ALJ/BWM/tcg DRAFT Agenda ID #4979

Ratesetting

11/18/05 Item 3

Decision PROPOSED DECISION OF ALJ MATTSON (Mailed 9/30/2005)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company To Revise Its Electric Marginal Costs, Revenue Allocation, and Rate Design. (U 39 M)

Application 04-06-024 (Filed June 17, 2004)

(See Appendix A for a list of appearances.)

TABLE OF CONTENTS

Title Page

INTERIM OPINION ADOPTING SETTLEMENT WITH FIVE
SUPPLEMENTAL SETTLEMENTS ON MARGINAL COST,
REVENUE ALLOCATION, AND RATE DESIGN 22

1. Summary 22

2. Background 22

2.1. Application and Proposed Testimony 22

2.2. BART and SierraPine Issues 33

2.3. Settlements 33

3. Terms of Settlements 55

3.1. May 13, 2005 Settlement 55

3.2. Supplemental Residential Settlement 88

3.3. Supplemental Small Light and Power Settlement 1010

3.4. Supplemental Light and Power Settlement 1111

3.5. Supplemental Agricultural Settlement 1313

3.6. Supplemental Energy Recovery Bond Settlement 1515

4. Discussion 1616

5. Comments on Settlements 2525

6. Residential Nonrefundable Discount Percentage for New
Customer Connections 2626

7. Comments on Proposed Decision 2828

8. Assignment of Proceeding 2828

Findings of Fact 2828

Conclusions of Law 3030

INTERIM ORDER 3131

Appendix A - List of Appearances

Appendix B - May 13, 2005 Settlement

Appendix C - Supplemental Residential Settlement

Appendix D - Supplemental Small Light and Power Settlement

Appendix E - Supplemental Light and Power Settlement

Appendix F - Supplemental Agricultural Settlement

Appendix G - Supplemental Energy Recovery Bond Settlement

INTERIM OPINION ADOPTING SETTLEMENT
WITH FIVE SUPPLEMENTAL SETTLEMENTS
ON MARGINAL COST, REVENUE ALLOCATION,
AND RATE DESIGN

1. Summary

The purpose of this proceeding is to establish just and reasonable electric rates for Pacific Gas and Electric Company (PG&E or applicant) effective January 1, 2006. These rates allow applicant to collect the revenue requirement determined in Phase 1 of applicant's test year 2003 general rate case (GRC), as modified by subsequent revenue requirement decisions. This is accomplished by assessing applicant's marginal costs, allocating revenues to customer classes, and designing rates.

To achieve these goals, applicant and parties have submitted a range of evidence, engaged in settlement discussions, and filed motions for Commission adoption of a settlement regarding marginal cost, revenue allocation and rate design, plus five supplemental settlements on rate design. We find that these settlements meet our tests for adoption, and grant the motions. All issues but one are now resolved. The proceeding remains open solely to address the issue of the agricultural class definition.