COM/MP1/ner/acb Mailed December 18, 2006

Decision 06-12-032 December 14, 2006

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company to Establish a Demonstration Climate Protection Program and Tariff Option. (U 39 M)

Application 06-01-012
(Filed January 24, 2006)

DECISION GRANTING APPLICATION WITH MODIFICATIONS

TABLE OF CONTENTS

Title Page

DECISION GRANTING APPLICATION WITH MODIFICATIONS 2 2

I. Summary 2 2

II. Procedural History 3 3

III. The Application 4 4

IV. Protests 7 7

V. A&M Costs 8 8

1. Parties' Positions - A&M Costs 8 8

2. Discussion - A&M Costs 11 11

A. Demonstration Project 11 11

B. Allocation of A&M Expenses 12 12

C. Shareholder Contribution Not Required, But Strongly Encouraged 17 17

VI. Performance Guarantees 20 20

1. Parties' Positions 20 20

A. PG&E's Backstop Funding Proposal 21 21

B. Parties' Minimum GHG Reduction Proposal 22 22

2. Discussion 22 22

A. PG&E's Backstop Funding Proposal 23 23

B. Parties' Minimum GHG Reduction Proposal 24 24

VII. Ratemaking Changes 26 26

1. Interest Rate on Funds Collected from the CPT 26 26

A. Parties' Positions 26 26

B. Discussion 27 27

2. Credit to Ratepayers for Tax Benefits from GHG Retirements 27 27

A. Parties' Positions 27 27

B. Discussion 28 28

3. Basis for Allocation of A&M Costs to Non-Participating Ratepayers 28 28

A. Parties' Positions 28 28

B. Discussion 29 29

VIII. Retirement of GHG Reductions 30 30

IX. Marketing Content 30 30

1. Parties' Positions 30 30

2. Discussion 31 31

X. Tax Deductibility of CPT Premiums 31 31

1. Parties' Positions 31 31

2. Discussion 32 32

XI. Reporting and Information Sharing 33 33

1. Reporting 33 33

2. Information Sharing 35 35

XII. Membership and Role of the EAG 35 35

1. Parties' Positions 35 35

2. Discussion 36 36

XIII. Role of CCAR 37 37

1. Parties' Positions 37 37

2. Discussion 37 37

XIV. Types of Projects Funded 38 38

1. Forestry 38 38

2. Other Sectors 39 39

A. Parties' Positions 39 39

B. Discussion 40 40

XV. TURN's Offset-Only Proposal 41 41

1. Parties' Comments 41 41

2. Discussion 42 42

XVI. Comments on Proposed Alternate Decision 42 42

1. A&M Expense 42 42

A. Allocation to PG&E Ratepayers as a Whole 42 42

B. Rate Design 43 43

2. Guarantee of Minimum GHG Reductions 44 44

3. Contract Commitments 45 45

4. Reporting 46 46

XVII. Assignment of Proceeding 46 46

Findings of Fact 46 46

Conclusions of Law 48 48

ORDER 49 49

APPENDIX A Service List

DECISION GRANTING APPLICATION WITH MODIFICATIONS

I. Summary

Pacific Gas and Electric (PG&E) demonstrates strong environmental leadership by being the first utility in the nation to offer its customers a means to offset their greenhouse gas (GHG) emissions. This proposal is a very important step in developing awareness of the causes of global warming and creating a sustainable and credible emissions offset program.

This decision grants, in part, PG&E's application for approval of a voluntary program, the Climate Protection Tariff (CPT). PG&E customers can elect to pay a monthly premium to offset the GHG emissions associated with their electricity usage through the CPT. This program will also allow PG&E to gain valuable experience in contracting for offsets on behalf of its customers, experience that is particularly relevant given the recent adoption of the California Global Warming Solutions Act of 2006 (Assembly Bill [AB] 32). We approve PG&E's application, subject to the following modifications:

· Performance Guarantee. PG&E's shareholders shall guarantee that the program results in 75% of the GHG emissions reductions estimated in the application. Thus, if the funds collected from customers who participate in the CPT are insufficient to purchase 75% of the emissions reductions PG&E estimates, PG&E's shareholders (or other sources discussed herein) shall make up the difference.

· Ratemaking changes. We adopt some of the ratemaking changes suggested by parties to this proceeding other than PG&E.

· Tax deductibility of CPT premiums. We require PG&E to take specific steps to determine whether residential CPT customers may deduct their CPT premiums as charitable contributions on taxes returns.

We also adopt several proposals PG&E made in its application, at hearing, or in post-hearing briefs:

· Retirement of GHG reductions. GHG reductions attained through the CPT program shall be "retired," - i.e., not used to meet other emissions reduction obligations or commitments, be they mandatory or voluntary.

· Marketing Content. PG&E shall coordinate with the Commission and the External Advisory Group (EAG; see below) on marketing its program to ensure that California consumers are educated about the risks of global warming and how they can make a difference.

· Reporting and Information Sharing. PG&E shall report program results to the Commission and be available to share information with other stakeholders interested in similar programs.

· Membership and Role of the EAG. The EAG, which will advise PG&E on aspects of the CPT program, shall include slots for additional members. We do not give the EAG decision making authority over the CPT program, but PG&E shall respond to EAG input and give it a role in marketing the program.

· Role of California Climate Action Registry (CCAR or Registry). PG&E may use $900,000 of its A&M budget to fund further protocol development by CCAR. PG&E shall ensure this funding is refundable if CCAR ceases to operate or have responsibility for certifying GHG reductions.

· Types of Projects Funded. PG&E shall start with forestry projects, but may fund other CCAR-certified GHG reductions projects (with conditions) as the CPT program matures.