III.
AGREEMENT
A. TERMS
A genuine dispute exists between SDG&E and ORA regarding the prudence of SDG&E's electric energy procurement practices, expenses, and operations. Accordingly, the Settling Parties agree to resolve all issues of which each of them is aware pertaining to SDG&E's power purchases for the period July 1, 1999 through February 7, 2001. The Settling Parties regard this Settlement Agreement as a whole, the resolution of which reflects substantial compromise among the parties. The resolved issues are interrelated and consolidated, no issue or term of this Settlement Agreement should be evaluated in isolation.
Each Party urges the Commission to approve this Settlement Agreement and the various compromises that produce it as a fair and reasonable resolution of the issues and a mutually acceptable outcome without the need to resolve material issues. Each Party hereby declares and represents that it has reached this determination, and is executing this Settlement Agreement, after consultation with its own legal counsel. The settled outcome is as follows:
1. The record period for this proceeding covers the period between July 1, 1999 and February 7, 2001.
2. SDG&E agrees to reduce the ERCRSA, which is a subaccount within the Transition Cost Balancing Account (TCBA), by the sum of $100 million as a full, complete, and final resolution of any and all issues associated with SDG&E's electric procurement practices for the period of time between July 1, 1999 and February 7, 2001. This adjustment will be made upon receipt of a final Commission decision approving this settlement.
3. The portion of A.00-10-008 addressing SDG&E's electric procurement practices, as expanded to included the period of time through February 7, 2001, shall be fully and finally resolved by the Commission decision approving this Settlement Agreement, and all ORA proposals for disallowances, audits and other recommendations are denied with prejudice.
4. The Commission's decision approving this Settlement Agreement shall be a final and binding resolution as to the reasonableness or prudence of SDG&E's electric procurement practices from July 1, 1999 through February 7, 2001 for purposes of future years Annual Transition Cost Proceedings or other Commission proceedings pertaining to SDG&E electric procurement activities.
B. OBLIGATION TO PROMOTE APPROVAL
The Settling Parties agree to use their best efforts to propose, support and advocate adoption of this Settlement Agreement by the Commission. The Settling Parties agree to perform diligently, and in good faith, all actions required or implied hereunder, including, but not necessarily limited to, the execution of any other documents required to effectuate the terms of this Settlement Agreement, and the preparation of declarations and exhibits for, and presentation of witnesses at, any required hearings to obtain the approval and adoption of this Settlement Agreement by the Commission. No Party to this Settlement Agreement will contest any aspect of this Settlement Agreement in any proceeding or in any other forum, by contact or communication, whether written or oral (including ex parte communications whether or not reportable under the Commission's Rule of Practice and Procedure) or in any other manner before this Commission.
The Settling Parties further agree that they will use reasonable efforts to provide notice to the other Settling Party that they intend to enter into ex parte discussions with any Commission decision-maker regarding the recommendations contained in this Settlement Agreement, whether reportable under the Commission's Rules of Practice and Procedure, or not. Moreover, the Settling Parties agree to actively and mutually defend this settlement if any other party to the proceeding opposes its adoption. The Settling Parties understand and acknowledge that time is of essence in obtaining the Commission's approval of this Settlement Agreement and that each will extend its best efforts to ensure the expeditious adoption of this Settlement Agreement.
C. PUBLIC INTEREST
The Settling Parties agree jointly by executing and submitting this Settlement Agreement that the relief and final resolution requested herein is just, fair and reasonable, and in the public interest. Each Settling Party presented extensive substantiation of its positions during the negotiations and participated in an informed, expert manner. Approval of this Settlement Agreement will, at a minimum, have the following benefits:
1) Will reduce the ERCRSA undercollection which was to be recovered from SDG&E's customers;
2) Will not result in an increase to SDG&E's rates in order to recover the ERCRSA undercollection;
3) Will help restore the credit and energy markets' confidence in SDG&E's financial health; and
4) Will avoid a potentially long and expensive litigation of issues pertaining to SDG&E electric procurement activities both this year and next, which would consume valuable resources of the Commission and SDG&E and would delay, and possibly prevent, the realization of the benefits listed above.
D. NON-PRECEDENTIAL EFFECT
This Settlement Agreement is not intended by the Settling Parties to be a binding precedent for any future proceeding except to the extent such future proceedings address the issues that have been specifically resolved herein. The Settling Parties have assented to the terms of this Settlement Agreement only for the purpose of arriving at the various compromises embodied in this Settlement Agreement. Each Party expressly reserves its right to advocate, in current and future proceedings, positions, principles, assumptions, arguments and methodologies which may be different than those underlying this Settlement Agreement and the Settling Parties expressly declare that, as provided in Rule 51 of the Commission's Rules of Practice and Procedure, this Settlement Agreement should be not be considered as a precedent for or against them.
E. INDIVISIBILITY
The Settling Parties acknowledge that the positions expressed in this Settlement Agreement were reached after consideration of all positions advanced in the prepared testimony of SDG&E and ORA, as well as a full consideration of procurement activities by SDG&E from September 1, 2000 through February 7, 2001 and numerous proposals offered during the settlement negotiations. This Settlement Agreement embodies compromises of the Settling Parties' positions. No individual term of this Settlement Agreement is assented to by any Party except in consideration of the Settling Parties' assents to all other terms. Thus, the Settlement Agreement is indivisible and each part is interdependent on each and all other parts.
Any Party may withdraw from this Settlement Agreement if the Commission modifies, deletes from, or adds to the disposition of the matters stipulated herein. The Settling Parties agree, however, to negotiate in good faith with regard to any Commission-ordered changes in order to restore the balance of benefits and burdens and to exercise the right to withdraw only if such negotiations are unsuccessful.
F. LIABILITY
The Settling Parties further agree that no signatory to this Settlement Agreement, nor any member of the Staff of the Commission, assumes any personal liability as a result of this Settlement Agreement.
G. GOVERNING LAW
This Settlement Agreement shall be governed by the laws of the State of California (without regard to conflicts of law principles) as to all matters, including, but not limited to, matters of validity, construction, effect, performance and remedies.
H. INTERPRETATION
The section headings contained in this Settlement Agreement are solely for the purpose of reference, are not part of the agreement of the Settling Parties, and shall not in any way affect the meaning or interpretation of this Settlement Agreement. All references in this Settlement Agreement to Sections are to Sections of this Settlement Agreement unless otherwise indicated. Each of the Settling Parties hereto and their respective counsel have contributed to the preparation of this Settlement Agreement. Accordingly, no provision of this Settlement Agreement shall be construed against any Party because that Party or its counsel drafted the provision.
I. NO WAIVER
It is understood and agreed that no failure or delay by any Party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or future exercise thereof or the exercise of any other right, power or privilege.
J. COUNTERPARTS
This Settlement Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
K. EXECUTION
By: /s/ DARWIN FARRAR__________ By: /s/ KEITH W. MELVILLE
Darwin Farrar Office of Ratepayer Advocates California Public Utilities Commission |
Keith W. Melville Jeffrey M. Parrott 101 Ash Street San Diego, CA 92112 (619) 699-5039 (619) 699-5027 (fax) |
August 29, 2001
ATTACHMENT 2
DECLARATION OF STEVE LINSEY
IN SUPPORT OF SETTLEMENT AGREEMENT IN A.00-10-008
1. This declaration addresses ORA's review of SDG&E's electric procurement practices between September 1, 2000 through February 7, 2001. Except where specifically indicated, this declaration refers to that time period. ORA's review was based upon SDG&E data responses to ORA in A.00-10-008, ORA knowledge of SDG&E's bilateral contracting and issuance of an RFP [outside of A.00-10-008], and independent ORA analysis.
2. ORA's discovery in A.00-10-008 extended in several data requests beyond august 31, 2000. This discovery provided information considered by SDG&E management in the fulfillment of it procurement duties. This discovery information contributed significantly to the ability of ORA to sufficiently determine issues related to the period beyond August 2000.
3. ORA performed a simple quantification of the potential disallowance range under two scenarios: hedging 100% of SDG&E's net short position, and hedging the same percentage of net short as Southern California Edison. The scenario involving hedging 100%, which provided a maximum potential disallowance. ORA determined that the potential disallowance was substantial, and varied greatly between the two scenarios.
4. ORA also performed a conceptual review of the issues for a reasonableness review spanning the period from September 1, 2000 through February 7, 2001. ORA determined that while the general issues were similar, there were substantial differences in SDG&E's actual behavior, as well as Commission regulation. Consequently, ORA determined that the detailed rationale that would likely apply to the post-August 2000 period would have several differences. Therefore, ORA would need to make substantial effort to create a case as compelling as that for the period from July 1, 1999 through August 31, 2000.
5. Among the significant issues that would need to be addressed are the following. Only the month of September 2000 was a summer month, and much of ORA's analysis of the pending case was specific to the summer months. In October 2000, SDG&E instituted a comprehensive risk management framework. The absence of such a framework figured prominently in ORA's determination that earlier SDG&E procurement had been unreasonable. ORA had also determined that SDG&E had started more active market monitoring, and attempted to participate in the block forward market beginning toward the end of July/August. The analysis of the post-August 2000 period would also be substantially complicated by the fact that the Commission granted authority for SDG&E to enter into bilateral contracts in October 2000, and SDG&E did in fact do so. ORA determined that there were numerous uncertainties in addressing these issues.
I declare under penalty of perjury that the foregoing is true and correct.
____/s/ STEVE LINSEY____________ __August 31, 2001
Steve Linsey
