Attachments A-E to A0211017 et al.
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STATE OF CALIFORNIA Arnold Schwarzenegger, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

May 13, 2004
Agenda ID#3561

Alternate to Agenda ID# 3432

TO: PARTIES OF RECORD IN APPLICATION 02-11-017 et al.

Enclosed is the Proposed Alternate Decision of Commissioner Brown to the Proposed Decision of Administrative Law Judge (ALJ) Halligan previously mailed to you.

When the Commission acts on the draft or alternate decision, it may adopt all or part of it as written, amend or modify it, or set aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Public Utilities Code Section 311(e) requires that an alternate to a draft decision be served on all parties, and be subject to public review and comment prior to a vote of the Commission. Rule 77.6(d) provides that comments on the alternate draft decision be filed at least seven days before the Commission meeting.

Comments on the alternate decision must be filed and served May 20, 2004. Reply comments are due May 25, 2004.

Pursuant to Rule 77.3 comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

AKM:vfw

Attachment

COM/GFB/vfw ALTERNATE DRAFT Agenda ID#3561

Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER BROWN (Mailed 05/13/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company for Authority, Among Other Things, To Increase Revenue Requirements for Electric and Gas Service and to Increase Rates and Charges for Gas Service Effective on January 1, 2003. (U 39 M)

Application 02-11-017

(Filed November 8, 2002)

Investigation on the Commission's Own Motion into the Rates, Operations, Practices, Service and Facilities of Pacific Gas and Electric Company.

Investigation 03-01-012

(Filed January 16, 2003)

Application of Pacific Gas and Electric Company Pursuant to Resolution E-3770 for Reimbursement of Costs Associated with Delay in Implementation of PG&E's New Customer Information System Caused by the 2002 20/20 Customer Rebate Program. (U 39 E)

Application 02-09-005

(Filed September 6, 2002)

(See Attachment E for List of Appearances)

OPINION: PHASE 1 ISSUES

TABLE OF CONTENTS

Title Page

ATTACHMENT A Settlement Agreement (PG&E, ORA, TURN, AGLET,
Modesto Irrigation District, Natural Resources Defense
Council and Agricultural Energy Consumers Assoc.

ATTACHMENT B Settlement Agreement (PG&E, ORA, TURN, City and County of
San Francisco, and Aglet).

ATTACHMENT C Stipulation Agreement (PG&E, San Luis Obispo Mothers for Peace,
Diablo Canyon, Independent Safety Committee, ORA, CEC, and TURN.

ATTACHMENT D Results of Operations TY 2003

ATTACHMENT E Service List

OPINION: PHASE I ISSUES

1. Summary

This decision resolves issues litigated in the revenue requirement phase (Phase 1) of Pacific Gas and Electric Company's (PG&E) test year (TY) 2003 General Rate Case (GRC). In this decision, we consider two comprehensive settlements filed by the majority of parties in this proceeding. Pursuant to Rule 51 et seq. of the Commission's Rules of Practice and Procedure, we consider a Settlement Agreement proposed by PG&E, the Office of Ratepayer Advocates (ORA), the Utility Reform Network (TURN), Aglet Consumer Alliance (Aglet), Modesto Irrigation District (MID), the Natural Resources Defense Council (NRDC), and the Agricultural Energy Consumers Association (AECA), (collectively, "the Settling Parties"), that resolves all but one of the issues raised by the Settling Parties regarding PG&E's forecast TY 2003 electric and gas revenue requirements and 2004, 2005, and 2006 attrition requests (the Distribution Settlement). We also consider a separate Settlement Agreement proposed by PG&E, ORA, TURN, Aglet, and the City and County of San Francisco (CCSF) regarding PG&E's forecast TY 2003 generation revenue requirements and related attrition, (the Generation Settlement).

Taken together, the Distribution Settlement and the Generation Settlement (also referred to jointly as the Settlements) provide for a TY 2003 revenue requirement of approximately $2.493 billion for electric distribution, $927 million for gas distribution, and $912 million for generation. Excluding revenues related to procurement, this represents an increase of approximately $236 million, or 10.44% in electric distribution revenues, $52 million, or 5.90% in gas distribution revenues, and $38 million, or 4.35% in generation revenues. A portion of the increase in GRC-related revenues is collected as other operating revenues, rather than from sales of electricity and gas. Therefore, the increase in revenues from sales to customers resulting from the Settlements is 8.46% electric distribution, 4.60% gas distribution and 3.90% generation.

We find that the Settlements are reasonable in light of the whole record, consistent with the law, and in the public interest. While the Settlements are to a certain extent "black box" settlements that do not represent the increased level of precision we sought when we approved PG&E's TY 1999 revenue requirement request, we are satisfied that they are in the public interest.

The 2003 base revenues authorized today are effective as of January 1, 2003, consistent with our decision in Decision (D.) 02-12-073. However, as a result of our recent approval in D.02-04-062 of a Rate Design Settlement lowering PG&E's rates by $799 million, the increase in PG&E's revenue requirements for electric distribution and generation authorized today has already been reflected, and to a large degree, offset, as part of the revenue requirement reductions approved in D.02-04-062.

PG&E's bundled gas distribution base revenues are changed by this decision as shown in the following table.1

      Class

Changes in Annual Revenues ($000's)

Revenue Change
Percent

Core Customers

    
     

Residential

$30,147

1.8

Small Commercial

9,355

1.9

Large Commercial

126

0.9

 

0

0

Wholesale

    
     

Non-Core Customers

    
     

Industrial Distribution

1,349

3.4

Industrial Transmission

0

0

Electric Generation

54

0.2

Cogeneration

30

0.2

     

Shareholder Absorption2

115

4.7

     

Total Change

$41,1763

1.8%

As a result of this decision, a residential gas customer using an average of 50-therms per month on a year-round basis would see average monthly bill increases of 67 cents.

As part of the Distribution Settlement considered and adopted in this decision, the next test year for PG&E will be 2007. We therefore direct PG&E to tender its Notice of Intent for the TY 2007 GRC consistent with the Rate Case Plan.4

In addition to the issues addressed in the Settlements, we consider Applicant's request for approval of a $128.6 million (total Company) contribution to the Company's Retirement Plan trust. Today's decision denies PG&E's request, finding that PG&E did not provide clear and convincing evidence that a contribution is needed at this time.

We also resolve disputed issues related to the Diablo Canyon Independent Safety Committee (DCISC). Today's decision approves a Stipulation filed by PG&E, ORA, the DCISC, TURN, and the Mothers for Peace, which provides that the DCISC shall continue with its current responsibilities and funding through "the term of this GRC." Today's decision also grants, in part, the Mothers for Peace Petition to modify D.88-12-083.

Finally, in this decision, we examine issues related to PG&E's executive compensation. We review and comment on certain executive bonuses designed to promote the retention of certain corporate officers during the difficult period of the energy crisis and the financial insolvency and bankruptcy of PG&E and PG&E Corp.'s non-utility affiliates. We find that the Senior Executive Retention Bonus Program has been, or will be, funded by shareholders, not ratepayers, and we adopt additional accounting and reporting measures to ensure that this remains the case.

This decision resolves all issues in Phase 1 of PG&E's TY 2003 GRC. Phase 2 of this proceeding will address marginal cost, revenue allocation and rate design. This proceeding remains open.

1 Revenue changes are allocated to customer classes using the marginal cost revenues adopted in PG&E's 2000 Biannual Cost Allocation Proceeding (BCAP) (D.01-11-001). 2 Amount represents 50% of the scaled distribution marginal cost revenue allocated to industrial transmission customers. D.98-06-073 (p. 20) ordered PG&E to reduce the distribution revenue requirement by 50% of the amount allocable to this customer class through the end of the Gas Accord period. 3 This is the total increase in CPUC revenue from sales; an additional amount of $10,442 from Other Operating Revenue (OOR) must be added to this amount to get the total rate case CPUC revenue increase of $51,618. 4 The Rate Case Plan was adopted in D.89-01-040.

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