5. Discussion

5.1. Approval of Parties' Settlement Agreement

Rule 12.1(d) requires that in order for a settlement to be approved by the Commission, the settlement must be: (1) reasonable in light of the whole record, (2) consistent with the law, and (3) in the public interest. Each element is present here.

5.1.1. Reasonableness in Light of the Whole Record

The parties contend the Settlement Agreement is reasonable in light of the whole record because it fully addresses and substantially modifies Cal-Am's most contentious proposal, uniform rate design across the systems. The settlement agreement instead proposes to charge a higher rate to customers of the systems with higher cost of service, based on two groups of systems.

The substantial revenue requirement increase remains a contentious issue for customers of the higher cost system, but the settlement shows that DRA and Cal-Am have thoroughly reviewed each cost item and made adjustments where possible, although the overall amount remains close to that sought by Cal-Am.

We agree that the settlement is reasonable in light of the record.

5.1.2. Consistent With the Law

The proposed settlement is consistent with the law. The parties explain that the proposed wastewater rates are just and reasonable as required by Pub. Util. Code § 451, and that Cal-Am has made a sufficient presentation on the record to justify the increased revenue requirement as required by Pub. Util. Code § 454.

We find that the settlement is consistent with the law.

5.1.3. In the Public Interest

Finally, we find that the settlement is in the public interest. The proposed settlement agreement provides for more equitable rate design among the differing wastewater systems and it saves the Cal-Am, the other parties, and the Commission the expense and time required to fully litigate this proceeding.

As shown by the comments opposing this settlement, Cal-Am needs to improve its relationship with its customers and especially its explanation of costs and operational plans for these systems. The public interest will be furthered by better customer consultation in advance of the next rate filing.

The public interest is also served by approval of the settlement agreement as an efficient means to resolve this application. For the foregoing reasons, the Commission finds that the settlement in this proceeding is reasonable in light of the whole record, is consistent with the law, and is in the public interest. The Settlement Agreement should therefore be approved.

5.2. Consolidation of this Proceeding with A.08-01-027 and A.08-01-024

In the scoping memo, this proceeding was consolidated with the General Rate Case and General Office proceedings due to common questions of fact and law. The decision resolving the remaining disputed issues in the Monterey Water General Rate Case and General Office proceedings is lengthy and complex, with limited relevance to wastewater customers. Therefore, we will set aside the consolidation of this wastewater proceeding and issue a decision separately resolving this application.