Despite concerns that the cost of state procurement on behalf of investor-owned utilities should be allocated more equitably among the utilities, the California Public Utilities Commission approved an order allowing the Department of Water Resources to collect roughly $4.65 billion from IOUs for its 2004 interim revenue requirement. Also approved were ?true-ups? of 2001-02 revenue requirements. Under the order, Pacific Gas & Electric is supposed to remit $1.87 billion for DWR long-term contract costs, bond charges, and associated costs. About $2.06 billion will be collected from Southern California Edison, while San Diego Gas & Electric will pay $550 million. This divvying up of costs could be revised once a permanent allocation method is approved, which will apply in 2004 and years beyond. Commissioners Geoffrey Brown, Loretta Lynch, and Carl Wood said they wanted to look at reworking the bond charge formula to more accurately allocate interutility costs. Wood said Edison ratepayers have paid $500 million more in rates than those of PG&E under the current bond scheme. Wood and Lynch cast dissenting votes on the order. In an angry response to the approved decision, Edison said in a statement that while the utility was able to reduce customer rates 13 percent last August, they are still higher than precrisis levels because of ongoing costs of the state?s long-term power contracts and bonds. Though the DWR charge is declining in 2004, ?Increased deliveries from [the agency?s] contracts and the corresponding reduction in use of electricity generated and produced by Edison will lead to a rate increase of about 3 percent,? said the utility. Not factored into DWR?s revenue requirement is its $425 million portion of a potential $1.5 billion in refunds from the El Paso settlement for alleged gas price manipulation. The settlement was approved in superior court last month but still needs final federal court approval. ?We urge DWR to promptly reduce its revenue requirement to reflect its share of the El Paso settlement,? said the order. As a result of the ?true-up? for 2001-02, PG&E?s 2004 revenue requirement was increased by about $101 million, while Edison?s and SDG&E?s were decreased by about $41 million and $59 million, respectively. In other meeting news, debt financing for PG&E?s bankruptcy settlement was set in motion. Commissioner Lynch had asked that the matter be put on hold for two weeks to give the legislature a chance to act on the dedicated rate component, a provision in PG&E?s bankruptcy settlement designed to set aside a portion of rates to finance the plan. Issuing debt at this point ?drastically reduces ratepayer benefits from the DRC,? argued Lynch. Lynch disputed commission president Mike Peevey?s contention that waiting will expose ratepayers to higher costs. Along with Wood, she cast dissenting votes on the matter. After heated sparring between Lynch and Peevey, a nail was put in the coffin of what is now a historical term?the ?rate freeze.? Before deregulation crashed and burned, the rate freeze for investor-owned utilities was due to sunset by March 2002, or when ?stranded? costs were paid off. Rates were frozen at prederegulation 1996 levels. The theory at the time was that if utilities could cut operating costs to less than the frozen levels, they could keep the difference. But then the energy crisis came along and ruined the rate-freeze theory, putting its demise on a philosophical level. Still, the commission is required to finalize its end. Lynch made a case for her alternate plan to examine possible PG&E stranded costs in a new phase of the case. She asserted that the ?real reason? to shut down the plan is to protect PG&E?s bankruptcy settlement. ?You are out of order here,? shot back Peevey. ?This has nothing to do with PG&E.? In a familiar pattern, Wood and Lynch dissented on the rate-freeze decision.