UDC Testimony on Retained Generation

Pursuant to the June 15th Ruling of ALJ DeUlloa, the UDCs filed testimony on
the revenue requirements for their retained generation and associated
ratemaking mechanisms. Attached is a brief summary of each of the UDCs'
proposals. Rebuttal testimony is due next Monday the 2nd. A prehearing
conference is scheduled for the 5th, with the hearing to begin on the 9th.

In a related matter, both SCE and PG&E filed motions to include as part of
the scope of the proceeding, the issue of the implementation and allocation
of DWR's revenue requirement. Specifically the UDCs believe the Commission
needs to (1) ensure that DWR's revenue requirement recovery does not
jeopardize recovery of the Commission determined URG revenue requirement (2)
the allocation of the revenue requirement among the investor owned
utilities; and (3) the allocation of the revenue requirement amount the
customers of each utility once the inter-utility allocation is completed.

The ALJ has not yet ruled on whether these issues will become part of the
proceeding.

Please review the attached summary. We need to determine as soon as
possible if we plan to participate in this proceeding.

Jeanne

<<X25702.DOC<<

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