5. Comments on Proposed Decision

The proposed decision of ALJ John S. Wong in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed pursuant to Rule 14.3 of the Commission's Rules of Practice and Procedure. Opening comments were filed by SDG&E and SoCalGas, and PG&E, and reply comments were filed by PG&E and the Indicated Settlement Parties. Those comments have been reviewed and appropriate changes have been incorporated into the decision.

1. The Joint Motion to approve the Gas Accord V Settlement was filed on August 20, 2010, to which SDG&E and SoCalGas filed comments in opposition to the Joint Motion.

2. An evidentiary hearing on the issues raised by SDG&E and SoCalGas was held on October 25 and 26, 2010.

3. Following the San Bruno explosion, rulings were issued in this proceeding to open a safety phase.

4. D.10-12-037 granted PG&E's request to make the revenue requirements and related elements in the Gas Accord V Settlement effective as of January 1, 2011 in the event the Joint Motion is granted.

5. PG&E's application covers the costs associated with operating its GT&S system.

6. PG&E's application requested a total revenue requirement of $529.1 million for 2011; $561.5 million for 2012; $592.2 million for 2013; and $614.8 million for 2014.

7. PG&E's revenue requirement in 2010 was $461.8 million, which was based on a settlement agreed to in 2007 and approved by D.07-09-045.

8. SDG&E and SoCalGas, who did not join in the settlement, oppose two elements of the Gas Accord V Settlement, and have raised two other issues that are not directly addressed by the Gas Accord V Settlement.

9. The concerns of PG&E's customers were expressed at the public participation hearings and in e-mails and letters to the Commission.

10. The Gas Accord V Settlement addresses all of the issues associated with the operation of PG&E's GT&S facilities and services for the four-year period beginning January 1, 2011 and ending on December 31, 2014.

11. Pertinent to our analysis of the Gas Accord V Settlement are the original positions of the parties which are contained in the prepared testimony, the protests and response to PG&E's application, the comparison tables attached to the Joint Motion, the comments at the public participation hearings, the issues raised by SDG&E and SoCalGas, and the safety-related issues raised by the San Bruno explosion.

12. The Gas Accord V Settlement has been agreed to by many different parties who represent a broad range of interests in the natural gas marketplace, and extensive discovery and settlement discussions took place before the settlement was agreed to.

13. DRA estimates that the Gas Accord V Settlement will result in a savings to core customers of about $77 million over the four-year period as compared to PG&E's original position.

14. The underlying elements which make up the agreed-upon revenue requirement for 2011 have not been thoroughly examined since the 2006 to 2007 timeframe, which resulted in the test year 2008 revenue requirement that was agreed to in the Gas Accord IV settlement that was approved in D.07-09-045.

15. PG&E has experienced increasing outlays of capital that have been well above historical levels and is forecasted to continue through the rate case period.

16. PG&E's proposed capital expenditures and O&M expenses are two key drivers of the overall revenue requirement, which the settlement parties were able to negotiate reductions amounting to approximately $220 million over the four-year period.

17. The Commission recognized in D.03-12-061 that Subpart O, which was issued in December 2003, would require gas utilities such as PG&E to implement a Pipeline Integrity Management Program, which requires gas utilities to assess, inspect and manage the integrity of all gas transmission lines located in a HCA.

18. Since the Joint Motion to approve the Gas Accord V Settlement was filed shortly before the San Bruno explosion, a ruling was issued asking parties to comment on whether the settlement provides the necessary funds for PG&E to carry out the capital expenditures and O&M activities that are required by Subpart O and related regulations.

19. In response to the ruling, the settlement parties commented that the Gas Accord V Settlement provides 92% of the monies that PG&E had requested for O&M pipeline integrity, 100% of the capital investment requested for pipeline integrity management in MWC-98, and to 98% of the monies that PG&E had requested for pipeline safety and reliability efforts in MWC-75.

20. The demand or throughput forecast is an important element for cost allocation and ratemaking purposes, and generally speaking, a larger throughput amount will result in more volume over which to spread the cost of providing a particular service.

21. The throughput forecasts in the Gas Accord V Settlement are higher than what PG&E had forecasted, except for the Silverado path.

22. The load factors agreed to in the Gas Accord V Settlement are the result of negotiations over the appropriate calculation methodology and inputs to use.

23. The non-PG&E settlement parties support the cost allocation of the Line 57C project costs because the amount that core storage and load balancing will pay reflects the reliability benefits they receive, and the amount that Market Storage will pay reflects the reliability benefits and increased Market Storage capacity that it receives.

24. The settlement agreed to rolled-in rate treatment for the additional McDonald Island compressors, which results in a lower allocation of costs to core storage and load balancing than under an incremental rate treatment.

25. The rate treatment in the settlement of PG&E's 25% share of the Gill Ranch Storage filed is consistent with the Commission's and PG&E's commitment to shield core ratepayers from the costs of that project.

26. The agreed-upon revenue sharing mechanism in the settlement provides significant ratepayer benefits through the $30 million annual seed amount, as well as the enhanced sharing of over- and under- collections.

27. The issues that the CTAs raised were addressed in the CTA Settlement, which is part of the Gas Accord V Settlement.

28. Other operational concerns about PG&E's GT&S system were raised by the settlement parties and were addressed or resolved by the Gas Accord V Settlement.

29. The original positions and concerns of PG&E and other market participants compared to the Gas Accord V Settlement demonstrate that the settlement parties have negotiated a number of different issues and have been able to reach agreed-upon resolutions.

30. The revenue sharing mechanism agreed to in the Gas Accord V Settlement excludes Schedule G-XF customers from being allocated any of the $30 million in annual seed money to fund this mechanism.

31. There is a well-documented history of how PG&E's Schedule G-XF customers have been responsible for the incremental costs of PG&E's Line 401 expansion project, and the rate design methodology for G-XF rates has remained unchanged since Line 401 was first authorized.

32. There is a clear separation between how the G-XF rate is designed, and how the rates for PG&E's backbone transmission and local transmission are designed, and the latter rates are affected by various inputs that have nothing to do with the Line 401 costs.

33. The reduction in the noncore Redwood Path and noncore Baja Path rates, as compared to PG&E's application and as agreed to in the Gas Accord V Settlement, are the result of a number of different factors that the settlement parties negotiated and which affect the inputs that generate the rates for the noncore Redwood Path and noncore Baja Path.

34. The SoCalGas' witness acknowledged that the G-XF rate is not impacted by every element that goes into the calculation of other rates, such as system throughput.

35. The rate design differences between G-XF rates and other noncore transmission rates result in a greater percentage reduction in the settlement for the noncore Redwood Path and noncore Baja Path rates as compared to the G-XF rate.

36. If SoCalGas is allowed to use its G-XF capacity to deliver gas into the PG&E citygate, PG&E is likely to suffer a revenue loss as a result of a reduction in sales of backbone transmission capacity to northern California shippers, which in turn will cause rates to increase on PG&E's backbone transmission system for both the core and noncore unless PG&E is ordered to absorb this loss.

37. Before the first Gas Accord market structure was agreed to in D.97-08-055, PG&E's Schedule G-XF tariff allowed delivery point flexibility.

38. With the change in the gas market structure from a bundled gas transportation system to an unbundled system, PG&E pointed out the need in A.96-08-043 to limit Line 401 expansion shippers to a single delivery point, instead of to multiple delivery points.

39. The quote in Exhibit 18 at 1-6, which is cited in footnote 20 of this decision, supports the argument that the Gas Accord market structure restricted delivery point flexibility.

40. Although the Exhibit A that SoCalGas and SDG&E rely on contains two delivery points, it is clear from various provisions in the December 1991 FTSA and the December 1996 amendment to the FTSA that the delivery point options of SoCalGas are subject to PG&E's current G-XF tariff.

41. PG&E's current Schedule G-XF tariff regarding the "Delivery Points" is unchanged from the G-XF tariff that was approved in Resolution G-3288, and states that "Customer may nominate only to the Delivery Point set forth in Exhibit A to the Customer's FTSA."

42. Although PG&E controls a large percentage of available gas storage in northern California, PG&E faces storage competition from several ISPs, and potential storage customers can easily compare storage prices by checking with the ISPs.

43. SoCalGas is the only provider of gas storage in southern California, and ISPs have not filed applications as readily to offer gas storage in southern California.

44. PG&E is already required to post certain gas storage information on its Pipe Ranger website.

45. One element of the public interest in the Gas Accord V Settlement relates to the safety concerns that have been highlighted as a result of the San Bruno explosion.

46. One of the issues raised by the San Bruno explosion is whether the capital expenditure projects that were previously identified by PG&E as high risk were actually completed, or whether other higher priority projects were built instead.

47. In response to the September 15, 2010 ruling, PG&E and the other settlement parties recognize that PG&E has committed to spending the full amount that the Gas Accord V Settlement has set aside for pipeline integrity activities and for pipeline safety and reliability efforts, and that the one-way balancing account agreed to in section 7.3.1 of the settlement will help ensure that PG&E spends all of the designated O&M monies for pipeline integrity management activities.

48. The Safety Report will provide the Commission staff with the information it needs to verify PG&E's use of the monies for their intended purpose, and to detect any problems with PG&E's prioritization or administration of its storage or pipeline capital projects or O&M activities.

49. The amount of funds that were negotiated in the settlement to preserve almost all of the capital projects and O&M work activities related to pipeline safety, reliability, and integrity provides assurance that PG&E will have sufficient funds during the rate cycle to meet the Subpart O requirements and to carry out the necessary projects and maintenance work to ensure safe and reliable service.

50. The pro forma tariff sheets reflect the agreements reached in the Gas Accord V Settlement, and were developed in consultation with the settlement parties.

1. In deciding whether the Joint Motion should be granted or not, we examine whether the settlement is reasonable in light of the whole record, consistent with the law, and in the public interest.

2. The exclusion of G-XF shippers from participating in the revenue sharing mechanism is not arbitrary, unreasonable, or discriminatory, and the request of SoCalGas and SDG&E to revise this part of the settlement to allow G-XF customers to participate in this mechanism is not adopted.

3. The proposal of SoCalGas and SDG&E to reduce the Schedule G-XF rates by the same percentage reduction that the noncore Redwood Path rates experience in the Gas Accord V Settlement is not adopted.

4. SoCalGas does not have a right to use its capacity on Line 401 to deliver into PG&E's citygate because SoCalGas' delivery point options are subject to PG&E's G-XF tariff, which limits the delivery point to a single delivery point as set forth in Exhibit A to the FTSA.

5. This proceeding is not the proper proceeding in which to lay the groundwork for storage posting requirements that could apply to all the ISPs in the future.

6. The proposal of SoCalGas and SDG&E to impose the FERC gas storage posting requirements on PG&E is not adopted.

7. Beginning October 1, 2011, PG&E should be required to provide the semi-annual Safety Report, which contains the information set forth in Appendix C of this decision, to the directors of the Energy Division and CPSD, and to the service list in this proceeding.

8. CPSD shall review the Safety Reports to monitor PG&E's storage and pipeline-related activities, to assess whether the projects which have been identified as PG&E to be high risk are being carried out, and to track whether PG&E is spending its allocated funds on these storage and pipeline-related safety, reliability, and integrity activities.

9. Should CPSD detect any problems with PG&E's prioritization or administration of the storage or pipeline capital projects or O&M activities, CPSD should bring the problems to the Commission's attention immediately.

10. The Gas Accord V Settlement is reasonable in light of the whole record, is consistent with the law, and is in the public interest.

11. The Joint Motion to approve the Gas Accord V Settlement is granted, and the terms contained in the Gas Accord V Settlement are adopted.

12. The pro forma tariffs set forth in Exhibit 5 of the Joint Motion are approved, and PG&E may them as the basis for its advice letter filings to implement the Gas Accord V Settlement.

13. Pursuant to D.10-12-037, PG&E should be authorized to collect its 2011 revenue requirement over the remaining months of 2011.

ORDER

IT IS ORDERED that:

1. The August 20, 2010 "Joint Motion of Settlement Parties for Approval of `Gas Accord V' Settlement" is granted, and the terms contained in the Gas Accord V Settlement Agreement, which is attached to this decision as Appendix A, are adopted.

2. The pro forma tariff sheets set forth in Exhibit 5 of the Joint Motion of Settlement Parties for Approval of "Gas Accord V" Settlement are approved, and Pacific Gas and Electric Company may use them as the basis for its advice letter filings to implement the approved and adopted Gas Accord V Settlement Agreement.

3. Within 30 days from today's date, Pacific Gas and Electric Company (PG&E) must file the necessary advice letters with the Energy Division under Tier 1 of General Order 96-B to implement and carry out the terms of the Gas Accord V Settlement Agreement, and to present the necessary tariff revisions.

4. Pursuant to Decision 10-12-037, Pacific Gas and Electric Company is authorized to collect its 2011 revenue requirement over the remaining months of 2011.

5. Pacific Gas and Electric Company (PG&E) must prepare on a semi-annual basis a "Gas Transmission and Storage Safety Report" (Safety Report) containing the information set forth in Appendix C to this decision and as described in this decision.

a. PG&E must serve the first Safety Report on October 1, 2011 on the directors of the Commission's Consumer Protection and Safety Division and the Energy Division, and to the service list in this proceeding, and PG&E must continue to serve semi-annual Safety Reports as set forth in Appendix C.

6. The Commission's Consumer Protection and Safety Division (CPSD) must review the Gas Transmission and Storage Safety Reports, and establish the necessary procedures to monitor Pacific Gas and Electric Company's (PG&E) storage and pipeline-related activities set forth in the reports, to assess whether the projects which PG&E identified in this proceeding as high risk are being carried out, and to track whether PG&E is spending its allocated funds on the storage and pipeline-related safety, reliability, and integrity activities.

a. Should CPSD detect any problems with PG&E's prioritization or administration of the storage or pipeline capital projects or O&M activities, CPSD must bring the problems to the Commission's attention immediately.

b. The Energy Division must provide CPSD with the necessary assistance to review and monitor these reports.

7. This proceeding remains open to address other issues raised in the safety phase.

This order is effective today.

Dated April 14, 2011, at San Francisco, California.

I abstain.

/s/ MICHEL PETER FLORIO

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