5. Description of Settlement Agreement

On March 15, 2011, Edison and DRA filed the Settlement Agreement along with a motion requesting Commission approval.

In their motion, the parties explained that Edison's amended application sought Commission approval for $6.837 million in increased operations and maintenance (O&M) expense, and $9.487 million in increased capital expenditures, which was reduced slightly by a December 17, 2010 Errata changing these figures to $6.792 million for operations and maintenance expense, and $9.428 million in capital expenditures. The parties summarized the annual revenue requirements impact of the final request as $10.390 million.

The parties stated that the Settlement Agreement reduces Edison's total annual revenue requirement by $2.317 million. This reduction reflects the following adjustments for Edison's final requested amount: (a) removal of $1.099 million in incremental O&M expenses (reflecting the removal of the entire $0.681 million in incremental O&M expenses related to the Canyon/Malibu fire and the entire $0.418 million in incremental O&M expenses related to the Grass Valley fire); (b) removal of $0.872 million in capital-related revenue requirement estimated to be recorded in the account through December 31, 2011 associated with $1.928 million in capital expenditures; and (c) removal of $0.346 million in interest expense estimated to be recorded in the account through December 31, 2011.

The parties concluded that after the adjustments, Edison would recover approximately $8.073 million, or 78% of its requested revenue requirement of $10.390 million recorded and estimated to be recorded in the 2007 Wind and Firestorm CEMA through December 31, 2011.

The parties contend that this amount is a fair compromise of strongly held views, and the Settlement Agreement will spare the Commission and the parties the effort required to litigate disputed issues. DRA stated that its audit of Edison's filing is complete and that along with discovery responses, the data and information provided have allowed DRA to gauge the strengths and weaknesses of Edison's request. Both parties agreed that the record of the proceeding has allowed them a fair opportunity to settle their differences and resolve all of the major issues within the scope of the proceeding. The parties concluded that the application sought authorization to recover costs incurred for restoring utility service and making repairs in response to a declared disaster, and that the Settlement Agreement provides for rate recovery of a level of costs acceptable to both Edison and DRA.