STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

December 30, 2002

TO: ALL PARTIES OF RECORD IN APPLICATIONS 00-10-045, and 01-01-044

Decision 02-12-064 is being mailed without the Dissent of President Lynch. The Dissent will be mailed separately.

Very truly yours,

/s/ CAROL A. BROWN

Carol A. Brown, Interim Chief

Administrative Law Judge

CAB:acb

Attachment

COM/MP1/PAJ/acb Mailed 12/30/02

Decision 02-12-064 December 19, 2002

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of San Diego Gas & Electric Company (U 902-E) for an Order Implementing Assembly Bill 265.	Application 00-10-045 (Filed October 24, 2000)
Application of San Diego Gas & Electric Company (U 902-E) for Authority to Implement an Electric Rate Surcharge to Manage the Balance in the Energy Rate Ceiling Revenue Shortfall Account.	Application 01-01-044 (Filed January 24, 2001)

OPINION REGARDING SAN DIEGO GAS & ELECTRIC COMPANY'S REQUEST FOR A SURCHARGE TO RECOVER THE AB 265 UNDERCOLLECTION AND

DECISION ADOPTING SETTLEMENT AGREEMENT

OPINION REGARDING SAN DIEGO GAS & ELECTRIC COMPANY'S REQUEST FOR A SURCHARGE TO RECOVER THE AB 265 UNDERCOLLECTION AND 22

DECISION ADOPTING SETTLEMENT AGREEMENT 22

I. Summary 22

II. Background 22

A. Procedural Background 22

B. Background Of Accounts 99

C. The Intermediate Term Contracts 1111

III. Position of the Parties 1212

A. SDG&E 1212

B. City of San Diego 2828

C. California Farm Bureau Federation 3030

D. Federal Executive Agencies 3232

E. Office of Ratepayer Advocates 3333

F. Utility Consumers' Action Network 3838

IV. Discussion 4444

A. Introduction 4444

B. AB X1 43 Overcollection 4444

C. AB 265 Surcharge Request 4545

1. Introduction 4545

2. The Relevancy Of The Character Of The Intermediate Term Contracts 4646

3. SDG&E's Proposed Settlement Is In The Public Interest 5151

4. The Resulting Reduction to the AB 265 Undercollection 5454

5. Other Sources Of Reducing The Undercollection 5555

6. Rate Ceiling 5757

7. Miscellaneous 5757

V. Comments on Alternate Proposed Decision 5757

A. Responses to Comments of the Parties 5757

B. Responses to Proposed Revisions of the ALJ's Proposed Decision 6363

VI. Assignment of Proceeding 7070

Findings of Fact 7070

Conclusions of Law 7676

O R D E R 8080

I. Summary

Today's decision addresses the relief requested by San Diego Gas & Electric Company (SDG&E) in the two above-captioned applications. SDG&E seeks authorization to impose a Revenue Shortfall Surcharge (surcharge) of $0.00349 per kilowatt hour (kWh) on residential, small commercial, and street lighting customers for a period of two years to recover the undercollected revenues resulting from the legislative enactment of a 6.5 cents per kWh rate ceiling on the rates of these customers.

A central issue in this proceeding are the power purchase contracts that SDG&E entered into with three entities in late 1996 and early 1997. These contracts are referred to in this proceeding as the intermediate term contracts.

This decision adopts the proposed settlement of June 14, 2002, which divides the profits from the intermediate term contracts between ratepayers and SDG&E's shareholders. This settlement will have the effect of reducing the undercollection resulting from the "AB 265" rate ceiling by $24 million. The reduction to the undercollection resulting from the adoption of this settlement, together with the expected true-up adjustment of the rates of the California Department of Water Resources (DWR), and other factors, including other matters currently before the Commission, have the potential to eliminate the undercollection by the end of 2003. SDG&E's request for a surcharge is therefore denied at this time.