6. Reasonableness of Requested Compensation

Having found that both TURN and AECA made substantial contributions to D.05-06-016, we next turn to the question of whether the compensation these two organizations are seeking is reasonable. Pursuant to the amendment to its request filed on December 8, 2005, TURN is now seeking $47,715.08 for its work in this proceeding,13 while AECA is requesting a total of $90,841.04.

Under Pub. Util. Code § 1802(a), the compensation requested must represent reasonable fees and costs for the customer's preparation for and participation in a proceeding to which the customer substantially contributed.

The issues we consider to determine reasonableness are discussed below.

6.1. The Effect of D.05-11-031 on the Compensation Requests of TURN and AECA

As noted in the introduction, TURN and AECA both submitted their compensation requests on August 15, 2006. Approximately three and one-half months after the submission of these requests, the Commission issued D.05-11-031, its final decision in R.04-10-010. D.05-11-031 has an important bearing on the hourly rates that TURN and AECA can recover here, and the decision requires that AECA be awarded substantially less than the amount it has requested.

As noted in D.05-11-031, the Commission opened R.04-10-010 for the purpose of ensuring that awards of intervenor compensation are consistent with Pub. Util. Code § 1806, which provides that compensation awards "shall take into consideration the market rates paid to persons of comparable training and experience who offer similar services," and that any compensation awarded "may not, in any case, exceed the comparable market rate for services paid by the commission or the public utility" to such persons for such services. To carry out these directives, the Order Instituting Rulemaking (OIR) in R.04-10-010 directed the utilities to file compensation data regarding the in-house and outside representatives who appear on the utilities' behalf before the Commission. The OIR also required intervenors to file (1) information regarding the training and experience of their own representatives, and (2) proposals which "analyze the utility data sets in relation to the qualifications of representatives who will appear on behalf of the intervenors." (Mimeo. at 4.)

Based on the data submitted by the parties and the resulting analysis, D.05-11-031 determined that the reasonable compensation to pay for attorneys with 13 or more years of experience who appear at the Commission on behalf of intervenors during 2005 ranges from $270 per hour to $490 per hour. (Id. at 16.) The decision also noted that absent one of three special considerations, "we will not authorize an increase from previously authorized rates for work performed in 2005." (Id.) One of the three considerations was that "where a representative's last authorized rate was for work performed before 2004," an increase of 3% per year, "roughly the recent rate of inflation as reported by various government agencies," would be reasonable. (Id. at 17.)

6.2. Discussion of Hours and Rates Requested by TURN

Pursuant to the amended compensation request that it filed on December 8, 2005, TURN seeks the following compensation and expenses for the work performed by its attorneys on the instant proceeding:

TURN also requests the following compensation and expenses for the work performed by its consultant, Jeff Nahigian, of JBS Consulting (JBS):

In its August 15, 2005 compensation request, TURN furnished a breakdown and description of the hours and expenses it is claiming for the work done by its attorneys and expert in this proceeding. Based on these records, we find the number of hours for which TURN is seeking compensation to be reasonable.

D.98-04-059 directs that before awarding compensation for an intervenor's work in a proceeding, we should also find that the value of the work to ratepayers exceeds the amount of compensation they are being asked to pay. This requires the intervenor to "monetize" the value of its participation in the proceeding to the extent possible. (79 CPUC2d 628, 669.)

As noted above, the principal benefit to ratepayers from the settlement we approved in D.05-06-016 is likely to be cleaner air in California's Central Valley. As PG&E and Edison pointed out in their applications, diesel engines used for agricultural pumping accounted for approximately 23% of the NOx emissions in the Central Valley during the summer of 2003, and about 31% of the reactive organic gas emissions. (D.05-06-016, mimeo. at 4, 26.) In his March 31, 2005 letter supporting the settlement agreement, Air Pollution Control Officer Larry Green of the Sacramento Metropolitan Air Quality Management District (SMAQMD) gave the following summary of the benefits that could result from the agricultural engine conversion program:

"Replacing just 1,000 existing diesel pumps with electric pumps will result in a reduction of about 2 tons/day of NOx emissions, equal to removing over 100,000 cars and trucks from the road. Eliminating these diesel pump emissions also will prevent over 40 premature deaths by 2015 and save Californians almost $60 million annually in lower health care costs. Using these electric pumps also reduces foreign oil dependency by eliminating the use of over 5 million gallons of diesel fuel. This also results in 40,000 fewer tons of CO2 emissions into the atmosphere."

We agree with TURN that although "it is impossible to know the total number of [agricultural] customers who will sign up for this program," TURN's participation also benefited ratepayers by helping to bring about a $27.5 million cap on PG&E's total spending for the engine conversion program. Since PG&E had originally estimated that it would spend somewhere between $34 and $127 million on the program, TURN is reasonable in asserting that its participation "ensured that ratepayers would be protected from such a huge increase in capital spending." (TURN Request, p. 7.)

Having concluded that the number of hours for which TURN seeks compensation is reasonable, and that TURN's participation should be considered productive within the meaning of D.98-04-059, we turn to the question of whether the rates TURN has requested for Hawiger's and Nahigian's work in 2005 should be authorized.

In its December 8, 2005 amended request, TURN asks that Hawiger's time in 2005 be compensated at $320 per hour, a $50 per hour increase over the $270 rate for Hawiger's 2004 work that was authorized in D.05-06-031. TURN argues that despite the general rule in D.05-11-031 that intervenor attorneys should not receive higher hourly rates for their work in 2005 than in 2004, an exception should be made in Hawiger's case because he satisfies the second and third conditions set forth in D.05-11-031 for departing from this rule. These conditions are:

"2. Where additional experience since the last authorized rate would move a representative to a higher level of qualification (e.g., from intermediate to senior), an increase is reasonable to bring the representative's hourly rate within the range of the representative's peers at the higher level.

"3. Where a representative's last authorized rate is below that of the range of rates shown in the tables above for representatives with comparable qualifications, an increase is reasonable to bring the representative's rate to at least the bottom level of the rate range. Here, we have in mind certain representatives who have historically sought rates at or below the low end of the range of rates for their peers. We emphasize, however, that for any given level of qualifications, there will always be a range of rates in the market, so this increase is intended to narrow but not necessarily eliminate perceived disparities." (D.05-11-031, mimeo. at 17-18; footnote omitted.)

TURN argues that the second condition is met here because "Hawiger's rates have been set in the past at a level more consistent with the rates of senior associates. His work in recent years clearly demonstrates the type of responsibility and ability that would warrant application of a partner's rates." (TURN Amended Request, p. 4.) TURN acknowledges that while this definition of a higher level of qualification is not discussed in D.05-11-031, the Commission should recognize that TURN's "request is consistent with the spirit of the condition." TURN also points out that as a 1993 law school graduate, Hawiger is "at the very top of the range for attorneys with comparable amounts of experience (the 8-12 year category)," and that a $325 hourly rate was recently authorized for Christine Mailloux, another TURN staff attorney who graduated from law school in 1993. (Id.)

TURN also argues that in Hawiger's case, the third condition in D.05-11-031 for granting higher 2005 compensation has been satisfied. TURN notes that when Hawiger joined TURN in 1998, his hourly compensation rate was set at $160, "the level of a first-year attorney rather than an attorney with five years experience." Although Hawiger's authorized rate has escalated steadily over the years, TURN argues that it has remained below that of equally-experienced peers, and that an increase to $320 per hour will serve to "reasonably narrow the resulting disparity." (Id. at 5-6.)

We decline to authorize the requested $50 per hour increase for Hawiger's 2005 work, which would represent an 18.5% increase over his 2004 rate. As TURN acknowledges in its amended request, Hawiger had little if any experience with utility issues when he joined TURN in 1998, even though he had graduated from law school five years earlier.15 TURN also concedes that the increases granted since then have been "generally consistent with the rates TURN requested," even though TURN now considers those rates too low and attributable to its own "conservatism rather than any suggestion by the Commission that higher rates were not warranted for Mr. Hawiger's work." However, the fact remains that over the years, TURN has generally gotten what it asked for in terms of Hawiger's compensation. The third condition in D.05-11-031 states that "for any given level of qualifications, there will always be a range of rates in the market," and that the purpose of the condition is to "narrow but not necessarily eliminate perceived disparities." Even though Hawiger's $270 rate is at the low end of the range for attorneys with his level of experience, it is still within that range, and thus reasonable.

Even though we decline to authorize the $50 per hour increase in Hawiger's rate that TURN has requested, we will authorize the $15 per hour increase that TURN is seeking for Jeffrey Nahigian's work during 2005. In two recent decisions, we approved TURN's request that Nahigian's work in 2005 be compensated at $155 per hour. (See, D.06-04-012, mimeo. at 14-15; D.06-04-029, mimeo. at 9.) For the reasons stated in those decisions, the same increase is appropriate here.

6.3. Discussion of Hours and Rates Requested by AECA

In its August 15, 2005 compensation request, AECA asks for the following compensation for work by its attorney, Peter Hanschen. AECA agrees that the compensation should be discounted by the factor discussed in Section 4 of this decision:

AECA has also requested the following compensation for the work performed by its outside consultants (Richard McCann, Steven Moss and Eric Cutter of M-Cubed) and in- house staff (Michael Boccadoro and Dan Geis):

Finally, AECA seeks reimbursement for the following direct expenses:

As in TURN's case, we find as preliminary matters that (1) based on the description and breakdown of hours and expenses that AECA submitted, its attorney and consultants invested a reasonable number of hours in this case, and (2) AECA's work should be considered productive within the meaning of D.98-04-059.

With respect to the time invested after the filing of the utilities' applications, AECA is seeking compensation mainly for time spent on motions, attending PHCs, preparing opening testimony, or participating in settlement negotiations. The hours claimed for these activities appear reasonable.

As noted previously, AECA is also seeking compensation for the significant number of hours it spent working with PG&E and Edison on the engine conversion program before the filing of the utilities' applications. As stated in Section 5.2 of this decision, we agree that much of this work would have been necessary even if the utilities had filed their applications first. Moreover, we agree that AECA's decision to work with the utilities prior to the filing of the applications contributed to a more expeditious outcome in this proceeding.

With respect to the cost-benefit analysis required by D.98-04-059 to determine productivity, we again conclude that the main benefit to ratepayers from AECA's work in this case is likely to be cleaner air in the Sacramento and San Joaquin Valleys. As stated above and in D.05-06-016, while these benefits are difficult to quantify, we have little doubt that they will be significant. The support for the March 30, 2005 settlement agreement expressed by CARB, SMAQMD and the San Joaquin Valley Air Pollution Control District are all evidence of this. Further, it was the probable air quality benefits that persuaded ORA to support the settlement agreement, even though ORA had concluded that the engine conversion program was unlikely to make a positive contribution to margin over the program's 10-year life. (D.05-06-016, mimeo. at 27 and footnote 13.)17

Although we agree with AECA that the number of hours it invested in this proceeding was reasonable and that these hours were productive under the test set forth in D.98-04-059, some discussion is necessary of the $575 and $595 hourly rates that AECA is seeking for Hanschen's work.

AECA does not cite any Commission decisions awarding rates of this magnitude for an attorney's work, which are higher than any hourly rates we have ever approved under the intervenor compensation program. Moreover, as discussed above, AECA's request is contrary to the guidelines set forth in D.05-11-031, which specify that the reasonable rates for attorneys with Hanschen's level of experience (13 or more years) range from $270 per hour to $490 per hour. (Mimeo. at 16.) As explained below, under the criteria set forth in D.05-11-031, we determine that AECA should receive $340 per hour for Hanschen's work on these applications in 2004, and $350 per hour for his work in 2005.

As noted above, D.05-11-031 specifies that in the absence of one of three special considerations, the Commission "will not authorize an increase from previously authorized rates for work performed in 2005." (Id.) The first of these three considerations is that "where a representative's last authorized rate was for work performed before 2004," an increase of 3% per year, "roughly the recent rate of inflation as reported by various government agencies," will be considered reasonable. (Id. at 17.)

That consideration is relevant here because the last time the Commission awarded intervenor compensation for work performed by Hanschen was in D.00-09-068. In that decision, the Commission determined that AECA should receive $300 per hour for the work Hanschen performed during 1998, 1999 and 2000 in connection with PG&E's 1999 Test Year general rate case. (Mimeo. at 18-19.) Applying the 3% escalation factor to this rate for the years since 2000 yields compensation rates for Mr. Hanschen's work in 2004 of $337.65, and $347.78 for his work in 2005. For ease of computation, we will round these figures to $340 for 2004 and $350 for 2005. Applying these rates to the hours billed by Hanschen (47.25 in 2004 and 52.25 in 2005) results in an award -- before application of the 77.3% discount factor -- of $34,352.50.

The hourly rates AECA has requested for work performed by Richard McCann and Steven Moss of the M-Cubed consulting firm require less discussion. AECA requests $160 per hour for McCann's work in 2004, $175 per hour for his work in 2005, and $175 per hour for Moss's work, all of which was performed in 2005. In D.03-09-067, we approved an hourly rate of $175 for both McCann and Moss. (Mimeo. at 7-8.) Thus, we approve the rates requested for the work by these gentlemen in this proceeding.

AECA has also requested an hourly rate of $110 for the work performed by Eric Cutter of M-Cubed. The Commission has not previously set an intervenor compensation rate for Cutter, who "specializes in making complex analyses transparent to diverse stakeholders," according to AECA. The AECA request notes that Cutter holds both a Master of Business Administration degree and a Master of Science degree from U.C. Berkeley (the latter being in Energy and Water Resources). Prior to joining M-Cubed, Cutter was a Senior Resource Analyst for PG&E. In view of this showing of experience, we will approve an hourly rate of $110 for Cutter's work.18

AECA has also requested an hourly rate of $150 for the work performed by its Executive Director, Michael Boccadoro. The last time we set a rate for Boccadoro's work was in D.00-09-068, where we approved an hourly rate of $125 for the work he performed during 1998 in connection with PG&E's 1999 Test Year general rate case. Applying the 3% escalation factor provided for in D.05-11-031 yields rates of $149.26 for Boccadoro's work in 2004, and $153.73 for his work in 2005. For ease of computation, we will approve an hourly rate of $150 for Boccadoro's work on these applications in both 2004 and 2005.

AECA has also requested a rate $125 per hour for the work of its Assistant Executive Director (and former Director of Public Affairs), Dan Geis. We have not previously determined an hourly rate for Geis. In support of its request, AECA states that Geis (1) graduated from California Polytechnic State University, San Luis Obispo, with a double major in Agribusiness and Political Science, (2) advocates regarding energy issues on behalf of the agricultural industry at the California Legislature, and (3) serves as AECA's coordinator for all Commission proceedings. (AECA Request, p. 11.) In view of this showing of experience, we will approve the requested rate of $125 per hour for Geis's work here.19

6.4. Discussion of Related Expenses

The itemized expenses submitted by TURN for its attorneys and consultant total $363.83. We find these expenses to be commensurate with the work performed and reasonable.

AECA submitted a claim for direct expenses of $3091.18 (before application of the 77.3% discount factor). Apart from the photocopying charges by Hanschen's law firm, Morrison & Foerster, all of these expense items appear reasonable.

We single out the photocopying charges for special discussion because they represent $1,871.94 out of the $3091.18 total. AECA has not provided any detail on this item, but it appears the figure is high because in November 2004 -- before the formal service list for this proceeding was established -- Hanshcen served three pleadings in this case totaling 15 pages (a petition to intervene, a motion for expedited consideration and a response to the joint PG&E-Edison motion to consolidate the applications) on the service lists for both A.02-05-004 and A.04-06-024. The former proceeding was Edison's 2003 general rate case, and the latter was Phase 2 of a PG&E general rate case. Both of these proceedings had very large service lists (with about 105 and 80 names, respectively), so serving all the people on them entailed making a large number of copies.

Even if we assume that 250 copies of the three pleadings were necessary, this would represent a charge of nearly 50 cents per page. Although we will allow this expense item in this instance, we caution AECA and other parties that in the future, they will be expected to provide a more thorough justification for such large photocopying bills.

13 Although TURN's December 8 amendment states that it is seeking $47,515.08, there is a $200 arithmetic error in the "consulting cost summary" table shown on page 9.

14 $95 per hour represents half of Ms. Suetake's hourly rate. Pursuant to D.98-04-059, only one-half of the attorney's hourly rate may be charged for preparing compensation requests. (79 CPUC2d 628, 658.)

15 Thus, it is not appropriate to compare Hawiger's authorized 2004 rate with that of Christine Mailloux, another 1993 law school graduate employed as a TURN staff attorney. As both the TURN website and pleadings filed in our Open Access and Network Architecture Development docket (R.93-04-003/I.93-04-002) indicate, Ms. Mailloux has been working on telecommunications issues since immediately after passage of the Telecommunications Act of 1996. In other words, Ms. Mailloux has spent a longer period dealing with telecommunications issues than Mr. Hawiger has dealing with energy issues.

16 As discussed in Section 4, AECA erroneously computed the discount factor at 78.4%. The correct figure (740÷957) is 77.3%.

17 As is evident from the discussion in D.05-06-016, AECA's and TURN's work in this proceeding cannot be considered duplicative, because even though both of these parties supported the March 30, 2005 joint settlement agreement, they were meaningful adversaries before the settlement was reached.

TURN not only filed a multi-faceted protest of the utilities' applications, but also resisted AECA's efforts at the January 14 and February 4, 2005 PHCs to obtain a decision on the engine conversion program prior to the Fall of 2005. At the February 4 PHC, the parties also sparred over whether TURN had been afforded enough discovery to be able to specify its differences with AECA and the applicants over the engine conversion program. (D.05-06-016, mimeo. at 9-13.) The TURN and AECA direct testimony also differed sharply over the cost-effectiveness of the proposed adders to the utilities' normal line extension allowances. (Id. at 10-11, 15-16.)

As stated in D.05-06-016, we decided to approve the March 30, 2005 joint settlement agreement "because of the reasonable balance it strikes between the competing interests in this case." (Id. at 25.) There can be no doubt that the work of both TURN and AECA contributed to clarifying and then resolving these competing interests.

18 We also note that under D.05-11-031, $110 per hour is the low end of the range for experts who appear on behalf of intervenors. (Mimeo. at 17.)

19 Appendix B to AECA's request shows that of the 188.75 hours of Geis's time for which AECA seeks compensation, 10.5 hours were spent researching and drafting the compensation request. In addition, the time entries for Geis's work indicate that AECA is seeking compensation for 10 trips he made from Sacramento to San Francisco. Under D.98-04-059, travel time and time spent preparing compensation requests are ordinarily compensated at half the advocate's usual rate. (79 CPUC2d at 658.) Accordingly, 148.25 of Geis's hours will be compensated at $125 per hour, and 40.5 hours at $62.50 per hour.

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