I. REASONABLENESS AND COST
RECOVERY

A. Employee-Related Transition Costs

1. Bargaining Unit Retraining Assistance Issue: PG&E and ORA agree that PG&E should recover $93,786 in record period costs incurred for Bargaining Unit Retraining Assistance for employees working at Morro Bay, Geysers, Moss Landing, Contra Costa, and Pittsburg power plants. In particular, because of additional information provided by PG&E, ORA agrees that recovery of $13,800 in costs for this program which it questioned in its report is consistent with the terms of the Settlement Agreement between PG&E, ORA and the Coalition of California Utility Employees, adopted in D.00-02-048, and is appropriate.

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2. Hunters Point Management Enhanced PIP Issue: Because of additional information provided by PG&E, ORA agrees that PG&E should recover $25,452 in record period costs incurred for Management Enhanced Performance Incentive Program (PIP) for 16 employees who were working at the Hunters Point plant.

B. Qualifying Facility And Other Power
Purchase Agreement Costs, Including
Legal and Administrative Costs

1. Recovery Of QF Administrative Costs: PG&E and ORA agree that none of PG&E's QF administrative costs were authorized for recovery in PG&E's 1999 General Rate Case (GRC). PG&E inadvertently included an estimate of the administrative costs in its 1999 GRC cost estimates, but the GRC decision did not authorize recovery of the electric portion of the "Gas And Electric Supply Expenses" component of GRC costs in which PG&E had inadvertently included an estimate of QF administrative costs. The 1999 GRC decision allows PG&E to propose a recovery mechanism for these costs at a future date.

PG&E and ORA agree that PG&E will remove all QF administrative costs from the electric portion of the Gas And Electric Supply Expenses estimate adopted in PG&E's 1999 GRC decision, D. 00-02-046 before recording that amount in PG&E's proposed Electric Supply Cost Memorandum Account (ESCMA), and will not seek recovery of QF administrative costs, except through the Transition Cost Balancing Account (TCBA). Because this Stipulation resolves issues in the 1999 ATCP, PG&E agrees that any recovery mechanism which it may propose for recovery of the amounts in the ESCMA shall not be proposed in the ATCP. PG&E further agrees that it will not seek to recover QF administrative costs associated with the 1999 ATCP record period through an alternative recovery mechanism.

Based on this, PG&E and ORA agree that PG&E appropriately recorded approximately $2 million in QF administrative costs in the TCBA during the first six months of 1999.

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2. QF Contract Costs: During the record period, PG&E reasonably and prudently administered and managed its QF contract agreements. During the record period, PG&E recorded in the TCBA QF contract payments and associated administrative and legal costs in the amount of $1,387.3 million.

3. QF Contract Restructurings/Modifications/Amendments/Dispute Settlements: During the record period, PG&E reasonably and prudently modified the contracts of or settled disputes with the 15 QF projects shown in Table 1, which appears at the end of this section. During the record period, PG&E recorded in the TCBA all costs incurred and payments made pursuant to these modified/settled QF contracts.

There are also three additional restructured QF PPAs for which PG&E is not seeking approval in this ATCP: (1) Mt. Poso Cogen Termination and Bridging Agreements;1/ (2) San Joaquin Cogen Termination Agreement; and (3) Ultrapower Blue Lake Termination Agreement. PG&E is seeking approval of these restructurings through separate Commission proceedings. PG&E and ORA agree that during the record period PG&E recorded costs associated with these restructurings in the TCBA. PG&E and ORA also agree that if the Commission does not approve the recovery of costs associated with these additional restructurings as recorded in the TCBA, PG&E will adjust these costs, including associated interest, in the TCBA to reflect the Commission's final decisions in these separate proceedings.

4. Associated QF Shareholder Savings Incentives: PG&E's testimony in this proceeding requested approval of a $0.554 million shareholder savings incentive associated with QF contracts that PG&E had restructured during the record period. ORA and PG&E agree that this amount should be reduced to $0.548 million, and that PG&E may recover this total shareholder savings incentive amount for these restructured QF contracts. This agreed upon amount includes a $6,100

1/ At the end of the 1999 ATCP record period, the Mt. Poso Termination Application was still an active proceeding. After the end of the record period, PG&E withdrew the Termination Application. TCBA entries resulting from withdrawal of the Termination Application will be subject to review in the 2000 ATCP.

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reduction from the recorded amount to reflect a compromise by PG&E and ORA on the amount of the shareholder incentive for the Big Creek buyout. ORA and PG&E's compromise in this case is not precedential or binding on either party for future, similar QF termination or buyout agreements. PG&E agrees it will make an appropriate entry in the TCBA to reflect this adjustment, including any associated interest.

There are also three additional restructured QF PPAs for which PG&E is not seeking approval in this ATCP: (1) Mt. Poso Cogen Termination and Bridging Agreements;2/ (2) San Joaquin Cogen Termination Agreement; and (3) Ultrapower Blue Lake Termination Agreement. PG&E is seeking approval of the shareholder incentives for these three PPA restructurings through the separate Commission proceedings, as well. PG&E and ORA agree that PG&E recorded costs associated with these incentive amounts in the TCBA. PG&E and ORA also agree that if the Commission does not approve these incentive amounts as recorded in the TCBA, PG&E will adjust them, including associated interest, in the TCBA to reflect the Commission's final decisions in these separate proceedings

5. Other Power Purchase Agreements (PPA): During the record period, PG&E reasonably and prudently administered and managed its Other Power Purchase Agreements.

During the record period, PG&E recorded in the TCBA Other Power Purchase Agreement payments and associated administrative and legal costs in the amount of $90.2 million (including $24.5 million of WAPA costs identified in ¶6 below).

PG&E and ORA agree that during the record period, PG&E erroneously recorded $1.6 of non-retail costs in the TCBA as costs associated with the Other Misc. Must-Take Agreements. Outside of the record period PG&E recorded an adjustment to the TCBA to correct this error.

2/ At the end of the 1999 ATCP record period, the Mt. Poso Termination Application was still an active proceeding. After the end of the record period, PG&E withdrew the Termination Application. TCBA entries resulting from withdrawal of the Termination Application will be subject to review in the 2000 ATCP.

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6. Western Area Power Administration Integration Agreement: During the record period, PG&E reasonably and prudently administered and managed its Western Area Power Administration Integration Agreement. During the record period, PG&E recorded in the TCBA $24.5 million in costs associated with the Western Area Power Administration Integration Agreement.

7. Adjustments Outside the Record Period for this Proceeding: PG&E has made some adjustments to the TCBA, relating to QF and other PPA activities during the record period for this 1999 ATCP, outside of the record period for this 1999ATCP.3/ Since PG&E recorded these adjustments outside the record period for this proceeding, PG&E agrees the accuracy of the accounting associated with these adjustments may be reviewed in the 2000 ATCP.

3/ These adjustments are noted in Table 7-B, page 7-25, of PG&E's direct testimony in this proceeding.

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Table 1

Pacific Gas and Electric Company

1999 Annual Transition Cost Proceeding

QF Contract Renegotiations/Modifications/Amendments/Dispute Settlements

Joint ORA/PG&E Recommendation for Commission Approval

Log No.	Project Name	Agreement <1>	Date Signed
25C321	Midway Sunset	PG&E Enabling Agreement	July 29, 1998
12C051	Koppers Industries, Inc.	Termination of Contract	Effective July 17, 1998
13C038	Burney Forest Products	· BFP Bridging Agreement Letter Extension · Second Amendment	September 25, 1998 October 19, 1998
13H005	Big Creek Water Works, Ltd.	· Termination and Buy-Out Agreement · Extension of Buyout and Termination Agreement	October 28, 1998 December 25, 1998
25C092	Fresno Cogen	· Fresno Fourth Power Deadline Extension Agreement · Further Extension of Repower Deadline Letter Agreement	October 27, 1998 June 2, 1999
10H059	James B. Peter	Additional Energy Delivery Letter Amendment	May 10, 1999
25C177	Red Top Cogeneration, L.P.	Settlement Agreement	December 17, 1998
16C047	Byron Power Partners	Settlement Agreement and Release	August 14, 1998
25C045	JRW Associates, L.P.	Settlement Agreement and Release	August 14, 1998
10P005	HL Power	· Pay for Curtailment Agreement (January - May 1999) · Pay for Curtailment Agreement (June - July 18, 1999)	December 17, 1998 May 25, 1999
13P162	Wheelabrator Hudson	· Weekly Pay-for-Curtailment Agreement · Weekly Pay-for-Curtailment Agreement	October 21, 1998 April 25, 1999
25C188 25C242 25C241	Kern Front High Sierra Limited Double "C" Limited	· Daily Pay for Curtailment Agreement · Extension of Term of Daily Pay for Curtailment Agreement	November 10, 1998 March 31, 1999
06P022	Woodland Biomass	Weekly Pay-for-Curtailment Agreement	July 31, 1998

Footnote

<1> Agreements in PG&E's workpapers pp. dgd-1 through dgd-477.

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C. Transition Cost Balancing Account Issues

1. December 8, 1998 San Francisco Outage: PG&E and ORA agree that further entries may be required in the TCBA based on the Commission's decision in Investigation 98-12-013. No further action is required at this time.

2. Correction of PBOPs Amortization Expense Entry: PG&E and ORA agree that the December 1998 monthly PBOPs entry was in error, requiring a later credit of $3,082,556 plus interest. PG&E recorded an adjustment in December 1999 to correct this error. No further action is required at this time.

3. Matching End-Of-Month TCBA Balances To The Subsequent Beginning-Of-Month TCBA Balances: PG&E and ORA agree that PG&E does not need to modify its "TCBA showing" to make the flow of balances from one month to the next more apparent, because PG&E provided to ORA a reconciliation of the balances covering the entire record period that explained the discrepancies. PG&E agrees that differences between one month's ending balance in the TCBA and the next month's beginning balance should be avoided, if possible. PG&E has implemented procedures to eliminate these differences in future TCBA reports. No further action is required at this time.

4. Interest On June Credit: PG&E and ORA agree that a $2,468,356 credit to the TCBA made in June 1999 should have included interest calculated back to December 31, 1996, in the amount of $352,211. PG&E recorded an adjustment in January 2000 to correct this error. No further action is required at this time.

5. Prior Period Adjustments: PG&E and ORA agree that PG&E's current method of including prior period adjustments in the TCBA report, which began in February 1999, together with the prior period adjustment documentation provided in PG&E's workpapers supporting the TCBA report, address ORA's proposal that "the TCBA should report Prior Period Adjustments in a consistent manner." No further action is required at this time.

6. Interest On Departing Load Customers Credit: PG&E and ORA agree that a record period debit entry relating to revenues from departing load customers that should have been a credit requires an adjustment of ($174,878), plus interest, to the TCBA. PG&E recorded an adjustment in January 2000 to correct this error. No further action is required at this time.