5. Standard of Review for Settlements
Prior to adopting any settlement, the Commission must be convinced that the parties had a sound and thorough understanding of the application and of all the underlying assumptions and data included in the record. This level of understanding of the application and development of an adequate record is necessary to meet the requirements for considering any settlement. The requirements are set forth in Article 12 of the Commission's Rules, which provides in pertinent part:
(a) Parties may...propose settlements on the resolution of any material issue of law or fact or on a mutually agreeable outcome to the proceeding. Settlements need not be joined by all parties; however, settlements in applications must be signed by the applicant....
The motion shall contain a statement of the factual and legal consideration adequate to advise the Commission of the scope of the settlement and of the grounds on which adoption is urged. Resolution shall be limited to the issues in that proceeding and shall not extend to substantive issues which may come before the Commission in other or future proceedings...
(b) Prior to signing any settlement, the settling parties shall convene at least one conference with notice and opportunity to participate provided to all parties for the purpose of discussing settlements in the proceeding....
(c) Settlements should ordinarily not include deadlines for Commission approval...
(d) The Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
In short, the settlement must comport with Rule 12.1(d), which requires a settlement be "reasonable in light of the whole record, consistent with the law, and in the public interest." We address below whether the settlement meets these three requirements. The Commission also takes into consideration a long-standing policy favoring settlements. This policy reduces litigation expenses, conserves scarce Commission resources and allows parties to craft their own solutions reducing the risk of unacceptable outcomes if litigated.4
This is the standard of review for this settlement. San Gabriel and DRA are the only parties to the settlement, which is unopposed. San Gabriel filed an application and submitted testimony explaining its request for rate increases in detail. DRA provided its analysis of the application, and the City of Fontana served testimony, all of which was admitted into the record at the hearing held on January 5, 2011. DRA and San Gabriel filed opening and reply briefs. The settlement indicates that most of the differences were resolved by use of more recent data, or clarified information, or ultimately through compromise positions between the parties. The settlement does not violate any statute, Commission decision or rule. Thus, the settlement is consistent with law.
San Gabriel represents the interests of its shareholders. DRA represents the interests of San Gabriel's ratepayers. Thus, the settling parties fairly represent the affected interests. The Cities of El Monte and Fontana represent customers living in their areas, and are also ratepayers themselves; neither party objected to the settlement. The settlement results, overall and for most specific issues, are generally within the range defined by the testimony. Therefore, the settlement is reasonable in light of the whole record.
The settlement results in rates sufficient to provide adequate reliable service to customers at reasonable rates while providing San Gabriel with the opportunity to earn a reasonable return. The settlement provides the Commission with sufficient information to carry out its future regulatory obligations with respect to the parties and their interests. Thus, the settlement is also in the public interest.
As discussed in the preceding paragraphs, the settlement has met the standard of review for settlements in that it is reasonable in light of the whole record, consistent with the law and in the public interest. Therefore, the settlement is adopted.
4 D.05-03-022 at 7-8.
