7. Discussion

The timing of our consideration of the RCES issues in Phase 3 of this proceeding comports with the California Legislature's passage of AB 1763, and the implementation of various dynamic pricing options for customers. It is more efficient to address cost recovery for the RCES effort here in this 2011 GRC Phase 3, rather than to consider separate cost recovery for certain elements in a dynamic pricing proceeding and recovery for certain other elements in a GRC Phase 1.

We conclude that the all-party RCES settlement offers a reasonable resolution of the Phase 3 issues before us, and hereby approve it. As a matter of public policy, the Commission favors settlement of disputes if the settlement is fair and reasonable in light of the record. This policy supports worthwhile goals, including reducing the expense of litigation, conserving scarce Commission resources, and allowing parties to reduce the risk that litigation will produce unacceptable results.⁷

The rules for the submission and review of settlements are set forth in Article 12 of the Commission's Rules of Practice and Procedures. The general criteria for Commission approval of settlements are stated in Rule 12.1(d) of the Rules of Practice and Procedure.⁸ Rule 12.1(d) provides that "[t]he 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." The Commission has rejected (or provided for modification of) settlements when these criteria are not met.

We find that the RCES settlement is reasonable in light of the whole record. The RCES settlement constitutes a negotiated arms-length compromise resolving differences among the RCES proposals set forth in the prepared testimony by PG&E and that of DRA, TURN, and CforAT. The RCES settlement incorporates appropriate safeguards to ensure that customers are protected against unreasonable expenditures, and that the RCES is implemented with appropriate scrutiny and oversight.

Contingent upon Commission approval, completion of the SmartMeterTM program roll-out and successful transition of customers to billing using SmartMeterTM interval data, PG&E expects to launch the revised bill during the latter half of 2013.

We conclude that parties to the RCES settlement have appropriately complied with the applicable procedural rules governing notice and submission of the settlements. To qualify as an all-party settlement, the sponsoring parties must show that that the settlement meets the following conditions:

1. The settlement agreement commands the unanimous sponsorship of all active parties to the proceeding;

2. The sponsoring parties are fairly reflective of the affected interests;

3. No term of the settlement contravenes statutory provisions or prior Commission decisions; and

4. The settlement conveys to the Commission sufficient information to permit it to discharge its future regulatory obligations with respect to parties and their interests.

In assessing settlements, we consider individual settlement provisions but, in light of strong public policy favoring settlements, we do not base our conclusion on whether any single provision is necessarily the optimal result. Rather, we determine whether the settlement as a whole produces a just and reasonable outcome.

In assessing the merits of settlements, we consider: (1) the risk, expense, complexity and likely duration of further litigation, (2) whether settlement negotiations were at arms-length, (3) whether major issues were addressed, and (4) whether the parties were adequately represented.⁹ We must be assured that parties to a settlement were able to make informed choices in the settlement process. With respect to whether a settlement agreement is consistent with the law, the Commission must be assured that no term of the settlement agreement contravenes statutory provisions or prior Commission decisions. A settlement that implements or promotes state and Commission policy goals embodied in statutes or Commission decisions would be consistent with the law. To determine whether a settlement agreement is in the public interest, in addition to substantive public interest concerns associated with the circumstances of a particular proceeding, the Commission may inquire into whether a settlement expeditiously resolves issues that otherwise would have been litigated.

In this instance, the parties convened and provided timely notice of a settlement conference (Rule 12.1(b)). PG&E filed a motion for approval of the all-party settlement, and provided a statement of factual and legal considerations adequate to advise the Commission of the scope of the settlement and the grounds on which its adoption is urged (Rule 12.1(a)).

A review of the signatories to the RCES settlement indicates that the sponsoring parties are fairly reflective of the affected interests. The settlement reflects a reasonable arms-length negotiation of Settling Parties' respective divergent litigation positions. DRA, in its role as an advocate for all ratepayers within California, reflects the affected interests of customers who will bear the costs of the RCES program and who will also stand to benefit from an improved bill format. TURN represents the consumer interests of PG&E's residential and small commercial customers. CforAT represents the interests of customers with disabilities, for example, with respect to their special needs for customer outreach and for easy-to-read customer bill information. PG&E represents the interests of utility investors and management in making sure the adopted outcome is operationally and financially feasible.

The settlement avoids the cost of litigation on RCES issues, and conserves scarce resources of parties and the Commission. On balance, we conclude that the RCES settlement offers a reasonable balancing of relevant interests. Considering the length and technical complexity of RCES issues identified in the pre-settlement testimony, and the potential cost of litigating such issues in detail, we conclude that the settlement represents a significant savings of time and resources.

We conclude that the proposed amount of $19.012 million represents a reasonable resolution of parties' disputes regarding the appropriate level of recovery. The pre-settlement differences between PG&E and DRA regarding the appropriate level of costs for RCES are summarized below:

Comparison of RCES Cost Recovery Proposals

(In Thousands of Dollars)

Activity	PG&E Proposal	DRA Proposal	Difference
Customer Inquiry	1,749	177	1,572
Customer Outreach	6,954	1,505	5,449
Billing, Revenue, Credit	1,242	694	548
Online Enablement	30	30
Information Technology	24,151	13,302	10,849
Project Management	609	554	55
Total	$34,735	$16,262	$18,473

The settlement amount of $19.012 million, in comparison with parties' pre-settlement positions, is much closer to the DRA proposal than it is to the PG&E proposal. Based on this comparison of costs, together with parties' agreement that significant improvements can still be achieved at this funding level, we conclude that the settlement amount represents a reasonable resolution of parties' differences.

The terms of the RCES settlement agreement are also consistent with law. The revisions to the Customer Energy Statement will satisfy the requirements of Pub. Util. Code § 739.

The record contains the prepared testimony on RCES issues sponsored by various parties. The settlement agreement contains detailed descriptions regarding the manner in which the RCES provisions are to be implemented.

Based on the record that contains the testimonies of all parties and the settlement provisions, we determine that the RCES settlement conveys sufficient information to permit the Commission to discharge future regulatory obligations. The settlement provides for the procedural vehicle of advice letter filings where parties and the Commission will have a forum in which to analyze in more focused detail the specific manner in which PG&E proposes to implement the measures covered in the adopted settlement.

Under the terms of the settlement, PG&E will revise the RCES to show a graphic representation of cost per tier for gas and electric usage, and to provide a clear definition of baseline. We conclude that including these features in the revised RCES design will promote greater customer awareness of how their behavior affects energy usage. Equipped with this enhanced awareness, customers will be encouraged to explore more ways to conserve energy and to save money on their utility bills. Particularly as the SmartMeterTM program is deployed across more of its service territory, PG&E will increase its ability to read customer meters remotely and on a frequent basis. As a result, PG&E will be able to offer its customers more detailed information on their energy usage, which can increase customer awareness of potential ways to save money by using energy more efficiently. The RCES will serve as an important vehicle for sharing this energy utilization information with customers in a clear and customer-friendly format.

Consistent with Rule 12.1(d), we thus find that the RCES settlement, as set forth in Appendix 1 of this decision, is reasonable in light of the whole record, consistent with law, and in the public interest. Also, the Settling Parties have followed and met the settlement proposal requirements of Rules 12.1(a) and 12.1(b). Accordingly, we approve the RCES settlement in its entirety, and direct PG&E to proceed with its implementation.

⁷ D.92-12-019, 46 CPUC 2d 538, 553.

⁸ Unless otherwise indicated, subsequent rule references are to the Rules of Practice and Procedure.

⁹ Re Pacific Gas & Electric Company, 30 CPUC 2d 189, 222.