ALJ/MSW/sid Mailed 2/14/2003

Decision 03-02-006 February 13, 2003

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company for Authority, Among Other Things, to Increase Rates and Charges for Electric and Gas Service Effective on January 1, 1999. (U 39 M)	Application 97-12-020 (Filed December 12, 1997)
Investigation into the Reasonableness of Expenses Related to the Out-Of-Service Status of Pacific Gas and Electric Company's El Dorado Hydroelectric Project and the Need to Reduce Electric Rates Related To This Non-Functioning Electric Generating Facility.	Investigation 97-11-026 (Filed November 19, 1997)
Application of Pacific Gas and Electric Company for Authority, Among Other Things, to Decrease its Rates and Charges for Electric and Gas Service, and Increase Rates and Charges for Pipeline Expansion Service.	Application 94-12-005 (Filed December 9, 1994)
Order Instituting Investigation Into Rates, Charges, and Practices of Pacific Gas and Electric Company.	Investigation 95-02-015 (Filed February 22, 1995)

OPINION ON BUSINESS AND

ACCOUNTING SYSTEM VERIFICATION AUDIT

1. Summary

In connection with Pacific Gas and Electric Company's (PG&E) test year 1999 general rate case (GRC), the Commission reviews an audit by the Office of Ratepayer Advocates (ORA) of PG&E's Systems Applications and Products in Data Processing business and accounting system (SAP System). Pursuant to an agreement reached by PG&E and ORA following issuance of ORA's audit report, $2 million is removed from PG&E's distribution rate base and $1.5 million is removed from the expense-related distribution revenue requirement to correct the effects of overstated Materials and Supplies (M&S) inventory balances in 1997. Pursuant to an earlier Commission order establishing the effective date of the revenue requirements authorized in this GRC, the adopted adjustments are made effective as of January 1, 1999.