BACKGROUND

A. Under the Act, DWR is authorized to sell electric power and energy to Customers. Amounts payable by DWR under this Servicing Order are payable solely from the Department of Water Resources Electric Power Fund established pursuant to Section 80200 of the California Water Code or other appropriated amounts legally available therefor.

B. Utility is engaged in, among other things, the transmission and distribution of electrical services to Customers in its service territory, the billing and collection for electrical services and other charges, and the ownership, installation and reading of electrical meters for certain of such Customers.

C. The Act and Applicable Commission Orders allow DWR and the Utility to enter into contracts under which the Utility provides for the transmission and distribution of certain power sold or made available for sale by DWR to Customers, and provides billing, collection and related services, as agent for DWR, on terms and conditions that reasonably compensate Utility for its services.

D. On September 6, 2001, the Commission issued Decision 01-09-015, ordering Utility to implement the Servicing Agreement which sets forth the terms under which Utility would provide for the transmission and distribution of DWR Power as well as billing and related services, and further ordering certain modifications to the Servicing Agreement as described in Ordering Paragraphs 2 and 3 of such decision.

E. On September 24, 2001, Utility filed a "Notice of Motion and Motion Regarding Request by California Department of Water Resources and order by California Public Utilities Commission that Pacific Gas and Electric Company Enter Into Servicing Agreement with the California Department of Water Resources" with the Bankruptcy Court.

F. On December 6, 2001, the Commission issued a ruling soliciting comments from parties concerning the possible use of excerpts from the Servicing Agreement as rules governing how Utility would remit funds to DWR and on December 12, 2001, Utility submitted its comments to the Commission. On February 21, 2002, the Commission issued Decision 02-02-051, approving and adopting a Rate Agreement between the Commission and DWR.

G. On May 16, 2002, the Commission issued Decision 02-05-048, ordering Utility to comply with the Servicing Order.

H. On September 19., 2002, the Commission issued Decision 02-09-053 relating to the allocation of DWR's power contracts, and the Commission desires to amend the Servicing Order to reflect the new operational arrangements under the contract allocation ordered by the Commission in such decision in this 2003 Servicing Order.

NOW, THEREFORE, DWR agrees, and PG&E is ordered to do as follows: