3. Discussion

3.1. The Opposition to the Joint Motion for Approval of Settlement Agreement.

Henricks argues that the Commission must be convinced that the parties had a sound and thorough understanding of the Application, and all of the underlying assumptions and data included in the record before it can consider a proposed settlement in this proceeding as being in the public interest. According to Henricks: "this level of understanding of the Application and development of an adequate record is necessary to meet the Commission's requirements for considering and settlement."⁵ Henricks relies on a 2008 general rate case decision that states:

In order for the Commission to consider any possible proposed settlement in this proceeding as being in the public interest, the Commission must be convinced that the parties had a sound and thorough understanding of the application, and all of the underlying assumptions and data included in the record. (D.08-07-045 at 6.)

Henricks asserts that because a Scoping Memo was not issued after the PHC and DRA did not make a statement about its findings from the audit or the discovery process, the required level of understanding was not demonstrated.

In the above decision, based on its review of the prepared testimony, hearings, and briefs, the Commission found that the parties to the settlement had a sound and thorough understanding of the application and the record. In the current proceeding, the parties produced similar documentation, including written statements prior to the PHC, the transcript from the PHC, and a status report regarding DRA's discovery findings. Thus, while it is true that a Scoping Memo was not issued, it is unlikely that the addition of such a document would increase the parties' level of understanding any more than the actions taken by the parties.

Henricks next argues that there is no rationale offered for the settlement amount, thereby showing that the parties do not completely comprehend the Application. As an initial matter, we do not agree with Henricks' claims that there is no rationale for the settlement amount.⁶ Moreover, while vagueness in the wording of the proposed Settlement Agreement could lead to the Commission finding that the Agreement does not meet the requirements of Rule 12.1(d), it does not necessarily indicate of lack of understanding. Contrary to Henricks' claims, the record shows continuous involvement by both SDG&E and DRA in this proceeding that speaks to their understanding of the Application. As noted by SDG&E:

DRA pursued discovery of SDG&E's Application and performed an audit of SDG&E's expenditures relating to the 2007 wildfires ... the Settling Parties thoroughly addressed the merits of the Settlement in the Joint Motion ... after about a year of work and consideration of the evidence and legal considerations, the Settling Parties agreed to an arrangement under which SDG&E will not recover its requested O&M of approximately $6.8 million. (SDG&E Reply to Opposition Motion, at 7.)

We conclude that the Settling Parties had a thorough understanding of the Application when they proposed the settlement. Therefore, the second PHC requested by Henricks is unnecessary, and the requested relief is denied.

3.2. The Joint Motion for Approval of Settlement Agreement

3.2.1. The Settlement Agreement

According to its application, SDG&E incurred approximately $112.1 million in total costs associated with the 2007 Fires. SDG&E sought Commission approval for approximately $6.8 million in O&M costs and $43 million in capital costs associated with the 2007 Fires. As a result, SDG&E's CEMA application sought a total revenue requirement of $32.2 million. The Settling Parties agree that the Commission should find that it is reasonable to remove all of the O&M expenses (totaling approximately $6.8 million) from SDG&E's total CEMA revenue requirement request. This reduction results in an authorized total revenue requirement of $25.44 million which represents 79% of SDG&E's originally requested recovery, and 23% of the total costs that SDG&E states it incurred related to the 2007 Fires. DRA recommended revenue requirement reductions based on its review of the available evidence, taking into consideration the opinions of the Commission's Consumer Protection and Safety Division in regards to the Witch, Rice and Guejito fires.⁷

The Settling Parties agree that the settlement represents a compromise and should not be considered precedent with respect to other CEMA costs not at issue in this proceeding, or any other matters in any way related to the 2007 Fires.

3.2.2. Reasonableness of the Settlement

The Settlement Agreement addresses all the major issues in the proceeding and approves rate recovery of a level of costs acceptable to both SDG&E and DRA. Consistent with D.95-05-042, a settlement must be reasonable before it can be adopted by the Commission.⁸ The Settling Parties assert that the settlement is reasonable in that it is a fair compromise of strongly held views which will spare the Commission and the parties the time, effort, and costs required to litigate disputed issues. Moreover, because discovery has been concluded, and DRA has completed its audit of SDG&E's showing, the parties were able to gauge the strengths and weaknesses of SDG&E's request prior to reaching settlement.

3.2.3. Consistency with the Law

A settlement must also be consistent with law in order for the Commission to adopt it.⁹ Other than the issues addressed in section 3.1 above, no party claims that a statutory provision or prior Commission decision would be contravened or compromised by the Settlement Agreement.

3.2.4. The Public Interest

Finally, the public interest and the interests of ratepayers must be considered before the Commission approves a settlement.¹⁰ Consistent with D.88-12-083, the Settlement avoids costly and protracted litigation and therefore reflects sound public policy. In addition, DRA, which represents the interest of all consumers of electricity in SDG&E's service territory, is satisfied that the Settlement Agreement represents a fair outcome. Accordingly, taken as a whole, the Settlement Agreement is in the public interest.

⁵ Opposition Motion at 3, citing SDG&E General Rate Case at 2008 Cal. PUC LEXIS 281, 8 (Cal. PUC 2008).

⁶ While the Settling Parties do not provide a mathematical calculation they explain that the settlement is reasonable in that it is a fair compromise of strongly held views which will spare the Commission and the parties the time, effort, and costs required to litigate disputed issues.

⁷ SDG&E disagreed with these opinions and questioned their relevance to this proceeding.

⁸ D.95-05-042, CPUC2d 779, 788.

⁹ D.95-05-042, CPUC2d 779, 788.

¹⁰ D.95-05-042, CPUC2d 779, 788.