3. Scope

The scope of this Phase 2 proceeding includes PG&E's proposals related to electric marginal costs, revenue allocation, and rate design. It also encompasses other parties' responsive testimony and recommendations developed in accordance with the procedural schedule adopted by this ruling.

As stated in its application, PG&E proposes:

· "Marginal cost, revenue allocation and rate design initiatives that continue progress toward cost based, efficient pricing, while taking into consideration equity among customers and customer acceptance."

· Revisions or updates to revenue allocation and rates for distribution, generation and public purpose programs, including price mitigation that reflects a 75 percent movement from current rates to full cost rates. Since PG&E is not proposing an increase to rates for the CARE program in this proceeding, the rate increase to the residential class will be allocated to rates for non-CARE usage in excess of 130 percent of baseline, consistent with the requirements of Assembly Bill 1X.

· In an effort to make its tariffs easier to understand, measures such as simplifying streetlight rates; eliminating the last remaining references to frozen June 10, 1996 rates (used to make commercial CARE and minimum average rate limiter calculations); and simplifying the calculation to determine the franchise fee surcharge paid by direct access customers.

· Revisions to the applicability statement in each of its agricultural rate schedules in an attempt to "bring much-needed clarity to an issue that has long been the subject of complaints and Commission decisions." PG&E requests that the Commission address its agricultural definition proposal on a separate, expedited track.

Because direct access customers also pay rates for distribution and public purpose programs, these customers will also be affected by PG&E's proposals. In addition, departing load customers will be affected by the change to public purpose program rates to the extent they are required to pay these rates.

In its PHC Statement, the Western Manufactured Housing Community Association identified two issues, the level of the master meter discount and application of the diversity benefit adjustment, both of which are appropriate for consideration in this proceeding.

At the PHC, there was discussion related to critical peak pricing. While demand responsive rates are generally within the scope of this proceeding, the manner in which critical peak pricing will be addressed will be determined upon consideration of pending Commission actions, including a decision in Application 05-01-016, and will be specified in a separate scoping ruling.