Discussion

Upon development of a full record on the M&S inventory balance issue, and consideration thereof by the Commission, the Commission may find that PG&E's authorized gas and electric revenue requirements are excessive and should be reduced. However, in the absence of immediate action on our part, the Commission could be required to make the correction of any such excessive revenue requirements prospective only, due to the legal limitation on retroactive ratemaking.

Even if a revenue requirement reduction is justified, significant delay may occur before any order reducing revenue requirements can be issued, particularly if hearings are required. PG&E's ratepayers could be held responsible for paying excessive rates for an extended period of time. By acting now to make PG&E's revenue requirements subject to reduction effective immediately, we can protect ratepayer interests in conformance with principles of retroactive ratemaking. Accordingly, we will on our own motion order that PG&E's authorized gas and electric revenue requirements and gas rates associated with M&S inventory balances are subject to reduction and refund, effective today.

This order does not presume that PG&E's position, ORA's position, or any other outcome with respect to the M&S inventory balance issue is reasonable or correct. Any such determination would be made based upon the record to be developed. We take this action today solely to preserve the interests of ratepayers in the event a reduction in revenue requirements is later found by the Commission to be justified.