3. PG&E's Updated Request

In its March 17, 2009 updated testimony, PG&E requests that the Commission approve and fund a seven-year Cornerstone program, for the years 2010 through 2016, with estimated capital expenditures of $1,992 million and operation and maintenance expenses of $59 million.

PG&E requests increases in its revenue requirement to account for the capital costs associated with these plant additions. Consistent with the December 19, 2008, assigned Commissioner's Ruling, PG&E will not increase rates to pay for the Cornerstone revenue requirements in 2010 and will therefore forego recovery of the costs associated with Cornerstone in 2010. PG&E will include all capital expenditures in its rate base and recover the costs of those capital improvements over the remaining life of the assets beginning in 2011. For the years 2011 through 2016, PG&E estimates revenue requirements totaling $1,112 million.³

PG&E proposes to track the revenue requirement associated with this project in a balancing account and will return to customers, with interest, any revenues authorized by this Commission that are in excess of the revenue requirement needed to recover the recorded costs of the reliability projects envisioned in Cornerstone. In addition, PG&E proposes to file annual reports with the Commission, describing work done over the previous year, a forecast of the work to be performed in the coming year, and documentation supporting any changes from prior forecasts at the level of elements over $1 million in capital expenditures.

The table below summarizes PG&E's request, as updated in its March 17, 2009 testimony.

PG&E Request

2010

2011

2012

2013

2014

2015

2016

Total

(Nominal dollars in thousands)

Capital Expenditures
Distribution Capacity	$ 55,352	$188,471	$254,474	$261,705	$240,577	$188,175	$135,523	$1,324,277
Distribution Automation	41,460	85,394	117,377	120,866	93,520	80,405	66,367	605,389
Rural Reliability	4,270	8,796	12,091	12,451	9,635	8,284	6,838	62,365
Total Capital Expenditures	$101,082	$282,661	$383,942	$395,022	$343,732	$276,864	$208,728	$1,992,031
Expenses
Distribution Capacity	-	$ 3	$ 742	$ 1,784	$ 2,893	$ 4,071	$ 5,046	$ 14,539
Distribution Automation	-	$ 975	$ 3,022	$ 5,902	$ 8,968	$ 11,491	$ 13,790	$ 44,148
Rural Reliability	-	5	16	32	48	62	74	237
Total Expenses	$ -	$ 983	$ 3,780	$ 7,718	$ 11,909	$ 15,624	$ 18,910	$ 58,924
Revenue Requirement	$ -	$ 40,540	$ 97,491	163,652	$224,827	$275,753	$310,027	$1,112,290

TURN, CUE and DRA opposed PG&E's proposed Reliability Performance Incentive Mechanism. In its rebuttal testimony,⁴ PG&E withdrew its proposal to establish a reliability performance metric with associated penalties and rewards, stating that after reviewing the intervenors' testimony, and given the complexity of developing an appropriate evaluation mechanism, the company believes that rather than litigating this issue further, it is preferable to simply remove this part of its proposal.

³ The remaining revenue requirement associated with the Cornerstone program would be recovered in rates over the remaining depreciable life of the assets. The depreciable life of the distribution expenditures is approximately 30 years.

⁴ Exhibit 2, at 1-22.