6. Objections to the SDG&E Test Year 2008 Settlements
6.1. Summary
UCAN and FEA filed timely objections to the proposed SDG&E Test Year 2008 Settlement and Southern California Generation Coalition objected to the SoCalGas proposed settlement omitting discussion of the revenue requirement associated with the purchase of the Cuyama-Casitas pipeline.25 We address that issue separately without impacting the settlement itself. Additionally, we address concerns by UCAN, FEA and others whose comments question the adoption of the settlement. UCAN presented a jeremiad of concerns, focusing on issues it believes need to be resolved and were excluded from the settlement.
6.2. UCAN's Objections - SDG&E Settlement
We have reviewed UCAN's detailed concerns and find, except as discussed below, that the settlement adequately addresses the litigated issues to derive a reasonable Test Year 2008 forecast for SDG&E. UCAN would have us not consider the proposed settlement under Rules 12.1 through 12.7. UCAN suggests we consider the proposal to be a "joint recommendation." (UCAN Comments, pp. 6-7.) UCAN also cites to the prior rules, Rule 51.1(e), which were subsumed into the new Rule 12. The new settlement rule drops any reference to "stipulations" and neither version (Rule 51 or Rule 12) provide for a "joint recommendation." We find that the settling parties followed the requirements of Rule 12 and the specific requirements of the scoping memo and the ALJ's rulings, including the January 8, 2008 Ruling Adopting Procedural Changes for A Proposed Settlement. As noted elsewhere, parties were encouraged from the start of the proceeding to engage in an inclusive settlement process.
In response to UCAN's comments, SDG&E filed a reply which showed UCAN's recommendations directly led to two major adjustments: first, a series of downward adjustments were made to the SDG&E end-of-litigation position in response to UCAN's litigation positions. This reduced SDG&E's pre-settlement start-point by $14.7 million. (Updated Table from UCAN Data Request 41, Question 35, in SDG&E's Response to ALJ filed February 2, 2008.) Second, SDG&E showed that within the settlement process, SDG&E and DRA specifically identified $17.7 million in downward adjustments as a part of the settlement directly attributed to outstanding UCAN litigation positions. (Ibid.) Thus, we find that there are $32.4 million in adjustments to the settlement revenue requirement directly attributed to UCAN's recommendations, i.e., the benefits are embedded in the settlement. We find that UCAN's positions were given significant weight in the settlement even without UCAN's participation in the final settlement.
UCAN's comments argue for various litigated proposals which it believes would reasonably further reduce the settlement's revenue requirement (after it implicitly accepts the $32.4 million discussed above) without further consideration of the included compromises between DRA and SDG&E. UCAN attached, without analysis or tabulation, a lengthy series of data questions and responses which, it asserts show how the settlement omitted UCAN's positions. But UCAN does not persuade us that the settlement is unfair: we find that the settlement as a whole is reasonable on the record before us and does include substantial compromises which encompass many of UCAN's positions.
UCAN does not explain whether or not the DRA and SDG&E settlement makes any adjustments which may equal or partially offset its list of recommendations. For example, UCAN implies that the settlement ignored a UCAN recommendation to eliminate $1,112,000 in Information Technology (IT) capital costs related to changing SDG&E's customer information and billing systems to accommodate community choice aggregation. (UCAN Comments, pp. 44 and 45.) But the SDG&E response, as included in UCAN's comments, states the settlement includes a combined reduction of $26,877,000 for many 2008 IT projects. DRA originally proposed a total adjustment of $28,746,000 million. UCAN fails to demonstrate that either the settlement still includes specific funding for community choice aggregation or why we should modify the settlement of IT costs by a further $1,100,000.
UCAN has only shown that it believes the revenue requirement should be lower. It has not shown the proposed settlement is not a reasonable compromise even though the compromise is principally between SDG&E and DRA. DRA's positions overlapped, although not completely, the positions of many intervenors. UCAN has not shown that we must discard the settlement and resolve every individual issue in order to adopt just and reasonable rates. UCAN merely argued the settlement "could be prettier, smarter or snazzier" or lower, not that it was unreasonable.
FEA makes a similar argument that the settlement does not explicitly address every issue. SDG&E responds that the settlement addresses, for example, tree trimming, property insurance, and other expenditures that were covered in FEA's testimony. (Joint Reply, p. 2.) Taken as a whole, based on an extensive record, we find the settlement to be reasonable. We are not obliged to individually resolve every litigation position as a potential modification to a settlement and neither TURN nor FEA convince us that the settlement as a whole is unreasonable.
6.3. Southern California Generation Coalition - Cuyama-Casitas Pipeline
The Southern California Generation Coalition points out that the SoCalGas Test Year 2008 settlement does not specifically address the Cuyama-Casitas pipeline which SoCalGas purchased in 2005. Previously, SoCalGas leased the pipeline. SoCalGas filed Advice Letter G-3537 where the company indicated that the projected revenue requirement based on owning the pipeline would be greater than the amount currently in rates based on the cost of leasing the pipeline.
Southern California Generation Coalition argues in its comments that Resolution G-3386, determined that SoCalGas should continue to recover as revenue requirement an amount predicated on leasing the Cuyama-Casitas pipeline in 2005, not a higher revenue requirement associated with SoCalGas owning the pipeline. That is, Southern California Generation Coalition argues the Commission specifically assigned the issue of the reasonableness of SoCalGas' purchase of the Cuyama-Casitas pipeline, and the impact of the purchase on SoCalGas' revenue requirement, to SoCalGas' next (i.e., this) general rate case: "The reasonableness of the purchase and its impact on revenue requirements may be revisited in SoCalGas' next general rate case." Resolution G-3386 at 1 (April 13, 2006). (Southern California Generation Coalition Comments, p. 2.)
SoCalGas states in its reply comments that "while Resolution G-3386 stated that Cuyama-Casitas issues "may" be revisited in this proceeding, it is not necessary to do so in order to establish [SoCalGas'] 2008 revenue requirement." (Joint Reply, p. 3.)
SoCalGas and the settling parties describe the settlement as "a recommended resolution of the revenue requirement of [SoCalGas] for Test Year 2008." (SoCalGas Test Year 2008 Settlement, see Appendix 2, p. 1.) Because the settlement does not adopt a specific component of revenue requirement or rate base for Cuyama-Casitas, it does not explicitly resolve the issue of whether Cuyama-Casitas' revenue requirement should remain set equal to its prior lease or adjusted herein. Rather, as is typical of a settlement, the settlement includes broad categories which may represent compromises between the settling parties on several different underlying points. We do not find that the failure of this settlement to expressly resolve the treatment the Cuyama-Casitas pipeline costs provides any reason to reject the settlement that in the overall compromises it reaches, is reasonable. Thus, the revenue requirement for service on the Cuyama-Casitas pipeline should not be changed as a result of this settlement.
25 "The reasonableness of the purchase and its impact on revenue requirements may be revisited in SoCalGas' next general rate case." Resolution G-3386 at 1 (April 13, 2006).
