Modifications to the Settlement Agreement

Should A.05-12-030 Remain as an Open Proceeding?

Paragraph 7 (p. 3) of the Settlement Agreement states, in relevant part:

"The Commission shall leave Application 05-12-030 open, or shall designate or open another proceeding, to provide Eligible QF Parties a means to bring their power sales contracts or issues regarding the negotiation of their firm-capacity power sales contracts with SCE to the Commission's attention and to allow for consideration or approval of those contracts or disallowances or sanction, as determined by the Commission."

The California Legislature requires ratesetting and quasi-legislative matters generally to be resolved within 18 months of the issuance of the scoping memo ruling.⁸ (See Pub. Util. Code § 1701.5.) Furthermore, § 1701.6 requires that the Commission annually report to the Legislature on the number of cases where resolution exceeded the time periods prescribed in scoping memos. These Legislative requirements argue against leaving this proceeding open indefinitely.

Alternatively, in an e-mail response to ALJ questions following the PHC,⁹ Settling Parties indicated that if the Commission was reluctant to leave this proceeding open or to reopen the proceeding for receipt of Eligible QF Party non-standard contracts, Settling Parties were amenable to other procedural vehicles including separate applications for Commission approval of Eligible QF Party non-standard contracts. We believe that this alternative procedure can provide the means by which SCE can present Eligible QF Party non-standard contracts to the Commission for approval. Thus, we modify the relevant portion of paragraph 7 in the Settlement Agreement to read: "SCE shall file separate applications for Eligible QF Party non-standard contracts to the Commission for approval."

The Settlement Agreement section entitled "Good Faith Negotiation Requirements and Conditions," which includes paragraph 7, provides assurance that Eligible QF Parties may negotiate contract terms similar to those provided in the KRCC Contract. With this purpose in mind, we expect that our modification to paragraph 7 will not affect this section, and that SCE will enter into good faith negotiations with Eligible QF Parties.

Above Market Costs

Paragraph 13 of the Settlement Agreement states that:

"SCE shall allocate any above-market costs of the KRCC Contract to the CTC component of its retail rates. SCE shall recover any above-market costs of the KRCC Contract through the CTC as authorized by the Commission."

Whether above-market costs will occur as a result of our approval of the KRCC Contract cannot be determined at this time. Further, customers of energy service providers, publicly owned utilities and other similarly situated parties who share in payment of ongoing CTC charges were not represented in this proceeding and are not parties to the Settlement Agreement. For example, municipal utility agencies and similarly situated parties share in payment of CTC, but are not represented as parties in this proceeding. Since the initial Application did not propose including any costs in ongoing CTC, it is understandable that parties who might have interests in ongong CTC charges did not participate. Because of this lack of notice, it would be unfair to adopt the Settlement Agreement's provision concerning the CTC.

The ALJ requested the Settling Parties alternative suggestions in response to this problem.¹⁰ Using the Settling Parties' alternative suggestion, we have modified paragraph 13 to state:

"SCE is directed to present its recommendation for the treatment of any above-market costs associated with the KRCC Contract, or similar contracts negotiated with Eligible QF Parties, in SCE's ERRA proceeding."

Since our modifications to the Settlement Agreement reflect alternatives suggested by the Settling Parties, we believe the purpose of the Settlement Agreement is unchanged.

Settlement Criteria

Parties to the proceeding have reached a global settlement of all disputed issues. In such cases, the Commission applies standards set forth in Rule 51.1(e) of the Commission's Rules to evaluate the proposed Settlement. This rule states:

"The Commission will not approve stipulations or settlements, whether contested or uncontested, unless the stipulation of settlement is reasonable in light of the whole record, consistent with law, and in the public interest."

The Settlement Agreement meets the criteria for a settlement pursuant to Rule 51.1(e), as discussed below.

The Settlement is Reasonable in Light of the Whole Record, Consistent With Law, and in the Public Interest

The Settlement Agreement is Reasonable in Light of the Whole Record

The prepared testimony and motion of the Settling Parties contain the information necessary to find the Settlement Agreement reasonable in light of the whole record.¹¹ Prior to the settlement, the Settling Parties conducted extensive discovery and the Settling Parties served detailed testimony on the issues related to the Application and the KRCC Contract.

The Settlement Agreement represents a reasonable compromise of the parties' positions. The prepared testimony of the Settling Parties is made a part of the Commission's record in this proceeding, and contains sufficient information for the Commission to determine the reasonableness of the Settlement Agreement.

The Settlement Agreement is Consistent
with Law

The Settling Parties believe that the terms of the Settlement Agreement comply with all applicable statutes and prior Commission decisions, and reasonable interpretations thereof. In agreeing to the terms of the Settlement Agreement, the Settling Parties have explicitly considered the relevant statutes and Commission decisions and believe that we can approve the Settlement Agreement without violating applicable statutes or prior Commission decisions.

The Settlement Agreement is in the Public Interest

The Settlement Agreement is a reasonable compromise of the Settling parties' respective positions. The Settlement Agreement is in the public interest. It is in the interest of SCE's customers because approval of the KRCC Contract provides an opportunity for SCE's customers to receive 300 megawatts (MW) of firm power, 150 MW of which is baseload and 150 MW of which is dispatchable. The Settlement Agreement avoids the cost of further litigation, and reduces the use of valuable resources of the Commission and the parties.

⁸ See, Pub. Util. Code § 1701.5.

⁹ See, ALJ Ruling on April 26, 2006.

¹⁰ See, ALJ Ruling on April 26, 2006.

¹¹ Appendix B to this decision lists the exhibits of all parties which are part of the record in this proceeding.