4. All-Party Settlement Agreement

The proposed Settlement Agreement conforms to Rules 12.1-12.7. In particular, we find that the proposed Settlement Agreement complies with Rule 12.1(d): it is reasonable in light of the whole record, is consistent with the law, and is in the public interest, as discussed below.

DRA had an opportunity to fully review GSWC's application, CEMA records, and data. We are confident that parties have addressed concerns and found a reasonable compromise in the provisions of the Settlement Agreement. As such, we adopt the Settlement Agreement without modification. The amount or recovery approved is summarized in Table 1 below, which includes GSWC's original position and the amounts agreed upon for settlement purposes:

Table 1: Summary of Settlement

Issues

GSWC Position

Settlement

Bark Beetle Direct Costs

$412,442

$412,442

Bark Beetle Under-Collection

$66,426

$66,426

Carrying Costs on Bark Beetle Under-Collection

$18,006

$0

Carrying Costs on Bark Beetle Direct Costs

$54,016

$42,016

2010 Storm Direct Costs

$307,159

$275,196

Carrying Costs on 2010 Storm Direct Costs

$610

$0

Total

$858,659

$796,080

GWSC and DRA agree to a total recovery of $796,080, which results in a reduction of $62,579 from the initial request of $858,659. Parties agree that recovery shall be implemented through a per kWh surcharge in ratepayer bills over a 12-month period. GSWC will file for authorization to implement the surcharge rate in a Tier 1 advice letter with the Commission's Energy Division within thirty days of Commission approval of the Settlement.

In addition, the parties agree that Bear Valley Electric may use the Base Rate Revenue Adjustment Mechanism to account for any over- or under-collection resulting from the recovery authorized in this proceeding. This would occur once the 12-month amortization period has expired and all collections under the authorized surcharge have been booked.

As stated in the motion requesting approval and adoption of the proposed Settlement Agreement, parties thoroughly analyzed facts and relevant Commission decisions pertinent to this proceeding. DRA thoroughly reviewed Bear Valley Electric's CEMA accounts and evaluated what portions of Bear Valley Electric's CEMA costs are incremental and thus recoverable.

The proposed CEMA costs, interest and carrying costs contained in the proposed Settlement Agreement strike a balance between the two parties' positions and are well within the range of cost recovery initially sought by GSWC on behalf of Bear Valley Electric. We find that the proposed Settlement Agreement is reasonable in light of the whole record.

We find that the proposed Settlement Agreement is consistent with the law and our prior decisions. The disaster declarations issued by Governors Davis and Schwarzenegger constitute events declared to be a disaster by a competent state or federal authority for the purposes of Section 454.9. Bear Valley Electric's use of the CEMA for recording costs incurred between June 30, 2005 and April 30, 2007, plus interest accrued through December 31, 2010, related to the bark beetle infestation, and costs related to restoring service in response to the January 2010 storms was appropriate under Section 454.9 and Resolution E-3238. Furthermore, the proposed costs, interest, carrying costs, cost recovery mechanism, and accrual of over- or under-collected amounts in the proposed Settlement Agreement are consistent with previous Commission decisions and direction.

We agree with parties that approval of the proposed Settlement Agreement is in the public interest. We evaluate the Settlement Agreement as a whole, and conclude that it serves the public interest by expeditiously resolving issues that would otherwise be litigated. The rate increase that will occur as a result of recovery of costs booked into the CMEA appears reasonable and justified, and the proposed Settlement Agreement will result in a rate increase that is less than the 2.14% increase over current rates originally proposed by GSWC in its application.

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