Discussion

Article 13.5, Stipulations and Settlements, Rule 51 et seq., applies to proposed settlements. In the ratesetting phase of this proceeding, the settling parties have tendered for our consideration an uncontested settlement as defined in Rule 51(f), i.e., a "... settlement that (1) is filed concurrently by all parties to the proceeding in which such... settlement is proposed for adoption by the Commission, or (2) is not contested by any party to the proceeding within the comment period after service of the ... settlement on all parties to the proceeding." The standard of review set forth in Rule 51.1(e) states that the Commission will not approve settlements, whether contested or uncontested, unless they are reasonable in light of the whole record, consistent with law, and in the public interest.

In preparing for hearings in this proceeding, RRB assigned an auditor and an engineer to investigate Arrowhead's accounting and operations. Each

prepared a report of his findings and presented and defended it in evidentiary hearings. The auditor's report examined operating expenses and deductions from 1994 through 1998, and made specific recommendations related to Arrowhead's accounting and bookkeeping procedures. The engineer inspected the company's facilities and operations, and used the auditor's results where appropriate as a base for his test year ratemaking projections. RRB's reports cover all components of Arrowhead's results of operations, and recommend a rate design and tariff revisions. During its investigation, RRB conducted a public meeting near Arrowhead's service territory at which customers had an opportunity to express their views and have their questions answered. RRB's charge is to represent water utility ratepayers and there is no indication that it has not earnestly upheld that purpose here.

Ratepayers' interests were also well represented by Peters' and Pretzinger's participation. Each indicated he had consulted with and reflected the views of a significant bloc of Arrowhead customers. Each served prepared testimony and defended his recommendations in evidentiary hearings. Peters and Pretzinger approached a solution to Arrowhead's problems differently, and in the end each has aligned himself with the settlement's proposed outcome.

Wanser, in contrast, entered the proceeding midway through the evidentiary hearings, did not claim to have collaborated with other affected customers, presented no evidence and did not testify in defense of her views. She is a party by virtue of having appeared in the prehearing conference for the forthcoming investigatory phase of this consolidated proceeding, and her interest appears to be more in the issues yet to come.

Arrowhead's interests were also competently represented in the proceeding's ratesetting phase. Arrowhead presented prepared exhibits and testimony and called numerous witnesses including the company's

owner/operator, its office manager and its full-charge bookkeeper, each of whom testified at length and introduced into the record evidentiary items relating to his or her areas of responsibility. Arrowhead had clearly prepared itself well to support its requested rate increase.

The settlement's three special provisions relating to memorandum accounts, future earnings, and repair completion notices are reasonably designed to accomplish their goals. The memorandum accounts will ensure that amounts allowed in rates for contract repair work and purchased water are used for those purposes and any variations properly accounted for, thus protecting both the company and its customers. By withholding judgment on the appropriate level of net earnings to include in rates until the record is complete on the investigatory phase issues, the Commission retains flexibility to tailor whatever remedy it deems appropriate. Customers' access to leak repair information can be assured by posting it in Arrowhead's offices rather than requiring individual mailings, and the resulting expense savings will flow immediately to customers through the rates we approve today.

In their motion, the settling parties state that no term of the settlement contravenes any statutory provision or any Commission decision. After examining the settlement carefully, we concur.

We conclude the proposed settlement is reasonable in light of the whole record, consistent with law and in the public interest. It will be approved.

Ordering Paragraph #2 of Resolution W-4167 held Arrowhead's earlier interim increase subject to refund; ordered a program of leak repairs utilizing 30% of Arrowhead's interim revenue increase; and ordered Arrowhead to report quarterly to its customers and Water Division information on system leaks repaired and water saved. Each of those three requirements is superseded by this decision.