6. Comments on Draft Decision

Pursuant to Rule 77.7(f)(9) of the Commission's Rules of Practice and Procedure, we determine that the public necessity requires a reduction in the 30-day period for public review and comment. Comments on the Draft Decision were due on March 6, 2003, and reply comments were due on March 10, 2003. PG&E, SDG&E, SCE and DWR filed timely comments. PG&E and DWR filed replies.

PG&E states that it is willing to proceeding under the Operating Agreement as modified provided that the Draft Decision is modified to correct a number of "typographical errors." We have modified the decision to correct the errors identified by PG&E regarding the references to "Interim Contracts," the Supplier Fuel Plan, and Sections 2.02(a), 2.02(d) and 2.02(e).

PG&E also suggests that the Draft Decision be modified to allow, rather than require, PG&E to file an executed Operating Agreement. PG&E states that because it cannot force DWR to sign the revised Operating Agreement, PG&E may not be able to comply with the Commission's requirement. PG&E notes that if the modified agreement is unacceptable to either PG&E or DWR, PG&E's default option would be to continue performance under the Operating Order. We agree, and will modify the Decision to reflect that PG&E and SDG&E may file the executed Operating Agreement within seven days.

PG&E also requests that the effective date of the Operating Agreement be January 1, 2003. PG&E argues that if the Operating Agreement is made effective prospectively, PG&E would be required to perform for several months under the Operating Order and then shift to the Operating Agreement and that having two sets of rules would be unnecessarily confusing. DWR states that it is not opposed to PG&E's request. We note that PG&E has been subject to the Operating Agreement since January 1, 2003. We do not believe it is less confusing to retroactively apply new rules than it would be to prospectively apply a new set of rules. Moreover, we seek to avoid any concerns regarding retroactive ratemaking by approving the modified Operating Agreements on a prospective basis.

DWR states that Exhibit C of the modified Operating Agreement and the Operating Order are silent on the treatment of energy trading transactions (e.g. sleeve transactions, basis swaps, etc.) in which a utility might engage. DWR believes that it would be inappropriate for these types of transactions to be included in the remittance calculations, and recommends that the modified Operating Agreement and the Operating Order be amended to explicitly exclude such trading transactions from the energy quantities used in remittance calculations. In its reply, PG&E states that this issue should be evaluated further, and suggests that the Commission not make this clarification at this time. PG&E recommends that the issue be discussed between DWR and the utilities and addressed by the Commission subsequently.

This issue has not been raised previously be the utilities or DWR and would affect the Operating Order as well as the modified Operating Agreement. We agree with PG&E that this issue should be discussed between the utilities and DWR and, if necessary a petition for modification of D.02-12-069 and this decision should be filed.

SCE and DWR also request that the Commission modify D.02-12-069 in certain areas. Although certain of the suggested changes may have merit, this decision addresses PG&E's and SDG&E's Motions for Approval of Operating Agreements and changes to D.02-12-069 are outside the scope of this decision. Requests for modification of D.02-12-069 should be filed by petition to modify that decision, providing all parties with notice and the opportunity to be heard regarding the proposed modifications.

In addition, as described further in the relevant sections of this decision, we clarify our expectations with respect to the utility Gas Supply Plans, and make other corrections and clarifications in response to the comments.