Proceedings

The prehearing conference was held on February 20, 2003, and the scoping memo was issued on March 12, 2003. The scoping memo confirmed our preliminary determination of this proceeding as ratesetting. During the prehearing conference, the Administrative Law Judge (ALJ) and parties agreed that the contested issues might be resolved or narrowed prior to an evidentiary hearing. The ALJ required the parties to discuss whether they could agree on the immediate conveyance of the property, thereby leaving the disposition of "gain-on-sale" proceeds as the remaining contested issue in the case. Unfortunately, the parties ultimately were unable to agree on such a procedure.

Because of stipulations and the ALJ's decisions on prehearing motions, the contested issues were considerably narrowed. No material facts remained in dispute, and an evidentiary hearing was unnecessary. The ALJ allowed the parties a final opportunity to brief all remaining legal issues, and the final briefing focused on these legal questions (paraphrased from the scoping memo):

· Should the Commission assign the "gain-on-sale" proceeds from the conveyance to shareholders or ratepayers?

· In making this decision, does the Commission apply state or federal law (principally FERC regulations concerning the Uniform System of Accounts)?

· What is PG&E's authority for its argument that FERC requires that "gain-on-sale" proceeds from transmission-related property be assigned to shareholders?