Findings of Fact

1. PG&E is in bankruptcy proceedings where three alternative PORs are under consideration.

2. PG&E must finance between $7.4 billion and $8.2 billion as a requirement of financing any of the three PORs.

3. The existing finance authority in D.02-11-030 did not provide for interest rate hedges or swaps in the form of forward rate agreements, options, and floors as proposed herein.

4. Interest rate swaps or hedges may save substantial costs by limiting the exposure to rising interest rate costs if interest rates rise before new securities are issued to finance a bankruptcy plan of reorganization for PG&E.

5. Interest rate swaps are a "hedge," or insurance, where the buyer pays a predetermined price to avoid the highest possible change in cost over time.

6. The Commission has not previously preapproved cost recovery of interest rate swaps in furtherance of any POR.

7. Interest rate hedges would likely be negotiated prior to the Bankruptcy Court's approval of any POR.

8. A bankruptcy finance hedging memorandum account will accumulate the costs of any interest rate hedges for rate recovery in the cost of capital true up.

9. The costs associated with interest rate swaps are eligible for inclusion in PG&E's cost of capital recovery in the post-bankruptcy true-up ordered in D.02-11-027 in A.02-05-022.

10. Utilities are usually required to issue debt in accordance with the Competitive Bidding Rules set forth in D.38614, as amended by D.49941, D.75556, D.81908, and Resolution F-616.

11. Interest rate hedges are opportunistic transactions that are not well suited to competitive bidding. The swaps, caps and collars previously authorized in D.02-11-030 were exempted from the competitive bidding rules. Forward rate agreements, options, and floors are also opportunistic transactions that are not well suited to competitive bidding.

12. Granting the proposed exemptions from the Competitive Bidding Rules may help to obtain interest rate hedges that are favorable to PG&E and its ratepayers.

13. PG&E has previously been granted an exemption from GO 24-B so that it can submit on a quarterly basis the information required by GO 24-B.

14. The GO 24-B exemption should also apply to interest rate hedges.

15. PG&E's proposed advice letter process is inadequate for the Energy Division and interested parties to review the proposed interest rate hedges.

16. PG&E has not justified a change in the decision making process that authorized the Commission's bankruptcy Financing Team to make the financial instrument issuance decisions regarding the bankruptcy POR as adopted in D.02-11-030.

17. PG&E's advice letter process is an unnecessary delay.