In a significant reversal, the California Public Utilities Commission on June 30 revised the method of allocating the fixed costs utilities must pay to reimburse the state Department of Water Resources for $25 billion of power purchases during the state?s energy crisis. By a 4-1 vote, the CPUC adopted president Mike Peevey?s alternate decision granting San Diego Gas & Electric?s petition to modify the commission?s December 2004 decision on DWR?s annual revenue requirement. DWR?s variable market-based costs will be allocated among the three utilities as before. Under the new methodology, Southern California Edison customers will pay 47.5 percent of DWR?s fixed costs, Pacific Gas & Electric customers will pay 42.2 percent, and San Diego Gas & Electric customers will pay 10.3 percent through the life of the contracts. SDG&E argued that the previous method of allocating $7.4 billion of above-market costs among the three utilities from 2004 to 2013 placed an unfair burden on San Diego customers because the utility serves far fewer customers than PG&E and Edison. PG&E approved the percentage-based method of allocating DWR?s fixed costs in a settlement agreement the three parties signed off on last fall. Commissioner Geoffrey Brown, who sponsored the CPUC?s December decision, argued that it equitably apportioned the costs that DWR incurred in purchasing power. SDG&E appealed that CPUC decision and sought a rehearing on grounds that the methodology was flawed and would result in unfair cost-shifting of $800 million to SDG&E customers. Moreover, the utility said, the decision relied on a ten-year forecast of above-market costs that is flawed and unreliable. PG&E, Edison, and The Utility Reform Network opposed SDG&E?s petition. An administrative law judge dismissed SDG&E?s petition for rehearing because the utility had made the same arguments in prior proceedings and the CPUC had rejected them. However, with his old nemeses Loretta Lynch and Carl Wood gone from the commission, Peevey garnered support from new commissioners Dian Grueneich and John Bohn and succeeded in overturning the CPUC?s December decision. Peevey characterized his alternate decision as a compromise between the parties? original proposals for allocating DWR?s costs. While he agreed that any cost shifting had a disproportionate impact on SDG&E?s relatively small customer base, Peevey said the utility exaggerated by contending that its customers would be charged $800 million too much. ?I believe the decision the PUC adopted was unfair,? Peevey said. ?In reality San Diego customers should have been paying somewhat more, but not as much as Brown?s decision.? Peevey added that he objected to requiring utilities to reimburse DWR for the full cost of the power supply contracts because it presumes that the long-term contracts were allocated fairly to begin with. Grueneich said she supported Peevey?s alternate because it would provide more regulatory certainty and enable the CPUC to avoid relitigating the contentious issue every year.