IV. Discussion

Settling Parties urge the Commission to adopt the Settlement Agreement pursuant to Rule 12.1(d) and find that it is "reasonable in light of the whole record, consistent with the law, and in the public interest."

The Settlement Agreement was reached after opposing parties were able to assess the strengths and weaknesses of their respective cases. As the Settling Parties explain, the QF Switcher and Remand Disputes have been the subject of extensive briefing in numerous pleadings by QFs, PG&E, and customer advocates during the past several years. Settling Parties point out that it is a strong measure of the reasonableness of the settlement that these parties, who vigorously disputed both issues the Settlement Agreement would resolve, have now agreed to the proposed compromise.

Second, the Settlement Agreement is consistent with the law. Settling Parties assert that the Settlement Agreement's resolution of the QF Switcher Dispute is within the Commission's power to resolve. We agree. Although the Federal Energy Regulatory Commission (FERC) found that energy prices paid during the true-up period were unreasonable and unjust,17 the prices paid to QF Switchers have not been the subject of FERC's orders because the QF Switchers sold their power directly to utilities at the PX market prices pursuant to the state's jurisdictional pricing regime. In addition, resolution of the Remand Dispute is clearly within this Commission's power to resolve as expressed by the Court of Appeal.

Approval of the Settlement Agreement is in the public interest as it resolves the QF Switcher and Remand Disputes and provides benefits to PG&E's electric customers. As the Commission has stated, to decide whether a settlement is in the public interest:

we consider individual elements of the settlement in order to determine whether the settlement generally balances the various interests at stake as well as to assure that each element is consistent with our policy objectives and the law.18

The Settlement Agreement is a compromise of these two difficult and complex issues contested by and among PG&E, TURN, DRA and the Indicated QF Switchers. As a result of the settlement of these long-standing disputes, ratepayers will receive, for pre-determined prospective periods, an explicit energy price reduction of $1.50/MWh (or negotiated lump-sum payments) for PG&E's claims arising from the QF Switcher and Remand Disputes as discussed above. Furthermore, PG&E should be authorized to fully recover in rates all payments made pursuant to the Settlement Agreement, subject to our review of the reasonableness of PG&E's administration of the Settlement Agreement.

Finally, the Settlement Agreement is in the public interest because it will avoid a potentially long and expensive litigation of the QF Switcher and Remand Disputes pertaining to the Indicated QF Switchers. Conducting further proceedings, including evidentiary hearings, and filing of briefs would consume resources of the Commission and the parties.

The Settling Parties request that the Settlement Agreement apply to the non-participating QF Switchers.

The Motion and Settlement Agreement was served on both participating and non-participating QF Switchers. No responses to the Motion were received.

We have reviewed the Settlement Agreement and find that it is reasonable. Because the Settlement Agreement is a reasonable resolution of the QF Switcher and Remand Disputes, and no non-participating QF Switchers have objected to the recommendation of Settling Parties, it is reasonable to apply the terms of the settlement to non-participating QF Switchers.

17 See, San Diego Gas and Electric Company, et al. (2000) 93 FERC para. 61,21.

18 D.96-01-011, 64 CPUC2d, 241, 267, citing D.94-04-088.

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