VI. Assignment of Proceeding

Michael R. Peevey is the Assigned Commissioner and Carol A. Brown is the assigned ALJ in this proceeding.

Findings of Fact

1. Pursuant to an ACR, the Commission considered the possible reallocation of the following DWR contracts: Sempra, Williams, Kings River, CCSF and Sunrise. Sunrise was under consideration in R.01-10-024, a proceeding slated for closing; Kings River and CCSF were under consideration in this docket; and the other contracts were not assigned to any proceeding.

2. The ACR set forth various reallocation proposals advanced by the IOUs, DWR and Commission ED staff and sought comments from the parties on these proposals.

3. The proceeding did not consider cost allocation, but the cost-follows-contract methodology established in D.04-12-014 remained.

4. The DWR contracts themselves were not at-issue, but for planning purpose the Commission wanted to address whether the IOUs needed any of the contracts reallocated to enable them to manage their portfolios and to plan for their procurement needs.

5. We find it is reasonable to reallocate the DWR Kings River contract to PG&E and the CCSF contract to PG&E after (1) approval of the CCSF Board of Supervisors to proceed with a sale of Initial Bonds to finance the facilities covered by the DWR contract with CCSF; and (2) expiration of DWR's rights to termination without recourse under Sections 4.02(1)(b) and (c) of the DWR/CCSF contract.

6. We find it reasonable to reallocate the DWR Williams D contract to SCE, effective January 1, 2007.

7. We are not reallocating the DWR Sempra or Sunrise contracts at this time.

8. If the IOUs have resource needs that can be met by utilizing a DWR contract that is allocated to another IOU, the IOUs are free to make reallocation swaps that allow them to meet their grid reliability obligations and that are consistent with the Commission's previous decisions addressing DWR contract allocation and the associated cost recovery mechanisms.

Conclusions of Law

1. It is reasonable to allocate the DWR contract with the Kings River to PG&E and affirm the agreement made between the two parties concerning this contract.

2. It is reasonable to the DWR CCSF contract to PG&E after (1) approval of CCSF Board of Supervisors to proceed with a sale of Initial Bonds to finance the facilities covered by the DWR contract with CCSF; and (2) expiration of DWR's rights to termination without recourse under sections 4.02 (1)(b) and (c) of the DWR/CCSF contract.

3. It is reasonable to allocate the DWR CCSF contract to PG&E, subject to the terms and conditions of the contract becoming final.

4. It is reasonable to allocate the DWR Williams Product D contract to SCE, effective January 1, 2007.

5. The DWR Sempra contract is allocated to SCE and it is reasonable to leave that contract with SCE.

6. The DWR contract with Sunrise Power Company is allocated to SDG&E and it is reasonable to leave that contract with SDG&E.

7. The IOUs may reallocate contracts between or among themselves to better meet grid reliability obligations as long as the reallocations are consistent with previous Commission decisions addressing contract allocations and the associated cost recovery mechanisms.

ORDER

IT IS ORDERED that:

1. The Department of Water Resources (DWR) contract with the Kings River Conservation District is allocated to Pacific Gas and Electric Company (PG&E) pursuant to the terms agreed to by these two parties.

2. The DWR contract with the City and County of San Francisco is allocated to PG&E, after (1) approval of the CCSF Board of Supervisors to proceed with a sale of Initial Bonds to finance the facilities covered by the DWR contract with CCSF; and (2) expiration of DWR's rights to termination without recourse under Sections 4.02(1)(b) and (c) of the DWR/CCSF contract.

3. The DWR Williams Product D (Williams) contract is allocated to Southern California Edison Company (SCE), effective January 1, 2007.

4. The DWR Sempra Energy (Sempra) contract will stay with SCE and the DWR Sunrise Power (Sunrise) contract will remain with San Diego Gas & Electric Company (SDG&E).

5. PG&E, SCE and SDG&E may make reallocation swaps of DWR contracts between and among themselves as long as the allocations are consistent with previous Commission decisions addressing DWR contract allocation and the associated cost recovery mechanisms.

6. Any motions not already ruled on or discussed below are deemed denied. SCE's motion to strike is denied as moot; PG&E's motion for confirmation that it could assume the Kings River contract is granted and we confirm the agreement between DWR and PG&E concerning the allocation of this contract; CAlifornians for Renewable Energy, Inc.'s (CARE) motion to file comments on the allocation of the Otay Mesa Generating Plant power purchase agreement is denied as moot; and CARE's motion for clarification of the allocation of the CCSF DWR contract is denied as premature.

7. PG&E and SDG&E are to file advice letters to modify Schedule 1 of the Operating Agreements and SCE is to file an advice letter to modify Schedule 1 of the Operating Order with DWR to reflect the changes from the reallocation of the DWR contracts as set forth herein.

This order is effective today.

Dated December 15, 2005, at San Francisco, California.

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