5. Uncontested Settlement Agreements

5.1. All-Party Settlements

We agree with the Settling Parties' assertions that the MCRA settlement and five rate design settlements are all party settlements. Each settlement was signed and endorsed by each and all of the parties that provided testimony on that particular settlement's subject matter.⁸ While participation in each of the settlements varied depending on parties' specific interests, a review of the signatories to each of the settlements indicates that the sponsoring parties are fairly reflective of the affected interests. Also, as discussed below, the settlements are consistent with law. Finally, based on the record that contains the testimonies of all parties and the settlement provisions regarding the timing of rate changes and the manner of implementing rate changes between GRCs, we determine that the settlements convey sufficient information to permit the Commission to discharge future regulatory obligations.

5.2. Reasonableness in Light of the Record

The MCRA settlement is an uncontested all-party settlement. In total there were 22 parties participating in negotiations related to the MCRA settlement, with representation for all affected rate classes. While there were a number of differences in the marginal costs and revenue allocations proposed by the various parties in prepared testimonies, settlement appears to provide a reasonable compromise of parties' positions in developing marginal costs and calculating revenue allocation for this proceeding. The settlement does not adopt any of the Settling Parties' marginal cost principles or proposals, but the Settling Parties do agree that it is reasonable for the Commission to approve the marginal costs in the settlement for the purposes of establishing unit costs in the development of revenue allocation and rate design in this proceeding and for customer-specific contract rate floors for customer retention and attraction.

By the EPMC revenue allocation, the revenue requirement is allocated proportionately to the various rate classes based on the marginal costs, or a certain percentage of the marginal costs, of each class. The Commission's general policy goal is full or 100% EPMC revenue allocation for all rate classes.⁹ Consistent with this policy, the settlement moves the allocation of revenues to the various customer classes to more closely reflect full marginal costs on an EPMC basis. The following table shows the present revenue allocation and the settlement proposed revenue allocation, each with the associated percentages of EPMC.

REVENUE ALLOCATION SUMMARY
(Revenue in Thousands of Dollars)
	Full EPMC		Present	% of		Settlement	% of
Bundled	Revenue		Revenue	Full EPMC		Revenue	Full EPMC
Residential	$4,846,274		$4,667,646	96.31%		$4,798,987	99.02%
Small L&P	1,395,156		1,328,011	95.19%		1,402,254	100.51%
Medium L&P	1,635,253		1,784,596	109.13%		1,695,207	103.67%
Schedule E-19	1,084,588		1,218,790	112.37%		1,115,054	102.81%
Streetlights	62,066		69,413	111.84%		63,166	101.77%
Standby	30,693		29,823	97.16%		30,689	99.99%
Agriculture	632,012		565,022	89.40%		587,570	92.97%
Schedule E-20	1,064,023		1,103,240	103.69%		1,060,222	99.64%
Total Bundled	$10,750,066		$10,766,541	100.15%		$10,753,149	100.03%
Direct Access
Residential	$4,029		$4,102	101.81%		$4,021	99.82%
Small L&P	6,835		5,887	86.13%		6,807	99.59%
Medium L&P	71,928		67,124	93.32%		71,847	99.89%
Schedule E-19	66,223		69,221	104.53%		67,432	101.83%
Agriculture	2,693		2,960	109.90%		2,794	103.75%
Schedule E-20	117,423		104,726	89.19%		113,781	96.90%
FPP	4,403		3,086	70.08%		3,791	86.08%
Total Direct Access	$273,533		$257,106	93.99%		$270,473	98.88%
Total Bundled & DA	$11,023,599		$11,023,647	100.00%		$11,023,622	100.00%

As can be seen from the table, the MCRA settlement proposal makes significant progress towards 100% EPMC revenue allocation for all rate classes. We find the settlement revenue allocation proposal to be reasonable.

The rate design settlements for each of the customer classes provide principles for developing the various rate tariffs from which customer bills will be calculated. Illustrative rates based on the revenue allocations included in the MCRA Settlement are provided. While rate design is an extremely complex process, compared to the number of marginal cost and revenue allocation issues identified in and addressed in the MCRA settlement, the number of identified rate design issues was small.

The residential, streetlight, SLP, MLLP and agricultural rate design settlements are all-party settlements. Each settlement included participation and agreement from each of the parties that prepared testimony related to the particular customer class being addressed.¹⁰ There is no opposition to any of these five rate design settlements. We note that all parties had the opportunity to review the results of other settlements for impacts on their interests, and no party objects to any of the settlements being discussed here.

Based on the evidentiary record of this proceeding, principally prepared testimonies, and the all-party status of the settlements, we find that each of the five rate design settlements fairly resolves identified issues and is reasonable.

5.3. Consistency with Law

We agree with the Settling Parties' assertion that the MCRA settlement agreement and each of the five rate design agreements are consistent with law. The process for conducting these settlements was in accordance with Article 12 of the Rules of Practice and Procedure. Further, there are no allegations, and we do not detect, that any element of the MCRA or five rate design settlements is inconsistent in any way with Public Utilities Code Sections, Commission decisions, or the law in general.

We do note certain consistencies such as conformance to the AB 1X residential rate restrictions; consistency with Section 2851(d)(2) which requires CSI costs to be imposed on all customers not participating in the California CARE or FERA programs, including those residential customers subject to the rate cap for existing baseline quantities or usage up to 130% of existing baseline quantities of electricity; the phase-in of full cost streetlight rates for the City and County of San Francisco, consistent with prior Commission directives (Resolution E-3203 and D.93-06-087); and the development of revised Schedules E-6 and EL-6 to fulfill the requirements of Section 2851(a)(4), requiring "a time-variant tariff that creates the maximum incentive for ratepayers to install solar systems..."¹¹

5.4. The Public Interest

We agree with the Settling Parties' assertion that the MCRA settlement agreement and each of the five rate design agreements are in the public interest. There are no allegations, and we do not detect, that any element of the MCRA or five rate design settlements is inconsistent in any way with the public interest.

The settlements are reasonable compromises of Settling Parties' respective litigation positions. The settlements avoid the cost of further litigation, and conserve scarce resources of parties and the Commission. It was important to get marginal costs revised in this proceeding because they had not been revised and adopted by the Commission since 1993. The settled revenue allocation moderates potentially harsh bill impacts while better aligning rates with costs. Also as stated earlier, Schedules E-6 and EL-6 provide a time-variant tariff that creates the incentives for ratepayers to install solar systems.

5.5. Annual Reports to Provide Information on Marginal Costs Are Unnecessary

Merced ID and Modesto ID (collectively, the Districts) filed comments on the proposed MCRA settlement. Merced ID and Modesto ID are both customers of PG&E and competitors in the provision of electric services to customers in California's central valley, and as such have an interest in the matters addressed in the Settlement Agreement. While the Districts do not oppose the Settlement Agreement, they indicate they were not able to participate as settling parties because of competitive concerns regarding PG&E's calculation of distribution marginal costs.

PG&E's location-specific distribution marginal cost approach was first litigated and adopted in Phase 2 of PG&E's 1993 GRC and has remained in place to date. In this proceeding, PG&E continues to use location-specific marginal costs. The Districts understand that PG&E's marginal distribution capacity cost approach in this proceeding is consistent with past practice and have not raised this as an issue in this proceeding. However, the Districts are concerned that this approach is outmoded and does not accurately reflect PG&E's current approach to evaluating and implementing new distribution projects within its overall system.

The Districts recommend that PG&E be required to submit annual reports describing in detail the location of distribution projects undertaken during the year, the cost of each project and the portion(s) of its territory the project is intended to serve. That information could then be used in an appropriate future proceeding to determine whether it is appropriate to calculate distribution marginal capacity costs on a system-wide, rather than division, basis.

According to PG&E, it already provides the data requested by the Districts in its GRCs, it will provide the same information in its next GRC, and there is no need for the Commission to impose an additional annual reporting requirement on PG&E that will provide no tangible value. PG&E states that if the Commission were interested in reconsidering location-specific versus system-wide distribution marginal cost methodologies, the Commission has many years of historic data to rely on. Also, if the Districts wish to raise this issue in future GRC Phase 2 or other proceedings, the Districts or Commission could also request more updated information from the utilities at that time, instead of requiring annual reports in between rate proceedings.

We agree with PG&E on the need to file annual reports on marginal costs. For GRCs, in general, there may be a number of issues that rely on the analysis of detailed historic data. To require annual reporting of such information for costs or methodologies that might be at issue in future proceedings is not an efficient procedure. PG&E has provided evidence that the necessary information identified by the Districts is available in its workpapers, and the amount of information is substantial.¹² Going forward, PG&E should continue to maintain the same detailed information describing the location of distribution projects undertaken during the year, the cost of the each project and the portion(s) of its territory the project is intended to serve. If needed in future proceedings that might consider the issue of location-specific versus system-wide marginal cost methodologies, this information will be available, if not in workpapers then through data requests. This procedure is reasonable, and we will not require PG&E to file annual reports.

⁸ Merced Irrigation District (Merced ID) and Modesto Irrigation District (Modesto ID) filed comments on the MCRA settlement, requesting certain marginal cost reporting requirements for PG&E to provide information that may be of use in future proceedings. The manner in which information should be reported for future proceedings is not addressed by the MCRA settlement. Also, neither Merced ID nor Modesto ID filed testimony in this proceeding, and they indicate they do not oppose the MCRA settlement. For these reasons, we consider the MCRA settlement to be an all-party settlement, even though Merced ID and Modesto ID were not sponsors.

⁹ See D.82-12-113 (10 CPUC 2d 512), D.83-12-065 (13 CPUC 2d 619), D.83-12-068 (14 CPUC 2d 15), and D.84-12-068 (16 CPUC 2d 721).

¹⁰ CAL SEIA, DRA, PG&E, PV Now, TURN, Vote Solar, and WMA are signatories to the residential rate design settlement.

CAL-SLA and PG&E are signatories to the streetlight rate design settlement.

CAL-SLA, CAL SEIA, DRA, PG&E, PV Now, TURN, and Vote Solar are signatories to the small light & power rate design settlement

BOMA, CLECA, CLFP, CMTA, CRA, CAC, DACC, EPUC, EUF, FEA, ICP, and PG&E, are signatories to the medium and large light & power rate design settlement.

AECA, CFBF, CRM, CAC, EPUC and PG&E are signatories to the agricultural rate design settlement.

¹¹ Since the settlement agreements were filed with the Commission, the Legislature passed Assembly Bill 1714, amending SB 1 to allow the Commission to delay the requirement that CSI customers take time variant pricing "until the effective date of the rates subject to the next general rate case of the state's three largest electrical corporations, scheduled to be completed after January 1, 2009." (See Pub. Util. Code § 2851(a)(4)(B).) In Decision 07-06-014, Opinion Modifying Decision 06-12-033 Regarding Time Variant Pricing Requirements (at p. 10), the Commission adopted such a delay. Accordingly, while the Settling Parties endorsed the schedules set forth in the Residential and Small Light and Power Agreements as being compliant with the time-variant requirement of Public Utilities Code Section 2851(a)(4), PG&E acknowledges that customers will not be required to take service on these time-variant rate schedules in order to receive CSI incentives until the first general rate case with rates effective after January 1, 2009. All the Settling Parties endorse and support PG&E's acknowledgement.

¹² Information contained in exhibits 23, 24, 25, and 26.