ALJ/DKF/hkr/sid Date of Issuance 9/7/2007

Decision 07-09-004 September 6, 2007

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company To Revise Its Electric Marginal Costs, Revenue Allocation, and Rate Design.
(U 39 M)

Application 06-03-005
(Filed March 2, 2006)

(See Appendix A for a list of appearances.)

INTERIM OPINION ADOPTING SETTLEMENTS
ON MARGINAL COST, REVENUE ALLOCATION,
AND RATE DESIGN

TABLE OF CONTENTS

Title Page

INTERIM OPINION ADOPTING SETTLEMENTS ON MARGINAL COST, REVENUE ALLOCATION, AND RATE DESIGN 2 2

1. Summary 2 2

2. Background 3 3

3. Settlements 5 5

3.1. Marginal Cost and Revenue Allocation Settlement 6 6

3.2. Residential Rate Design 7 7

3.3. Streetlight Rate Design 9 9

3.4. Medium and Large Light & Power Rate Design 10 10

3.5. Small Light & Power Rate Design 11 11

3.6. Agricultural Rate Design 13 13

3.7. Commercial Building Master Meter Issues 13 13

4. Standard of Review 15 15

4.1. All-Party Settlements 15 15

4.2. Contested Settlements 16 16

5. Uncontested Settlement Agreements 17 17

5.1. All-Party Settlements 17 17

5.2. Reasonableness in Light of the Record 18 18

5.3. Consistency with Law 21 21

5.4. The Public Interest 22 22

5.5. Annual Reports to Provide Information on Marginal Costs
Are Unnecessary 23 23

6. Master Meter Settlement Agreement 25 25

6.1. TURN Contests the Master Meter Settlement 26 26

6.2. Reasonableness in Light of the Record 26 26

6.2.1. Position of TURN 26 26

6.2.2. Position of BOMA 30 30

6.2.3. Discussion 34 34

6.3. Alternative Terms and Conditions 39 39

6.3.1. Common Loads Should not Be Allocated to Tenants 39 39

6.3.2. Submeters Should Provide at Least the Same Information
as the Master Meter 40 40

6.3.3. Tenants Should Be Provided With the Same Information
Currently Provided to Residential Submetered Tenants
by the Utility and the Master Meter Customer Pursuant
to D.04-11-033 and D.05-05-026 40 40

6.3.4. PG&E Should Allow Submetering Only Where the Master
Meter Customer Meets Certain Requirements 44 44

6.4. Consistency with Law 46 46

6.4.1. D.63562 47 47

6.4.2. D.92109 49 49

6.4.3. D.99-10-065 51 51

6.4.4. D.05-05-026 53 53

6.5. The Public Interest 55 55

6.5.1. Discussion 55 55

6.6. Conclusion on Master Meter Settlement 56 56

7. Comments on Proposed Decision 57 57

8. Assignment of Proceeding 58 58

Findings of Fact 58 58

Conclusions of Law 61 61

INTERIM ORDER 63 63

APPENDICES:

Appendix A-List of Appearances

Appendix B-Settlement Agreement on Marginal Cost and Revenue Allocation Issues

Appendix C-Supplemental Settlement Agreement on Residential Rate Design Issues

Appendix D-Supplemental Settlement Agreement on Streetlight Rate Design Issues

Appendix E-Supplemental Settlement Agreement on Medium and Large Light and Power Rate Design Issues

Appendix F-Supplemental Settlement Agreement on Agricultural Rate Design Issues

Appendix G-Supplemental Settlement Agreement on Small Light and Power Rate Design Issues

Appendix H-Supplemental Settlement Agreement on Commercial Building Master Meter Issues

INTERIM OPINION ADOPTING SETTLEMENTS
ON MARGINAL COST, REVENUE ALLOCATION,
AND RATE DESIGN

1. Summary

This decision concerning Phase 2 of Pacific Gas and Electric Company's (PG&E) general rate case (GRC) adopts electric marginal costs and principles for revenue allocation to the customer class level and the design of tariff schedule rates. Revised rates will become effective November 1, 2007 and will allow PG&E to collect the revenue requirement determined in Phase 1 of its 2007 GRC, as modified by subsequent revenue requirement authorizations.

PG&E and interested parties have submitted a range of evidence, engaged in settlement discussions, and filed motions for Commission adoption of a settlement agreement regarding marginal cost and revenue allocation, plus five supplemental rate design settlement agreements and a supplemental settlement agreement on commercial building master meter issues. We find that the marginal cost and revenue allocation and five supplemental rate design settlement agreements meet our tests for adoption, and grant the motions to adopt those settlements. We also adopt the commercial building master meter settlement agreement with the condition that PG&E and building owners provide tenants with information concerning rates and their consumer rights and that PG&E and the Building Owners and Managers Associations provide certain information on their experience with commercial building master metering in PG&E's next GRC.

The proceeding remains open to consider future dynamic pricing tariffs and options for PG&E.