5. PG&E'S Ratemaking Proposal

PG&E requests the Commission to authorize PG&E to establish a Diablo Canyon Seismic Study Balancing Account (DCSSBA) to record and recover its actual costs of conducting the seismic studies. PG&E estimates that the expenses associated with the seismic studies will be $16.73 million. PG&E proposes to commence recovery of costs over a three-year period based upon the $16.73 million estimate and annually to true-up its generation rates based upon actual costs as recorded in DCSSBA. Costs to be recorded to the DCSSBA included costs for the activities described in Section III, which reflect PG&E's implementation of the CEC AB 1632 Report recommendation that PG&E perform additional seismic studies using 3-D seismic imaging. These costs are not reflected in any other PG&E proceeding, such as the 2011 general rate case. The annual estimates of expense for these addition seismic studies are:

2011 $2.63 Million

2012 $11.78 Million

2013 $2.32 Million

PG&E proposes that the costs recorded to the DCSSBA be recovered in the Utility Generation Balancing Account (UGBA), or its successor, as part of the Annual Electric True-up (AETU) for recovery through CPUC-jurisdictional rates.

PG&E will begin recovery of $2.63 million, plus an allowance for Uncollectibles and Franchise Fees, in the UGBA starting on January 1, 2011. PG&E will track the difference between the $2.63 million and the actual expenditures in the DCSSBA. In 2012, the amount to be collected in the UGBA will be revised to $11.78 million, plus the balance in the DCSSBA at the end of 2011, and an allowance for Uncollectibles and Franchise Fees. In 2013, the amount collected in the UGBA will be revised to $2.32 million, plus the balance in the DCSSBA at the end of 2012 and an allowance for Uncollectibles and Franchise Fees. Any amounts in the DCSSBA at the end of 2013 and subsequent years will be transferred to the UGBA annually as part of the AETU proceeding.

Amounts transferred to UGBA for recovery in rates will be collected in generation rates in the same manner as other generation revenue. New rates to include recovery of these costs will be designed based upon the then-current adopted methods for setting electric rates for generation revenue requirement changes.

Costs incurred by PG&E to comply with directions issued by the IPRP shall be recovered in the DCSSBA. The IPRP may employ consultants and experts. Costs incurred by the IPRP shall be reimbursed by PG&E and recovered in the DCSSBA. Recognizing that the projected $16.73 million cost is an estimate, we are concerned that cost overruns are possible without prior authorization by the Commission. Therefore we shall cap the costs at $16.73 million and require PG&E to apply for removal of the cap when it believes the costs will exceed $16.73 million.