2. Background

The Mountain House Area is the site of a planned community to be built in a mostly undeveloped portion of western San Joaquin County, north of Tracy, within the boundaries of the Mountain House Community Services District.⁷ Until recently, development of the Mountain House planned community has progressed slowly. At the end of 2000, the Mountain House Area had less than 140 electric service accounts, mostly widely dispersed residences and agricultural accounts, with a total peak load of less than 800 kilowatts. When construction of the planned community is completed, the area is expected to have more than 16,000 electric distribution customers.

PG&E previously provided electric and gas distribution and transmission services to customers in the Mountain House Area until 2001, when § 9610 became effective. PG&E utilized its 12 kV (kilovolt) main line (main line) from PG&E's Herdlyn substation and tap lines that branch off the main line to provide this electric distribution service. As of January 1, 2001, when MOD became responsible for electric distribution service in the area, MOD had no electric distribution lines in the area to serve the existing load. PG&E and MOD therefore entered into a license and lease agreement, which permits MOD to receive a limited amount of power from PG&E's main line and to use PG&E's tap lines to deliver electricity to customers.

According to the application, after the passage of AB 2638, MOD began constructing a substation and a 21 kV line running parallel to part of PG&E's main line in the Mountain House Area. MOD completed construction of these facilities in 2002. MOD has also constructed new lines to connect the new wastewater plant and sewage treatment plant to PG&E's electric distribution system and new lines to connect a domestic water plant to MOD's distribution system. However, MOD still needs to use PG&E's main line and certain tap lines to deliver electricity to customers. Since PG&E is no longer serving electric distribution customers in the Mountain House Area, it no longer needs these tap lines for utility purposes.

Some of the tap lines that PG&E proposes to sell to MOD are located on five PG&E wooden transmission poles. However, since PG&E does not wish to sell these transmission poles, PG&E has therefore agreed to lease space on the poles to MOD.

PG&E therefore seeks approval of the following agreements with MOD for the lease and sale of electric distribution facilities to MOD, so that MOD may provide electric distribution service in the Mountain House Area, pursuant to § 9610:

· The license and lease dated December 28, 2000 and amended on December 27, 2002 (the license/lease);

· The purchase and sale agreement dated December 27, 2002 (the sale agreement);

· The wood pole lease dated December 27, 2002 (the pole lease).