3. adopting a means for transmitting the interim surcharges collected by the CLCs to Pacific and GTEC without compromising proprietary and confidential information.
Pursuant to Ordering Paragraph (OP) 4 of D.99-07-048, Pacific filed complete costs schedules on August 24, 1999 detailing the actual implementation costs incurred by year between January 1, 1996 and December 31, 1998.
In response to the directives of D.99-07-048, the ALJ convened a prehearing conference (PHC) on September 29, 1999 to establish a procedural schedule for a reasonableness review of implementation costs and to reconsider an appropriate cost recovery mechanism. By ALJ ruling dated October 13, 1999, a schedule was adopted for Pacific to file a report on the reasonableness of its costs and for parties' replies, as well as for depositions.
On December 20, 1999, Pacific filed its Report on Implementation Cost Recovery seeking to recover $175 million, representing recorded costs for the years 1996-98. Pacific also sought to recover all accrued interest charges on the balance in the memorandum accounts based on the most recent three-month commercial paper rate.
As part of its December 20, 1999 filing, Pacific attached Declarations of responsible company representatives to support its proposal. The Declarations addressed the following topics: (1) management control and tracking processes used to implement projects and to create new products; (2) internal and external audit findings regarding Pacific's cost tracking system; and (3) the relationship of costs reported in the OANAD proceeding and the costs tracked to the implementation costs memorandum account.
In compliance with D.99-07-048, Pacific filed complete cost schedules on August 24, 1999, detailing its recorded implementation costs for 1996-98. As part of its filing, Pacific included the Local Competition Cost Tracking Manual developed with Coopers & Lybrand. This manual describes the general principles applicable to tracking costs, and outlines the methodology that Pacific utilized in identifying the actual local competition implementation costs. Independent audits were completed by Price Waterhouse LLP for the years 1996-98, concluding that the cost schedules presented by Pacific fairly represented the costs accumulated in the local competition tracking codes. A summary of the costs assigned to each project category, and a description of the categories is set forth in Appendix B of this decision. Pacific sought to recover these costs over a three-year period, levied as an equal percentage surcharge to each customer, regardless of their class, based on billed revenue. The active parties in the proceeding undertook discovery and conducted depositions. Pacific produced 8,500 pages of documents in discovery and the depositions of 14 Pacific representatives.
The assigned ALJ subsequently agreed to the active parties' request to suspend the further schedule to file replies to Pacific's showing to permit parties to pursue settlement discussions.
The active parties thus began settlement discussions and reached an agreement in principle. The parties then convened a settlement conference on May 1, 2000, pursuant to Rule 51.1 of the Commission's Rules of Practice and Procedure. At that settlement conference, a copy of a draft settlement agreement was distributed and discussed. Modifications to the draft occurred as a result of those discussions. On May 18, 2000, the active parties signed the Settlement Agreement that is the subject of this decision.
The parties sponsoring the Settlement are Pacific, AT&T Communications of California, Inc. (AT&T), MCI Worldcom (now known as "Worldcom, Inc.), the California Cable Television Association, the Commission's Office of Ratepayer Advocates (ORA), and The Utility Reform Network (TURN). No parties filed a response to the proposed Settlement.
