The Settlement Agreement is in the Public Interest

As stated previously, the settlement results in significant benefits to SCWC's electric customers. SCWC customers will also realize the benefit of a fixed amortization rate rather than an increase in the amortization rate that would otherwise be required to amortize the substantial undercollection in the PPAC Balancing Account. While this means the amortization rate is in place for a longer period, this will help reduce the severity of rate increases.

We also encourage SCWC to pursue its complaint against Mirant at FERC in order to obtain additional benefits for ratepayers.

The Settlement Agreement also provides that SCWC will not increase its water utility rates in 2002 for the previously authorized step and attrition amount of $600,000. Although this is an unusual provision for an electric energy settlement, nevertheless it is a benefit for SCWC's water utility customers. SCWC explains that this benefit is a result of its cash conservation program to fund BVECSA operations. Due to the cash conservation program, SCWC is unable to meet certain pro-forma earnings test requirements and is unable to increase rates for SCWC water utilities. Accordingly, Settling Parties agreed to include this benefit in the Settlement Agreement. As explained by ORA this is a benefit that will accrue to water utility customers specifically, but nevertheless is a benefit for another segment of ratepayers represented by ORA.

Finally, the Settlement Agreement is in the public interest because it will avoid a potentially long and expensive litigation of issues pertaining to SCWC's energy purchase contracts, and the resulting rate design litigation necessary to recover the revenue requirement. Conducting further proceedings, including evidentiary hearings, and filing of briefs would consume valuable resources of the Commission and the parties.