VI. Substantial Contribution

Under § 1802(h), a party may make a substantial contribution to a decision in one of several ways. It may offer a factual or legal contention upon which the Commission relied in making a decision, or it may advance a specific policy or procedural recommendation that the ALJ or Commission adopted. A substantial contribution includes evidence or argument that supports part of the decision even if the Commission does not adopt a party's position in total.

A. Aglet

Aglet asserts that it made a substantial contribution to this proceeding because its 10.60% recommended ROE for Sierra contributed to the 11.40% to 10.60% range of reasonableness adopted by the Commission and because the adopted 10.80% ROE is only 20 basis points higher than Aglet's recommendation. By comparison, the authorized ROE is 120 basis points lower than Sierra's requested 12.00% ROE.

Aglet also asserts that the Commission adopted several of its positions in this proceeding. For example, Aglet opposed Sierra's 30 basis point upward ROE adjustments for risks associated with Sierra's proposed performance-based ratemaking (PBR) mechanism and for flotation costs, as discussed on pages 13-16 of D.00-12-062. The Commission agreed with Aglet and rejected Sierra's proposed adjustments.

Aglet contends that the Commission authorized an ATM for Sierra based on evidence and recommendations from Aglet and other parties. Aglet initially opposed adoption of an ATM; however, Aglet believes it contributed to resolution of this issue through its evidence that demonstrated Sierra's annual litigation costs incurred in processing annual cost of capital proceedings are material and can substantially reduce Sierra's California earnings, as discussed on page 24 of D.00-12-062. Aglet further contends that the final decision adopted its recommendation that the unbundling of the Sierra's electric distribution function should be heard in Sierra's next cost of capital proceeding, as set forth in Ordering Paragraph 4 of D.00-12-062.

B. API

Similar to Aglet, API asserts that it made a substantial contribution to this proceeding because the 10.80% ROE adopted for Sierra was close to API's recommended 10.50% ROE. API contends that the Commission relied on its financial-model-based testimony, analytical methods, and risk factors in arriving at a reasonable ROE for Sierra as discussed on pages 17-19 of D.00-12-062.

API also asserts that it made a substantial contribution to the adoption of an ATM, as discussed on pages 22-27 of D.00-12-062, even though API opposed the establishment of an ATM for Sierra and the Commission did not adopt API's views on this matter.

C. Sierra's Opposition

Sierra opposed the compensation requests of Aglet and API on the basis that their participation in this proceeding was duplicative and did not provide necessary inputs for the issuance of a final decision on Sierra's ROE, PBR risk, flotation cost, or ATM.

With respect to the ROE, Sierra contends that the Commission determined that 10.80% was the proper ROE for Sierra based on changes in interest rates over the last 10 years with a 20 basis point deduction to reflect the current downward trend in interest rates. Sierra asserts that Aglet and API's testimony did not add to the ROE testimony of ORA. Sierra believes that Aglet simply added 10 basis points to its recommended ROE for Pacific Gas and Electric Company to arrive at its ROE recommendation, and that API's financial model testimony had no bearing on the Commission's decision in setting a fair ROE. Noting the Commission's statements to the effect that judgment, not the precision of financial models, is the key to selecting a specific ROE estimate within the range predicted by analysis, Sierra asserts that the Commission gave little weight to financial models presented by any of the parties.

With respect to PBR risk and flotation costs, Sierra acknowledges that it knew of the Commission's prior position and policy on these issues but chose to pursue these issues in this proceeding to preserve the issues for the record. Sierra contends that ORA, not the intervenors made the arguments that prevailed on these issues by citing D.94-11-076 (diversifiable risk entitled little weight in the calculation of Sierra's ROE ⁷) and D.92-11-047 (flotation costs excluded from Sierra's ROE).⁸

With respect to the ATM, Sierra contends that the Commission specifically approved the ATM proposed by ORA and agreed to by Sierra while Aglet and API opposed the adoption of an ATM in their initial testimony.

Sierra contends that the residential and small commercial customers represented by Aglet, and residential customers represented by API, are the same customers represented by ORA. Sierra contends that all customer classes benefited from ORA's participation in this proceeding, particularly since there is no rate design issue.

Sierra concludes that the Commission should not make any compensation award in this proceeding because every issued discussed and resolved against Sierra was fully supported by ORA's evidence; evidence introduced by Aglet and API merely duplicated ORA's testimony. This conclusion is based on Sierra's understanding and interpretation of § 1801.3(f) and D.98-04-059. Section 1801.3(f) instructs the Commission to administer the intervenor program "in a manner that avoids unproductive or unnecessary participation that duplicates the participation of similar interests otherwise adequately represented or participation that is not necessary for a fair determination of the proceeding." D.98-04-059 clarified that although the compensation statutes envision that some duplicative participation may still make a substantial contribution, duplicative participation which is unnecessary may not be compensable at all.

D. Replies to Sierra's Opposition

Aglet and API filed replies to Sierra's opposition. They also amended their compensation requests to seek recovery of their time and costs incurred to respond to Sierra's opposition.

1. Aglet

Aglet pointed out that all testimony, briefs, and other pleadings in this proceeding were due and filed concurrently with ORA, and although Aglet communicated with ORA throughout the proceeding, it did not know ORA's positions before serving its own testimony. Aglet concludes from a comparison of its testimony, examination, briefs and comments to the proposed decision that its entire showing contributed to D.00-12-062. For example, Aglet believes that it corrected a factual error in the proposed decision, contributed to implementation details for the adopted ROE and ATM and identified corrections and minor revisions to the proposed decision that differed from ORA.

2. API

API `s reply to Sierra was submitted on April 6, 2001 (one day late) with an accompanying motion explaining that API was not able to timely respond because of its participation in another proceeding. No party will be prejudiced by acceptance of its late response, so the motion is granted.

API says independent financial modeling reinforced ORA's modeling results. Regarding the adopted ROE, API cites page 21 of D.00-12-062 to substantiate that the starting point of the non-Sierra side of the adopted ROE range was the median of the values recommended by API, Aglet, and ORA.

E. Conclusion

The ROE adopted in the final decision was based on the midpoint of Sierra's adjusted 11.40% ROE and other parties' average of 10.60%, as addressed on pages 16-21 of D.00-12-062. Hence, the testimony of Aglet and API was used to establish a reasonable ROE for Sierra.

With respect to PBR risk and flotation costs, it was Sierra that reintroduced these issues into this proceeding after unsuccessfully litigating these issues in prior proceedings. Because Sierra raised these issues, it was reasonable for Aglet and API to address any or both of these issues to protect the interest of the ratepayers that they represent.

Aglet's ratepayer focus was small commercial and residential utility customers, and API's focus was individual residential utility customers. Because ORA's participation in this proceeding was based on a balance of the interest of all customers, including residential, agricultural, small commercial, and large commercial, the active participation of Aglet and API did result in more diverse customer representation than would have occurred had ORA been the only customer representative.

The ATM adopted for Sierra was not solely dependent on the testimony of ORA or identical to the ATM proposed by ORA. To the contrary, Aglet's testimony on the impact of Sierra's litigation costs and earnings from annual cost of capital proceedings was instrumental in deciding whether to adopt an ATM for Sierra, as discussed on page 24 and throughout D.00-12-062. Aglet's testimony was also the basis to fine-tune the adopted ATM, such as the effective date of the ATM, as shown by comparison of the proposed decision, and comments on the proposed decision, to D.00-12-062.

Although D.00-12-062 did not adopt all of Aglet and API's specific factual or legal contentions, and policy or procedural recommendations, the record does substantiate that Aglet and API substantially contributed in setting a reasonable ROE and disallowing PBR risk and flotation costs. Aglet also substantially contributed in establishing an ATM for Sierra. The participation of Aglet and API at times overlapped ORA's but not to such an extent as to be merely duplicative. Aglet and API have satisfied the substantial contribution requirement.