VII. Partial Approval of the Stipulation

Rule 51.1(e) of the Commission's Rules of Practice and Procedure says that the Commission will not approve settlements or stipulations, whether contested or uncontested, unless they are reasonable in light of the whole record, consistent with law, and in the public interest.

Applicant and ORA jointly sponsor the stipulation. While not determinative of the stipulation's reasonableness, we note that the stipulation is unopposed. Califarming, Inc. does not oppose it. BIAK's participation in these proceedings does not extend to the issues addressed in this opinion.

ORA's charge in water matters is to represent water utility ratepayers, and it has done so here. Applicant represents its interests and those of its stockholders. Therefore, the parties sponsoring the stipulation are fairly reflective of the affected interests. This factor also tends to support an inference that the stipulation is reasonable.

Finally, the record contains the testimony and reports prepared by Applicant and ORA. These reports address Applicant's results of operations, attrition, rate design, tariff revisions, and cost of capital. The stipulation is the result of subsequent negotiations between Applicant and ORA, and represents their final recommendation to the Commission. It indicates the negotiated result for each significant contested item. The stipulation provides for an outcome that is less than what Applicant initially requested in its application and more than what ORA initially recommended in its reports. The compromises made appear reasonable considering the initial positions and the reasons given for adopting one position or another, or an intermediate position. Considering these factors, together with the lack of opposition to the stipulation and the fact that all the necessary interests were at the bargaining table, we find that the stipulation is reasonable in light of the whole record.

Regarding the lawfulness of the stipulation, Applicant and ORA represent that no term of the stipulation contravenes any statutory provision or any Commission decision. We concur except as regards the proposed rate increases for the Palos Verdes District; we will discuss those increases later.

The record contains a full explanation of the parties' initial positions. In addition, the stipulation includes Applicant and ORA's proposed summary of

earnings for test years 2001 and 2002, the derivation of the attrition allowance for 2003 and 2004, rates for each year, tariff sheets to be put into effect if the stipulation is approved, the underlying adopted quantities, and an explanation of how the 2002, 2003 and 2004 rate increases will be implemented. The record is sufficient for the Commission to determine what the issues are, and how the stipulation resolves them. The stipulation also contains sufficient information to permit the Commission to discharge its future regulatory obligations with respect to the parties and their interests. Therefore, the stipulation recommended by Applicant and ORA is in the public interest except for the proposed rate increases for the Palos Verdes District.

The stipulation, when reviewed as a total product, is reasonable in light of the whole record, consistent with law and in the public interest except for the proposed rate increases for the Palos Verdes District. It will be approved except as discussed below.