III. CONCLUSION

D.07-12-052 is hereby modified as discussed above, and as set forth in the ordering paragraphs below. As modified, rehearing of D.07-12-052 is denied because no legal error has been demonstrated.

IT IS THEREFORE ORDERED THAT:

1. D.07-12-052 is modified as follows:

a. The fifth sentence of the first paragraph under Section 2.3.7 ("Discussion") is modified to read as follows:

"Thus, we require the IOUs to at least maintain their current QF capacity over the next decade, subject to the requirements of the Public Utility Regulatory Policies Act of 1978 ("PURPA") (16 U.S.C. § 824a-3 et seq.)."

b. Finding of Fact 36 is modified to read as follows:

"We find the IOUs treatment of QF resources for system reliability purposes to be reasonable given the information available to the IOUs at the time of their filing. However, on September 20, 2007, the Commission issued D.07-09-040 adopting pricing and policy mechanisms for the IOUs' purchase of energy and capacity from the QFs and we require each IOU to maintain its current level of QF capacity throughout the planning cycle, subject to the requirements of PURPA. We anticipate that the IOUs will incorporate the new directives in subsequent LTPP filings."

c. Conclusion of Law 20 is modified to read as follows:

"Treatment of QFs by the IOUs in their LTPPs was reasonable in light of the information available to the IOUs at the time of their filings, but QF policy and pricing issues are now established by D.07-09-040. To be consistent with the QF policies now established by D. 07-09-040, the IOUs shall modify their LTPPs to include maintenance of the current level of QF capacity, subject to the requirements of PURPA."

2. Rehearing of D.07-12-052, as modified, is hereby denied.

This order is effective today.

Dated September 18, 2008, at San Francisco, California.

MICHAEL R. PEEVEY

President

DIAN M. GRUENEICH

JOHN A. BOHN

RACHELLE B. CHONG

TIMOTHY ALAN SIMON

Commissioners