The CPUC, through resolution E-3788, approved the surcharge and the City's proposed program in December 2002. The undergrounding program proposed maximizing the value of the undergrounding surcharge. Initially SDG&E would act as project manager over all undergrounding projects including design, engineering and construction; with the City reserving the right to assume this responsibility if it desired. This proposed program included the following:

• SDG&E would expend the City's pro rata allocation of SDG&E's CPUC authorized capital budget of 1.1% embedded in rates for Rule 20 capital projects (currently approximately $10 million per year) to fund all City requests for any Rule 20 A, B and/or C projects. All work would be done pursuant to the proposed City Council Policy 600-8, Underground Conversion of Utility Lines by Utility Company, San Diego Municipal Code, and the Memorandum of Understanding.
• Rule 20A projects would be allocated separately from non- Rule 20A projects. Expenditures for Rule 20A projects would be reported by SDG&E quarterly along with other expenditure reports. Rule 20A allocated projects are limited to those streets that meet the criteria for Rule 20A. Non-authorized expenses for 20A projects such as City owned street lighting and pavement resurfacing costs would be paid for with surcharge revenues.
• SDG&E is required to: Meet all project defined milestones, provide the City Manager with quarterly expenditure reports of all undergrounding activities, provide a yearly overhead utility inventory, and provide information to City staff or consultants to perform periodic value engineering studies to improve future project efficiency.

The surcharge that comes to the City is to be used solely for utility undergrounding activities. These surcharge revenues would pay for additional undergrounding projects which include those projects not meeting Rule 20A criteria. The surcharge revenue would be used to expend undergrounding funds as follows:

1. The design and construction for the underground conversion of electrical distribution, transmission (whenever feasible), and associated structures within Underground Utility Districts that are not funded with CPUC Rule 20A funds.
2. Providing and installing all necessary street lighting associated with any underground conversion project, including CPUC Rule 20A projects.
3. Any pavement resurfacing or slurry seal resurfacing required as a result of any underground conversion project, including CPUC Rule 20A projects.
4. All City construction management costs associated with underground conversion activities, including CPUC Rule 20A projects.
5. Any tree replacement required as a result of any underground conversion project, including CPUC Rule 20A projects.
6. Any value engineering or similar studies relating to underground conversion projects or activities.
7. Costs of conversion on private property.
8. All environmental compliance costs as may be required.
9. All directly related expenses to underground electrical systems.
10. Expenses related to joint trench costs and installation costs of conduit and substructures; as provided for in any cable company franchise agreements or other agreement.