6. California Environmental Quality Act

Under the California Environmental Quality Act (CEQA) and Rule 17.1 of the Commission's Rules of Practice and Procedure (Rules), we must consider the environmental consequences of projects that are subject to our discretionary approval.³⁹ Thus, in deciding whether to approve A.04-05-041, we must consider if doing so will alter an approved project, result in new projects, change operations, etc., in ways that have an environmental impact.

PG&E intends to use $1.008 billion of long-term debt and preferred stock authorized by this Opinion to finance capital expenditures during 2005 - 2008.⁴⁰ PG&E estimates that its total capital expenditures during this period will exceed $6.5 billion.⁴¹ However, PG&E represents that it cannot identify the specific capital expenditures that will be financed with the long-term debt and preferred stock issued pursuant to this Opinion. According to PG&E, there is not a direct connection between the issuance of debt and equity and a specific use of proceeds. PG&E asserts that on the day the proceeds from the issuance are received, the cash will be mingled with PG&E's other cash and disbursed as needed.⁴² PG&E states that to the extent that capital expenditures are financed with the proceeds of the long-term debt and preferred stock issued pursuant to this Opinion, CEQA review will occur as needed when PG&E goes through the regulatory processes applicable to each capital project.⁴³

We are skeptical of PG&E's claim that it cannot identify any specific capital expenditures that will be financed with the long-term debt and preferred stock authorized by today's Opinion. As a large utility, PG&E must plan and budget for many different capital programs, ranging from the routine replacement of utility poles and pipelines, to the replacement of nuclear steam generators. It is hard for us to believe that PG&E's planning and budgeting for capital expenditures does not consider how the capital expenditures will be financed.

To ensure compliance with CEQA, we will require PG&E to file by December 31^st of each year an annual informational advice letter that lists and describes the specific capital expenditure programs that will be financed during the following year with the proceeds from the long-term debt and preferred stock authorized by today's Opinion. This requirement will end when all the long-term debt and preferred stock authorized by this Opinion has been issued and proceeds expended. The capital expenditure programs listed in the advice letter shall be divided into two categories. The first category shall consist of all capital expenditure programs that do not require any additional Commission approval pursuant to Section 851, Sections 1001 et seq., or GO 131-D. For each program listed in the first category, PG&E shall identify the exact reason(s) why no additional CEQA review is required. PG&E may use the proceeds from the long-term debt and preferred stock authorized by today's Opinion to fund programs in the first category without additional authority from the Commission.

The second category shall consist of capital expenditure programs that require Commission approval and CEQA review in a proceeding initiated pursuant to Section 851, Sections 1001 et seq., or GO 131-D. PG&E may not use the long-term debt and preferred stock authorized by today's Opinion to fund these programs until (1) the Commission has approved these programs pursuant to Section 851, Sections 1001 et seq., or GO 131-D, and (2) the Commission (or other lead agency) has completed any attendant CEQA review.

Pursuant to Section 824 and GO 24-B, we will require PG&E to maintain records which demonstrate that the only capital expenditure programs funded, in whole or in part, with the long-term debt and preferred stock authorized by today's Opinion are those that have received all necessary CEQA approvals. If PG&E is unable to identify specific capital expenditure programs funded with the long-term debt and preferred stock authorized herein, we will assume that the debt and preferred stock issued pursuant to today's Opinion have been used to fund an annual amount of capital expenditures shown in Appendix A of this Opinion,⁴⁴ and that the capital expenditures shown in Appendix A have been allocated pro rata among all of PG&E's capital expenditure programs funded during the year.