D0412047 Test Year 2005 Return on Equity and on PG&E's True Up Year 2004

II. Summary

This decision addresses the debt equivalence issue for Southern California Edison Company (SCE), Pacific Gas and Electric Company (PG&E), and San Diego Gas & Electric Company (SDG&E), adopts a test year 2005 return on equity (ROE) for SCE, and both a true up year 2004 and test year 2005 ROE for PG&E.

The test year 2005 ROE for SCE is 11.40%, which results in a corresponding 9.07% return on rate base and a $43.6 million revenue requirement reduction for 2005.¹

The true up year 2004 and test year 2005 ROE for PG&E is 11.22%. That authorized ROE results in a corresponding return on rate base of 8.53% for true up year 2004 and 8.77% for test year 2005 resulting in a $1.2 million increase in electric and a $8.3 million reduction in gas revenue requirements for test year 2005.²

¹ SCE's projected revenue requirement reduction of $28.2 million at an 11.60% ROE plus $15.4 million ($7.7 million impact on each 10 basis points change in ROE per Exhibit 34) equals a $43.6 million revenue requirement reduction for test year 2005. ² PG&E's projected $25.6 million electric and $0.9 million gas revenue requirement increase at a 11.60% ROE that includes estimated savings from the issuance of energy recovery bonds less $24.4 electric and $9.2 gas revenue requirement change ($8.7 million electric and $3.3 million gas impact for each 10 basis points change in authorized ROE as set forth in Exhibit 35) equals a $1.2 million electric increase and $8.3 million gas reduction in test year 2005 revenue requirements.