3. Positions of the Parties

PG&E and SDG&E jointly request that the Commission stay the implementation of the Operating Order and approve the negotiated Agreements. The joint motion alleges that failure to stay the implementation of the Operating Order would result in "confusion and uncertainty" due to potential inconsistencies between the duties and obligations in the Operating Order and the Agreements. The joint motion also alleges that PG&E and SDG&E would suffer irreparable harm if the motion is not granted due to the commercial uncertainty of being subject to an Operating Order instead of an Agreement.

SDG&E's primary concern is that the Commission's decision be adopted in the form of an "agreement" instead of an "order." According to SDG&E the Operating Order and the Agreements have fundamentally the same objectives, but the Agreements have several essential and mutually negotiated improvements that warrant Commission approval. SDG&E describes these improvements as: (1) Establishing a commercially acceptable and mutually agreed upon limited agency relationship between SDG&E and DWR; (2) Clarifying that the Utility, in managing its overall portfolio, holds no higher contractual duty to DWR than it does to its own ratepayers; (3) Clarifying that DWR is not in the business of reviewing Utility least cost dispatch, other than to verify compliance with the supplier contracts; (4) Clarifying the Commission's role in review of utility contract administration and dispatch; (5) Providing DWR with the right to review and approve key financial decisions, such as longer term gas purchases; (6) Limiting SDG&E's contractual liability in a commercially reasonable way; and (7) Providing a mechanism for utilities to obtain instructions from DWR on how to administer DWR's contracts where there are several choices available or the utility is uncertain how to perform in compliance with a contract.

PG&E argues that the Agreements would resolve a "flaw" in the Operating Order that exists because the Operating Order presumes a contractual relationship between DWR and the utilities where there is none. PG&E argues that where only one party under a bi-lateral arrangement is bound by the order, the order is fundamentally flawed. PG&E states that attempting to compel DWR to accept terms defining the role of the utility as a limited agent for and on behalf of DWR is not legally controlling or commercially feasible. PG&E asserts that the Agreements establish a legally binding, mutually acceptable commercial relationship between the parties and should be approved by the Commission.

SCE comments that it is prepared to comply with the Operating Order and does not see the problems of proceeding under the Operating Order argued in the motion. SCE believes that the Operating Order can be implemented successfully and requests that the Commission refrain from requiring SCE to enter into a similar agreement. SCE contends that some of the changes proposed in the Agreements would significantly adjust the influence that DWR has over utility administration of the DWR Contracts. In particular, SCE states that the changes made to the procedures for calculating surplus sales are inconsistent with prior Commission orders and are unworkable. SCE notes that, if approved, the proposed changes to Exhibit C of the Agreements would result in three different methods of calculating surplus sales revenues and remittances. SCE argues that because the Commission has not adopted procedures for "truing-up" the allocation of DWR's Revenue Requirement or insulating each utility's allocation of DWR costs from the other utilities' dispatch decisions; it should not approve differing methods for calculating and remitting surplus sales revenues.

DWR supports the motions filed by PG&E and SDG&E.