ALJ/TIM/k47 DRAFT ITEM 9

12/21/2000

Decision DRAFT DECISION OF ALJ KENNEY (Mailed 12/14/2000)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Expedited Application of Pacific Gas and Electric Company (U 39 M) to (1) Issue, Sell and Deliver One or More Series of Its First and Refunding Mortgage Bonds, Debentures, Subordinated Deferrable Interest Debentures, Promissory Notes and/or Other Evidences of Indebtedness in Connection with Domestic or Euro-Market offerings, to Guarantee the Obligations of Others in Respect of the Issuance of Securities and to Arrange For Standby Letters of Credit as Performance Guarantees, the Total Aggregate Principal Amount of Such Issuances and Guarantees Not to Exceed $2 Billion; (2) Enter into One or More Interest Rate Caps, Collars and Swaps; (3) Issue Variable Rate Debt (Including Fixed Rate Debt Swapped to a Variable Rate) to Finance Balancing Account Undercollections; and (4) Obtain an Exemption from the Competitive Bidding Rule.

Application 00-10-029 (Filed October 18, 2000)

Title Page

OPINION 2

1. Summary 2

2. Background 2

3. Requested Authority 3

A. Use of Proceeds to Finance TRA Undercollection 3

i. PG&E's Request 3

ii. Discussion 4

B. Use of Proceeds for Section 817 Purposes 6

i. PG&E's Request 6

ii. Discussion 7

C. Use of Accrued Interest for General Corporate Purposes 10

i. PG&E's Request 10

ii. Discussion 10

D. Types of Long-Term Debt 11

i. PG&E's Request 11

ii. Discussion 13

E. Exemption from Section 701.5 13

i. PG&E's Request 13

ii. Discussion 14

F. Interest-rate swaps, Caps, and Collars 14

i. PG&E's Request 14

ii. Discussion 15

G. Exemption from Competitive Bidding Rules 16

i. PG&E's Request 16

ii. Discussion 18

H. Reporting Requirements 18

i. PG&E's Request 18

ii. Discussion 19

4. Pub. Util. Code Section 1904(b) 19

5. Category and Need for Hearing 20

6. Pub. Util. Code Section 311 20

Findings of Fact 21

Conclusions of Law 25

ORDER 29

OPINION

1. Summary

This decision authorizes Pacific Gas and Electric Company (PG&E) to issue $2 billion of additional long-term debt¹ to finance a large undercollection in its Transition Revenue Account (TRA) caused by a tremendous increase in the price of wholesale electricity in recent months. This decision also authorizes PG&E to use $370 million of the $2 billion of long-term debt authorized by this decision for the purposes listed in Pub. Util. Code § 817,² but only if PG&E does not need $370 million to finance its TRA undercollection. Finally, this decision denies PG&E's request for perpetual authority to issue $2 billion of additional long-term debt for the purposes listed in § 817.