Conclusions of Law

1. Those aspects of D.06-07-029 and D.07-11-051 that are inconsistent with SB 695 should be modified to comply with the requirements of SB 695.

2. Those aspects of D.06-07-029 and D.07-11-051 that are consistent with SB 695 do not need to be modified.

ORDER

IT IS ORDERED that:

1. The choice of a utility to elect or not elect to use the Cost Allocation Mechanism for a generation resource is eliminated.

2. Cost Allocation Mechanism treatment for utility-owned generation is permitted.

3. The duration of Cost Allocation Mechanism treatment of a generation contract matches the duration of the underlying contract.

4. Rulemaking 10-05-006 remains open.

This order is effective today.

Dated May 5, 2011, at San Francisco, California.

MICHAEL R. PEEVEY

President

TIMOTHY ALAN SIMON

CATHERINE J.K. SANDOVAL

MARK FERRON

Commissioners

I abstain.

/s/ Michel Peter Florio

Commissioner