I. BACKGROUND

In D.01-01-061, the Commission issued an emergency interim decision applicable to San Diego Gas and Electric Company (SDG&E), Pacific Gas and Electric Company (PG&E), and Southern California Edison Company (Edison). The Commission adopted a short-term payment mechanism, as required by Water Code § 200(i), for electric power supplied by the California Department of Water Resources (CDWR). The Commission also ordered that all electric power resources under the control of the utilities, called "utility retained generation," or "URG," were to be used pursuant to a descending order of priority:

1. to serve, at cost-based rates, existing customers;

2. to be sold at cost-based rates, to other California electric utilities; and

3. to be sold or bartered in a manner that minimizes future generation costs to utility customers. (D.01-01-061, at 7.)

We should clarify here that we compressed two rules in the second priority. The first rule requires that each utility sell to the other California utilities the electric power in excess of that required to serve its own customers. The second requires that for the purpose of this interim emergency order, the reasonable purchase price for the other utilities is the cost-based price of the selling utility.

The decision in part implements Water Code § 200, an urgency statute enacted in January 2001 as part of the response to the current electricity shortages and spiraling prices in California. It also responds to the Governor's January 17, 2001 declaration of a State emergency and the order of the Federal Energy Regulatory Commission (FERC) vacating the requirement that the public utility companies sell their electric power resources into the Power Exchange and then purchase their electric power needs for their customers from the Power Exchange.¹

PG&E and Edison have filed a joint application for rehearing of our decision regarding several issues, including the method for calculating the payment to CDWR and the interim accounting rules for the "cost-based rates" applicable to utility retained generation. SDG&E has individually filed an application for rehearing on one issue. It claims that the Commission does not have the authority to require that the electric power it has acquired under certain wholesale contracts must serve California customers as we ordered in
D.01-01-061. SDG&E argues that it has the right to resell the electric power acquired from these particular contracts at current wholesale prices and to make these wholesale sales solely for the benefit of its shareholders.

Neither of the applications has substantiated legal error in our interim decision. Accordingly, rehearing is denied in both instances.