STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

July 5, 2005 Agenda ID #4766

Ratesetting

TO: PARTIES OF RECORD IN APPLICATION 04-06-024

This is the proposed decision of Administrative Law Judge (ALJ) Mattson, previously designated as the principal hearing officer in this proceeding. All parties have stipulated to a reduction of the Section 311(d) 30-day waiting period, allowing the item to appear on the Commission's agenda on July 21, 2005. Accordingly, comments must be filed and served by July 15, 2005, and reply comments filed and served by July 18, 2005. This matter was categorized as ratesetting and is subject to Pub. Util. Code § 1701.3(c). Pursuant to Resolution ALJ-180 a Ratesetting Deliberative Meeting to consider this matter may be held upon the request of any Commissioner. If that occurs, the Commission will prepare and mail an agenda for the Ratesetting Deliberative Meeting 10 days before hand. When an RDM is held, there is a related ex parte communications prohibition period.

The Commission may act at the regular meeting, or it may postpone action until later. If action is postponed, the Commission will announce whether and when there will be a further prohibition on communications.

When the Commission acts on the proposed 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 proposed 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:sid

ALJ/BWM/sid DRAFT Agenda ID #4766

Ratesetting

Decision PROPOSED DECISION OF ALJ MATTSON (Mailed 7/5/2005)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company To Revise Its Electric Marginal Costs, Revenue Allocation, and Rate Design. (U 39 M)

Application 04-06-024 (Filed June 17, 2004)

(See Appendix A for a list of appearances.)

INTERIM OPINION ON BART AND SIERRAPINE EXEMPTIONS

FROM ENERGY RECOVERY BOND CHARGES

1. Summary

Pacific Gas and Electric Company (PG&E or applicant) seeks to charge the San Francisco Bay Area Rapid Transit District (BART) and SierraPine Ltd. (SierraPine) certain costs associated with applicant's energy recovery bonds (ERBs). These bonds are used to reduce ratepayer costs related to applicant's bankruptcy reorganization. BART contends it is exempt from ERB-related charges, except to the extent that it may purchase supplemental power from PG&E. SierraPine asserts that it is fully exempt.

We agree with BART and SierraPine, and find that neither entity is subject to these charges to the extent specified herein. The issue of responsibility for ERB-related charges is the same, but the underlying legislation and backgrounds for the BART and SierraPine claims differ. Therefore, we describe each separately. The proceeding remains open to address marginal cost, revenue allocation and other rate design issues.