Assignment of Proceedings

Michael R. Peevey is the assigned Commissioner and Carol A. Brown is the assigned ALJ in this proceeding.

1. Settling Parties presented the Commission with a Joint Settlement Agreement entered into by PG&E, SCE, SDG&E, Constellation, WPTF, DRA, Aglet, J. Aron & Company, TURN, Mirant, AReM, and Barclays Bank, PLC.

2. The Settlement Agreement addresses Item 16 of D.06-07-029, which requires a periodic auction process for the distribution of energy rights in new generation contracts. This process is necessary in order for LSEs to implement the cost and benefit sharing mechanism established in D.06-07-029.

3. The Settlement Agreement is the result of nearly twenty mediation sessions for the purpose of establishing principles for the auction process required in D.06-07-029.

4. The Settlement Agreement establishes principles that ensure an independent, transparent, and fair auction procedure in which multiple stakeholders and the Commission retain active involvement.

5. The Settlement Agreement establishes products that facilitate an active market, and allows for the development and auction of new products.

6. We find that the Settlement Agreement reaches a compromise that is reasonable in light of the whole record.

7. We find that the Settlement Agreement is consistent with law, especially as required by D.06-07-029.

8. We find that the Settlement Agreement, with clarifications, benefits the public by creating a fair and efficient market for energy products that facilitates the building of new generation facilities in the State.

1. The Settlement Agreement, with clarifications, meets the requirements of Rule 12.1 of the Commission's Rules of Practice and Procedure and is adopted by the Commission.

2. In accordance with Rule 12.5, the settlement is binding on all parties in this proceeding and resolution in this settlement is limited to the issues in this proceeding. Adoption of this Settlement Agreement does not extend to substantive issues which may come before the Commission in other or future proceedings.

O R D E R

IT IS ORDERED that:

1. The Settlement Agreement entered into between the Settling Parties (attached as the May 11, 2007 Joint Motion and Appendix A thereto), with the clarifications set forth in Appendices B and C, is adopted.

2. Each IOU shall set up a balancing account to record the costs and benefits (including any associated nonbypassable charges collected) and perform annual true ups for all of its cost-allocation methodology (CAM) identified resources. In general, the CAM resource account should be divided into sub-accounts that track these costs and benefits for each CAM-identified resource.

3. Pacific Gas and Electric Company should make an election within 45 days of the date of mailing of this final decision, by way of an Advice Letter, as to which of the five power purchase agreements' resources from its 2004 RFO results, as approved by the Commission in D.06-11-048, would be subject to the cost sharing mechanism as developed in D.06-07-029.

This order is effective today.

Dated September 20, 2007, at San Francisco, California.

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