IX. THE END OF THE AB 1890 RATE FREEZE

Both PG&E and Edison argue that the Commission unlawfully failed to declare that the rate freeze was over, presenting somewhat different arguments why this is so. Many of the Utilities' arguments were considered and rejected by the Commission in the Accounting Decision and will not be repeated here. However, after reviewing the applications for rehearing we are of the opinion that it would be prudent for the Commission to now reconsider the issue of whether the AB 1890 rate controls should be ended. New legislation, AB 6X in particular, has materially affected the implementation of AB 1890. We wish to reconsider the viability of maintaining the AB 1890 rate controls in light of these recent legislative changes.

Further proceedings will address the impact of AB 6X on the AB 1890 rate freeze paradigm, and the actual date of the end of the rate freeze. We anticipate that the issues involved in this determination are legal as opposed to factual, and the Commission can adequately resolve the issue of ending the rate freeze after briefing by the parties. We accordingly will direct the ALJ Division to set a schedule enumerating the issues to be addressed. We further note that we must also determine the extent and disposition of stranded costs left unrecovered, and will address this in proceedings subsequent to our determinations regarding the rate freeze.

Therefore IT IS ORDERED that:

1. Decision 01-03-082 shall be modified as follows:

a. On page 9 after the first full paragraph, the following paragraph shall be inserted: "Both Utilities included in their RSPs trigger mechanisms which would automatically increase rates if undercollected power costs exceeded a certain level. The Utilities claim that further rate increases, as implemented through the proposed trigger mechanism, may be necessary if their financial condition continues to worsen."

b. On page 15, the first sentence of the last paragraph shall be changed to: "This rate increase is subject to several conditions."

c. On page 15, the following paragraph shall be inserted after the fourth paragraph: "We also grant an increase of three cents per kWh to be collected by SCE and PG&E. Although this amount is higher than the Utilities' immediate request, we do not adopt the Utilities' proposed trigger mechanisms for further rate increases. However, we anticipate that this amount will be enough to stabilize the state's energy supply system and pave the way for DWR to be reimbursed for its power purchases, without the need for future rate increases."

2. Limited rehearing is granted on the issue of whether rate controls under AB 1890 should be ended. We direct the ALJ Division to issue an expedited briefing schedule enumerating the issues to be addressed.

3. Rehearing on all remaining issues in the applications for rehearing of Decision 01-03-082, as modified herein, is denied.

This order is effective today.

Dated January 2, 2002, at San Francisco, California.

LORETTA M. LYNCH

President

RICHARD A. BILAS

CARL W. WOOD

GEOFFREY F. BROWN

Commissioners

I dissent.

/s/ HENRY M. DUQUE

Commissioner