3. Substantial Contribution

In evaluating whether a customer made a substantial contribution to a proceeding, we look at several things. First, we look at whether the Commission adopted one or more of the factual or legal contentions, or specific policy or procedural recommendations put forward by the customer. (§ 1802(i).) Second, if the customer's contentions or recommendations paralleled those of another party, we look at whether the customer's participation unnecessarily duplicated or materially supplemented, complemented, or contributed to the presentation of the other party. (§§ 1801.3(f) and 1802.5.)

As described in § 1802(i), the assessment of whether the customer made a substantial contribution requires the exercise of judgment.

In assessing whether the customer meets this standard, the Commission typically reviews the record, composed in part of pleadings of the customer and, in litigated matters, the hearing transcripts, and compares it to the findings, conclusions, and orders in the decision to which the customer asserts it contributed. It is then a matter of judgment as to whether the customer's presentation substantially assisted the Commission.⁸

With this guidance in mind, we turn to the claimed contributions CFC made to D.08-11-056.

CFC alleges that it fully participated in Phase II(a). CFC attended the prehearing conference on April 11, 2008, and participated in workshops held on June 2 and July 1 and 2, 2008. CFC states that it filed four sets of comments in Phase II(a): Post-Workshop Comments on June 9 and June 16, 2008; Comments on the Costs and Benefits associated with transferring DWR's contracts to the IOUs on August 4 and August 14, 2008; Summary Comments on August 25 and September 8, 2008; and Comments on the Proposed Decision on October 27 and October 31, 2008. CFC took an active role in this proceeding in an effort to provide the Commission with information it felt should be taken into account when deciding whether to facilitate ending DWR's role as supplier of power to retail customers.

CFC summarizes the issues it addressed in its comments as follows:

Post-Workshop Comments:

· Whether the transfer of DWR's contract and initiation of direct access will precipitate another energy crisis.

· Whether DWR has the legal capacity to enter into a novation of the contracts.

· Whether the assignment of novation of the contracts will increase the cost of utility service.

· Whether a non-IOU party may step into the shoes of DWR.

· Whether the IOU's have the necessary credit rating to assume the contracts.

· How the payments owed under the contracts and for servicing bonds would be collected.

· Particular terms in each of the contracts which need to be considered.

· What type of review of replacement contracts is required.

Comments on Costs and Benefits:

· Legal and economic consequences of assignment versus novation.

· An estimate of transactional costs, e.g., participation in workshops and hearings.

· Increased capital costs.

· Cost of transferred claims and future claims.

· The lack of novation clauses in some contracts and conditions of novation imposed by other contracts, e.g., seller cooperation.

· Litigation costs.

· Likelihood of improvement of contract terms.

· Time and expense of renegotiated contracts.

· Level of review of renegotiated contracts.

· Statutory procurement review process.

· DWR Administrative Costs.

· Attempt to quantify unquantifiable benefits.

Summary Comments:

· Specific terms of particular contracts which must be satisfied to transfer contracts, e.g., Sempra contract

· Costs and Benefits of Novation.

· Legality of Novation.

· Resistance of Sempra to assignment/novation.

· Transferees other than IOUs.

· Regulatory review of replacement contracts.

· Likelihood of improvement of contract terms.

· Likelihood that novation/assignment will increase cost of utility service (early return of reserves, administrative costs, incremental costs assumed by IOUs, capital costs, working capital costs, negotiation costs, workshop costs and claim costs.

Comments of Proposed Decision:

· Obstacles to novation, e.g., The Coral and CalPine `all or nothing' contract terms, credit rating requirements.

· Lack of benefits to ratepayers; creation of new costs not taken into account in the PD.

· Legality of novation.

· Pre-approval of replacement contracts.

· Amount of discretion given workshop participants with no real guidelines or limits.

· Need for a more thorough analysis of costs and benefits.

· Procedure for considering issues in Phase II(a)(2) and Phase II(b).

CFC submits that it substantially contributed to D.08-11-056 because the Decision has adopted in whole or in part one or more factual contentions, legal contentions, or specific policy or procedural recommendations presented by CFC, i.e., that the likelihood of transferring all of DWR's contracts to the IOUs was uncertain; that the IOUs credit ratings and the need to negotiate novation clauses in some contracts would create and obstacle to achievement of that goal; that the likelihood of achieving estimated costs and benefits, and of negotiating more favorable terms, was uncertain; and that additional costs would be created if IOUs assumed the obligations under the contracts. CFC contends that through its participation in the proceeding, the Commission responded to many of the concerns expressed by CFC and offers the following analysis in support of this contention.

We conclude that CFC did make a substantial contribution to D. 08-11-056, although some of its efforts were duplicative of those of other parties. As discussed in Section 5 below, the 25% disallowance of CFC claimed costs recognizes the undue duplication. We conclude that the remaining claim represents a substantial contribution warranting compensation. We take note of various examples where CFC made a significant contribution to D.08-11-056 warranting intervenor compensation. For example, CFC pointed out the difficulties which would have to be overcome in order to transfer DWR's entire portfolio to IOUs⁹ and the Commission "recognized that various uncertainties may influence the achievement of this goal by January 1, 2010."¹⁰ CFC pointed out the likelihood of prolonged negotiation of contracts without novation clauses and the Commission agreed that "[s]ome additional negotiations with the counterparties would be necessary before DWR could end its obligation to supply power under the existing contracts."¹¹ CFC identified particular contracts which could not be transferred because of the IOU's credit ratings,¹² and the Commission took that into account, but did not discuss the contracts further.¹³ The Commission determined that "No party has demonstrated that the likelihood of failure (of negotiations) is so compelling that no further efforts should even be attempted to accelerate the removal of DWR as a supplier of power."¹⁴ "On the other hand, no party has presented a compelling showing that achieving full novation of all contracts by January 1, 2010 will be easy. Challenges do exist that could affect the achievement of the goal."¹⁵

CFC argued that the costs and benefits hypothesized by the IOUs were not reliable estimates.¹⁶ The Commission agreed: "We recognize that there are various uncertainties associated with the precision and reliability of the estimates, and evaluate them taking into account their inherent limitations. The net benefit estimates are subject to uncertainties beyond whether (or how quickly) acceptable replacement contracts could be implemented. The estimates are also sensitive to changing conditions in the financial and natural gas markets over time."¹⁷ The Commission also recognized that "IOUs, DRA, CFC and TURN argue that the Commission should reject Reliant's and AReM/CACES's estimates of net benefits as exaggerated,"¹⁸ and the Commission held, "[W]e are not relying upon the estimates to set rates or revenue requirements, but are simply considering the estimates as an approximate benchmark."¹⁹

CFC argued that new costs would be created if the IOUs assumed the DWR contracts.²⁰ The Commission agreed "Consequently, in negotiating any replacement agreements involving material amendments in terms, the contracting IOU will need to consider carefully any potential impacts of collateral and credit requirements as a result of such contract amendments. Any amended contracts submitted for Commission review would have to offer sufficient net benefits to ratepayers to counterbalance the costs of posting of any collateral and letters of credit."²¹

The Commission noted that "CFC likewise identifies regulatory transactions costs as an offset to potential ratepayer benefits."²² The Commission "recognize[d] that some transactions costs will be incurred and constitute an offset to any net benefits that may be realized."²³ It did not however, feel that "such costs will be significant enough to overwhelm any potential savings that may otherwise be realized."²⁴

In addition, the Commission noted CFC's argument that "the transfer of contracts could be delayed while the reasonableness of their terms was being litigated,"²⁵ and Reliant's counter-argument that "assuming that a DWR contract is novated `as is,' and solely to the IOUs, the requisite `just and reasonable' review under Section 451 has already been completed through past Commission decisions under which the DWR power charges have been allocated to the IOUs and recovered in retail rates."²⁶ The Commission held that the "Commission has never made a finding that the DWR contracts are just and reasonable," and "reject[ed] Reliant's argument that the Commission has implicitly determined that the DWR contract costs are just and reasonable because it has allowed those costs to be included in rates."²⁷

⁸ D.98-04-059, 79 CPUC2d 628 at 653.

⁹ See e.g., CFC's Opening Comments, filed August 25, 2009 at 2-3.

¹⁰ D.08-11-056 at 3.

¹¹ D.08-11-056 at 10.

¹² See e.g., CFC's Opening Comments, filed August 25, 2008 at 8-9.

¹³ Id. at 47.

¹⁴ Id. at 16.

¹⁵ Id. at 16.

¹⁶ See e.g., CFC Opening Comments, filed October 27, 2008 at 10.

¹⁷ D.08-11-056 at 23.

¹⁸ D.08-11-056 at 22, CFC's Reply Comments, filed August 18, 2008 at 5-6.

¹⁹ Id. at 24.