Over objections of two commissioners that rate cuts missed the mark, the California Public Utilities Commission on February 26 narrowly approved $799 million in rate reductions for Pacific Gas & Electric?s bundled customers. The final amount was $60 million less of a reduction than PG&E requested last month. Starting next month, residential customers will see a 4 percent rate reduction, while industrial customers? rates will drop by about 12 percent. The legislated 10 percent rate reduction that was part of deregulation legislation will be rolled into rates instead of appearing on customer bills. The majority of commissioners voted for the plan in part, according to commission president Michael Peevey, because voting now rather than holding it saves $68 million per month for ratepayers. ?This represents another step away from the energy crisis,? Peevey stated. He added that the allocation of rate savings is ?equitable.? Commissioners Loretta Lynch and Carl Wood voted against the rate plan because it did not reduce rates enough, they said. They cited two instances where PG&E income should have counted to lower rates even further. Both argued that PG&E headroom (the difference between generation-related costs and generation-related revenues) last year was far higher than the $95 million in overcharges factored into rate reductions. Specifically, Lynch noted that the Energy Division calculated headroom of $300 million. Wood and Lynch added that the $56 million in after-tax refunds to PG&E ordered on February 25 by the Federal Energy Regulatory Commission in a settlement among Williams and utilities over allegations of price manipulation should push rates down further. The decision adopts a rate-design settlement among PG&E, consumer groups, and large customer groups that determines how rates are divvied up under PG&E?s reorganization plan. Despite its support for the bankruptcy settlement and this rate allocation, The Utility Reform Network said the approved reductions leave rates ?inflated? by costs of the CPUC?s approval of PG&E?s bankruptcy bailout. ?Even with this decrease, PG&E?s rates are still among the highest in the United States. . . . PG&E has nothing to brag about,? said TURN. PG&E originally sought an $815 million rate cut proposal but updated it late last month to an $860 million decrease, which included an $18 million increase in rates for direct-access customers. But the move to push up direct-access rates was rejected on grounds that it would be too hasty based on an advice letter filing. Also rejected in the plan is a $79 million decrease PG&E wanted knocked off the Department of Water Resources? 2004 revenue requirement, to account for estimated funds DWR is slated to receive from the $1.5 billion El Paso settlement. That deal resolved allegations of price manipulation by El Paso. DWR has said it does not know the exact amount of funds it will receive from that company. Direct-access customers will help pay for financing the refinancing part of PG&E?s bankruptcy settlement?the dedicated rate component of the reorganization plan?under the current 2.7 cent\/kWh cap. Departing load customers will not be on the hook for costs of the dedicated rate component. The approved rates will remain in effect until phase 2 of PG&E?s general rate case. In other rate-setting news, baseline rates were reduced for PG&E?s lower-use customers. ?Baseline? refers to a threshold under which certain customers get a break on rates based on cost per kilowatt-hour. Commissioner Geoffrey Brown said that these customers would be able to save up to $200 a year.