4. Discussion

Settling Parties urge the Commission to adopt the Settlement Agreement pursuant to Rule 12.1(d)¹² and find that it is "reasonable in light of the whole record, consistent with the law, and in the public interest."

4.1. The Amended Settlement Agreement
is Reasonable in Light of the Whole Record

The Amended Settlement Agreement was reached after opposing parties were able to assess the strengths and weaknesses of their respective cases. The Amended Settlement Agreement represents a reasonable resolution of the dispute between Cal Am, DRA and MPWMD regarding Water Project preconstruction costs. The Settling Parties have agreed to reduce Cal Am's request by $137,632 in disallowances, plus $9,485 in related interest. Settling Parties have also removed from Cal Am's SRSBA $185,893 in labor and related costs incurred through December 31, 2006, that may be duplicative of GRC expenses. Furthermore, as the Settling Parties point out DRA reviewed the extensive amount of documents reflecting Cal Am's 2007 costs and found them reasonable. Finally, Settling Parties have agreed on the full recovery of charges from ASR Systems for services through December 31, 2007, for the Water Project thus resolving an additional dispute.

The Amended Settlement Agreement also addresses Cal Am's production of documentation supporting preconstruction costs in this proceeding, and Cal Am's inclusion of documentation supporting preconstruction costs in future applications for Water Project preconstruction costs. Production of these documents will reasonably assist parties in assessing Water Project costs and increase efficiency.

In addition, the Amended Settlement Agreement proposes a schedule for the filing of future applications and the submittal of reports and testimony by other parties. This schedule is a reasonable provision for resolving future applications as it provides a timeline for certain events and actions by Cal Am and other parties.

Finally, the Amended Settlement Agreement proposes a method to report an accounting of the preconstruction amounts collected from ratepayers, and the status of the SRSBA. This reporting method is a reasonable approach to provide information to the Commission and others regarding Water Project preconstruction costs.

4.2. The Settlement Agreement is
Consistent with the Law

Settling Parties contend that the 2007 preconstruction costs set forth in the Amended Settlement Agreement were reasonably and properly incurred in the pursuit of a long-term water supply solution to satisfy directives to Cal Am contained in State Water Resources Control Board Order 95-10.

The Amended Settlement Agreement also complies with Commission decisions addressing Water Project preconstruction costs. Furthermore, as required by the Commission's Rules, Settling Parties properly noticed and held a settlement meeting, assisted by an ALJ mediator, on August 29, 2008.

4.3. The Amended Settlement Agreement
is in the Public Interest

Settling Parties agree that resolving this matter is in the public interest because it will avoid potentially costly litigation. Should the proceeding continue to full evidentiary hearings and litigation on the merits to address the costs incurred by Cal Am for the Water Project through 2007, all parties would need to invest additional time and resources.

The public interest is further served since the Amended Settlement Agreement proposes a reasonable schedule for future applications to address Water Project preconstruction costs. This element reduces the procedural uncertainty of future applications and increases the efficiency of staff resources.

Also, the Amended Settlement Agreement is in the public interest because it will provide Cal Am with customer contributions useful for establishing a reliable water service, and will mitigate the rate impact of a long-term water supply solution on Monterey District customers.

Finally, we note that the Settling Parties comprise all of the active parties in A.08-04-019, and we do not know of any parties who contest the Amended Settlement Agreement. Thus, the Amended Settlement Agreement commands the unanimous sponsorship of all active parties in this proceeding, who fairly represent the interests affected by the Amended Settlement Agreement. We find that the evidentiary record contains sufficient information for us to judge the reasonableness of the Amended Settlement Agreement and for us to discharge any future regulatory obligations with respect to this matter. Thus, the proposed Amended Settlement Agreement is consistent with the criteria for all-party settlements set forth in D.92-12-019 (46 CPUC2d 538).

¹² All references to Rules are to the Commission's Rules of Practice and Procedure unless otherwise noted.