Findings of Fact

1. SDG&E, ORA, Duke Energy North America, West Coast Power, California City-County Streetlight Association, and California Farm Bureau Federation have filed a settlement agreement.

2. The settlement resolves all of the disputed issues among the settling parties, except one: Whether Assembly Bill 1X (AB1X) precludes increases in total rates for residential usage up to 130% of baseline. The settling parties have agreed in settlement Section 6 to abide by the Commission's determination on that issue.

3. Agricultural Energy Consumers Association was not an active party in the proceeding, and its views are not known on any issue.

4. FEA is the sole active, non-settling party. FEA contests only the inter-class revenue allocation proposal in settlement Section 2. FEA expressly takes no exception to any other settlement provision.

5. The record is clear and sufficient on the purpose of the proposed caps and floors, the levels of proposed caps and floors, and the inter-class revenue allocation effects those caps and floors would have at the various possible SAPC levels.

6. The past Commission decisions FEA cites to support its opposition to caps and floors were issued in response to extraordinary circumstances and should be given no weight in the context of this decision. The Commission has not abandoned moderate cost allocation caps as FEA contends.

7. Adopting FEA's position in favor uncapped EPMC allocations in this instance would lead to unreasonable increases and decreases for some customer classes and should be rejected.

8. The Commission should avoid imposing radical rate swings each time a marginal cost study is produced with potentially differing results from the last adopted cost study.

9. The caps and floors proposed in settlement Section 2 would produce movement toward cost-based distribution rates while avoiding radical rate swings.

10. The inter-class revenue requirement allocations the settlement produces, including the caps and floors, are reasonable.

11. The active parties in the proceeding are representative of the stakeholders, and each has ably and vigorously pursued the interests of its constituencies.

12. With this order, we will have established all of the updated marginal cost, cost allocation and rate design guidance necessary for SDG&E to complete its electric distribution rate design and prepare and file tariffs once the TY2004 COS revenue requirement is known.