SDG&E

On July 9, 1999, ORA and SDG&E requested that the Commission adopt a settlement agreement that would resolve or otherwise dispose of all issues raised by ORA in SDG&E's 1998 ATCP. The sole issue in dispute between ORA and SDG&E relates to employee transition costs. SDG&E requests that we find the costs and revenues recorded in its TCBA and related memorandum accounts from January 1, 1998 through June 30, 1998 are reasonable, based on the settlement and the audit adjustments, discussed below.

A. Settlement

ORA was the only active party to dispute any of the entries to SDG&E's TCBA and related memorandum accounts and subaccounts. SDG&E provided testimony stating that the entries to these accounts are reasonable and are in compliance with applicable Commission decisions and various provisions of Assembly Bill (AB) 1890.

ORA disputed SDG&E's request in three areas: Generation Capital Additions Memorandum Account, employee transition costs, and post-retirement benefits other than pensions (PBOPs). ORA objects to the recovery of 1997 capital additions because no decision had been issued on SDG&E's 1997 capital additions application by the time ORA submitted its report. SDG&E now agrees to seek recovery of approved 1997 capital additions in its 1999 ATCP. The PBOPs issue was removed from consideration in this proceeding. No other intervenor submitted testimony on SDG&E's application.

The only remaining issue in dispute is employee transition costs and this is the subject of the proposed settlement. ORA proposed a disallowance of $426,219 of SDG&E's requested $430,219 in employee transition costs. This disputed amount is the amount SDG&E requested as employee transition costs associated with retention contracts for selected employees. ORA and SDG&E now agree that $355,000 is reasonable.

We review this settlement under the settlement rules provided in Rule 51 et seq.³ and the criteria we have developed for all-party settlements. We find that the settlement is reasonable in light of the whole record, consistent with the law, and in the public interest. In D.92-12-019 (46 CPUC2d 538), the Commission set forth criteria for our approval of a proposed all-party settlement:

a. all active parties must sponsor the settlement;

b. the sponsoring parties must be fairly reflective of the affected interests;

c. no term of the proposed settlement can contravene statutory provisions or prior Commission decisions; and

d. the settlement must convey sufficient information to permit us to discharge our future regulatory obligations with respect tot he parties and their interests.

We are pleased that ORA and SDG&E responded to the assigned Commissioner's and ALJ's observation that alternative dispute resolution could be successfully employed in this proceeding. We agree that proceedings such as this ATCP, which address issues that are primarily factual in nature, are likely candidates for the settlement process. We can make all the requisite findings from the record herein.

First, ORA and SDG&E are the only active parties to take positions on SDG&E's application. Second, the sponsoring parties reflect the affected interests. ORA represents all ratepayers and SDG&E represents the interests of both its employees and shareholders. Third, the settlement contravenes no statute or applicable Commission precedent. Fourth, the settlement amply informs the Commission of the circumstances the settlement addresses and the basis on which parties agreed. In this case, the public interest is served because active parties agreed on a mutually beneficial outcome, while representing the major interests in the proceeding. The settlement is a reasonable compromise that fairly serves the interests of SDG&E, its shareholders, customers, and employees. Commission and party resources are freed up and the cost of litigation is avoided.

The settling parties agree that $355,000 associated with employee transition costs is reasonable based on additional information provided during the settlement process. Thus, ORA and SDG&E now agree that $355,000 plus the undisputed amount of $4,000 should be recovered as employee transition costs in the TCBA. These amounts should be subject to the applicable interest calculation at the three-month commercial paper rate. The settlement is set forth in Appendix B.