II. TCBA UNDERCOLLECTIONS

PG&E similarly contends that the Commission is required to allow PG&E to recover its TCBA undercollections as part of its prospective URG revenue requirement. PG&E presented this scenario as an alternative to its market valuation recovery proposal. According to PG&E, since those undercollections now have been characterized as transition/generation costs they must be recoverable through its URG revenue requirement. PG&E alleges that the Commission must include these past uneconomic costs because they are part of PG&E's URG cost of service.

PG&E's undercollection argument fails for most of the same reasons as its market valuation argument. D.01-10-067 only concludes that the current phase of the proceeding will determine PG&E's prospective revenue requirement, and that the issue of past uneconomic costs should be considered separately. PG&E does not, and cannot, demonstrate that this analytic division is beyond the Commission's discretion. Nor can PG&E contend that any confiscation has occurred since no rates have been set, and PG&E has not been denied recovery of any costs.

PG&E also claims that the Decision violates the equal protection clauses of the federal and state Constitutions, and is discriminatory in violation of Public Utilities Code section 453 because it discriminates between Edison's
URG-related costs, and PG&E's related costs. The bases for PG&E's argument are suggestions in Edison's pleadings that TCBA undercollections be incorporated in this phase of the proceeding, and the Commission's settlement with Edison, which provides for some recovery of Edison's undercollections.

PG&E has no legal basis for a discrimination under either section 453 or the equal protection clauses. Section 453 concerns discrimination by utilities, and PG&E makes no argument suggesting why that section should apply to the Commission's actions concerning PG&E's and Edison's URG revenue requirements. Moreover, equal protection violations are rare in the field of economic regulation. As the California Supreme Court has stated: "In the area of economic regulation, the high court has exercised restraint, investing legislation with a presumption of constitutionality and requiring merely that distinctions drawn by a challenged statute bear some rational relationship to a conceivable legislative purpose." (People v. Olivas (1976) 17 Cal.3d 236, 243.) This same standard is applied to the Commission's rate decisions. (Toward Utility Rate Normalization (TURN) v. Public Utilities Commission (1978) 22 Cal.3d 529.)

Here, PG&E fails to demonstrate any discrimination. Although PG&E refers to Edison filings seeking certain treatment of TCBA undercollections, PG&E fails to cite any Commission holding endorsing or adopting Edison's suggestions. Since there is no such holding, PG&E can point to no disparate treatment of Edison and PG&E concerning the inclusion of TCBA undercollections in the determination of a prospective URG revenue requirement. Furthermore, as TURN notes in its response, Edison's proposal differs from PG&E's in a number of significant respects, and therefore there is no reason for the Commission to treat these proposals identically.

PG&E's other claim of discriminatory treatment concerns the settlement that the Commission entered into with Edison. As PG&E points out, the Edison settlement allows for some recovery of TCBA undercollections in Edison's retail rates. D.01-10-067 cannot be considered disparate treatment of PG&E, however, since the Edison settlement and the resulting rate agreement has nothing to do with the specific issue of the utilities' prospective URG revenue requirement, the subject of the current phase of this proceeding. Moreover, as mentioned above, PG&E has not been foreclosed from recovering some or all of its TCBA undercollections in retail rates at some point. We are not considering that issue in our current efforts to calculate the utilities' prospective URG revenue requirements.

Even if PG&E could demonstrate that it was treated differently from Edison, that difference would not be an equal protection violation. The fact that Edison agreed to a settlement of its federal claims against the Commission, unlike PG&E, renders it differently situated from PG&E. Because the two utilities are now in fairly different circumstances, distinctions in their regulatory treatment would be permissible.