XI. Assignment of Proceedings

Geoffrey F. Brown is the assigned Commissioner and Peter V. Allen is the assigned Administrative Law Judge in these proceedings.

Findings of Fact

1. The allocation methodology ordered in D.04-12-014 creates a disproportionate rate effect on SDG&E ratepayers.

2. Annual re-litigation of an allocation methodology to be applied to DWR's revenue requirement is neither efficient nor necessary.

3. DWR's supplemental revenue requirement determination was based on Prosym Run 45.

4. The Proposed Settlement's use of the costs-follows-contracts methodology is not equitable.

5. The Proposed Settlement and D.04-12-014 both relied upon a forecast of future above-market costs.

6. The Proposed Settlement's and D.04-12-014's use of historical forecasts of the net short positions of the three utilities as a basis for future cost allocation is too uncertain to be found equitable.

7. No party's litigation position proposed an equitable allocation methodology.

8. The pro rata allocation methodology adopted in D.02-12-045 was generally equitable, but the residual calculation approach used in that decision was flawed.

9. Several parties proposed fairness metrics for evaluating allocation methodologies.

10. Avoidable DWR contract costs were previously allocated in D.02-09-053.

Conclusions of Law

1. A permanent allocation methodology for DWR's revenue requirement should be adopted.

2. SDG&E's petition to modify D.04-12-014 should be granted, in part, as described in this decision.

3. D.04-12-014 should be vacated and replaced with this decision.

4. D.05-01-036, which granted partial rehearing of D.04-12-014, is now moot.

5. The Proposed Settlement is inconsistent with D.02-12-045.

6. The Proposed Settlement is not equitable, and should not be approved.

7. The parties' fairness metrics provide an equitable basis for determining a permanent allocation of total costs. Those percentages should be adjusted to account for the fact that this decision is allocating unavoidable costs only.

8. The pro rata allocation methodology adopted in D.02-12-045 provides a reasonable starting point for a permanent allocation of total costs.

9. The residual calculation approach used in D.02-12-045 should be replaced with a separate calculation of fixed costs.

10. This decision construes, applies, implements, and interprets the provisions of Assembly Bill (AB) 1X (Chapter 4 of the Statutes of 2001-02 First Extraordinary Session).

ORDER

IT IS ORDERED that:

1. SDG&E's petition to modify D.04-12-014 is granted, in part, as specified in this decision.

2. D.04-12-014 is vacated and replaced with this decision.

3. D.05-01-036 is vacated.

4. The allocation methodology adopted today for Department of Water Resources' (DWR) revenue requirement is permanent.

5. The Proposed Settlement is not adopted.

6. The allocation of variable costs previously adopted in Decision (D.) 02-09-053 remains unchanged.

7. The allocation of fixed costs of DWR's revenue requirement is: Pacific Gas and Electric Company - 42.2%, Southern California Edison Company - 47.5%, and San Diego Gas & Electric Company - 10.3%.

8. Pub. Util. Code § 1731(c) (applications for rehearing are due within 10 days after the date of issuance of the order or decision) and Pub. Util. Code § 1768 (procedures applicable to judicial review) are applicable to this decision.

9. Consistent with D.04-01-028, the allocation methodology adopted in this decision should be applied as of January 1, 2004 as in Appendix A.

This order is effective today.

Dated June 30, 2005, at San Francisco, California.

MICHAEL R. PEEVEY

President
SUSAN P. KENNEDY

DIAN M. GRUENEICH

Commissioners

I dissent.

/s/ GEOFFREY F. BROWN

Commissioner

Commissioner John A. Bohn, being necessarily absent,
did not participate.

APPENDIX A

IOU Cost Allocation Summary

1	Power Costs						$4,859,626,196
2	Administrative & General Expenses						$59,000,000
3	Extraordinary Costs						$37,054,868
4	Net Operating Revenues						($320,372,326)
5	Interest Earnings on Fund Balance						($32,212,129)
6	Other Revenues (Contract Settlements, Extraordinary Receipts)						($51,896,968)
7	Net Total of Variable Contract Costs, other Fixed Costs, and Net Revenues						$4,551,199,641
8
9		PG&E			SCE	SDG&E	Total
10	Direct-assign Variable Contract Costs			$91,240,650	$175,304,580	$204,519,570	$471,064,800
11
12	Total Fixed Costs = Total Costs less Variable Costs						$4,080,134,841
13	Adopted Allocator of Fixed Costs		42.20%		47.50%	10.30%	100%
14	Fixed Cost Allocation		$1,721,816,903		$1,938,064,049	$420,253,889	$4,080,134,841
15	Less: Off-system Sales		($18,078,332)		($215,013,323)	($39,486,934)	($272,578,590)
16	DWR Reconciliation to State Controller (Table A-1, line 19)		($2,807,666)		($3,160,287)	($685,283)	($6,653,237)
17	Subtotal		$1,792,171,555		$1,895,195,019	$584,601,241	$4,271,967,815
18	2001/2002 True-up Amounts (D.04-01-028)		($100,590,687)		$41,308,258	$59,282,429	$0
19	Sub-Total--IOU DWR Revenue Requirement before DA CRS		$1,691,580,868		$1,936,503,277	$643,883,670	$4,271,967,815
20
21	Less: Direct Access Power Charge-Related Revenues		($104,312,750)		($104,663,900)	($32,119,330)	($241,095,980)
22	Total Revenue Requirement (Bundled Service)		$1,587,268,118		$1,831,839,377	$611,764,340	$4,030,871,835
23	2004 DWR Delivered Energy (kWh)		21,145,876		21,910,180	7,998,786	51,054,842
24
25	IOU Power Charge Calculation		PG&E		SCE	SDG&E	Total
26	Variable Power Cost Component		$0.00431		$0.00800	$0.02557	$0.00923
27	Fixed Power Cost Component		$0.08143		$0.08845	$0.05254	$0.07992
28	2001/2002 True-up		($0.00476)		$0.00189	$0.00741	$0.00000
29	Less: Off-system Sales		($0.00085)		($0.00981)	($0.00494)	($0.00534)
30	Adjustment to Operating Account (Table A-1, line 19)		($0.00013)		($0.00014)	($0.00009)	($0.00013)
31	Adjustment to match DWR year-end balance		($0.00092)		($0.00092)	($0.00092)	($0.00092)
32	DA CRS Contribution		($0.00493)		($0.00478)	($0.00402)	($0.00472)
33	Total IOU Power Charge		$0.07414		$0.08268	$0.07556	$0.07803

(END OF APPENDIX A)