counties.

Year to year, franchise fee payments fluctuate depending on the costs utility customers pay for gas and electricity. The 2004 franchise fee payments represent a 3 percent decrease over the 2003 payments – which were $50.8 million for gas and $77.6 million for electric – primarily due to decreased natural gas usage resulting from more mild weather in 2004.

PG&E began making $124 million in franchise fee and franchise fee surcharge payments in late March when $36.3 million in payments were made to 48 counties in which it operates. The remainder of the payments, more than $88 million, will be paid to the 242 cities in northern and central California on or before April 15*. The payments to cities began the week of April 4, 2005.

(*Stockton receives its franchise fee and franchise fee surcharge payments on July 31 of each year)

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For more information about Pacific Gas and Electric Company, please visit our web site at www.pge.com