filters and products with the attachment mechanism to other utilities and entities that might be able to use them. This effort to commercialize intellectual property (IP) by SDG&E is consistent with D.13-05-010, where the Commission encourages commercialization of IP as beneficial to both ratepayers and shareholders. General Order 173, Rule 3 Public Utilities (P.U.) Code Section 851 and General Order (G.O.) 173 are germane to this request. G.O. 173 Rule 3 establishes a series of conditions that must be met in order for a sale or licensing of assets to qualify for Advice Letter treatment. The criteria of G.O. 173 include California Environmental Quality Act compliance, no adverse effect on the public good, distribution of the financial proceeds from the transaction, and a total valuation under $5 million. Terms of the Licensing Agreement The terms of the licensing agreement include the terms and conditions necessary to satisfy Section 851 and G.O. 173 as outlined above. The licensing agreement includes additional terms and conditions that provide further financial benefits and legal protections for SDG&E, its shareholders, and the ratepayers. Notice of AL 3092-E was made by publication in the Commission’s Daily Calendar. San Diego Gas & Electric states that a copy of the Advice Letter was mailed and distributed in accordance with Section 4 of General Order 96-B. Advice Letter 3092-E was not protested. The Commission finds that the proposed agreement meets each of the applicable criteria set forth in G.O. 173, Rule 3 as discussed below. “a. The activity proposed in the transaction will not require environmental review by the
“g. If the transfer is a lease or a lease-equivalent, the total net present value of the lease payments, including any purchase option, does not have a fair market value in excess of $5 million, and the term of the lease will not exceed 25 years.” The term of the license SDG&E proposes to grant to Red Lion is 25 years. Therefore, the net present value of the forecasted royalty payments over the 25 year period must be less than $5 million. The retail price of the HCOR filter developed by Red Lion and SDG&E is $900. Given the revenue sharing agreement, the value of the transaction is not anticipated to exceed $5 million. Considering the agreement grants a royalty on the net revenue earned by Red Lion on the sale of filters utilizing the Sleeve Flue Invention, and the lack of market depth for the product, the value of the transaction will very likely be under $5 million over the term of the license. G.O. 173 requires the value of the transaction to be under $5 million in order for the transaction to qualify for Advice Letter treatment. The utility clearly states that the total value of the transaction will be under $5 million. However, both in the advice letter, and then again in responding to Energy Division Data Request, SDG&E claims that the Net Present Value of the transaction is impossible to know given market fluctuations and lack of research into market depth. Given the specialty market characteristics, SDG&E’s estimation that the NPV of the transaction will be under $5 million is reasonable. h. If the transaction conveys an easement, right-of-way, or other less than fee interest in real property, the fair market value of the easement, right-of-way, or other interest in the property does not exceed $5 million. Not Applicable i. The transaction will not materially impact the ratebase of the utility. (This requirement does not to telephone corporations subject to the Uniform Regulatory Framework (URF) or which are not subject to rate of return regulation.) The proposed transaction will not materially impact the utility’s ratebase. Given that the property is intellectual in nature, it is not reflected in the