4. Issues in Proceeding

The November 2, 2001 Scoping Memo identified the principal issues to be considered in this Application. These issues involve Commission approval of:

"(1) PG&E's entries to the TRA during the record period July 1, 1999 through April 30, 2001;

"(2) the reasonableness of PG&E's special electric contracts;

"(3) PG&E's proposal on the elimination and retention of certain balancing and memorandum accounts;

"(4) PG&E's proposals for revenue requirement adjustments;

"(5) PG&E's electric sales and billings forecast for 2002;

"(6) PG&E's proposals for revenue allocation and rate design;

"(7) PG&E's Schedule Power Exchange price calculations and methodology;

"(8) PG&E's entries to the Electric Vehicle Balancing Account; and also

"(9) PG&E's entries to the Schedule E-BID Memorandum Account and Power Exchange Block Forward Memorandum Account."¹

PG&E presented evidence concerning each of these issues in its testimony. Of central importance to this proceeding is PG&E's analysis of its special contracts. Based on its review of its special contacts, PG&E proposes a disallowance, entered as a shareholder credit, of $33,166.

In its response, ORA's testimony presented its views on whether PG&E's showing provided an adequate factual record supporting each proposed RAP adjustment. ORA contends that all of PG&E's special electric contracts are unreasonable, and proposes a disallowance of $40 million.

On all other issues, ORA found itself in agreement with PG&E's proposed RAP entries, adjustments, or illustrative filings. Concerning matters where there was substantial agreement between ORA and PG&E, the presiding ALJ conducted extensive cross-examination to ensure the development of an adequate factual record to support the Commission's policy determinations.

We first address the central disputed issue in this proceeding - the reasonableness of the special electric contracts - and subsequently review all other matters that constitute the scope of this proceeding.