Description of the Settlement

The Settlement Agreement addresses the stipulation between the Settling Parties on the reasonableness and prudence of SDG&E's electric procurement activities during the period from July 1, 1999 through February 7, 2001. SDG&E's initial showing in its application only addressed its procurement practices during the period July 1, 1999 through August 31, 2000. However, for purposes of this stipulation and settlement both SDG&E and ORA agree that it is reasonable and in the interests of SDG&E's customers to expand the period of time addressed in the Settlement Agreement to February 7, 2001. This agreement is based upon: (1) the opportunity presented to, and exercised by, ORA while this case was pending to evaluate and assess SDG&E's electric procurement activities during the period from September 1, 2000, through February 7, 2001; (2) the fact that after February 7, 2001, the DWR took full responsibility for procuring, on behalf of SDG&E's bundled customers, SDG&E's "net-short" requirements thereby curtailing SDG&E'S obligation to procure electric power in excess of its utility retained generation; (3) the statutory language of Pub. Util. Code § 332.1(g) that requires no more than one proceeding to examine the prudence and reasonableness of SDG&E's procurement activities for the period beginning at the latest on June 1, 2000.

The Settlement Agreement specifically requires that, if approved, the Commission will make the following orders:

(1) The record period for the portion of this proceeding addressing SDG&E's electric procurement practices will be July 1, 1999 through February 7, 2001;

(2) SDG&E shall reduce the undercollection balance in its Energy Rate Ceiling Revenue Shortfall Account (ERCRSA) by the sum of $100 million dollars as a full, complete, and final resolution of all issues associated with SDG&E electric procurement practices over the period of time between July 1, 1999 and February 7, 2001.

(3) The portion of Application (A.) 00-10-008 addressing SDG&E's electric procurement practices, as expanded to include the period of time through February 7, 2001, is fully and finally resolved, and all ORA proposals for disallowances, audits, and other penalties are denied with prejudice;

(4) The Commission's decision approving the Settlement Agreement is a final and binding resolution as to the reasonableness and prudence of SDG&E's electric procurement practices from July 1, 1999 through February 7, 2001 for the purpose of any future year Annual Transition Cost Proceeding (ATCP) or other Commission proceedings pertaining to SDG&E's electric procurement activities.

The Settling Parties refer us to the full text of the Settlement Agreement for all of its provisions and details. In particular, the Settling Parties refer us to Section E, entitled "Indivisibility," stating that the stipulations expressed in the Settlement Agreement embody compromises of the Settling Parties' positions such that no individual term or agreement in the Settlement Agreement is assented to by either of the Settling Parties except in consideration of the Settling Parties' agreements to all other terms. Thus, the Settlement Agreement is indivisible and each part is interdependent upon the Commission's adoption of all parts.