4. Standard of Review
4.1 Overview
The Commission's prudent manager standard is the appropriate reasonableness standard to apply to the costs recorded in a CEMA.2 In order for the Commission to consider the proposed settlement in this proceeding as being in the public interest, the Commission must be convinced that the parties had a sound and thorough understanding of the application and all of the underlying assumptions and data included in the record. This level of understanding of the applications and development of an adequate record is necessary to meet our requirements for considering any settlement, as discussed below. The record is composed of all filed and served documents.
This section summarizes the requirements for review and approval of any proposed settlement and then provides an analysis to demonstrate that the proposed settlement is reasonable and should be approved. The February 5, 2007 scoping memo (Mimeo, pp. 4 - 5) provided specific guidance and mandated two settlement conferences to encourage and promote the likelihood of settling the application.
4.2. Standard for Approval of a Settlement
(Rule 12.1) Proposal of Settlement
(a) Parties may ... propose settlements on the resolution of any material issue of law or fact or on a mutually agreeable outcome to the proceeding. Settlements need not be joined by all parties; however, settlements in applications must be signed by the applicant ...
The motion shall contain a statement of the factual and legal considerations adequate to advise the Commission of the scope of the settlement and of the grounds on which adoption is urged. Resolution shall be limited to the issues in that proceeding and shall not extend to substantive issues which may come before the Commission in other or future proceedings. ...
(b) Prior to signing any settlement, the settling parties shall convene at least one conference with notice and opportunity to participate provided to all parties for the purpose of discussing settlements in the proceeding. ...
(c) Settlements should ordinarily not include deadlines for Commission approval ...
(d) The Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
In short, we must find the settlement comports with Rule 12.1(d), which requires a settlement to be "reasonable in light of the whole record, consistent with law, and in the public interest." We address below whether the settlement meet these three requirements.
A further standard is articulated in San Diego Gas & Electric 46 CPUC 2d 538 (1992), and applies to all-party settlements. As a precondition to approving such a settlement, the Commission must be satisfied that:
1. The proposed all-party settlement commands the unanimous sponsorship of all active parties to the proceeding.
2. The sponsoring parties are fairly representative of the affected interests.
3. No settlement term contravenes statutory provisions or prior Commission decisions.
4. Settlement documentation provides the Commission with sufficient information to permit it to discharge its future regulatory obligations with respect to the parties and their interests.
We can answer all four requirements in the affirmative for PG&E's uncontested settlement with DRA.
2 See for example, D.02-08-064, dated August 22, 2002, mimeo., pp. 5-8.
