7. Settlement Agreement
The Settlement Agreement is appended to this decision. Key terms include:
· The parties agree that the way in which CPA completed its February 16, 2006 RA compliance filing led the Commission's Energy Division and CPSD to believe that CPA had not timely procured the capacity needed to meet its 2008 Year-Ahead System RA obligation.
· For settlement purposes only, CPSD accepts that CPA had timely acquired the capacity needed to meet its 2008 Year-Ahead System RA obligation consistent with D.05-10-042 and D.06-06-064.
· CPA shall make a settlement payment to the State of California General Fund in the amount of $225,000 within 60 days of the issuance of a final and non-appealable decision by the Commission approving the Settlement Agreement without material change.
· The parties agree that this Settlement Agreement is a release of all claims as between CPSD and CPA relating to Investigation 09-01-017 and releases CPA, its officers, directors, employees, affiliates, and successors from all claims regarding this matter.
As CPA and CPSD are the only parties to this proceeding, the proposed settlement is an all-party settlement.
7.1. Standard of Review
We have a long history of reviewing settlements.8 In doing so, we have often acknowledged California's strong public policy favoring settlements. This policy supports many worthwhile goals, such as reducing litigation expenses, conserving scarce resources of parties and the Commission, and allowing parties to reduce the risk that litigation will produce unacceptable results.
In assessing settlements we consider individual settlement provisions but, in light of strong public policy favoring settlements, we do not base our conclusion on whether any single provision is the optimal result. Rather, we determine whether the settlement as a whole produces a just and reasonable outcome.
We have specific rules regarding approval of settlements:
"The Commission will not approve stipulations or settlements whether contested or uncontested, unless the stipulation or settlement is reasonable in light of the whole record, consistent with law, and in the public interest." (Rule 12.1(d) of the Commission's Rules of Practice and Procure)
In addition to consistency with Rule 12.1(d) with respect to all party settlements, it is our general policy to adopt such settlements, conditioned on the following factors: 9
a. The settlement agreement commands the unanimous sponsorship of all active parties;
b. Sponsoring parties are fairly reflective of the affected interests;
c. No settlement term contravenes statutory provisions or prior Commission decisions; and
d. The settlement conveys sufficient information to permit the Commission to discharge future regulatory obligations with respect to parties and their interests.
7.2. Discussion
7.2.1. All Party Settlement
The Settlement Agreement satisfies the conditions for adoption of all party settlement requirements. That the settlement agreement commands the unanimous sponsorship of all active parties and sponsoring parties are fairly reflective of the affected interests is evident. CPA, the accused party, and CPSD, acting of behalf of the Commission and consumers, are the only parties to this proceeding. Also, as discussed below, the Settlement Agreement is consistent with law. Finally, the Settlement Agreement specifies the amount of the fine, the manner in which it must be paid, and when it must be paid, conveying sufficient information to permit the Commission to discharge its responsibility for resolving this proceeding.
7.2.2. Reasonableness in Light of the Record
The range of the penalty is $0 (CPA's position) to $735,534 (CPSD's position). We must determine whether a $225,000 fine is supported by evidence and resolves this proceeding in a reasonable manner.
First of all, we recognize that this is an all-party settlement. It is our general policy to adopt all-party settlements provided they satisfy certain conditions. As discussed above, these conditions have been met. Through compromise, CPA and CPSD were able to agree to a fine in the amount of $225,000.
Also, CPA and CPSD now agree to certain facts which support the reasonableness of the settlement. First of all, the parties agree that the way in which CPA completed its February 16, 2006 RA compliance filing led the Commission's Energy Division and CPSD to believe that CPA had not timely procured the capacity needed to meet its 2008 Year-Ahead System RA obligation. Secondly, the parties agree that CPA had timely acquired the capacity needed to meet its 2008 Year-Ahead System RA obligation consistent with D.05-10-042 and D.06-06-064.
The severity of the alleged violations would have been high, if CPA had not adequately procured resources and backstop procurement had been required. In that case, the full fine as recommended by CPSD would have been justified and reasonable. However, based on the now agreed to facts, that is not the case here. CPA had adequate resources and was able to sufficiently address both alleged deficiencies in its December 21, 2007 filing. No backstop procurement for 2008 was required. A fine in the lower part of the $0 to $739,567 range is therefore appropriate.
Based on the fact that this is an all party settlement and that a lower than maximum fine is appropriate, we conclude that the Settlement Agreement and, in particular, the agreed to $225,000 fine are reasonable in light of the record.
7.2.3. Consistency with Law
The Settlement Agreement is consistent with law. The process for developing the Settlement was in accordance with Rule 12.1 of the Rules of Practice and Procedure, as modified by the administrative law judge (ALJ).10 Further, we do not detect that any element of the Settlement is inconsistent in any way with the California Public Utilities Code Sections, Commission decisions, or the law in general.
7.2.4. Public Interest
The Settlement Agreement is in the public interest. It avoids the cost of further litigation, and conserves resources of the parties and the Commission. Furthermore, while the Settlement Agreement by its nature is non-precedential, the fact that a fine has been levied sends a clear message that, whether intended or not, non-compliance with the RAR filing requirements will result in adverse consequences to the LSE. To the extent that this message results in more diligent LSE compliance with RAR, the public interest is served.
8 See, for example, D.88-12-083, 30 CPUC2d 189.
9 See D.92-12-019, 46 CPUC2d 538, 550-551.
10 At evidentiary hearing on September 14, 2009, given that the settlement would be an all-party settlement of all issues in the proceeding, CPA requested a waiver of the requirement that a settlement conference be held prior to the parties executing the settlement agreement. That request was granted.
