9. Comments on Both Draft Decisions

As noted on page 2, today's decision modifies D.01-09-045 in several areas. After reviewing the comments we conclude that application of a duplication penalty to reduce awards to participants that make substantial contribution is not permissible under the statues governing compensation of participating customers in Commission proceedings. Second, the hourly rates that D.01-09-045 awarded certain of GL/LIF's advocates are modified as appropriate to utilize the hourly rates adopted in D.02-05-011 for 1998 and later years.

Today's decision was issued for comment as a "revised draft decision" on July 25, 2002. GL/LIF filed comments. These comments repeat assertions and arguments that GL/LIF made earlier, and that are fully addressed elsewhere in today's decision.

The ALJ's earlier draft decision on these compensation requests was mailed to the parties in accordance with Pub. Util. Code Section 311(g) (1) and Rule 77.7 of the Rules of Practice and Procedure. TURN, PA, and GL/LIF filed opening comments. Verizon Communications, PA, and TURN filed reply comments. We have reviewed the comments and conclude that no substantive changes to the draft decision are warranted. We make a modification to Finding of Fact 8, as discussed below, to clarify that we apply a discount for duplication of effort because the duplication was unproductive and unnecessary.

On various grounds, all the commenters challenge the disallowance for duplication. TURN and PA suggest that the draft misconstrues the statutory provision regarding duplication. GL/LIF and PA also claim that the draft decision ignores the ways in which each of them made unique contributions. Verizon Communications (successor to one of the original applicants in this proceeding) agrees generally with GL/LIF and PA that their respective fee requests should not be reduced based on duplication of effort. We first examine the statutory arguments, then respond to the arguments regarding unique contributions.

The relevant provisions of the Pub. Util. Code are Sections 1801.3(f) and 1802.5. The first provision states the legislative intent that the Commission administer the intervenor compensation program so as to avoid "unproductive or unnecessary participation that duplicates the participation of similar interests otherwise adequately represented or participation that is not necessary for a fair determination of the proceeding." (PA's emphasis.) The second provision states that customer participation that "materially supplements, complements, or contributes to the presentation of another party...may be fully eligible for compensation if the participation makes a substantial contribution...consistent with Section 1801.3."

As we have discussed above, there is no statutory basis for a duplication discount. We will not engage in the sterile and genuinely unproductive exercise of determining whose participation was predominant in making the substantial contribution, as among PA and GL/LIF, or whether the participation of each was "merely additive" to the other. Both organizations participated effectively and made substantial contributions as the statute defines it. They are entitled to reasonable compensation, unreduced by a "duplication penalty" for which there is no statutory warrant.

GL/LIF object to the hourly rate set for determining the fees awarded their expert witnesses, and PA objects to the hourly rate for its law clerks. Turning first to GF/LIF, they suggest that we improperly distinguish in hourly rates between TURN's expert witnesses (from the firm of Murray & Cratty LLC) and GL/LIF's expert witnesses (who are part of GL/LIF's staff). According to GL/LIF, their experts were awarded lower rates because their experts are not "for hire" (GL/LIF Comments, p.10), and because their experts represent minorities. (Id., p. 2.) GL/LIF are mistaken. The respective hourly rates are set with due regard for the standard set in Section 1806²⁰ and applied by us in setting hourly rates in this and many prior proceedings in which these particular expert witnesses have participated.

As TURN correctly notes in replying to GL/LIF, the Commission can draw reasonable distinctions between expert witnesses who provide different services in a similar market, or who operate in different markets. For reasons explained below, such distinctions are evident here.

Historically, the Murray firm has provided analysis (including computer modeling) of technical issues pertinent to regulatory economics in general (for example, cost of capital) and in particular to the restructuring of traditional utility industries, especially telecommunications (for example, pricing of unbundled network elements)²¹ In this proceeding, the Murray firm submitted testimony on the appropriate standard to use in analysis of merger benefits, the calculation and allocation of those benefits, and the merger's effects on local competition. TURN has provided data supporting our finding that the hourly rates set for the Murray firm reflect market rates for persons who perform the analytical work just described.

GL/LIF's experts, as compared to the Murray firm, perform different kinds of analysis. At the Commission, the GL/LIF experts have analyzed the impacts on low-income communities of changes in traditional utility industries. GL/LIF does not assert that the market rate for such analysis is the same as the market rate for the kind of analysis the Murray firm performs. GL/LIF bases its argument about market rate on the impressive credentials that their experts have. We do not question those credentials; however, the statute speaks not just to training and experience but also to "similar services." GL/LIF's experts did not perform services similar to those of the Murray firm, and accordingly we cannot use the Murray firm hourly rates unless we can reasonably find that the services actually performed by GL/LIF's experts command those hourly rates in the market. We have no basis on this record to make such a finding.

PA contends that the hourly rate for law clerks should be $100 per hour, rather than the $75 per hour that we utilize. PA's citation to D.00-02-044 does not convince us to modify the adopted rate. In that decision we refer to a survey showing average billing rates for paralegals between $41 and $117 per hour. This is generally consistent with the $75 per hour rate that we utilize here and that we previously adopted in D.00-04-001.

Lastly, TURN and GL/LIF argue that the Commission unduly scrutinizes the accounts presented by intervenors in support of compensation requests. We disagree. Our decisions (including today's decision) apply the statutory standards that govern compensation requests, as well as our rules and decisions where we have implemented or interpreted those standards. Unfortunately, as our experience in this proceeding illustrates, the accounts of some intervenors are sometimes very deficient. That this has happened in this proceeding and many times before with GL/LIF is regrettable, but the cure lies with GL/LIF.