V. Substantial Contribution

A. Background

In D.03-05-013, we awarded UCAN approximately $36,000 for its substantial contribution to D.02-12-064. UCAN's contribution related to its joint participation in the development of the value of the intermediate term contracts, the Joint Proposal of the intervenors and the resulting Memorandum of Understanding (MOU). As discussed in D.03-05-013, the intervenors and SDG&E agreed, and we concurred, the MOU resulted in a value to ratepayers of at least $24 million.

B. UCAN

Not all of UCAN's proposals were adopted in D.02-12-064, and as a result it filed an application for rehearing. UCAN asserts it made a substantial contribution to D.03-08-072, which addressed the application for rehearing. Though rehearing was denied, UCAN contends that D.03-08-072 resulted in many changes to the findings of fact and conclusions of law in D.02-12-064 as a result of issues it raised, and that these modifications constitute a substantial contribution to D.03-08-072.

UCAN further asserts it made a substantial contribution to the Court of Appeal decision, UCAN v. PUC, which resulted from UCAN obtaining judicial review of D.02-12-064 and D.03-08-072. According to UCAN, the Court of Appeal criticized the Commission's interpretation of § 332.1, and established legal precedent pertaining to the interpretation of that code section. UCAN v. PUC also addressed the broad power of the Commission to settle pending cases, which according to UCAN, is "likely to be used by this Commission to defend its settlements from challenge in the future." (UCAN Request, p. 11.) UCAN argues it should be compensated for using the appellate courts to pursue an outcome of a Commission proceeding favorable to the customers it represents, even when UCAN is unsuccessful in its appellate efforts.

UCAN's February 27, 2003 compensation request did not include the cost of UCAN's participation in the June 2002 evidentiary hearings and its comments on the June 14, 2002 settlement agreement. Although UCAN's January 7, 2005 compensation request is not seeking compensation for this work, UCAN contends that these efforts resulted in a substantial contribution to the ALJ's proposed decision and to D.02-12-064.⁶

C. SDG&E

SDG&E contends that UCAN should not be awarded any compensation for its work related to the petition for writ of review before the Court of Appeal.⁷ SDG&E asserts that the Court of Appeal decided against UCAN on every issue in UCAN v. PUC. Although the court disagreed with the Commission's interpretation of the phrase "utility-owned or managed generation assets" in § 332.1(c), the court "reached the same conclusion as the Commission that the utility-owned or managed generation assets did not have to be the `exclusive source to offset the AB 265 shortfall.'" (SDG&E Response, pp. 4-5; 120 Cal.App.4^th at 658.) Thus, according to SDG&E, the Court of Appeal did not adopt UCAN's interpretation of the statute.

SDG&E also contends that Southern California Edison Company v. Public Utilities Commission of the State of California (2004) 117 Cal.App.4^th 1039,⁸ does not automatically entitle an intervenor for the costs and fees of obtaining judicial review under all scenarios. SDG&E points out that in SCE v. PUC, the intervenor was awarded compensation for its work in successfully defending the judicial review of a Commission decision. SDG&E asserts that the intervenor compensation legislation requires that intervenors only be compensated when their "presentation makes a substantial contribution to the adoption, in whole or in part, of the commission's order or decision." (§ 1803(a).) Since UCAN was unsuccessful in its effort to have the Court of Appeal overturn D.02-12-064 and D.03-08-072, SDG&E contends that UCAN's associated fees and costs of obtaining judicial review are not compensable.

SDG&E further argues that the outcome in UCAN v. PUC does not amount to a substantial contribution of a Commission decision or order. SDG&E contends that nothing in UCAN v. PUC affected any existing Commission decision. SDG&E asserts in footnote 22 of its response that the only substantial contribution that UCAN is trying to establish is that the Court of Appeal agreed with UCAN's contention that the Commission wrongly interpreted § 332.1. Although the Court of Appeal disagreed with the Commission's interpretation of the phrase "utility-owned or managed generation assets," SDG&E asserts that this was insignificant because the Court of Appeal was not persuaded to adopt UCAN's interpretation of § 332.1(c). SDG&E also argues that the two precedents that UCAN claims were created in UCAN v. PUC are "simply restatements of existing law, of which the Commission is already well aware." (SDG&E Response, p. 8.)

Lastly, SDG&E argues that UCAN failed to justify the use of outside counsel Ed Silverman in UCAN's appellate efforts, as that work was led by another outside counsel, Alan Mansfield, and by UCAN's Michael Shames.

D. Discussion

We previously addressed UCAN's February 27, 2003 request for compensation in D.03-05-013. In that decision, we found that UCAN, Aglet, and TURN made substantial contributions to D.02-12-064 through "their earlier analysis of the [June 18, 2001 memorandum of understanding] MOU and their leadership roles in developing and presenting the Joint Proposal." (D.03-05-013, p. 10.) As a result, "Joint Intervenors substantially contributed to an ultimate outcome in D.02-12-064 that is more favorable to ratepayers than the earlier MOU alternative." (Ibid.) ⁹

UCAN's January 7, 2005 request for compensation states that it seeks an award for work omitted from its February 27, 2003 request, and the subsequent work relating to its application for rehearing of D.02-12-064 and the appellate review of D.02-12-064 and D.03-08-072. Since UCAN's February 27, 2003 request for compensation did not include the other work that UCAN engaged in which led up to the issuance of D.02-12-064, and because the compensation related to judicial review must have a connection between the issues that are appealed and the substantial contributions the intervenor made to the Commission decisions, it is appropriate to address whether UCAN made any other substantial contributions to D.02-12-064.¹⁰

UCAN asserts:

"Here, UCAN clearly made a substantial contribution to the proposed decision of ALJ Wong, which did adopt UCAN's fundamental contention that the intermediate term contracts were utility `owned or managed' assets, and revenue from the contracts should be used to offset the AB 265 balancing account. (Proposed Decision of ALJ Wong (PD), Mailed 9/24/02, at p. 61-62). The [proposed] decision discusses at length evidence reviewed in UCAN's brief about statements Sempra [SDG&E's parent company] made undermining the company's claims about the purpose of the intermediate term contracts, as well as UCAN's suggestions for other sources of revenue to offset the balancing account. (PD at 38-43) The PD adopts language addressing UCAN's recommendation that money from DWR [Department of Water Resources] rate adjustments potentially be allocated to offset the balancing account. ([PD] at 62)" (Request for Compensation, p. 7.)

UCAN made a substantial contribution to D.02-12-064 by arguing that revenues from the intermediate term contracts should have been used to offset the AB 265 balancing account. As noted in the Summary at page 2 of D.02-12-064, a "central issue in this proceeding are the [intermediate term] power purchase contracts that SDG&E entered into with three entities in late 1996 and early 1997." Although UCAN's argument ultimately was not adopted by the Commission, the issue that UCAN raised about the intermediate term contracts was a central focus of D.02-12-064 and extensively discussed at pages 44 to 50 of that decision. We also stated in D.02-12-064 that the evidence regarding the intermediate term contracts that UCAN and other parties presented "on this key point directly bears on, and contributes to the rationale for, our decision herein." (D.02-12-064, p. 60.) UCAN's argument regarding the intermediate term contracts also formed the basis of its appeal to the Court of Appeal. Thus, we find that UCAN's work regarding the intermediate term contracts made a substantial contribution to D.02-12-064.

UCAN also asserts that it made a substantial contribution to D.03-08-072, which substantially amended D.02-12-064. SDG&E does not oppose UCAN's request in this regard.

D.03-08-072 was issued as a result of the applications for rehearing of D.02-12-064. Although D.03-08-072 did not overturn D.02-12-064, as UCAN had advocated on rehearing, we clarified D.02-12-064 by addressing two of the issues that UCAN had raised in its application. First, the discussion in D.02-12-064 regarding AB 265 was clarified as a result of "the issues raised by Applicants [for rehearing]." (D.03-08-072, p. 10.) The Commission modified D.02-12-064 by adding additional language in Ordering Paragraph 1.a. of D.03-08-072.

UCAN's second argument on rehearing was that certain customers should be excluded from the AB 265 surcharge. D.02-12-064 at page 56 states that "surcharge-related issues are moot and do not require further discussion." We addressed this issue and clarified this passage in Ordering Paragraph 1.d. of D.03-08-072.

Since we addressed the two issues that UCAN raised on rehearing in D.03-08-072 by modifying D.02-12-064 with additional text, we find that UCAN made a substantial contribution to D.03-08-072. As a result of the clarifying changes in Ordering Paragraphs 1.a. and 1.d. of D.03-08-072, which modified portions of D.02-12-064, we likewise find that UCAN made a substantial contribution to D.02-12-064 as a result of its rehearing efforts.

UCAN also asserts it made a substantial contribution to UCAN v. PUC. UCAN contends that the Court of Appeal "agreed with UCAN's contention that the Commission wrongly interpreted . . . Public Utilities Code [§] 332.1, and that the statute was not vague and did not make a distinction between ratepayer and shareholder assets, as the Commission claimed." (January 7, 2005, Request for Compensation, p. 3.)

According to records in UCAN's compensation request, the major portion of its time was spent in the appellate work before the Court of Appeal. UCAN contends that § 1802(a) and court precedent compel the Commission to award UCAN compensation for the work related to the judicial review of D.02-12-064 and to D.03-08-072. SDG&E essentially argues that UCAN's appellate work is not compensable unless the intervenor successfully defends the Commission's decision from attack, or successfully overturns the Commission's decision.

In addressing whether UCAN made a substantial contribution by virtue of the appeal that led to UCAN v. PUC, we must follow § 1802(a), which defines "compensation" to include "the fees and costs ... of obtaining judicial review, if any." Thus, the work related to appellate review before the Court of Appeal can be compensated as long as there is a sufficient nexus between that work and the substantial contribution made in the Commission decision for which compensation is sought. Specifically, under governing Commission and judicial precedents, the work in the reviewing court must be related to or necessary for the substantial contribution. We discuss these precedents below.

The Commission addressed the issue of awarding intervenor compensation for "obtaining judicial review" in D.02-06-070, where TURN was awarded compensation for federal court litigation work that the utilities initiated. The Commission found the work was related to or necessary for TURN's substantial contribution to Commission decisions in proceedings that prompted the utilities' federal court litigation. Subsequently, the Commission denied compensation for court work where the work did not meet the "related to or necessary for substantial contribution" test. In D.05-01-059, for example, the Commission denied compensation to another intervenor for judicial review work because the work was not related to the intervenor's substantial contribution to the earlier Commission decision. Similarly, in D.05-04-049, the Commission denied compensation to TURN for judicial litigation costs of challenging a settlement between the Commission and a utility because TURN did not substantially contribute to either the settlement or any further action by the Commission on remand.

The common thread among these decisions is that in order for the judicial forum work to be compensable, the work must be "related to or necessary for" the intervenor's substantial contribution for which compensation is sought. (See D.03-04-034, p. 5; D.05-01-059, pp. 9-10; D.05-04-049, pp. 9-11; 117 Cal.App.4^th, pp. 1052-1053.)

In the situation before us, we previously found in D.03-05-013 that UCAN made a substantial contribution to D.02-12-064. As discussed earlier, we also find that UCAN made other substantial contributions to both D.02-12-064 and D.03-08-072. The appellate work that UCAN performed at the Court of Appeal relates directly to the substantial contributions that UCAN made to D.02-12-064 and D.03-08-072. In UCAN v. PUC, UCAN argued that the Commission misconstrued § 332.1 and, by approving the settlement with SDG&E, exceeded its authority by contravening § 332.1(c) and violating two provisions of the California Constitution. (UCAN v. PUC, 120 Cal.App.4^th at 648.) In particular, UCAN argued on appeal that D.02-12-064 failed to determine whether the intermediate term contracts were subject to the offset accounting procedure in § 332.1(c) as a "utility-owned or managed generation assets."

The Court of Appeal concluded that the Commission did not change or modify § 332.1(c). However, the court stated "we disagree in part with the PUC's interpretation of the statute, but our disagreement has no bearing on the legality of the settlement agreement." (UCAN v. PUC, 120 Cal.App.4^th at 656.) The Court of Appeal then clarified the phrase "utility-owned or managed generation assets" in § 332.1(c) by stating:

"the phrase `utility-owned or managed generation assets' does not refer to generation assets owned or managed by the utility for the benefit of ratepayers. Nothing in the language of the statute makes a distinction between a generation asset that serves shareholder interests and a generation asset that is used by the utility for the benefit of its utility customers. As the administrative law judge correctly pointed out, `utility-owned or managed,' which modifies `generation assets,' are the operative words. Put another way, the statute applies to generation assets that are owned or managed by the utility. Had the Legislature wanted to make a distinction between shareholder generation assets and ratepayer generation assets, it could have done so. It has not. " (UCAN v. PUC, 120 Cal.App.4^th at 658.)

Although the Court of Appeal concluded that the Commission inappropriately found a distinction between shareholder assets and ratepayer assets in § 332.1(c), the court went on to find that the adoption of the settlement in D.02-12-064 did not contravene § 332.1(c). (UCAN v. PUC, 120 Cal.App.4^th at pp. 658-659.)

We view with substantial reluctance the notion that "obtaining judicial review" [§ 1802(a)] of a "substantial contribution" [§ 1801.3(d)] to an underlying decision should justify the award of intervenor compensation where judicial review is largely unsuccessful.¹¹ The general, if largely unarticulated, rule regarding judicial review where an intervenor sues the Commission is that, for the intervenor to receive an award of compensation for the costs of its suit, the intervenor must prevail. Here, UCAN's effort to overturn our settlement failed, but its contention that we misinterpreted the statute prevailed.

In this specific instance, the judicial review sought, and achieved, by UCAN was "related to or necessary for" the underlying substantial contribution. UCAN acted in a manner consonant with its substantial contribution to the underlying decision and was successful in urging its interpretation of Pub. Util. Code § 332.1(c) on the Court of Appeal, adding substantially to the interpretation of that statute and correcting an error of interpretation on our part. While the applicant's interpretation did not compel reversal of our settlement of this case, largely because our settlement (in the Court of Appeal's words) "sidestepped"¹² the substantive issue of how § 332.1(c) should be interpreted, the judicial review sought by UCAN and the resulting definitive statutory interpretation materially contributed to the decisional law involving an important statute arising out of the 2000-2002 energy crisis legislation.

We do not countenance recompense for the unsuccessfully litigious. This was no technical vindication of a trifling dispute; nor was it a pyrrhic victory. The Court of Appeal's decision was a substantial and material interpretation of a relevant and essential statute in which our appraisal of a key provision of law was deemed to have erred. Under these peculiar (and not easily replicable) circumstances, we find that the reasonable cost of obtaining judicial review is "related to or necessary for" the substantial contribution made in the underlying Commission decision, and is therefore compensable under the intervenor compensation statutes (§§ 1801-1812).

In summary, we find that applicant UCAN's efforts in this proceeding relating to the application for rehearing resulted in a substantial contribution to D.02-12-064 and D.03-08-072. Additionally, we find that the reasonable cost of "obtaining judicial review" [§ 1802(a)] of those Commission decisions is compensable because the decisional law of this state has been clarified to be consonant with the specific "legal contentions" [§ 1802(i)] of applicant UCAN's substantial contribution in the decisions at issue.