3.1 Uncontested Issues

The principal substantive issue before us is whether the ratemaking adjustments that PG&E and ORA have agreed upon should be made effective January 1, 1999 as proposed by ORA. Before resolving this issue we briefly review the uncontested recommendations of ORA regarding accessibility of the SAP System, PG&E's responses to those recommendations, and the proposed ratemaking adjustments.

With respect to ORA's recommendation that PG&E provide complete documentation for expenses included in its accounts, PG&E agrees that all invoices and supporting documentation for accounting entries in PG&E's financial books must be available for inspection by the Commission staff. PG&E's goal is to have such documentation optically archived and available through the SAP System. For the time being, PG&E states that it must rely on hard copy or electronic support other than optical archiving. We note that PG&E agrees that it should provide technical support for Commission staff in using the SAP System during regulatory audits, that it should keep ORA informed of any new modules or other system upgrades, and that it should provide continued access to SAP as was provided during the current review along with readily available technical staff to assist in the access to appropriate SAP data. We also note PG&E's agreement that it is subject to "critical review" of expenditures incurred for any modifications or upgrades to the SAP system.

We commend PG&E and ORA for their collaborative efforts in addressing and resolving the issues that were raised in connection with the SAP System verification audit. We note with approval that PG&E appears to recognize the need to make its business and accounting system accessible to the Commission staff, including ORA, in a meaningful way. We expect PG&E's continued cooperation in this regard. This includes the timely provision of supporting documentation for all accounting entries and the provision of necessary technical support and assistance in the use of the system.

We will adopt PG&E's and ORA's uncontested joint recommendations to remove $2 million from PG&E's distribution rate base and to remove $1.5 million from the expense-related distribution revenue requirement, which recommendations are more fully described in the background section of this opinion. We are satisfied that the recommendations reflect the informed judgments of both PG&E and ORA regarding the effects of the overstated M&S inventory balances in 1997. Among other things, the compromise recommendation on expenses fairly and appropriately resolves the uncertainty regarding the amount of the imbalance that was included in the expenses previously approved.