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In the Matter of the Application of Pacific Gas and Electric Company for: (1) Authority to Sell or Assign Recovery Property to One or More Financing Entities; (2) Authority to Service Recovery Bonds on Behalf of Financing Entities; (3) Authority to Establish Charges Sufficient to Recover Fixed Recovery Amounts and Fixed Recovery Tax Amounts; and (4) Such Further Authority Necessary for PG&E to Carry Out the Transactions Described in this Application. (U 39 M)

Application 04-07-032

(Filed July 22, 2004)

A. Satisfactory Legislation 8

B. Ratepayer Benefits 9

C. Effect of the Bonds on PG&E's Credit Ratings 13

D. Compliance with Sections 701.5 and 816, et seq. 14

E. IRS Private Letter Ruling 16

F. Approval of the Energy Recovery Bonds 17

A. No Recourse to the State 18

B. Two Series of Energy Recovery Bonds 18

C. Authorized Amount of Energy Recovery Bonds 20

D. The Bond Transaction 22

E. Credit Rating Issues 24

F. Bond Issuance Costs 26

G. Tax Issues 27

H. Use of Bond Proceeds 28

I. Exemption from the Competitive Bidding Rule 31

A. Summary of the DRC 33

B. Summary of the ERBBA 38

C. Termination of the RARAM 42

D. Customer Responsibility for Bond Charges 42

E. Bill Presentation 44

F. Revenue Accounting 44

G. Billing, Collecting, and Remitting the DRC 45

A. Use of Bond Proceeds 49

    i. Position of the Parties 49

    ii. Discussion 49

B. Timing of Energy Recovery Bonds 51

    i. Position of the Parties 51

    ii. Discussion 52

C. Energy Supplier Refunds 54

    i. Position of the Parties 54

    ii. Discussion 54

D. Public Notice and Comment on Bond-Related Advice Letters 54

    i. Position of the Parties 54

    ii. Discussion 56

E. Recovery of Bond Charges from New Municipal Load and BART 57

    i. Position of the Parties 57

    ii. Discussion 59

F. Recovery of Bond Charges from Departing Load 61

    i. Position of the Parties 61

    ii. Discussion 62

G. Rate Decrease for CARE and Residential Consumers 64

    i. Position of the Parties 64

    ii. Discussion 66

1 2004 Stats., ch. 46.

2 These estimated savings assume the Bonds will receive favorable tax treatment.

3 All statutory references are to the Public Utilities Code unless otherwise indicated.

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