VIII. Reasonableness of Requested
Compensation

Aglet seeks $9,138⁹ in compensation for its participation in this proceeding, approximately $2,500 below its $11,650 NOI budget. API seeks $37,251¹⁰ in compensation for its participation in this proceeding, approximately $250 below its $37,500 NOI budget. The following table summarizes the compensation request of Aglet and of API.

Activity	Aglet	API
Fees	$ 8,657	$ 36, 576
Costs	481	675
Total Request	$ 9,138	$ 37,251

In D.98-04-059, the Commission adopted a requirement that a customer demonstrate his or her participation was "productive," as that term is used in § 1801.3, where the Legislature gave the Commission guidance on program administration. In that decision, we discussed the requirement that participation must be productive in the sense that the costs of participation should bear a reasonable relationship to the benefits realized through such participation. Customers are directed to demonstrate productivity by assigning a reasonable dollar value to the benefits of their participation to ratepayers. This exercise assists us in determining the reasonableness of the request and in avoiding unproductive participation.

D. Aglet

Aglet does not determine the dollar impact of its showing in this proceeding. However, because its testimony contributed to establishing the subjective ROE range from 11.40% to 10.60% and because Sierra's authorized ROE has decreased from 11.60% to 10.80%, Aglet contends that it contributed to Sierra's resulting $520,000 decrease in annual revenue requirement. Aglet also contends that it saved Sierra's ratepayers approximately $27,000 because D.00-12-062 adopted Aglet's recommendation to adopt an earlier effective date for Sierra's revenue requirement. Aglet identified, but did not quantify, its contribution to the ratepayer benefits of the ATM, which streamlines Sierra's regulatory process and reduces future litigation costs for all parties. Considering these factors, we find that Aglet's participation was productive.

We turn to the reasonableness of Aglet's requested time and costs. The following table summarizes the fees requested for the professional and other work (travel, preparation of compensation request) performed by Weil.

Time	Hours x Rate = Amount
Professional	28.1 $220 $ 6,182
Other	22.5 110 2,475
Total Fees	$ 8,657

Aglet maintained a detailed summary of time spent by its Director (James Weil) with hours broken down by date, major activity, and description of work. Aglet is seeking compensation for time spent by Weil during 2000 and 2001. To facilitate a detailed review of its fee request, Aglet provided a summary of the 34.6 professional hours Weil spent on major issues in this proceeding. The major issues were identified as small utility ROE premium, PBR, ATM, implementation, corrections and minor revisions, other issues, and general work.

Aglet reduced the 34.6 professional hours by 6.5 hours (to 28.1 hours) due to the Commission's partial rejection of Aglet's positions on major issues. These voluntary reductions consisted of 20%, or 4.5 hours, of Weil's time on the small utility ROE premium, ATM, and implementation, and 40%, or two hours, of Weil's time spent on other issues. The 22.5 hours included in "other" time consist of approximately 12 hours spent traveling to hearings and meetings and 10.5 hours preparing Aglet's compensation request and reply to Sierra's opposition. The following table summarizes Weil's claim for professional time by category.

Issue	Hours
ROE	4.7
PBR	2.0
ATM	10.3
Implementation	3.4
Corrections	3.5
Other Issues	2.9
General Work	1.3
Total Hours	28.1

Our prior discussion of Aglet's substantial contribution and productivity substantiate that Aglet's hours are reasonable. Aglet has adjusted its claim for issues on which it did not prevail. We will compensate Aglet for all time claimed.

Aglet is seeking a $220 hourly rate for the professional time that Weil spent on this proceeding. Consistent with Commission precedent, Aglet seeks $110, half the 2000 requested hourly rate, for time spent by Weil traveling between his offices and the Commission's offices, and for time he spent preparing Aglet's compensation request.

Section 1806 requires our compensation awards to consider the market rates paid to persons of comparable training and expertise offering similar services. The compensation awarded may not, in any case, exceed the comparable market rate for services paid by the Commission or by the public utility, whichever is greater, to persons of comparable training and experience who are offering similar services. The hourly rate requested by Aglet for Weil in this proceeding is the same rate found reasonable for Weil in 2000 by the Commission in D.00-07-015, D.00-07-047, and D.00-11-002, and we will use that rate here.

Aglet seeks $481 for costs incurred as a result of its participation in this proceeding. Approximately $313 is for copies and postage; the remaining $168 is for bridge toll, parking, and mileage reimbursement. These costs represent approximately 5.00% of Aglet's total compensation request and below its $650 NOI budget for such costs. Aglet has adequately substantiated its costs and should be compensated for the full $481.

E. API

API believes that an objective dollar value for the benefits of its participation to ratepayers cannot be determined. However, API believes that its financial modeling reinforced the showing ORA and to a lesser extent Aglet in prevailing on the allowable ROE.

The record provides adequate information for us to determine that API productively participated in this proceeding. For example, API's testimony was used to establish a reasonable ROE for Sierra, and its PBR testimony was useful, given Sierra's attempt to relitigate an issue rejected in prior cost of capital proceedings.

We turn to the reasonableness of API's requested time and costs. Here, we find that much of the time is unreasonable, and should be disallowed, as we discuss later. The following table summarizes the fees requested by API for witnesses Knecht and Czahar in this proceeding.

Individual Fees	Time	Hours x Rate = Amount
Knecht	Professional Other	81.8 $220 $ 17,996 29.9 110 3,289
Czahar	Professional	69.5 220 15,291
Total Fees		$ 36,576

API maintained detailed records of the time Knecht and Czahar spent in this proceeding with hours broken down by date and general description of work. API also provided an estimate of time spent on major issues consisting of ATM, modeling, risk factors, ROE, interest rates, and general work. General work included activities applicable to API's initial review, discovery requests, attendance at the PHC and hearings, and general pleadings. API first allocated its professional hours between the time it spent on general work and the substantive issues. API treated some of the substantive issues in the aggregate because it could not separate its time spent on the ROE issue from other issues, such as modeling and risk. The following table summarizes API's professional hours.

	Hours
Issue	Knecht	Czahar	Total
ATM	2.0	0.0	2.0
Modeling	18.2	46.9	65.1
Risk Factors	18.3	10.3	28.6
ROE	18.3	10.3	28.6
Interest Rates	2.0	1.0	3.0
General Work	23.0	1.0	24.0
Total Hours			151.3

Under § 1802(h), the Commission may award compensation for all reasonable advocate's fees for preparing or presenting a contention or recommendation when the customer's participation results in a substantial contribution even if the decision adopts that customer's contention or recommendation only in part. Many of API's claimed hours do meet the standard set in § 1802(h).

First, API's position on ATM was not adopted in whole or in part. Thus, the time spent by API on this issue (two hours) shall be disallowed.

Second, API spent approximately 122 of its 151 hours, or 80%, on modeling, risk factors, and ROE issues. While API made a substantial contribution on these issues, much of its related testimony and the underlying model runs were cumulative and excessive. Ratepayers should not have to pay for these unreasonable hours.

Specifically, a review of API's testimony and the record shows that API ran approximately 30 variations of its ROE models. This is substantially more than the 11 variations ran by Sierra and three by ORA. API then revised its financial models and ROE direct testimony in its September 6, 2000 rebuttal testimony. The revisions consisted of eliminating four utilities with too few historic data points from its RP and retention-ratio DCF methods, adding a net-of-tax income component in its RP, updating the results of its various financial models to reflect July 1, 2000 data for all variables except its 10 years of daily betas,¹¹ and switching its DCF initial prices from the four Thursdays in July 2000 to the first price quote in July 2000. These adjustments resulted in API recommending an increase in its recommended ROE for Sierra from 10.4% to 10.5%, which is 10 basis points l ower than ORA and Aglet's recommended 10.6%.

Undoubtedly, financial modeling was a proper way to assess the reasonableness of Sierra's requested ROE.¹² But how much modeling is necessary to make API's case, or justifiable in light of Sierra's small size (just over 44,000 California customers)? We need not determine what is the minimal modeling effort in order to find that the extent of time API claims (122 hours) in preparing and presenting, correcting, updating, and testifying on its numerous financial models, risks factors and recommended ROE is excessive. The number of hours consumed is particularly surprising, given that API's experts have a great deal of prior experience with precisely these issues in proceedings before this and other utility commissions.

We observe that ORA and Aglet recommended a similar ROE for Sierra but needed far less effort than API to support their recommendation. For example, Aglet, the non-modeling intervenor, spent only seven hours on this issue in comparison to API's 122 hours. Of the parties using financial modeling, ORA utilized three models, far fewer than API's multiple models. API also redid much of its modeling, ostensibly to incorporate more recent data or to correct errors, yet this additional modeling had almost no impact on API's recommendation. We find that API's modeling efforts greatly exceeded what was necessary and appropriate to support its recommendation.

In light of these considerations, we will allow API to recover 61 hours, or half, of its 122 professional time allocated to Sierra's modeling, risk, and ROE issues. API should be compensated for all remaining professional hours. In sum, API should be compensated for 88.3 professional hours (151.3 less 2 ATM hours and less 61.0 modeling, risk factors and ROE hours).

API also seeks compensation for 29.9 hours of other time spent in this proceeding. This time includes 12 hours¹³ for API's travel time to file and serve documents. The remaining 17.9 hours consist of nine hours spent traveling to hearings and meetings, and 8.9 hours on preparation of the compensation request and the reply and serving of a reply to Sierra's opposition.

The 12 hours spent in delivering documents and testimony should be excluded from any compensation award. There are more reasonable and efficient ways for API to deliver data and testimony, such as delivery services and electronic mail. However, in recognition that costs would be incurred in using the various delivery services available to API, we will allow API to recover its requested mileage included in its costs. This leaves 17.9 hours of indirect time eligible for compensation, of which 5.5 hours represent work performed in 2001

The $220 hourly rate requested by API for Knecht and Czahar is $45 higher than the $175 hourly rate awarded to them in D.00-07-013 for work performed in 1998 and 1999. API explains that the $175 rate was lower than its requested $200 rate in that proceeding because API did not sufficiently address its productive participation in that proceeding and did not allocate its hours by issue. API has remedied those defects in its current request for compensation, so API contends that the only remaining issue is whether its hourly rate should be increased from $200 for work performed in 1998 and 1999 to $220 for its work performed in this proceeding in 2000 and 2001. API says its requested $220 hourly rate is the going rate for similar professional work, as indicated by the rate awarded Aglet in D.00-07-013 for work performed by Weil in 2000.

In D.01-10-024, we addressed a request by Knecht and Czahar for hourly rates for work performed in 2000. In that decision, page 12, we found that their experience and training are comparable to that of Weil who was compensated $220/hour in 2000. However, D.01-10-024 found that because of their specific performance in that proceeding, including procedural problems and failure to follow regulations and rulings, the rate awarded should be reduced to $190/hour for their 2000 work.

Here we assess the specific performance of Knecht and Czahar in this proceeding, also for work performed in 2000, to determine whether they have cured the problems identified in D.01-10-024 and can be compensated at the $220/hour level that their experience and training should warrant. We again have found procedural and substantive problems with their participation. For example, API made a defective NOI showing (see Section IV.B above) and failed to make the productivity showing required by § 1801.3(f), requiring our staff to perform additional work that should have been completed by the intervenor. For these reasons, we award compensation to Knecht and Czahar based on a $190/hour rate for 2000.¹⁴

Consistent with our rules in D.98-04-059, API reduced its requested $220 hourly rate by half, to $110, for its time spent on travel and preparation of its compensation request. Because API is awarded a $190 hourly rate for its professional time in this proceeding¹⁵ its requested $110 hourly rate for other time should be reduced to $95.

API seeks $675 for associated incurred as a result of its participation in this proceeding. Approximately $346 is for copies and postage; the remaining $329 is for parking and mileage reimbursement. These costs represent less than 2.00% of its total compensation request and below its $1,200 budget for such costs in its NOI. API has adequately substantiated its costs and should be compensated for the full $675.