VIII. Conclusion
The principal public interest in this proceeding is the delivery of safe, reliable, utility service at just and reasonable rates. After careful review and subject to the modification discussed in this decision, we are convinced that the Settlements balance the various interests at stake, resulting in a fair and reasonable TY 2004 revenue requirement, such that we can find SoCalGas' and SDG&E's rates to be just and reasonable. Pursuant to Rule 51.1(e) we reach this conclusion only after finding that the Settlements, taken together, are reasonable in light of the whole record, consistent with the law, and in the public interest.
A. Reasonable in Light of the Whole Record
We find that the Settlements are reasonable in light of the whole record for two reasons. First, while the SDG&E Settlement is not an all-party settlement, both settlements are supported by parties representing all various affected interests in this proceeding. Both settlements represent a fair and reasonable compromise of the issues. The following parties support both the SoCalGas and SDG&E settlements.
ORA, whose charge is to represent ratepayer interests, was an active participant in the proceeding and supports the Settlements. ORA filed complete, detailed testimony consisting of an account-by-account review of SoCalGas' and SDG&E's TY 2004 revenue requirement forecast. TURN was an active participant in the proceeding and supported the SoCalGas Settlement. TURN served testimony on a broad range of consumer issues. Utility Workers Union of America, AFL-CIO (UWUA), and Local 483 served testimony addressing issues of concern to represented employees. SCGC's testimony addressed issues related to SoCalGas' GIR implementation costs and resource planning issues. Greenlining served testimony on supplier diversity, philanthropy and executive compensation.
Since the Settling Parties filed their motion for adoption of these settlements, two other parties have come to realize the merits of this settlement and now support them. The Federal Executive Agencies filed late comments supporting the SDG&E settlement. The Electric Generator Alliance also filed in its comments that "the settlement agreements represent a fair and reasonable compromise of the issues contested in these proceedings, and EGA supports the settlements and the associated motions."
Two parties filed comments opposing the SDG&E settlements. UCAN opposed the Settlement for SDG&E in its comments on the proposed settlement. UCAN objected that the partial settlement increases SDG&E's distribution revenues by 27.3% over its 2001-recorded costs that, according to UCAN, equates to an annual increase in electric operations costs of almost 7%. The City of Chula Vista was an active participant in the proceeding, but did not sponsor expert testimony. The City believes that its residents and businesses need relief from the high energy prices since 2000.
We have considered UCAN's and the City's comments and the responses of the settling parties, and other relevant factors as we reviewed both the litigated positions of the parties and the justifications that are included in the settlements. The parties' negotiations were informed by a thorough record consisting of over 600 exhibits and 20 days of evidentiary hearings. Consequently, the Settling Parties had ample opportunity to test the positions of opposing parties through discovery and cross-examination. In addition, the positions presented generally represented strongly held, well-supported opinions of experienced witnesses who are familiar with this Commission's processes. Taking the two settlements together with all appendices, the parties have provided 415 pages of detailed description of the settlements' terms representing ten days of settlement negotiations.57 Typically, the Settlements are reached after opposing parties are able to assess the strengths and weaknesses of their respective cases. When parties with opposing interests agree to a settlement, it may be one indication of the reasonableness of the settlement. The revenue requirements adopted by the Settlement are within the range of positions taken by the parties.
UCAN argues that the settlement does not contain enough detail to allow the Commission to evaluate it. We do not agree, nor do we find this reason enough to justify rejection of the settlements. Attachments D to each of the settlements is a revised version of the full comparison exhibits58 that show not only the parties positions on all the issues in dispute by FERC account, but also how the settlements resolve each such issue. In some cases, the settlements resolve each individual issue; in other cases, the settlements resolve a few disputed issues within a single FERC account on a consolidated basis.
UCAN also argues that the settlement is not representative "of active parties" in this proceeding. Ratepayer interests are reflected in the settlement due to ORA's participation in the settlement, and FEA's support for the settlement. UCAN does not identify what stakeholders' interest it represents different than ORA or FEA.
The City of Chula Vista did not conduct discovery, did not file testimony, did not participate in cross-examination, and ultimately did not present a position in its comments significantly different than UCAN's. Though we sympathize with the ratepayers of Chula Vista, we cannot reduce a utilities' revenue requirement simply to allow ratepayers to have a reduction in rates.
The critical issue in these proceedings is to ensure that the companies receive a reasonable level of revenue for monopoly distribution services that will in turn assure customers of safe, reliable and responsive service under conditions of prudent management, while assuring the companies' ability to earn an authorized rate of return, again assuming prudent and effective management. We do not intend to place safety, reliability or the responsiveness of the companies' service at risk through under funding activities, programs and service.
We find that the revenue requirements contemplated by the Settlements with the exceptions we have noted, are justified by the parties' showing and are in the interest of SoCalGas' and SDG&E's ratepayers and the public.
C. Consistent with the Law
The Settling Parties assert that the Settlement Agreement is fully consistent with applicable law. We agree. We are not aware of any policy, rule or order that would be contravened by the Settlements.
D. In the Public Interest
Finally, we find that the Settlements are in the public interest. Like many settlements, they are the result of compromises to accommodate and balance the interests of all the parties and the public. We find that Settling Parties have compromised their litigation positions and have arrived at a reasonable result in light of the extensive record.
Just as we acknowledged in D.04-05-055, settlement by nature are to a certain extent a "black box," we are however satisfied that the Settling Parties presented thorough detailed Settlement Agreements. The Settlements would adopt total amounts for general categories rather than adopting a detailed forecast for each specific account. The Settling Parties maintain that this high level agreement does not imply any specific resolution of issues at a detailed level, with the exception of those issues specifically discussed in the Settlements. We are willing to take a step back and approve forecasts for general categories, but in doing so, we must acknowledge that there are downstream consequences associated with adopting this type of "black box" approach.
For example, in SoCalGas' and SDG&E's next GRCs, parties will not be able to ascertain the specific amounts adopted for certain accounts, or compare recorded amounts to the corresponding "adopted" forecast with the same degree of precision we typically expect. We do not view this as an insurmountable problem, given the fact that under forecast test year ratemaking a utility is generally neither obligated to spend the authorized amount nor limited to spending only the authorized amount. A fundamental tenet of forecast test year ratemaking is that the utility retains the discretion between the test years to manage its revenues and activities as it sees fit, consistent with its obligations to provide safe, reliable, environmentally sound utility service. Although we review the utility's request on an account-by-account basis, for the most part, the ratemaking adjustments we make to SoCalGas' and SDG&E's budgets are not binding.
We caution the utilities that our approval of a "high level" forecast in this Cost of Service Proceeding should not be interpreted to mean that there is any doubt regarding whether or not SoCalGas and SDG&E was authorized funding to accomplish the various objectives set forth in their application. An essential factor in our finding that the Settlements are in the public interest is the understanding that, by virtue of its agreement to the TY 2004 revenue requirement provided in the Settlements, SoCalGas and SDG&E intends to fulfill the objectives stated in their Cost of Service request. We also continue to expect the utilities to maintain their systems according to applicable standards set by the Commission's numerous General Orders.
The Settling Parties confirm our understanding in the Motions to Approve the Settlements. In both SoCalGas and SDG&E's motions to adopt the Settlement Agreements, the Settling Parties state that the Settlement Agreements will allow the utilities to provide a reasonable level of service, based upon historical spending, trends, customer and system growth, and other cost drivers.
Absent this type of commitment, we would be unable to find that the Settlements are in the public interest. In adopting the Settlements, we make it abundantly clear that both SoCalGas and SDG&E is expected to continue meet all of its service obligations and maintain and upgrade its system in a manner consistent with its TY 2004 forecast. By providing SoCalGas and SDG&E with the discretion to spend the authorized revenue requirement as it sees fit, we are not authorizing the utilities to defer maintenance, cancel proposed upgrades or service improvements, or reduce staffing in a manner inconsistent with the objectives identified in its request. In future GRCs, we will not entertain claims that the adopted revenue requirement somehow forced SoCalGas and SDG&E to do otherwise.
57 The SDG&E settlement contains 24 pages in the main section and 199 pages in its Attachment D. The SoCalGas settlement has 28 pages in the main section and 162 pages in its Attachment D.
58 Ex. 149 and 150
