Pacific Gas and Electric applied to the California PublicUtilities Commission (CPUC) to reduce electric rates at the end ofthe electric rate freeze, but no later than March 31, 2002. Thestate law that governs the restructuring of California’selectricity market, AB 1890, gave residential and small businesscustomers a 10% rate reduction on Jan. 1, 1998 and froze rates atthat level. The state law also provided investor-owned utilities atransition period to recover stranded costs. That transition periodends March 31, 2002, or when the past investment costs have beenrecovered, whichever comes first. At that time, the rate reductionswill go into effect.

The actual amount of the rate decreases will depend on theoutcome of several proceedings before the CPUC and FERC which willbe decided before the end of the rate freeze and on the prevailingprice of energy at the time.

PG&E’s filing at the CPUC to reduce the electric rates isknown as Phase 2 of PG&E’s 1999 General Rate Case. The proposedrate cuts range from 11% to 43% for residential, commercial,industrial and agricultural customers. In addition, the ratecategories for customer groups also will be streamlined. Forexample, small agricultural customers will join the smallcommercial customer class. The commercial rate schedules generallyhave lower average rates than PG&E’s current agricultural rateschedules.

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