20. Joint Recommendations as Proposed Settlements
Neither the JRO nor the JRR were filed as formal settlements via separate motion. Instead, the JRO sponsors presented the JRO as a recommendation shortly before the start of evidentiary hearings and the JRR sponsors presented the JRR on the first day of hearings.
Because the JRO is uncontested and sponsored by all of the active parties in the proceeding, parties waived cross examination of witnesses on operational issues. However, representatives of the sponsoring parties testified as a panel in support of the JRO during examination by the ALJ.
Similarly, representatives of the parties sponsoring the contested JRR testified as a panel. However, in addition to examination by the ALJ, the JRR panel was cross examined by parties opposing specific provisions of the JRR.
The parties sponsoring the JRO submitted joint opening and reply briefs addressing the factual and legal considerations required to be addressed by
Rule 12.1(a) to advise the Commission of the scope of the settlement and the bases for adopting the recommendations. The parties sponsoring the contested JRR similarly submitted joint opening and reply briefs addressing the factual, legal, and policy considerations supporting adoption of the recommendations, and opponents of the JRR submitted briefs explaining why the JRR recommendations should not be adopted.
The Commission has specific tests for granting a motion for settlement. Specifically, Rule 12.1(d) provides that the Commission will not approve a settlement, whether contested or uncontested, unless it is reasonable in light of the whole record, consistent with law, and in the public interest.
Rule 12.7 permits parties to sponsor joint testimony without the applicability of the settlement rules, and the sponsoring parties have done so. Although the JRO and JRR were not filed as formal settlements via separate motion, the JRO and JRR recommendations comply with Rule 12.1 in all other respects. As discussed below, the JRO and the JRR satisfy the Commission's requirements for approval of formal settlements.
20.1. The JRO
The recommendations presented in the JRO do not contravene or compromise any statutory provision or prior Commission decision, are reasonable, consistent with the law, and in the public interest. The JRO and each of the recommendations put forth in the JRO meet the tests for Commission adoption.
The JRO is reasonable in light of the whole record because it represents a package of inter-related compromises made by the all of the parties. Each of the recommendations put forth in the JRO was addressed by evidence of record, and each falls within the range of recommendations offered by the various parties in their testimony.
Each of the recommendations put forth in the JRO is reasonable in light of the whole record, because the parties sponsoring the JRO fairly reflect all of the affected interests, these parties actively participated in this proceeding, and the recommendations put forth in the JRO fairly and reasonably resolve the operational issues raised by the parties.
The sponsors of the JRO have balanced a variety of issues of importance to them and have agreed to each of the recommendations put forth in the JRO as a reasonable means by which to finally resolve the operational issues identified in this proceeding. As discussed throughout this decision, each of the recommendations put forth in the JRO reflect numerous compromises made by parties from their competing litigation positions.
The sponsors of the JRO are experienced in public utility litigation, and the JRO is the result of extensive and vigorous settlement negotiations. The Commission could have resolved the issues in this proceeding in favor of CCC, DRA, IP, Long Beach, RES, SCE, SCGC, SDG&E/SoCalGas, Shell, Southwest Gas, TURN, or Watson. Accordingly, the sponsors of the JRO have balanced a variety of issues of importance to them and have agreed to the recommendations put forth in the JRO as a reasonable means by which to resolve all of the operational issues raised in the Application and in the responses and protests to the Application.
The recommendations put forth in the JRO are the result of arms-length negotiations between all of the parties and are uncontested. The sponsors of the JRO state that it was the product of numerous and extensive settlement conferences noticed under the provisions of Rule 12, including those provisions pertaining to confidentiality. Thus, for these reasons, and taken as a whole, the recommendations put forth in the JRO are reasonable in light of the whole record.
The parties dispute factual and legal issues, but set aside their disputes and propose recommendations that they contend are within the Commission's jurisdiction and do not contravene or compromise any statutory provision or prior Commission decision. Taking the JRO as a whole, the JRO does not contravene or compromise any statutory provision or prior Commission decision.
There is a public policy favoring the settlement of disputes to avoid costly and protracted litigation.95 The JRO and each of the recommendations set forth therein satisfy this public policy preference for the following reasons.
The sponsors of the JRO represent the interests of the Applicants and their customers, including shippers, end-use customers and other ratepayers. SDG&E/SoCalGas represent the interests of their shareholders and provide necessary energy services to their customers. DRA and TURN represent the interests of residential customers and subscribers, and Shell, Southwest Gas, and IP represent the interests of shippers, and SCE, SCGC, Long Beach, Watson, and RES represent the interests of commercial end users. Thus, the sponsors of the JRO represent the interests of shareholders, ratepayers, and others that have an interest in the southern California natural gas market and the services provide by the SDG&E/SoCalGas gas transmission system.
The recommendations put forth in the JRO serve the public interest by resolving competing concerns in a collaborative and cooperative manner. By reaching agreement, the parties avoid the costs of further litigation in this proceeding, and eliminate the possible litigation costs for rehearing and appeal. Approval of the JRO recommendations provides speedy and complete resolution of contested issues between the parties and facilitates prompt approval of the Application.
Thus, the uncontested JRO meets the applicable settlement standards of Rule 12.1(d) and therefore should be provided the same deference the Commission accords settlements generally.
20.2. The JRR
The recommendations presented in the contested JRR do not contravene or compromise any statutory provision or prior Commission decision, are reasonable, consistent with the law, and in the public interest. The JRR and each of the recommendations put forth in the JRR meet the tests for Commission adoption.
Unlike the uncontested JRO, some of the recommendations presented in the JRR are opposed by CCC/Watson and/or IP.96 None of the recommendations presented in the JRR are opposed by SCE, Shell, Southwest Gas, or Long Beach.97 Thus, most of the active parties in this proceeding support or do not oppose the recommendations presented in the JRR.
The JRR is sponsored by core customer representatives (DRA and TURN), small-to-medium-sized noncore customers (CMTA), large electric generation noncore customers (SCGC and RES) and SDG&E/SoCalGas. Thus, the JRR represents an agreement among parties with diverse interests who took different positions on many of the unbundled backbone transmission revenue requirement and rate issues.
The JRR recommendations were addressed by evidence of record. Each of the recommendations put forth in the JRR is reasonable in light of the whole record, because the parties sponsoring the JRR fairly reflect all of the affected interests, these parties actively participated in this proceeding, and the recommendations put forth in the JRR fairly and reasonably resolve the revenue requirement and rate issues raised by the parties. Although CCC/Watson argue that large noncore ratepayers who use natural gas at high load factors are not represented among the supporters of the JRR, many of the JRR recommendations benefit such customers and these recommendations were supported or not opposed by CCC/Watson and IP.
As noted above, public policy favors the settlement of disputes to avoid costly and protracted litigation. Because the JRR recommendations represent a package of compromises in litigation positions made by the JRR sponsors, the policy favoring the settlement of disputes would be undermined if parties are encouraged to oppose select portions of settlements while enjoying the benefits of the settlement provisions they support.
The JRR sponsors have balanced a variety of issues of importance to them and have agreed to each of the recommendations put forth in the JRR as a reasonable means by which to finally resolve the revenue requirement and rate issues identified in this proceeding. Because the JRR recommendations are presented as an integrated package of unbundled backbone transmission revenue requirement and rate recommendations, all of the JRR recommendations should be approved.
95 D.88-12-083, 30 CPUC2d 189, 221.
96 CCC, IP, and Watson support JRR Recommendations Nos. 3 and 4.a, and do not oppose Recommendations Nos. 2.a.i, 2.b, 2.b.i, 2.b.iii, and 4. In addition, IP does not oppose Recommendation No. 5.
97 SCE explicitly supports JRR Recommendation No. 2.c.
