206 Cal. App. 4th 897
Cal. Ct. App.2012Background
- The City generates Hetch Hetchy power; PG&E transmits it to San Francisco, with Municipal Load and Firm Resale Load distinctions under IA terms.
- Ferry Building, owned by the Port, was designated Municipal Load under the 1997 Master Settlement Agreement (MSA).
- Renovation (completed 2003) transformed Ferry Building into a predominantly private, retail/office complex; master tenancy shifted from the Port to Ferry Building Investors/Equity Office.
- The City continued to supply electricity to the renovated Ferry Building, billed at Municipal Load rates, prompting PG&E to challenge whether this remained Municipal Load.
- The 1987 Interconnection Agreement (IA) governs PG&E’s transmission; the MSA’s 2.a.v.d creates a framework for a ‘new account’ when there’s a material change in use or activity.
- A trial court held there was a 100% material change, concluding the Ferry Building no longer qualified as Municipal Load; on appeal, the court affirmed on the Municipal Load/IA issue but reversed on damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did renovation create a new account under the MSA § 2.a.v.d? | PG&E | City | Yes; material change created a new account under MSA § 2.a.v.d. |
| Does post-renovation use still constitute Municipal Load under the IA's 'municipal public purposes'? | PG&E | City | No; post-renovation use does not satisfy Municipal Load under IA § 1.43. |
| Is the City selling electricity to a private entity within the IA’s scope of Municipal Load? | PG&E | City | Yes; sale to Ferry Building Investors/subtenants is sale to a private entity, outside Municipal Load. |
| Did PG&E waive the private-sale exclusion through prior designations or conduct? | PG&E | City | No; prior designations varied and did not reflect a broad waiver; waiver evidence is unreliable. |
| Are the declaratory relief judgments within the proper scope of the IA/MSA dispute? | PG&E | City | Declaratory relief appropriately construed within contract limits; fourth/fifth declarations are proper when read to address IA/MSA rights. |
Key Cases Cited
- Larsen v. City & County of S.F., 152 Cal.App.2d 355 (Cal. App. Dist. 1st Div. 1957) (municipal public purpose; limits of government action analogies)
- United Airlines, Inc. v. City & County of San Francisco, 616 F.2d 1063 (9th Cir. 1979) (Raker Act; commercial sales and municipal/public use distinction)
- Crestview Cemetery Assn. v. Dieden, 54 Cal.2d 744 (1960) (treats contractual intention as reliable evidence of meaning)
- Pipes v. Hilderbrand, 110 Cal.App.2d 645 (Cal. App. Dist. 2nd 1952) (municipal actions for development of public use)
- U.S. v. City & County of San Francisco, 310 U.S. 16 (U.S. Supreme Court 1940) (Raker Act context; public power allocation)