9. Conclusion

The principal public interest in this proceeding is the delivery of safe, reliable, utility service at just and reasonable rates. After careful review and subject to the modification discussed in Section 7.2 above, we are convinced that the Settlements balance the various interests at stake, resulting in a fair and reasonable TY 2003 revenue requirement, such that we can find PG&E's rates to be just and reasonable. Pursuant to Rule 51.1(e) we reach this conclusion only after finding that the Settlements, taken together, are reasonable in light of the whole record, consistent with the law, and in the public interest.

9.1 Reasonable in Light of the Whole Record

We find that the Settlements are reasonable in light of the whole record for two reasons. First, while the Settlements are not all partly settlements, they are supported by all parties taking positions on PG&E's TY 2003 revenue requirement request. ORA, whose charge is to represent ratepayer interests, was an active participant in the proceeding and supports the Settlements. ORA filed complete, detailed testimony consisting of an account-by-account review of PG&E's TY 2003 revenue requirement forecast.

TURN and Aglet also represent ratepayer interests and were active participants in the proceeding. TURN and Aglet each offered several recommendations, including reductions to PG&E's forecasts for CIS, A&G expenses, Distribution O&M expenses, Customer Accounts and Services, joint pole receipts, meter reading expenses, uncollectibles, and attrition relief. MID, NRDC, and CCSF each took issue with specific elements of PG&E's TY 2003 forecast and proposed alternative forecasts for these issues.

Only one party opposes any portion of the Settlements, and that party, DWR, takes issue with one aspect of the Distribution Settlement, but does not oppose the remaining elements.

The parties' negotiations were informed by a thorough record consisting of over 200 exhibits and 36 days of evidentiary hearings. Consequently, the Settling Parties had ample opportunity to test the positions of opposing parties through discovery and cross-examination. In addition, the positions presented generally represented strongly held, well-supported opinions of experienced witnesses who are familiar with this Commission's processes. When parties with opposing interests agree to a settlement, it may be one indication of the reasonableness of the settlement.

Second, the revenue requirements adopted by the Settlement are within the range of positions taken by the parties. In supporting the Settlements, PG&E is foregoing $304 million compared to its TY 2003 forecast as presented in the Comparison Exhibit, and ORA is agreeing to an increase of $84 million compared to its final litigation position. We find that the revenue requirements contemplated by the Settlements are justified by the parties' showing and are in the interest of PG&E's ratepayers and the public.

9.2 Consistent with the Law

Although the Settling Parties have not identified any statutory provision or prior Commission decision that would be contravened by the Settlements, as discussed in Section 7.2, above, we find that the provision of the Settlements allowing for a "minimum" attrition adjustment is inconsistent with our attrition policy and incompatible with the public interest. We have modified the Settlements to eliminate the minimum attrition adjustment.

We are not aware of any other policy, rule or order that would be contravened by the Settlements. Although PG&E requested that the Commission reconsider several of the findings adopted in D.00-02-046 in its showing, the Settlements adopt a "high level" agreement, and do not attempt to modify the Commission's findings and policies adopted in D.00-02-046. As modified to remove the minimum attrition adjustment and with the understanding that the Settlements should be construed as leaving intact all policy decisions adopted in D.00-02-046, we find that the Settlements are consistent with the law and Commission precedent.

9.3 In the Public Interest

Finally, we find that the Settlements are in the public interest. Like many settlements, they are the result of compromises to accommodate and balance the interests of all the parties and the public. We find that Settling Parties have compromised their litigation positions and have arrived at a reasonable result in light of the extensive record.

The Settlements would adopt total amounts for general categories rather than adopting a detailed forecast for each specific account. The Settling Parties maintain that this high level agreement does not imply any specific resolution of issues at a detailed level, with the exception of those issues specifically discussed in the Settlements. In the interest of not altering the Settlements, we are willing to take a step back and approve forecasts for general categories, but in doing so, we must acknowledge that there are downstream consequences associated with adopting this type of "black box" approach. For example, in PG&E's next GRC, parties will not be able to ascertain the specific amounts adopted for certain accounts, or compare recorded amounts to the corresponding "adopted" forecast with the same degree of precision we typically expect. We do not view this as an insurmountable problem, given the fact that under forecast test year ratemaking a utility is generally neither obligated to spend the authorized amount nor limited to spending only the authorized amount. A fundamental tenet of forecast test year ratemaking is that the utility retains the discretion between the test years to manage its revenues and activities as it sees fit, consistent with its obligations to provide safe, reliable, environmentally sound utility service. Although we review the utility's request on an account-by-account basis, for the most part, the ratemaking adjustments we make to PG&E's budgets are not binding on PG&E.

We caution PG&E that our approval of a "high level" forecast in this GRC should not be interpreted to mean that there is any doubt regarding whether or not PG&E was authorized funding to accomplish the various objectives set forth in their application. An essential factor in our finding that the Settlements are in the public interest is the understanding that, by virtue of its agreement to the TY 2003 revenue requirement provided in the Settlements, PG&E intends to fulfill the objectives stated in their GRC request. The Settling Parties confirm our understanding in the Motion to Approve the Generation Settlement, which represents that the Generation Settlement "permits PG&E to recover reasonable costs of necessary capital investments in, and operations and maintenance of, its generation assets." The Settling Parties further state that "the Settlement provides sufficient capital to allow PG&E to adequately maintain the facilities and ensure their long term availability to serve customers."⁴⁰

Absent this type of commitment, we would be unable to find that the Settlements are in the public interest. We emphasize that claims by PG&E that a particular project or activity was not funded in this GRC will not be entertained simply because the total amount granted in this case is less than the total amount initially requested. This policy is consistent with our prior holding that "[I]t would be unjust and unreasonable to make ratepayers responsible for expenses directly attributable to deficient or unreasonable deferred maintenance, or to make ratepayers pay a second time for activities explicitly authorized by the Commission in the past. (D.00-02-046, Conclusion of Law 15, p. 536, emphasis added.)

In adopting the Settlements, we make it abundantly clear that PG&E is expected to continue meet all of its service obligations and maintain and upgrade its system in a manner consistent with its TY 2003 forecast. By providing PG&E with the discretion to spend the authorized revenue requirement as it sees fit, we are not authorizing PG&E to defer maintenance, cancel proposed upgrades or service improvements, or reduce staffing in a manner inconsistent with the objectives identified in its request. In future GRCs, we will not entertain claims that the adopted revenue requirement somehow forced PG&E to do otherwise.