Spreadsheet: jeff_dasovich__14105__Response to 10-12 Workshop Questions
Sheet: Q1-4

GA II Rate Design and Cost of Service
Follow up Question/Answer to October 12, 2000, Workshop
QUESTION 1
Q. What are the debt, preferred and equity costs included in PG&E's
2001 Cost of Capital Application and what is the application number?
A. PG&E's 2001 Cost of Capital Application is number A. 00-05-013 and requests the
following:
2001 Cost of Capital Application (A. 00-05-013)
 |  | Capitalization |  |  |  | Cost of Capital
 |  | Debt | Preferred | Equity |  | Debt | Preferred | Equity
Base 2000 |  | 0.462 | 0.058 | 0.48 |  | 0.0726 | 0.066 | 0.1122
Base 2001 |  | 0.462 | 0.058 | 0.48 |  | 0.0741 | 0.0656 | 0.124
 |  |  |  |  | Debt | Preferred | Equity | Total
2000 Weighted Cost |  |  |  |  | 0.0335 | 0.0038 | 0.0539
2001 Weighted Cost |  |  |  |  | 0.0342 | 0.0038 | 0.0595
Weighted Cost Change
QUESTION 2
Q. Does PG&E expect to receive Emission Reduction Credits for NOx retrofit investments on L400/L401?
A. No.
Emission Reduction Credits (ERCs) are applicable only to voluntary upgrades
to reduce emissions. PG&E will invest in L400/L401 retrofits to comply with local, state
and federal regulations therefore the credits for voluntary investments will not apply.
QUESTION 3
Q.  Is corporate (holding company) A&G included in the utility A&G cost?
A.  Yes.  The estimated A&G expense in the Gas Accord II cost of service includes an
allocation of holding company costs.
Holding company costs are allocated to the utility and other subsidiaries using an
approach approved by the CPUC in the Holding Company audit proceeding.   In PG&E's
1999 GRC, the CPUC determined that certain holding company costs benefit ratepayers
and should be included in the utility revenue requirement.  For example, at PG&E, the Tax,
Insurance, and Internal Audit Departments are located in the holding company, not in the
utility.  When these departments provide vital services to the utility, the cost of those
services are properly charged to the utility.
PG&E's 2003 estimate of holding company A&G expenses for the Gas Accord II cost of
service was derived as follows:
1.  A 1999 base forecast was developed using recorded adjusted 1999 holding company
costs billed to PG&E ($49.9 million).
2   The utility portion of the forecasted increase in holding company spending in 2000
($15.6 million) was added to the 1999 base and then escalated to derive a 2003 forecast for holding
company costs allocated to the utility ($65.6 million in 1999 dollars).
3.  The utility portion of holding company costs was then unbundled to allocate 8.3% or
$5.5 million (in 1999 dollars) to the Gas Transmission and Storage Unbundled Cost Category.
Holding company costs represent about 8% of recorded 1999 utility A&G costs of about $640 million.
[NAME] 4
Q. Why did the 1999 GRC continue to allocate costs to fossil plants, despite divestiture?
A.  The 1999 GRC and other CPUC decisions require PG&E to wait until the two-year O&M contracts
with the new owners of the fossil and geothermal power plants expire before PG&E can apply to the
CPUC to reallocate the common costs previously allocated to those sold power plants.  These O&M
contracts will expire in 2000 and 2001.  PG&E will then apply to reallocate the A&G expenses and
common plant.  PG&E expects that the CPUC will determine the reallocation by 2003.  Thus, PG&E
has included the reallocated common costs in the Accord II cost of service.