V. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Thomas R. Pulsifer is the assigned ALJ in this proceeding.

Findings of Fact

1. The Appendix tables appearing in D.06-07-030 depicted illustrative figures, but did not reflect actual CRS figures.

2. The footnote modification proposed by PG&E accurately reflects the intent of the Appendix tables.

3. The adoption of the modification to add the footnote, as proposed by PG&E, does not provide support for the derivation of a DWR Power Charge for 2005 utilizing the 2.7 cents/kWh CRS cap with no provision for a true-up.

4. The 2.7 cents/kWh cap was applied to MDL with the explicit provision for subsequent consideration and adjustment, as stated in D.03-07-028, COL 14.

5. In D.06-07-030, the Commission found, based on the data provided through the working group process, that for the period 2001-2004 all MDL appeared to be exempt from the DWR Power Charge. Although no specific information was provided for 2005, the Commission made a similar finding applicable to 2005.

6. In view of the apparent exception of MDL from the DWR Power Charge through 2005, it was concluded in D.06-07-030 that no further need existed to quantify a specific benchmark or DWR Power Charge for MDL for 2001-2005.

7. The purpose of the 2.7 cents/kWh CRS cap, as applied to MDL, was to limit the maximum exposure of MDL customers in a given year, but its purpose was not to create permanent overcollections of CRS funds.

8. As explained in D.02-11-022, total CRS requirements were expected initially to produce an undercollection when the 2.7 cents/kWh cap was first adopted, but in subsequent years to yield a surplus to pay down the prior undercollection.

9. Consistent with the principles of bundled customer indifference, the goal of the CRS over time is to balance out to zero any under- or overcollections so as to avoid cost shifting.

10. In D.06-07-030, the Commission authorized a billing adjustment for DA customers to eliminate any DA CRS overcollection as a result of the 2.7 cents/kWh CRS cap.

11. In order to promote consistency between DA and DL customers, similar treatment is appropriate with respect to avoidance of any overcollections of DWR Power Charges.

12. PG&E's Petition for Modification should be denied to the extent it seeks permission to disregard future accumulated negative indifference amounts as an offset to future positive indifference amounts that specifically relate to the costs for DWR contract power.

13. The appropriate clarification of D.06-07-030 is that negative indifference amounts will be eligible to offset future positive indifference amounts after September 1, 2006, if any, but will not be eligible to be applied against any other components of the CRS.

14. At the expiration of the DWR contract term, the applicability of the indifference requirement would also expire.

15. In the event that there is any net cumulative negative indifference balance at the time the DWR contracts expire, that balance will not be credited to DA/DL customers. It will simply expire.

Conclusions of Law

1. The Petition to Modify D.06-07-030 should be granted in part, with respect to the footnote addition to Table 3C, as set forth in the OPs below.

2. Adoption of the footnote addition should not be construed as Commission endorsement of PG&E's methodology for deriving a DWR Power Charge applicable to Schedule E-NWDL or Schedule E-SDL with no provision for the effects of overcollections that may accrue.

3. It would be inconsistent with Commission principles prohibiting cost shifting to impose a DWR Power Charge under Schedule E-NWDL or Schedule E-SDL based on the 2.7 cents/kWh CRS cap that resulted in a permanent or protracted overcollection.

4. To the extent that a DWR Power Charge were applicable to Schedule E-NWDL or Schedule E-SDL, the proper basis to finalize such charge would be the actual indifference amount, instead of merely applying a 2.7 cents/kWh charge on a derivative basis without a true-up.

5. The Petition to Modify D.06-07-030 should be denied in part, with respect to the request relating to clarification of OPs 8 and 9.

6. The requirement to maintain bundled customer indifference did not end on June 30, 2006 merely because PG&E's CRS undercollection was deemed to be zero.

7. D.06-07-030 recognized that in future years after June 30, 2006, the possibility existed that market conditions could change such that DWR power costs could result in additional net positive amounts charged to DA or DL customers necessary to achieve bundled customer indifference.

8. D.06-07-030 should be modified to clarify that the requirement to track negative indifference applies on a prospective basis during the period subsequent to June 30, 2006, and that such negative indifference amount would only be eligible to offset future positive indifference, but would not be eligible to be applied against any other components of the CRS.

ORDER

IT IS ORDERED that:

1. The Petition to Modify Decision (D.) 06-07-030 of Pacific Gas and Electric Company (PG&E) is hereby granted in part, and denied in part, as directed below.

2. D.06-07-030 is hereby modified to add the following footnote language on Appendix Table 3C:

No market benchmarks for PG&E were adopted for 2003-2005. For 2006, PG&E does not have any purpose for an "MDL Accrual Rate." Therefore, for PG&E, the calculations for 2003-2006 are illustrative only. The market price benchmarks for 2003-2005 were imputed from the adopted cost responsibility surcharge undercollection for PG&E as of December 31, 2005, in Decision 06-07-030, no reported undercollections are applicable to MDL CRS obligations as of December 31, 2005 for PG&E.

3. The granting of PG&E's proposed modification regarding Appendix Table 3C does not constitute endorsement of PG&E's methodology for deriving a DWR Power Charge under Schedule E-NWDL based on the 2.7 cents/kilowatt-hour (kWh) Cost Responsibility Surcharge (CRS) with no true-up.

4. PG&E shall promptly meet and confer with the legal representatives of the customers subject to Schedule E-NWDL and Schedule E-SDL to seek agreement concerning the necessary adjustment to the California Department of Water Resources (DWR) Power Charge to recover applicable obligations. The calculations shall be conducted in accordance with the findings of this order, namely, that the 2.7 cents/kWh cap is intended only as a placeholder, and that the DWR Power Charge is to be determined utilizing the Total Portfolio Indifference methodology.

5. We direct PG&E and representatives of Additional Customer Load and Split-Wheeling Departing Load customers to file and serve a joint statement in this proceeding within 20 business days of the effective date of this decision on the results of its meet and confer session to seek agreement on the calculations required to the DWR Power Charge to result in a pay-down of any undercollections to zero for these customers. In the event that the parties have failed to reach agreement, each party shall set forth in its filed statement its position as to the applicable DWR Power Charge figures to be applied in the statement together with supporting assumptions.

6. To the extent that there is a perceived inconsistency in D.06-07-030 with regard to Ordering Paragraphs 8 and 9, the inconsistency is hereby reconciled to confirm that negative indifference amounts shall be tracked and offset against any positive indifference amounts that may accrue subsequent to June 30, 2006. Any such negative indifference amount would only be eligible to offset future positive indifference, and would not be eligible to be applied against any other components of the CRS.

7. The sentence on page 17 of D.06-07-030 at the bottom of that page is hereby modified. The sentence in D.06-07-030 reads:

"Given the parties agreement on the end of year 2005 undercollection balance, with the balance reaching zero by June 2006, PG&E will not be required to track the undercollection balance thereafter."

This sentence is hereby modified as follows (indicated by underlining):

"Given the parties agreement on the end of year 2005 undercollection balance, with the balance reaching zero by June 2006, PG&E will no longer have an undercollection balance to be drawn down."

8. Rulemaking 02-01-011 remains open.

This order is effective today.

Dated May 3, 2007, at San Francisco, California.

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