XIV. Ratemaking Treatment

PG&E proposes that the Commission:

1. Adopt $706 million as a reasonable and prudent cost for replacement of the steam generators;³⁰

2. Determine that actual costs equal to or less than $706 million will be placed in ratebase and fully recoverable in rates;

3. Authorize PG&E to seek recovery in rates of any amounts above $706 million, subject to an after-the-fact reasonableness review of the additional costs;

4. Authorize PG&E to record the revenue requirement associated with plant additions for each unit equal to or less than $706 million ($326 million for Unit 1 and $380 million for Unit 2) in the UGBA as of the date of operation of each unit;

5. Authorize PG&E to include the revenue requirement associated with each unit in rates on January 1 of the year following commercial operation of each unit;

6. Authorize PG&E to record in the UGBA the revenue requirement, if any, associated with plant additions above $706 million as of the date of operation of each unit. PG&E would be at risk for these revenue requirements, and would only be allowed to include them in rates if such costs were ultimately found to be reasonable and prudent by the Commission; and

7. Approve modifications to the UGBA to allow for the recording of the above revenue requirements.

PG&E's first three proposals have been addressed previously, and will not be repeated here.

Once the SGRP has been completed for each unit, and the unit is back in service, there is no reason to preclude PG&E from having the opportunity to earn a return on its investment. Therefore, we intend to allow PG&E to record in the UGBA the revenue requirement associated with plant additions up to the cap as of the date of operation of each unit. We also intend to allow PG&E to include the revenue requirement associated with each unit in rates, up to $326 million for Unit 1 and $380 million for Unit 2, on January 1 of the year following commercial operation of each unit.³¹ The rate increase would be subject to refund. We will require PG&E to request authority to implement the above rate increase for each unit by advice letter. When the SGRP is complete for both units, PG&E will be required to file an application to include the costs in ratebase. If a reasonableness review is to be performed, it will be done as part of that application.

ORA recommends that the revenue requirement be phased in over three years to avoid an unacceptable increase in rates. PG&E disagrees and represents that the rate increase, based on $706 million, would amount to less than 2%. Since the record does not demonstrate that a significant rate increase would occur, we see no need to require a phase in. However, since circumstances may change, we will not preclude the possibility of a phase in.