Provisions Of The Proposed Settlement Agreement

The proposed settlement agreement (PSA) contains a number of provisions that provide additional benefits to PG&E compared to the Commission’s plan of reorganization (POR) submitted by the Commission to the bankruptcy court. The most significant modifications compared to the Commission’s POR are:

Allowing PG&E to keep between $775 million and $875 million in headroom from 2003, and increasing the size of the regulatory asset from $1.75 billion to $2.21 billion. Together, these increase ratepayer payments compared to the POR by over $2 billion over the next 9 years.
Eliminating a $400 million disallowance against PG&E for imprudent procurement practices that has been proposed in an ongoing PUC proceeding;
Fixing PG&E’s rate of return on equity at 11.22% for up to nine years;
Allowing Department of Water Resources (DWR) contracts to be assigned to PG&E only after a very high credit rating is achieved by PG&E;
Precluding the Commission from exercising its authority on a number of issues, including PG&E’s practices on taking money out of the utility in the form of dividends;
Requiring environmental easements (or the sale to environmental interests) for the lands associated with PG&E’s hydroelectric projects, along with $70 million for environmental enhancements.