Settlement Discussion

The settling parties have tendered a "contested settlement" as defined in the Commission's Rules of Practice and Procedure, Rule 51(e), i.e., a "... settlement that is opposed in whole or part, as provided in this article, by any of the parties to the proceeding in which such stipulation or settlement is proposed for adoption by the Commission." Rule 51.1(e) requires that settlement agreements be reasonable in light of the whole record, consistent with law, and in the public interest. This settlement is tendered pursuant to Rule 51, and it is under this standard of review set forth in Rule 51.1(e) that we will evaluate it.

Each of the parties spent considerable time and effort conducting discovery, analyzing the others' showings on marginal cost, revenue allocation and rate design, and examining the technical, policy and legal issues central to this proceeding. Each prepared and served extensive written testimony and exhibits setting forth and supporting its position before evidentiary hearings began. That prepared material was admitted into the record, and it shows that all of the parties to have been vigorous and capable advocates on behalf of their constituencies.

The active parties in the proceeding are representative of the stakeholders in the matter before us, and each has ably and vigorously pursued the interests of its constituencies. The settlement sets forth the parties' initial positions on the important issues, and explains the agreed-upon outcomes in detail sufficient to allow the settlement to be implemented. For the single issue on which the settling parties still had a difference, interpretation of AB1X, they stated their positions and agreed to abide by the Commission's decision. The Commission subsequently did reach a decision and issue an order in that matter in another proceeding, as explained in the next section. The settling parties presented a panel of expert witnesses to explain and defend their agreed outcome to the one settled issue that was contested by a non-settling party: the proposed inter-class revenue requirement allocations contested by FEA.

The settling parties have developed a record that supports their proposed agreement. We have reviewed the settlement they propose and conclude that it is reasonable in light of the whole record.

FEA charges that the settling parties have failed to support their proposed inter-class revenue allocation, and have therefore failed to sustain the legal burden for adopting a settlement. We disagree. As we described in the previous section, we have a clear and sufficient record as to the purpose, the levels, and the effects of the settlement's proposed allocations. After examining that record, we concluded that the inter-class revenue requirement allocations the settlement produces, including the caps and floors, are reasonable. FEA's charge is without merit.

We have considered all of the settlement's provisions individually and as part of the whole, and we have examined FEA's objection to settlement Section 2 specifically. No provision of the settlement is in violation of any statute or Commission decision or rule.

The public interest will be served by moderate rate changes across customer classes and moving rates toward costs. The revenue allocation and rate design template the settlement provides to implement our forthcoming cost of service determination in SDG&E's A.02-12-028 will accomplish that.

We thus conclude that the settlement meets the requirements of Rule 51.1(e) in that it is reasonable in light of the whole record, consistent with law, and in the public interest. We adopt the outcomes the settling parties have agreed on. Under Rule 51.1(a), those outcomes and the methods the settling parties have used to develop them are not to be considered precedential in future Commission proceedings. We examine the single issue on which they did not agree in the section that follows.