4. Review of Settlements
With the exception of the limited disputes raised by certain parties as noted above, all of the active parties who submitted testimony on the issues in this proceeding joined in support of the respective Settlement Agreements. As a matter of public policy, the Commission favors settlement of disputes if they are fair and reasonable in light of the record. This policy supports worthwhile goals, including reducing the expense of litigation, conserving scarce Commission resources, and allowing parties to reduce the risk that litigation will produce unacceptable results.56
The rules for the submission and review of settlements are set forth in Article 12 of the Commission's Rules of Practice and Procedures. The general criteria for Commission approval of settlements are stated in Rule 12.1(d) of the Rules of Practice and Procedure.57 Rule 12.1(d) provides that "[t]he Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and in the public interest." The Commission has rejected (or provided for modification of) settlements when these criteria are not met.
We find that the Settlements are reasonable in light of the whole record. The outcomes constitute a compromise between the positions set forth in the prepared testimony by PG&E and the positions of parties that were active on this issue.
We conclude that the parties have appropriately complied with the applicable procedural rules governing notice and submission of the settlements presented in this proceeding. To qualify as an all-party settlement, the sponsoring parties must show that that a settlement meets the following four conditions:
1. The settlement agreement commands the unanimous sponsorship of all active parties to the proceeding;
2. The sponsoring parties are fairly reflective of the affected interests;
3. No term of the settlement contravenes statutory provisions or prior Commission decisions; and
4. The settlement conveys to the Commission sufficient information to permit it to discharge its future regulatory obligations with respect to the parties and their interests.
In assessing settlements, we consider individual settlement provisions but, in light of strong public policy favoring settlements, we do not base our conclusion on whether any single provision is necessarily the optimal result. Rather, we determine whether the settlement as a whole produces a just and reasonable outcome
Factors to be considered in reviewing settlements include: (1) the risk, expense, complexity and likely duration of further litigation, (2) whether the settlement negotiations were at arms-length, (3) whether major issues were addressed, and (4) whether the parties were adequately represented.58 The Commission must be assured that parties to a settlement were able to make informed choices in the settlement process. With respect to whether a settlement agreement is consistent with the law, the Commission must be assured that no term of the settlement agreement contravenes statutory provisions or prior Commission decisions. A settlement that implements or promotes state and Commission policy goals embodied in statutes or Commission decisions would be consistent with the law. To determine whether a settlement agreement is in the public interest, in addition to substantive public interest concerns associated with the circumstances of a particular proceeding, the Commission may inquire into whether a settlement expeditiously resolves issues that otherwise would have been litigated.
In this instance, the parties convened and provided timely notice of a settlement conference (Rule 12.1(b)). They filed motions for approval of each of the settlements, each of which provided a statement of the factual and legal considerations adequate to advise the Commission of the scope of the settlement and of the grounds on which adoption is urged (Rule 12.1(a)).
The Commission will not approve stipulations or settlements, whether contested or uncontested, unless the stipulation or settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
In the following sections we discuss the merits of the Settling Parties' proposal as it relates to our approval criteria.
While participation in each of the settlements varied depending on parties' specific interests, a review of the signatories to each of the settlements indicates that the sponsoring parties are fairly reflective of the affected interests. Sponsors of each settlement fairly represent the wide variety of types of customers and customer classes that are affected by the issues addressed therein. The settlements are reasonable compromises of Settling Parties' respective litigation positions. The settlements avoid the cost of further litigation, and conserve scarce resources of parties and the Commission.
The terms of each settlement agreement are also consistent with law. The record contains the prepared testimony of all the parties on marginal cost and revenue allocation, The Settlement Agreement contains detailed descriptions regarding the timing of rate changes and the manner in which they are to be implemented.
Finally, based on the record that contains the testimonies of all parties and the settlement provisions regarding the timing of rate changes and the manner of implementing rate changes between GRCs, we determine that the settlements convey sufficient information to permit the Commission to discharge future regulatory obligations.
Our long-standing policy is that contested settlements should be subject to more scrutiny compared to an all-party settlement.59 We explained the rationale behind this heightened scrutiny in D.07-03-044:
In judging the reasonableness of a proposed settlement, we have sometimes inclined to find reasonable a settlement that has the unanimous support of all active parties in the proceeding. In contrast, a contested settlement is not entitled to any greater weight or deference merely by virtue of its label as a settlement; it is merely the joint position of the sponsoring parties, and its reasonableness must be thoroughly demonstrated by the record. (D.07-03-044, at 13 (quoting D.02-01-041, at 13).)
We have expressed a willingness to consider, and when appropriate, approve settlements that are not joined by all parties. In D.10-12-035 (the QF Summit Decision), the Commission stated that, for many years, it has been willing to consider a settlement not supported by all parties under the following criteria "[W]e consider whether the Settlement taken as a whole is in the public interest. In doing so, we consider the individual elements of the settlement in order to determine whether the settlement generally balances the various interests at stake as well as to assure that each element is consistent with our policy objectives and the law." (QF Summit Decision, mimeo, at 27, citations omitted.)
To the extent that certain settlement issues were contested in this proceeding, we provided opposing parties the opportunity to be heard through evidentiary hearings. Based on the results of those hearings, as discussed in detail above, we have concluded that the terms of the settlements offer reasonable results.
Consistent with Rule 12.1(d), we thus find that each of the settlements presented above are reasonable in light of the whole record, consistent with law, and in the public interest. Also, the Settling Parties have followed and met the settlement proposal requirements of Rules 12.1(a) and 12.1(b).
56 D.92-12-019, 46 CPUC2d 538, 553.
57 Unless otherwise indicated, subsequent rule references are to the Rules of Practice and Procedure.
58 Re Pacific Gas & Electric Company, 30 CPUC2d 189, 222.
59 D.07-03-044, Opinion Authorizing PG&E's GRC Revenue Requirement for 2007-2010, mimeo., at 13 (citing D.96-01-011, Finding of Fact 5).
