3. Discussion

Pursuant to Rule 12.1(d), the Commission will not approve the settlement unless it is reasonable in light of the whole record, consistent with law, and in the public interest.

The parties stipulate to the fact that, after CNE submitted its December 1, 2008, month-ahead resource adequacy compliance filing for January 2009, CNE was required to procure an additional 180 MWs in order to meet its resource adequacy and that CNE amended its filing on December 15, 2008, to reflect that additional procurement. The parties dispute whether this constitutes a violation of the system resource adequacy requirements and, even if it does, whether a penalty should be imposed and in what amount.

CPSD cites to Commission authority in support of its assertion that the deficiency in CNE's December 1, 2008 month-ahead resource adequacy compliance filing automatically subjected CNE to a penalty, and that the amount of the penalty is $1.8 million. CNE cites to the procedural and decisional background to the Commission's resource adequacy program including
D.06-07-031, which provides that the Energy Division will give an LSE notice and a limited time to resolve a violation prior to recommending the initiation of an enforcement action. CNE cites to correspondence from the Commission's Energy Division directing CNE to promptly correct this deficiency and, upon its doing so, confirming that CNE was then compliant, in support of its assertion that it was not in violation of Commission rules or orders. CNE cites to Commission's precedent in support of its assertion that, if there were a violation, mitigating circumstances might reduce or eliminate a penalty, and presents evidence of mitigating circumstances that might do so. Based on the whole record, both parties face substantial litigation risk as to whether their respective positions will prevail. The settlement payment amount of $300,000 reasonably reflects the litigation risk faced by the parties.

Nothing in the settlement agreement contravenes any statute or Commission's decision or rule. The settlement agreement is therefore consistent with applicable law.

The settlement agreement avoiding the time, expense and uncertainty of further litigating and resolving the matter and, by requiring a settlement payment, affirms the importance of adherence to the Commission's rules and orders. The settlement agreement is therefore in the public interest.