ALJ/JMH/avs Mailed 4/9/2003

Decision 03-04-029 April 3, 2003

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Establish Policies and Cost Recovery Mechanisms for Generation Procurement and Renewable Resource Development.

Rulemaking 01-10-024 (Filed October 25, 2001)

DECISION ON MOTIONS TO

APPROVE OPERATING AGREEMENTS

Table of Contents

Title Page

DECISION ON MOTIONS TO 11

APPROVE OPERATING AGREEMENTS 11

1. Summary 22

2. Background 22

3. Positions of the Parties 44

4. Discussion 66

4.1 Areas of Agreement 77

4.2 Areas Subject to Modification 1010

4.2.1 Termination Rights 1010

4.2.2 Transition Period 1111

4.2.3 Utility Fees and Charges 1414

4.2.4 Binding Arbitration 1616

4.2.5 Operating Protocols 1616

4.2.6 Fuel Management Protocols 1919

4.2.7 Settlement Principles for Remittances and Surplus Revenues 2525

5. Conclusion 3434

6. Comments on Draft Decision 3636

7. Assignment of Proceeding 3838

Findings of Fact 3838

Conclusions of Law 3939

ORDER 4040

Appendix AA : PG&E Operating Agreement

Appendix A : SDG&E Operating Agreement

1. Summary

This decision grants Pacific Gas and Electric Company (PG&E's) and San Diego Gas and Electric Company (SDG&E's) requests for approval of Operating Agreements between PG&E and The California Department of Water Resources (DWR) and SDG&E and DWR, subject to certain modifications. Appendices A and B of this decision contain "clean" copies of the approved Agreements for PG&E and SDG&E respectively. PG&E and SDG&E may file advice letters with the executed copies of the modified Agreements within seven days. The joint motion for a stay is denied.