3. Substantial Contribution

In evaluating whether a customer made a substantial contribution to a proceeding, we look at several things. First, we look at whether the Commission adopted one or more of the factual or legal contentions, or specific policy or procedural recommendations put forward by the customer. (§ 1802(i).) Second, if the customer's contentions or recommendations paralleled those of another party, we look at whether the customer's participation unnecessarily duplicated or materially supplemented, complemented, or contributed to the presentation of the other party. (§§ 1801.3(f) and 1802.5.)

As described in § 1802(i), the assessment of whether the customer made a substantial contribution requires the exercise of judgment:

In assessing whether the customer meets this standard, the Commission typically reviews the record, composed in part of pleadings of the customer and, in litigated matters, the hearing transcripts, and compares it to the findings, conclusions, and orders in the decision to which the customer asserts it contributed. It is then a matter of judgment as to whether the customer's presentation substantially assisted the Commission.²

With this guidance in mind, we turn to the claimed contributions Aglet made to the proceeding.

Aglet focused its showing on: (1) the financial health of SDG&E and SoCalGas; (2) post-test year ratemaking, also called attrition; (3) the impact of a collection of utility initiatives known as the Utility of the Future (UoF) on post-test year ratemaking; and (4) performance incentive mechanisms. These issues are within the scope of the proceeding. Aglet also participated with other intervenors in pleadings addressing the effective date of revenue requirements authorized in D.08-07-046 (Identified as "Memorandum account" in Aglet time records.) To further investigate Aglet's claim of substantial contribution, we turn to the record.

3.1. Financial Health

Aglet was the only party to oppose the contention of SDG&E and SoCalGas that they "need" the resources requested in their applications to plan, build, and maintain their operating facilities. Through Aglet's exhibits, they pointed out that SDG&E and SoCalGas in past years earned more than their authorized returns on equity despite Commission disallowance of requested revenue requirements. Aglet presented substantial evidence that SDG&E and SoCalGas are financially healthy. Aglet requested that the Commission find-as it previously did for Pacific Gas and Electric Company (PG&E) and Southern California Edison Company-that the applicants are financially healthy.

In D.08-07-046, the Commission cited the previous finding of fact for PG&E but declined to issue a finding for SDG&E and SoCalGas. The Commission endorsed Aglet's contention (set forth in its opening brief of October 11, 2007, at 11) that SDG&E and SoCalGas did not need all of their test year and attrition requests to maintain the financial health required to provide adequate utility service. In discussion of earnings sharing mechanisms, the Commission stated:

"In these proceedings, where SDG&E and SoCalGas proposed settlements for Test Year 2008 and post-test year ratemaking, we believe the companies would not have settled if the expert opinions of SDG&E and SoCalGas management thought that doing so would harm the financial health of either company." (D.08-07-046, at 42.)

3.2. Attrition, UoF and Earnings Sharing

Attrition, UoF and earnings sharing issues are closely linked and are incorporated in this discussion of Aglet's efforts.

SDG&E and SoCalGas proposed a six-year rate case cycle, covering Test Year 2008 and five attrition years. Aglet's attrition year revenue requirement adjustments focused on four components: (1) expense increases based on a collection of utility cost escalation factors, customer growth rate, and annual productivity factors; (2) capital-related cost increases based on averages of recent year plant additions, escalated using construction cost indices; (3) separate escalation of medical costs; and (4) a z-factor adjustment for extraordinary costs that have revenue requirement impacts that exceed $5 million. (Summarized in Aglet opening brief, at 9.) The Division of Ratepayer Advocates (DRA) supported a five-year case term, escalation of operating expenses using the Consumer Price Index (CPI), separate escalation of medical costs capped at 8%, plant additions proposed by the utilities, and z-factor adjustments. (Exhibit DRA-25, summary at 25-2 through 25-4.) The Utility Reform Network (TURN) and Utility Consumers' Action Network (UCAN) did not present independent analyses or recommendations regarding post-test year ratemaking, but supported Aglet's presentation.

Prior to reaching the two post-test ratemaking settlements, Aglet made a full showing on attrition and UoF issues. (Exhibit Aglet-1, at 9-28.) Aglet reviewed utility attrition proposals and recommended 2009 and 2010 attrition adjustments based on forecast changes to the CPI, applied to all base rate revenue requirements. Aglet opposed special escalation factors for medical costs and z-factor protections. (Aglet opening brief, summary items on at 2.) Aglet calculated the impact of UoF costs and benefits on future utility earnings, and analyzed the effect of the GRC cycle on those earnings. (Exhibit Aglet-1, at 13-17; supporting documents in Exhibit Aglet-2, at 1-3.)

After hearings were completed and briefs were filed, Aglet settled post-test year ratemaking issues with SDG&E, SoCalGas, DRA, and TURN. The settlements include fixed dollar amounts for revenue requirement changes in the attrition years, without specific separation of the dollar amounts between expenses and capital-related costs. The settlements continue existing electric and gas sales mechanisms, revenue balancing accounts similar to the defunct Electric Revenue Adjustment Mechanisms to ensure that the utilities collect the full authorized revenue requirement, regardless of a variance in sales and volumes and existing z-factor tariffs. They do not allow separate escalation of medical expenses, or any earning sharing mechanism. All settling parties agreed on attrition allowances for 2009, 2010, and 2011 (a four-year rate case cycle). The utilities and DRA separately agreed on attrition allowances for 2012 (a five-year rate case cycle). The Commission approved the two settlements, with a four-year rate case cycle. (D.08-07-046, Discussion at 34-40; Findings of Fact 29-34 at 91-92; Conclusions of Law 5-7, 9-10, 17-18, 25-27, at 97-99.) The Rules of Practice and Procedure prohibits public disclosure of the details of the settlement negotiations. (Rule 12.6.) However, the adopted settlements include several features first proposed by Aglet.

Aglet clearly made a substantial contribution to resolution of post-test year ratemaking issues, as expressed in the findings and conclusions cited above. Aglet added to the evidentiary record, represented TURN and UCAN in hearings and settlement talks, took a lead role in negotiating the adopted settlements, and assisted in drafting and editing necessary settlement pleadings.

3.3. Performance Incentives

Aglet submitted evidence on several policy issues related to utility performance incentives; non-optimal resource allocation induced by incentives; histories of SDG&E and SoCalGas incentive rewards; financial community recognition of incentive revenues; causality between incentives and performance; existing management compensation incentives; and cost effectiveness. (Exhibit Aglet-1, at 31-37; supporting documents in Exhibit Aglet-2, at 7, 18-32.) Based on this showing, Aglet recommended that the Commission deny SDG&E and SoCalGas requests for approval of incentive mechanisms. Aglet did not review or analyze the details of the many proposed mechanisms.

In D.08-07-046, the Commission briefly discussed Aglet's position, but it did not adopt Aglet's recommendation or make any finding or conclusion in support of Aglet's policy determinations. (D.08-07-046, Discussion, at 51-52.) Therefore, Aglet voluntarily excludes 57.8 of its hours assigned to performance incentives from its request for compensation.

3.4. Memorandum Account

Aglet participated with other customers parties in litigation of the effective date of GRC revenue changes. TURN and Aglet filed joint comments on the proposed decisions that preceded D.07-12-053, which established revenue requirements memorandum accounts pending issuance of D.08-07-046, and in response to an invitation for further comments. (Comments filed December 10 and 17, 2007, and January 10, 2008.)

SDG&E and SoCalGas favored making test year revenue requirement changes effective January 1, 2008. TURN and Aglet argued that procedural delays caused by SDG&E and SoCalGas, specifically related to late disclosure of UoF evidence, justified a delay in the effective date of revenue requirement changes.

The Proposed Decision of ALJ Long found for customers on the issue. ALJ Long recommended that revenue requirement changes should become effective February 1, 2008. ALJ Long quoted from TURN and Aglet comments in the Proposed Decision, "Intervenors argue there was harm" and "Intervenors were delayed and distracted by the applicants' omission of Utility of the Future information from the rate case." (Proposed Decision, at 84.)

The Commission adopted several minor corrections and revisions that Aglet recommended. (Aglet Opening Comments on Proposed Decision, June 30, 2008, pp. 5-6.) The Proposed Decision of ALJ Long was rejected and instead the Commission adopted an alternate, which included the position of SDG&E and SoCalGas. The effective date of revenue requirement changes was January 1, 2008. Nevertheless, the Commission should award Aglet compensation for contributions to the Proposed Decision on this issue, in accordance with Commission practices. Based on a review of Aglet's participation in D.08-07-046, its efforts made a substantial contribution in these proceedings and the decision reflects the significant impacts of Aglet's advocacy.

² D.98-04-059, 79 CPUC2d 628 at 653.