IV. Interim Decision

Based on our analysis of the SGRP , our preliminary findings in D.05-02-052 were that:⁷

· The SGRP is cost-effective.

· $706 million, as adjusted for actual inflation and cost of capital, is a reasonable estimate of the SGRP cost.

· We do not intend to conduct an after-the-fact reasonableness review if the SGRP cost does not exceed $706 million. However, we are not precluded from doing so.

· If the SGRP cost exceeds $706 million, or the Commission later finds that it has reason to believe the costs may be unreasonable regardless of the amount, the entire SGRP cost will be subject to a reasonableness review.

· The cap is $815 million as adjusted for actual inflation and cost of capital. PG&E will not be allowed to recover SGRP costs in excess of this amount.

· We intend to allow PG&E to record in the UGBA the revenue requirement associated with plant additions up to the cap as of the date of operation of each unit.

· We intend to allow PG&E to include the revenue requirement associated with each unit in rates, up to $326 million for Unit 1 and $380 million for Unit 2, on January 1 of the year following commercial operation of each unit, subject to refund. PG&E will be required to file an advice letter to request authority to implement the above rate increase for each unit. The rate increase shall not take effect until and unless the advice letter is approved by the Commission.

· After completion of the SGRP, PG&E will be required to file an application for inclusion of the costs thereof permanently in rates, regardless of whether the costs exceed $706 million. If a reasonableness review is performed, it will be done in connection with the application.