4. Meeting the Criteria of Section 367.3

The application and its attached exhibits show that SierraPine's Rocklin facility meets the eight criteria set forth in Section 367.3(a), and therefore it is a qualifying direct transaction customer for purposes of Section 367.3 relief.

4.1 Section 367.3(a)(1)

Pursuant to Section 367.3(a)(1), the customer must have entered into a direct transaction contract for a plant or facility prior to January 1, 2000 that extended service through at least February 1, 2001. Exhibits attached to the application show that SierraPine entered into a Power Sales agreement with PG&E Energy Services Corporation on December 30, 1997. The agreement provided that PG&E Energy Services Corporation would provide direct access service to the Rocklin facility for at least three years, and thereafter unless terminated by either party on 30 days' notice.

4.2 Section 367.3(a)(2)

Pursuant to Section 367.3(a)(2), the plant or facility must have been involuntarily returned to bundled service after February 1, 2001, as a result of the ESP terminating electrical service under the direct transaction contract. On April 15, 2001, Enron Energy Marketing Corporation, successor-in-interest to PG&E Energy Services Corporation, terminated service under the SierraPine agreement. Exhibits to the application show that the Rocklin facility was returned to bundled service after the termination.

4.3 Section 367.3(a)(3)

Section 367.3(a)(3) requires that the plant or facility must have entered into a new direct transaction with an ESP and a DASR must have been submitted within 90 days from the date the plant or facility's direct transaction contract was involuntarily terminated. SierraPine on June 29, 2001, entered into an Energy Services Agreement with APS Energy Services Company, Inc. (APS) for service to, among other locations, the Rocklin facility. Exhibits to the application show that a DASR to switch service from Pacific Gas and Electric Company (PG&E) to APS was submitted on July 2, 2001.

4.4 Section 367.3(a)(4)

Under Section 367.3(a)(4), a plant or facility must have continuously participated in an interruptible or curtailable service program. Based on an exhibit attached to the application, the Rocklin facility has continuously participated in an interruptible or curtailable service program with PG&E.

4.5 Section 367.3(a)(5)

Section 367.3(a)(5) requires that a plant or facility must have had an average total cost for all aspects of electric service, as a percentage of sales, in excess of 8% for the period January 1, 1996 to December 31, 2000. A summary financial statement for the Rocklin facility shows that average total cost of electricity as a percentage of sales for the relevant period exceeded 8%.

4.6 Section 367.3(a)(6)

Section 367.3(a)(6) requires that the plant or facility must have had an average net profit margin as a percentage of sales greater than 2% for the period January 1, 1996, to December 31, 2000. A summary financial statement for the Rocklin facility shows that it had an average net profit margin as a percentage of sales greater than 2% for the relevant five-year period.

4.7 Section 367.3(a)(7)

Pursuant to Section 367.3(a)(7), the average total electric service cost as a percentage of sales must exceed the average net profit margin as a percentage of sales for the facility for the period January 1, 1996, to December 31, 2000. Exhibit 13 of the application is a summary financial statement for the Rocklin facility showing that the average total electric service cost as a percentage of sales exceeded the average net profit margin for the relevant five-year period.

4.8 Section 367.3(a)(8)

Section 367.3(a)(8) requires that an application be submitted within seven days of the operative date of that section, and be accompanied by a declaration from an officer stating that unless relieved of the expense of the DA surcharge, the facility faces certain and imminent closure. The application was submitted to the Commission within seven days of August 11, 2003. Attached to it as Exhibit 14 is the declaration of Jim Skinner, vice president and chief financial officer of SierraPine, stating that the Rocklin facility cannot continue to operate without relief from the DA CRS and that the facility faces certain and imminent closure.

Based on the application and its exhibits, we conclude that SierraPine's Rocklin facility meets the eight criteria of Section 367.3 and is therefore a "qualifying direct transaction customer" within the meaning of that statute.