6. Discussion

In D.88-12-083, 30 CPUC2d 189, 221-223, the Commission established a standard for review of settlements.3 Rule 12.1(d) of the Commission's Rules states:

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 D.92-12-019, 46 CPUC2d 538, 550-551, the Commission amended the standard to adopt a policy on "all-party" settlements. As a "precondition" to approval of all-party settlements, the Commission must be satisfied that:

1. The settlement commands the unanimous sponsorship of all active parties to the proceeding;

2. The sponsoring parties are fairly representative 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.

We find that the Settling Parties comprise all active parties. No other party submitted testimony or indicated it would participate in the hearings.

We find that the Settling Parties represent all affected interests. PG&E represents the interests of its shareholders and DRA represents the interests of customers.

We agree with the Settling Parties that no statutory provision or prior Commission decision would be contravened or compromised by the Settlement. In particular, we are satisfied that the Settlement does not allow recovery of costs for any counties that were not part of a disaster as declared by a competent authority.

The precondition regarding sufficient information has been applied principally to settlements that establish revenue requirements, rates, rules or conditions of service. This Settlement sets PG&E's total revenue requirement resulting from the CEMA Application and specifies that PG&E may include the authorized revenue requirement in its DRAM for inclusion in rates as part of its next AET advice letter.

In sum, we find that the Settlement meets all four preconditions for Commission approval of an all-party settlement.

The four factors discussed above are preconditions for Commission approval of this Settlement, but not a substitute for requirements that a settlement also be reasonable, consistent with law and in the public interest. (D.95-05-042, 59 CPUC2d 779, 788.) In D.88-12-083, the Commission discussed many factors that might be balanced in determining whether a proposed settlement is reasonable.

First, an element in determining the fairness of a settlement is the relationship of the settled amount to the risk that a given party will obtain its desired result. (D.88-12-083, 30 CPUC2d 189, 267.) PG&E requested a revenue requirement of $6.56 million. Discovery, which consisted of an audit of PG&E's showing as well as several data requests, allowed DRA to gauge the strengths and weaknesses of PG&E's request. The settled amount of $5.92 million represents roughly 90% of PG&E's request and based on the facts and circumstances of the instant Application, represents a fair outcome, from the Settling Parties' perspective, which meets the Commission's criterion.

Second, the Settlement is a reasonable compromise of strongly held views.

Third, the Settlement will spare the Commission and the parties the effort required to litigate disputed issues, particularly given the relatively small range of disputes raised in this proceeding, and the importance of the Commission allocating its resources effectively. The Commission has a history of favoring settlements. Commission approval of the Settlement will provide speedy resolution of contested issues and will promote amicable working relations among the parties.

Fourth, counsel and advocates for the Settling Parties are experienced in public utility litigation.

Fifth, settlement negotiations were accomplished at arm's length and without collusion.

Sixth, the Settlement is uncontested. No other party opposes the Settlement. The absence of adverse reaction from affected interests favors approval.

Seventh, the Settlement addresses all major issues that were raised within the proceeding, and within the authority of the Settling Parties to settle. The Settlement approves rate recovery of a level of costs acceptable to both PG&E and DRA.

We have reviewed the Settlement as a unified, comprehensive resolution of the issues at hand. It would be unfair to the Settling Parties to try to match individual Settlement elements against the specific costs identified in the Application and PG&E testimony, and then determine whether each match-up meets the standards for review of settlements. The willingness of the Settling Parties to cease their efforts to prove or disprove their cases is a key element of the Settlement.

For all of these reasons, we conclude that the Settlement is reasonable in light of the whole record.

As discussed above in the context of preconditions for approval of all party settlements, no statutory provision or prior Commission decisions would be contravened or compromised by the Settlement. In particular, there is sufficient information to meet the requirement of D.07-07-041 that CEMA recovery is limited to costs incurred in jurisdictions declared disasters by competent state or federal authorities.

There is a strong public policy favoring the settlement of disputes to avoid costly and protracted litigation. (D.88-12-083, 30 CPUC2d 189, 221.) Absent opposition and absent identification of any serious defect in the Settlement, the Commission should approve it.

Nonetheless, the Commission has long held that settlements submitted for review and approval are not simply the resolution of private disputes like those heard in civil court. The public interest and the interests of customers must be considered, and it is the Commission's duty to protect those interests.

The principal public interest affected by this proceeding is delivery of safe, reliable electric service at reasonable rates. The Settlement advances this interest because it permits PG&E to recover most of the asserted, and Commission-staff scrutinized, CEMA costs. Taken as a whole, we conclude that the Settlement is in the public interest.

3 The decision was revised by D.89-03-062, but the revisions did not affect the standard.

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