Proponent's Explanation of Why the Numbers Adopted in the Settlement are Reasonable

At the hearings on November 1, 2000, the ALJ asked the parties to explain why the numbers adopted in the settlement are reasonable. Their responses are summarized as follows:

Applicant:

In the course of negotiations, the parties look at areas where there are disagreements and try to determine the causes of the disagreements. There could be errors or misunderstandings on both sides. The parties then negotiate with the intention of finding a mutually agreeable outcome. The settlement proposes such an outcome.

RRB:

Negotiation is a process of exchanging information. There may be information that was not available at the time RRB prepared its reports. Sometimes information that Applicant may have becomes available to RRB for the first time. Negotiations are a chance for the parties to exchange information and to try to come up with a solution to a problem themselves, rather than going to hearing and having someone else decide the matter for them.

Sometimes, on reflection by the Applicant who files its application at the start of the process and by RRB who files its reports much later, the case takes a different direction based on some key information that is provided during the negotiations.

An additional consideration is that issues can be addressed in several different ways. Forecasting, which involves a fair amount of conjecture, can be approached in several different ways. For example, different types of trends can be used.

On the topic of cost of capital, fair disagreement exists as to what the basic formula is and what the appropriate inputs are.

Through the process of negotiation the parties were able to address the issues. The parties reached the settlement through an exchange of information and ideas that may not have been possible through the hearing process.