VII. Review of the Settlement
Rule 51.1(e) of the Commission's Rules of Practice and Procedure requires that any settlement must be:
1. Reasonable in light of the entire record;
2. Consistent with applicable law; and
3. In the public interest.
The settlement is proposed by CSD and Commonwealth, who are the active parties in this proceeding. The other party, SDG&E, has no objection to the settlement. Therefore, the settlement is unopposed.
Commonwealth represents itself, and CSD represents all ratepayers. The parties are, therefore, reflective of the affected interests.
CSD, with the help of its independent auditors, has completed most of what it intended to do in its investigation and is satisfied that its investigation is sufficient to support the settlement. CSD and Commonwealth state that the settlement is supported by the exhibits and testimony in the record. In the settlement, Commonwealth admits to most of CSD's allegations. As a result, we find that the record is sufficient for us to evaluate the settlement. We also find that the settlement is reasonable in light of the record developed in this proceeding. Specifically, the record shows that all contentions in the investigatory order have been examined and evaluated, with most of the contentions shown to have merit, and to require sanctions as proposed in the settlement.
The fines imposed in the settlement are within statutory requirements. The fines and restitution are appropriate, given the nature of Commonwealth's violations and the need to provide redress to customers. In addition, the settlement is not in violation of any applicable law, or any Commission rule or order. Therefore, we find that the settlement is consistent with applicable law.
The settlement's provision for repayment of all customers who received supplemental bills provides restitution to affected customers. The settlement also provides for payment by Commonwealth of some of the costs incurred by the Commission in this proceeding, and avoids the costs of further litigation. In addition, the settlement provides that Bloom and Mensch will not have any further significant involvement with Commonwealth without the Commission's approval. Therefore, we find that the settlement is in the public interest.
For all the foregoing reasons, we will adopt the settlement.
1. CSD and Commonwealth filed motions for adoption of the settlement on May 3 and 10, 2001.
2. The settlement is unopposed.
3. The parties are reflective of the affected interests.
4. In the settlement, Commonwealth admits to most of CSD's allegations.
5. The record is sufficient for the Commission to evaluate the settlement.
6. The settlement is consistent with the record developed in this proceeding.
7. The fines imposed in the settlement are within statutory requirements.
8. The settlement is not in violation of any law, or any Commission rule or order.
9. The settlement provides restitution to affected customers.
10. The settlement provides for payment by Commonwealth of some of the costs incurred by the Commission in this proceeding, and avoids the costs of further litigation.
11. The settlement provides that Bloom and Mensch will not have any further significant involvement with Commonwealth without the Commission's approval.
1. The settlement is reasonable in light of the entire record, consistent with applicable law, and in the public interest.
2. The settlement should be adopted.
3. In order that Commonwealth may issue refunds to customers as soon as possible, this order should be effective immediately.
IT IS ORDERED that:
1. The motions for adoption of the Settlement Agreement between the Commission's Consumer Services Division and Commonwealth Energy Corporation filed on May 3 and 10, 2001, respectively, are granted.
2. The Settlement Agree ment, included as Attachment A to this decision, is adopted.
3. This proceeding is closed.
This order is effective today.
Dated , at San Francisco, California.
ATTACHMENT A
Page 1
SETTLEMENT AGREEMENT
This Settlement Agreement (Agreement) is entered into by and between Commonwealth Energy Corporation (Commonwealth) and the Consumer Services Division (CSD) of the California Public Utilities Commission (Commission).
WHEREAS, Commonwealth is a California corporation which has registered with Commission as an Electricity Service Provider under Public Utilities Code (Code) § 394, and has been assigned registration number 1092; and
WHEREAS, on June 24, 1999 the Commission issued an Order Instituting Investigation (OII) in docket I.99-06-036; and
WHEREAS, the alleged violations identified in the OII occurred during the period that Frederick M. Bloom served as Chairman and CEO of Commonwealth, ending with Bloom's removal from Commonwealth on or before January 1, 2000 by Commonwealth's Board of Directors; and
WHEREAS, the current management of Commonwealth and CSD desire to resolve all issues related to the past operations and past practices of Commonwealth; and
WHEREAS, Commonwealth and CSD acknowledge that fully contested hearings in the OII would be time-consuming and expensive for all parties, and that the public interest will be served by an order of the Commission approving this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants herein, Commonwealth and CSD through their authorized
ATTACHMENT A
Page 2
representatives who are the signatories hereto, hereby agree to the following provisions of this Agreement as a means of fully resolving all issues between them.
1. Commonwealth agrees to pay the statutory fine of $20,000 per violation of Code § 394(b)(8), for its failure to report, in its registration application, sanctions that had been imposed on its then-President, Chairman and CEO, Fred Bloom, during the last ten (10) years, for seven (7) violations of various consumer protection statutes, for a total of $140,000. The violations triggering the unreported sanctions were committed personally by Bloom prior to his serving as CEO of Commonwealth. Current Commonwealth management has subsequently determined that Bloom was the person who decided that such violations need not be disclosed in Commonwealth's application. Commonwealth admits these seven violations of Code § 394(b)(8) were committed by Mr. Bloom in his capacity as Chairman and CEO. (See Exh. 3.) Commonwealth agrees that, if Bloom returns in any capacity whatsoever, or if former Commonwealth President David Mensch returns as a director, officer, or employee, within Commonwealth or any of its subsidiaries at any time after the adoption of this Agreement, Commonwealth shall immediately file a formal application for re-registration under Code § 394.1(a), disclosing the resumed relationship with either or both of these former officers. Commonwealth further agrees that it will serve a copy of any such application on CSD, as well as filing it with the Commission, and that it will refer in such application to this docket number (I.99-06-036), and to this paragraph of this Agreement. Commonwealth understands and agrees that any such application may
ATTACHMENT A
Page 3
be protested by agency enforcement staff, and that the Commission has jurisdiction and discretion, regardless of whether or not staff files a protest, to grant or deny re-registration.
2. Commonwealth admits that supplemental bills were sent to certain of its customers at Bloom's direction, and that this act was a violation of Code § 394.5, and agrees to pay a fine of $500 for each of the 159 violations documented in the initial Declaration of CSD's Special Agent Rich Chan, for a total of $79,500. The fines shall be paid within 15 days of the adoption of the settlement by the Commission, with a check payable to the Commission for deposit in the General Fund.
3. Commonwealth agrees to repay, to all Commonwealth customers who received a supplemental bill which forms part of the basis of the allegations herein, the amount of such supplemental bill paid by such customers within 90 days of the date of a final order of the Commission approving this Agreement. Commonwealth has estimated that supplemental bills totaling $648,725.23 were mailed to customers; see Exhibit COM-4, p. 2. Such repayment will take the form of either a credit for those customers who paid the supplemental bill and continue as Commonwealth's customers, or the form of a refund for those who paid the supplemental bill but are no longer Commonwealth's customers. To the extent that Commonwealth has already refunded all or a portion of the supplemental billing amount to any customer, this Agreement obligates Commonwealth to pay only the difference between amounts already paid and the entire supplemental bill amount. The Commission's consultant will audit the restitution process, and CSD will petition to re-open this docket if
ATTACHMENT A
Page 4
the audit finds irregularities. Monies represented by returned or undeliverable restitution checks, and by checks which remain uncashed by their stale dates, will be turned over promptly to the State Controller as unclaimed property for the escheat process.
4. Commonwealth agrees to pay the Commission $37,000 in fees owed by the Commission as of April 16, 2001 to its independent auditor, UCM, which assisted CSD in connection with the audit of Commonwealth's billing records in preparation for the hearings which were scheduled to take place on that date.
5. Commonwealth agrees to cooperate fully and freely, should CSD choose, at any future time, to confirm the accuracy of Commonwealth's billing process, through an independent verification of Commonwealth's records. Any billing problems found in this follow-up audit may only be the subject of a separate enforcement proceeding.
6. This written Agreement contains the entire understanding and agreement of Commonwealth and CSD, and supersedes all other written and oral exchanges, or arrangements or negotiations among them or their representatives with respect to the subject matter contained herein and fully resolved hereby; and neither this Agreement, nor any of the terms of this Agreement, may be altered, amended, waived, terminated, discharged or modified, except by a writing properly executed by Commonwealth and agency enforcement staff. CSD agrees that this Agreement is dispositive of all issues that it believes should be pursued in Order Instituting Investigation (I.) 99-06-036
ATTACHMENT A
Page 5
This Agreement resolves and settles all causes of action, claims, disputes, allegations, and demands between CSD and Commonwealth, including:
a. all allegations raised by CSD in its investigative report to the Commission dated June 7, 1999, Exhibits 1 through 3, including the allegations that Commonwealth violated Code § 394.5(a) and Code
§ 394.25(b)(1);b. all allegations raised by CSD in its investigative report to the Commission dated September 21, 1999, Exhibit 4, including the allegation that Commonwealth violated Code § 394(b)(8);
7. By stipulation, all prepared testimony distributed by the parties is accepted into the record as evidence without cross-examination, subject to adoption of this Agreement by the Commission without hearings. In the event that the Commission requires hearings, the parties reserve the right to cross-examine each other's witnesses on the exhibits and prepared testimony distributed as of the date of such hearings, as well as on any other matter on which the Commission may require hearings in this docket.
8. Commonwealth agrees to cooperate fully and freely with CSD, the Commission's Energy Division, and/or any state or federal regulatory or law enforcement agency, in any investigation of the activities of Bloom, during the period he served as an officer of Commonwealth.
ATTACHMENT A
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9. The parties acknowledge the party status of San Diego Gas & Electric Company (SDG&E). SDG&E has reviewed the Agreement, and has advised Commonwealth and CSD that it has no objection to the Commission's adoption of the Agreement.
10. The Commission has advised the Court of Appeals that the Court's mediation is not needed in connection with docket No. G027959.
