Pacific Gas & Electric (PCG)

DWR Allocated Contracts

The Utility acts as a billing agent for the collection of the DWR’s revenue requirements from the Utility’s customers. The DWR’s revenue requirements consist of a power charge to pay for the DWR’s costs of purchasing electricity under its contracts and a bond charge to pay for the DWR’s costs associated with its $11.3 billion bond offering completed in November 2002. In December 2004, the CPUC issued a decision on the permanent cost allocation methodology for the DWR’s power charge revenue requirements in 2004 and subsequent years, among the three California investor-owned electric utilities. The Utility’s customers’ share of 2004 DWR power charge revenue requirement is approximately $1.7 billion after consideration of the DWR power charge adjustment to implement this decision. The Utility’s customers’ share of 2004 DWR bond charge revenue requirement is approximately $369 million. In January 2005, the CPUC granted limited rehearing of its permanent cost allocation decision to address how to calculate the above-market costs of the DWR power contracts. A final decision on DWR permanent cost allocation is expected in the first quarter of 2005. The Utility cannot predict the final outcome of this matter. As a result of the transition from frozen rates and the electricity procurement recovery mechanism described below, the collection of DWR revenue requirements, or any adjustments thereto, should not affect the Utility’s results of operations.

DWR Allocated Contracts

The Utility acts as a billing agent for the collection of the DWR’s revenue requirements from the Utility’s customers. The DWR’s revenue requirements consist of a power charge to pay for the DWR’s costs of purchasing electricity under its contracts and a bond charge to pay for the DWR’s costs associated with its $11.3 billion bond offering completed in November 2002. In December 2004, the CPUC issued a decision on the permanent cost allocation methodology for the DWR’s power charge revenue requirements in 2004 and subsequent years, among the three California investor-owned electric utilities.  In January 2005, the CPUC granted limited rehearing of its permanent cost allocation decision to address how to calculate the above-market costs of the DWR power contracts.  A final decision on DWR permanent cost allocation is expected in the second quarter of 2005. The Utility cannot predict the final outcome of this matter. As a result of the transition from frozen rates and the electricity procurement recovery mechanism described below, the collection of DWR revenue requirements, or any adjustments thereto, should not affect the Utility’s results of operations.

The CPUC is also considering reallocation of certain DWR contracts for operation and dispatch purposes.  The Utility is unable to predict the outcome of this proceeding, nor the potential financial impact.

DWR Allocated Contracts

        The Utility acts as a billing agent for the collection of the DWR's revenue requirements from the Utility's customers. The DWR's revenue requirements consist of a power charge to pay for the DWR's costs of purchasing electricity under its contracts and a bond charge to pay for the DWR's costs associated with its $11.3 billion bond offering completed in November 2002. In December 2004, the CPUC issued a decision on the permanent cost allocation methodology for the DWR's power charge revenue requirements in 2004 and subsequent years, among the three California investor-owned electric utilities. The Utility's customers' share of 2004 DWR power charge revenue requirement is approximately $1.7 billion after consideration of the DWR power charge adjustment to implement this decision. The Utility's customers' share of 2004 DWR bond charge revenue requirement is approximately $369 million. In January 2005, the CPUC granted limited rehearing of its permanent cost allocation decision to address how to calculate the above-market costs of the DWR power contracts. A final decision on DWR permanent cost allocation is expected in the first quarter of 2005. The Utility cannot predict the final outcome of this matter. As a result of the transition from frozen rates and the electricity procurement recovery mechanism described below, the collection of DWR revenue requirements, or any adjustments thereto, should not affect the Utility's results of operations.