3. Discussion

3.1. Standard of Review

We review this uncontested settlement pursuant to Rule 12.1(d) which provides that, prior to approval, the Commission must find a settlement "reasonable in light of the whole record, consistent with the law, and in the public interest." We find the settlement agreement meets the criteria for a settlement pursuant to Rule 12.1(d), and discuss each of these three criteria below.

Initially, we note that the circumstances of the settlement, particularly its endorsement by all parties, generally support its adoption. DRA, which represents ratepayer interests, and A-3CC, which represents large electric users, both initially protested the application, and both parties actively participated in the proceeding and in the settlement negotiations.

Parties prepared and served exhibits on revenue requirement, marginal costs, revenue allocation, and rate design issues. Thus, the Settlement Agreement was reached after careful analysis of the application by parties representing a broad array of affected interests. The record also shows that the Settlement Agreement was reached after substantial give-and-take between the parties which occurred over a significant amount of time. This give-and-take is demonstrated by the positions initially taken by parties in prepared testimony, amended testimony, and rebuttal testimony, and the final positions agreed upon in the Settlement Agreement.

The Settlement Agreement is also consistent with Commission decisions on settlements, which express the strong public policy favoring settlement of disputes if they are fair and reasonable in light of the whole record.¹⁴ This policy supports many worthwhile goals, including reducing the expense of litigation, conserving scarce Commission resources, and allowing parties to reduce the risk that litigation will produce unacceptable results.¹⁵ As long as a settlement taken as a whole is reasonable in light of the record, consistent with law, and in the public interest, it may be adopted. We next analyze these criteria with specific reference to the Settlement Agreement.

3.2. Settlement Agreement is Reasonable
in Light of the Whole Record

Ordinarily, a question about utility rates is measured by whether the price is "just and reasonable." (See California Pub. Util. Code § 451.) ¹⁶ We first examine whether the proposed rate increases are justified in the proceeding record. We find that they are. The documents filed in this proceeding, including but not limited to, the Application, Amended Application, and the Joint Motion combined with the Testimony, Amended Testimony, and Rebuttal Testimony served by the various parties and admitted to the record by this Decision, contain the information necessary for us to find that the revenue requirement is justified by increased costs of service.

The Settlement Agreement is also reasonable. Prior to the settlement, parties conducted extensive discovery, and served detailed testimony on the issues related to revenue requirement, marginal costs, revenue allocation, and rate design. The proceeding record contains sufficient information for us to conclude the Settlement Agreement represents a reasonable compromise of the parties' positions.

3.3. Settlement Agreement is
Consistent with Law

The Joint Parties believe that the terms of the Settlement Agreement comply with all applicable statutes. These include, e.g., Pub. Util. Code15 § 451, which requires that utility rates must be just and reasonable, and § 454, which prevents an increase in public utility rates unless the Commission finds such an increase justified. We agree that the required showings under §§ 451 and 454 have been made. Further, nothing in the Settlement Agreement contravenes statute or prior Commission decisions.

3.4. Settlement Agreement is
in the Public Interest

The Settlement Agreement is in the public interest and in the interest of Sierra's customers. The agreed-upon revenue requirement is significantly below Sierra's request. The revenue allocation and rate design proposed in the Settlement Agreement moderate potentially harsh bill impacts but also move revenue responsibility closer to the cost of service.

Our approval of the Settlement Agreement avoids the cost of further litigation, and reduces the use of valuable resources of the Commission and the parties. Finally, we note that the settling parties comprise all of the active parties in Sierra's GRC, and we do not know of any party who contests the Settlement Agreement. Thus, the Settlement Agreement commands the unanimous sponsorship of all active parties in this proceeding, who fairly represent the interests affected by the Settlement Agreement. We find that the evidentiary record contains sufficient information for us to determine the reasonableness of the Settlement Agreement and for us to discharge any future regulatory obligations with respect to this matter.

For all these reasons, we approve the Settlement Agreement as proposed.

¹⁴ See e.g., D.05-03-022 at 9.

¹⁵ Id.

¹⁶ All references are to the Public Utilities Code unless otherwise noted.