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STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

March 9, 2004 Agenda ID #3326

TO: PARTIES OF RECORD IN APPLICATION 03-10-044

Enclosed is the draft decision of Administrative Law Judge Allen. The decision will not appear on the Commission's agenda for at least 30 days after the date it is mailed. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ Angela K. Minkin

Angela K. Minkin, Chief

Administrative Law Judge

ANG: avs

ALJ/PVA/avs DRAFT Agenda ID #3326

Decision DRAFT DECISION OF ALJ ALLEN (Mailed 3/9/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company (U 39 M) for Authorization to Sell its Kern Facility Pursuant to Public Utilities Code Section 851 and Executive Order D-44-01

Application 03-10-044

(Filed October 22, 2003)

ORDER REGARDING PUBLIC UTILITIES CODE SECTION 377

The proposed sale of Pacific Gas & Electric Company's Kern Facility to North American Power Group is barred by Public Utilities Code Section 377 (§ 377). The application is denied.

Background Chronology

May 15, 2000 - Pacific Gas & Electric Company (PG&E) filed an application (Application 00-05-031) to establish a market value for its Kern Facility, a non-operational gas fired power plant located in Bakersfield, California.

December 13, 2000 - PG&E filed a supplemental application, identifying North American Power Group (NAPG) as the winning bidder of an auction process, and requesting Commission approval of the sale of the Kern Facility to NAPG.

January 18, 2001 - Assembly Bill 6 (ABX1 6), amending § 377, became effective, establishing a moratorium on the divestiture of certain utility electric generation facilities.

April 3, 2001 - The Commission issued Decision (D.) 01-04-004, which held that the proposed sale of the Kern Facility to NAPG was barred by the amended § 377, denied PG&E's request to sell the facility, and ordered PG&E to restart the Kern Facility.

July 31, 2001 - Governor Gray Davis signed Executive Order D-44-01, which conditionally suspended § 377 to the extent it would prohibit the transfer of the Kern Facility to NAPG.

October 2, 2001 - The Commission issued D.01-10-002, which denied rehearing of D.01-04-004, closed the previous proceeding, and directed PG&E to file a new application in compliance with the requirements of the Executive Order.

October 22, 2003 - PG&E filed the present application requesting Commission approval of the sale of the Kern Facility to NAPG, asserting that it was in compliance with the requirements of the Executive Order.

November 13, 2003 - Executive Order D-44-01 ceased to be in effect.

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