5. Settlement

DRA and PG&E, the only two active parties in this proceeding, entered into a Settlement to resolve all issues in the proceeding. The Settlement was filed as a Joint Motion on August 28, 2009.

The Settlement consists of the following key agreements:

1. The reasonable total costs recoverable from this CEMA Application is $11.09 million, consisting of $8.01 million in capital costs and $3.08 million in expenses. The revenue requirement resulting from these costs is $5.92 million in electric revenue requirements, including interest through December 31, 2010, franchise fees, and uncollectibles, to be recovered in rates in 2010,² with any under or over collections of these amounts accruing to the associated balancing accounts. Upon approval of this Settlement by the Commission, PG&E will record commensurate amounts for the CEMA revenue requirement into the Distribution Revenue Adjustment Mechanism (DRAM) for rate recovery through its next available electric rate change in 2010 and through the Annual Electric True-up (AET) advice letter.

2. The Settling Parties agree that the Commission should find that it is reasonable for PG&E to recover $5.92 million as PG&E's total authorized revenue requirement in this Application. The final Settlement amount reflects litigation uncertainty assessed by one or both parties.

² The revenue requirement numbers include interest calculated at the actual 90-day commercial paper rate through August 2009, and at the August 2009 90-day commercial paper rate thereafter on the unamortized balanced through 2010. The numbers will change slightly over time as the forecasted 90-day commercial paper rate is replaced by the actual 90-day commercial paper rate in each month following August 2009.