Conclusions of Law

1. The settling parties have tendered a contested settlement as defined in the Commission's Rule 51(e).

2. The settling parties have developed a record that supports the settlement.

3. The settlement meets the requirements of Rule 51.1(e) in that it is reasonable in light of the whole record, consistent with law, and in the public interest.

4. The settlement should be adopted.

5. Under Rule 51.1(a), the outcomes the settling parties have reached, and the methods they have used to develop those outcomes, are not to be considered precedential in future Commission proceedings.

6. The interpretation of Assembly Bill 1X and Water Code Section 80110 set forth in Decision 04-02-057, Final Opinion on Phase 2 Issues in Order Instituting Rulemaking 01-05-047, must be applied under settlement Section 6 to spread to the residential class SDG&E's residential electric distribution revenue allocation.

7. The updated marginal electric distribution costs, rate design criteria, and tariff modifications established in this order should form the basis for revised electric distribution rates and tariffs to be ordered when SDG&E's test year 2004 electric revenue requirement is determined in SDG&E's cost of service proceeding, A.02-12-028.

8. This decision should be made effective immediately in anticipation of our order in SDG&E's TY2004 cost of service proceeding.

ORDER

IT IS ORDERED that:

1. The Joint Settlement Agreement (settlement), Appendix A to this order, filed by San Diego Gas & Electric Company (SDG&E), Office of Ratepayer Advocates, Duke Energy North America, West Coast Power, California City-County Streetlight Association, and California Farm Bureau Federation is adopted. The Street Lighting Cost of Service Model attached to and filed with the settlement has been omitted from Appendix A for brevity, but is part of the settlement and is in the proceeding record.

2. The updated marginal electric distribution costs, rate design criteria, and tariff modifications established in the settlement and this order shall form the basis for revised electric distribution rates and tariffs to be ordered when SDG&E's test year 2004 electric revenue requirement is determined in SDG&E's cost of service proceeding, Application (A.) 02-12-028.

3. SDG&E's A.03-03-029 is granted as set forth above, and in all other respects is denied.

4. A.03-03-029 is closed.

This order is effective today.

Dated April 22, 2004, at San Francisco, California.

D0404042 Appendix A - Joint Settlement Agreement

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