A quick recap:
National TV has exposed Prue, Piper and Phoebe as witches. While Prue and Piper try to deal with the mass of people in front of the manor and their sudden fame, Phoebe unaware of the events in the surface manages to reverse the spell that had Cole turn evil again, just to find out about the havoc that has broken in the surface from Leo that had been sent to the underworld to warn Phoebe of the situation and try to get Tempus the time-demon to reset time. As a result of people panicking Piper is badly hurt by a bullet from a lunatic, and since Leo isn’t able to hear Prue’s call for help, she doesn’t survive the damage caused, and dies.
In the meanwhile, the source has offered a pact; he would make Tempus reverse time if Phoebe joins the dark side, which she doesn’t agree to, until she learns is the only way to save her sister, and adds a condition, since down below no one would be affected by the time reset, she wants Cole to be able to warn Prue and Piper, otherwise there is no deal. And even though the source seemingly agrees to her request, he plans to betray his word and have Cole detained and Phoebe killed.
So this brings us to the point, where we have Prue and Piper facing Shax without Phoebe to come down from the attic with the spell to wound him, and to call Leo to heal her badly hurt sisters (if you recall from before time was reset, Phoebe is the one that wounds Shax before he can do further damage and also is the one that calls Leo to heal Prue and Piper)
And that is how season 3 ends, Prue and Piper hurt, the doctor as well, and Phoebe and Cole in the under world. Season 4 begins with Piper casting any possible spell to bring Prue back (here we learn Prue died and Piper survived Shax’s attack) we also see Phoebe is no longer in the underworld and neither is Cole. Which brings us to our first dilemma:
How was Phoebe able to escape from the underworld?
Here is a bit of Shadowflight’s idea of what happened:
Down below, The Source appears, and grabs Phoebe. Two more minions shimmer in on either side of Cole, grabbing him by the arms. Phoebe says something to the effect of "You really think I would come here unprepared?!" and suddenly a brilliant white lightning seems to envelope the Source...Phoebe breaks out of his grasp, and Cole using the distraction to his benefit, fights off the two guards. Cole & Phoebe quickly shimmer out.
Back at the manor, Phoebe rushes to Prue and Piper...crying in disbelief of the situation. Cole stands back, feeling helpless. Leo returns and tells them that the Powers that Be have done all they can. Piper gets angry and asks him "What the hell have the Powers that Be done for us?!" Cole suddenly speaks up...looking at Phoebe. "It was a bluff, wasn't it? You didn't hurt the Source...they *Points upward* did."
Phoebe, no longer distracted by thoughts of Prue, remembers what transpired. "You're right. I had nothing. We were as good as dead." Leo then speaks up and tells them that The Powers That Be intervened...which was against all their rules...He doesn't know why they've gotten involved.
Which connects perfectly to my theory:
The Source, like all beings, is enslaved to certain cosmical rules. It is possible that when he made the pact with Phoebe, since the destiny of forces of Evil and Good alike were dependant on the time reset to avoid exposure, he was bound to a magical contract, where if the terms were not fulfilled, no one was bound to it anymore. I believe if the source hadn’t tried to detain Cole and kill Phoebe, she wouldn’t be able to leave the underworld, so actually by trying to undo the Charmed Ones, the Source actually ensured their continuity and their future
Looking at the events as in a timetable, we would see:
Prue and Piper save the doctor from Shax.
Shax attacks again hurting both Prue and Piper.
Phoebe rushes downstairs in time to say the spell, wound Shax, and call for Leo.
Leo arrives just in time to save Prue and Piper.
Prue and Piper follow Shax into the street to finish him, Phoebe goes to the underworld to save Cole.
Phoebe reverses the evil spell that had been cast on Cole.
Prue and Piper are exposed as witches.
Prue and Piper send Leo to warn Phoebe to try and reset time.
While Leo is in the underworld Piper is mortally hurt.
The Source offers to reset time if Phoebe stays. Phoebe disagrees.
When Phoebe learns Piper’s death can only be undone by resetting time she agrees to stay as long as Cole can warn her sisters of the danger of being exposed.
The source has time reset and Cole detained.
We end up at the beginning with a slight change…
Prue and Piper save the doctor from Shax.
Shax attacks again hurting both Prue and Piper.
Only this time there is no Phoebe to cast a spell and thus Shax is able to kill the doctor.
Without Phoebe to call for him Leo is unaware of the danger and doesn’t reach Prue in time.
Nevertheless Leo is able to save Piper.
Once the Source has broken his word, Phoebe is free to break hers as well, and is able to return to the surface, where she encounters the sad true, that her sister has passed away, and there is nothing she can do about it anymore.
Why?
The source clearly stated that resetting time again would kill Tempus because he was still weak form the last time he was defeated by the Charmed Ones, which leaves our sisters stuck with the power of two, and without Prue, leading to the incredible episode, Charmed Again, where the Power of Three is reconstituted and the Charmed Ones reborn, with a new sister to replace the lost one.