3. The Settlement Agreements

Table 1 presents the earnings claims covered by the settlement agreements, by utility and AEAP proceeding. ORA has settled all the outstanding earnings claims of the utilities that relate to the pre-1998 shared-savings incentive mechanism for (non low-income) energy efficiency programs. As indicated in Table 1, this encompasses the third and fourth installments of the earnings claims associated with programs implemented over the 1995-1997 timeframe, as well as the earnings claims associated with measures implemented between 1998 and 2000 that were the result of pre-1998 program commitments.¹⁰

In addition, ORA has settled all the outstanding earnings claims of the utilities that relate to LIEE program activities in this consolidated proceeding. As indicated in Table 1, this encompasses the first and second installments for program year 1999-2003 activities. For years in which the claims are zero, the utility did not meet the minimum performance requirement associated with the incentive mechanism for that year, and therefore, no earnings are requested.

Finally, the settlement agreements cover all outstanding earnings claims associated with the milestone mechanisms in place for the 1999, 2000 and 2001 program years. In the table below, we summarize the outstanding earnings claims and settlement amounts presented in the settlement agreements, by type of incentive mechanism and by utility:¹¹

Outstanding Claims and Proposed Settlement Amounts for Energy Efficiency (EE) and LIEE (millions of nominal dollars, including interest and FF&U)
							Total		Proposed
	Pre-1998 EE		1999-2001 EE		LIEE		Claims		Settlement	Difference
											% claim
PG&E	$171.783		$33.172		$1.702		$206.657		$186.000	$20.657	90%
SCE	$22.883		$21.340		$1.467		$45.690		$42.035	$3.655	92%
SDG&E	$73.308		$9.582		$0.652		$83.542		$73.100	$10.442	88%
SoCalGas	$7.718		$6.581		$2.231		$16.530		$14.300	$2.230	87%
Totals:	$275.692		$70.675		$6.052		$352.419		$315.435	$36.984	90%

As indicated above, the ORA and the utilities are proposing to settle the outstanding earnings claims at approximately 90% of amounts claimed, including interest and franchise fees and uncollectibles (FF&U).¹² While the settlement agreements would obviate the need for the Commission to further review these outstanding claims, they would still require the utilities to perform all measurement and evaluation studies required by previous Commission decisions for prior program years, in order to inform future program and resource planning.

The settlement agreements call for amortizing these earnings claims over time or consolidating them with other rate changes, in order to minimize or completely eliminate the need for any rate increases.¹³ The utilities have also clarified that no additional interest will accrue as these amounts are amortized for rate recovery purposes.¹⁴

In presenting the settlements to the Commission, ORA and each of the utilities argue that the pending AEAP proceedings establish a large, detailed and consistent record justifying the total AEAP incentive payments for prior program years. However, they also recognize that some of the AEAP claims have been pending for nearly five years, and at least six more years will pass before the last AEAP claims will be resolved under the adopted installment schedule. To save the time and expense of further regulatory proceedings, to gain the benefit of the time value of money be collecting some incentives before their scheduled recovery period, and to reflect the uncertainty of whatever may happen in the next six years, ORA and the utilities believe that it is reasonable to settle the outstanding claims as proposed. Moreover, they argue that settling these matters will allow the Commission to call a "clean end" to the various and complicated current and future shareholder earnings claims that would be made under already approved Commission mechanisms.