Discussion
The Settlement is an agreement among all active parties to this proceeding that have contested Edison's issues now resolved in the Settlement. Other than ORA, no other party submitted prepared testimony regarding Edison's application. The June 7, 2000 settlement conference was attended by Edison, ORA (by phone) and Coalition of California Utility Employees (CCUE). CCUE did not express opposition to the Settlement.
In D.88-12-083, the Commission established a standard for review of settlements and stipulations. Rule 51.1(e) of the Commission's Rules of Practice and Procedure, adopted shortly after the decision, recites the standard:
The Commission will not approve stipulations or settlements, whether contested or uncontested, unless the stipulation or settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
In D.92-12-019 (46 CPUC 2d 538), the Commission set forth criteria for its approval of a proposed all-party settlement:
· all active parties must sponsor the settlement;
· the sponsoring parties must be fairly reflective of the affected interests;
· no term of the proposed settlement can contravene statutory provisions or prior Commission decisions; and
· the settlement must convey sufficient information to permit us to discharge our future regulatory obligations with respect to the parties and their interests.
Proceedings such as the ATCP, which address issues that are primarily factual in nature, are likely candidates for the settlement process. The Settlement meets all three elements of the standard for review and the criteria for all-party settlements.
Reasonableness In Light Of The Whole Record
In the decisions discussed above, the Commission discussed many factors that might be balanced in determining whether a proposed settlement is reasonable. The Settlement meets those standards. First, the Settling Parties represent all affected interests. No other active parties contested Edison's application. Edison represents the interests of its shareholders and provides necessary energy services to its customers. ORA represents the interests of all of Edison's retail customers.
Second, the Settlement is a reasonable compromise of strongly held views. ORA and Edison submitted extensive evidentiary showings in this proceeding. The Settlement resolves all the disputed issues raised in the prepared testimony.
Third, several adjustments have been made as a result of additional information. In addition, the recovery recommendations regarding employee-related costs is a fair and reasonable settlement of the costs in dispute. The relationship of the amount agreed upon compared to the risk of each party obtaining its desired result is reasonable.
Fourth, the Settlement will spare the Commission and the parties the effort required to litigate complex disputed issues. Commission approval of the Settlement will conserve the resources of the parties and the Commission. The Settlement constitutes a more efficient and optimal use of the parties' resources in comparison with traditional litigation.
Fifth, counsel and witnesses for the Settling parties are experienced in public utility litigation, and ORA is a governmental participant. These negotiations were accomplished at arm's length and without collusion.
Sixth, the Settlement is uncontested, as was demonstrated by the lack of opposition at the settlement conference. Despite the breadth and magnitude of disputed issues, no other party opposes the Settlement. The absence of adverse reaction from affected interests favors approval.
For all of these reasons, we believe that the Settlement is reasonable in light of the whole record.
Consistency With Law
There is no statutory provision or prior Commission decision that would be contravened or compromised by the Settlement.
Among other things, the two parties reviewed the provisions of IBEW 47 and UWUA 246 WPB agreements and the ISP for reasonableness. The two parties agree that the programs and benefits in each of the WPB agreement and the ISP, as referenced in the settlement, are reasonable, provide employee benefits that comply with Section 375(a), and the costs incurred pursuant to them qualify for recovery as transition costs through the TCBA.
Public Interest
There is a strong public policy favoring the settlement of disputes to avoid costly and protracted litigation. Absent opposition and absent identification of any serious defect in the Settlement, the Commission should adopt the Settlement. Nonetheless, the Commission has long held that settlements submitted for review and approval are not simply the resolution of private disputes like those that may be heard in civil court. The public interest and interests of ratepayers must be considered, and it is the Commission's duty to protect those interests.
The principal public interests affected by this proceeding are facilitating electric industry restructuring and reforming utility regulation, as required by both legislation and prior Commission decisions. Settlement of factual matters related to transition costs and reasonableness issues advances these interests because the Commission is spared the time and effort to hear and decide transition cost issues regarding balancing and memorandum accounts, purchased power agreements, pumped storage operations, post retirement benefits, and employee-related costs. Settlement of the employee-related issues also saves litigation time and effort, and promotes safe, reliable service at reasonable rates. The Settlement is a reasonable compromise of ratepayer and shareholder responsibility for the reasonableness review of employee-related costs as part of the transition to competition caused by AB 1890. The settled amount is within the range of dispute.
Finally, the Settlement contains sufficient information to permit the Commission to discharge its future regulatory obligations with respect to the parties and their interests.
In summary, we believe the Settlement: (1) is reasonable in light of the testimony and the whole record; (2) is consistent with the law; (3) is in the public interest; and (4) provides for a mutually-acceptable outcome to a pending proceeding, thereby avoiding the time, expense, and uncertainty of litigating the issues resolved by the Settlement. Accordingly, we agree that the Settlement should be approved.
Comments on Proposed Decision
The proposed decision of the ALJ in this matter was mailed to the parties in accordance with Section 311(d) of the Public Utilities Code and Rule 77.1 of the Rules of Practice and Procedure.
1. ORA was the only active party to dispute any entries to Edison's TCBA and related memorandum accounts and subaccounts.
2. On July 15, 2000, Edison and ORA executed the "Settlement Between Southern California Edison Company and the Office of Ratepayer Advocates in the 1999 Annual Transition Cost Proceeding (Application No. 99-09-006, et al.)" (Settlement) resolving all contested issues.
3. The Settlement is the product of extensive discussions between Edison and ORA. Both parties entered into these discussions after conducting discovery and reviewing the testimony of each party.
4. No party has opposed the Settlement.
5. The Settlement is reasonable in light of the strength of each party's litigation position, the risk, expense, and complexity of litigation, and the settled amounts upon which the parties agreed.
6. Edison's Post-Record Period TCBA Adjustments included accrued interest, in the amount of $0.489 million, associated with adjustments made subsequent to the record period. No additional adjustments for interest are required.
7. Edison's emission trading credits should not have been adjusted for FF&U and, in November 1999, Edison credited the TCBA in the amount of $13,129.36 ($12,624.54 plus accrued interest of $504.82) to reverse the adjustment. Edison's adjustment in the TCBA should be reviewed in the 2000 ATCP.
8. Edison's natural gas procurement and management activities during the record period, including its activities related to pipeline capacity held on El Paso, are reasonable.
9. The reasonableness of Edison's natural gas procurement and management activities related to pipeline capacity held on El Paso should not be delayed until a settlement between Edison and El Paso is implemented.
10. The return on rate base and income taxes associated with Edison's authorized capital additions for oil/gas-fired generating stations subsequent to their dates of divestiture were erroneously recorded in Edison's NGCAMA and transferred to the TCBA. In February, 2000, Edison credited the TCBA in the amount of $5.956 million ($5.567 million of return and income taxes associated with authorized 1996 oil/gas-fired generation capital additions that was inadvertently recorded in the NGCAMA, plus accrued interest of $0.389 million) to reverse the error. Said adjustment should be reviewed in the 2000 ATCP.
11. Edison's settlement of a contractual dispute with SMUD associated with two Edison/SMUD Power Sales Agreements, the SMUD Termination and Edison/ORA Settlement, are reasonable.
12. Edison's interutility and QF contract costs recorded in the TCBA during the record period are reasonable.
13. The portion of Edison's settlement with Wheelabrator resolving a retail tariff dispute in Wheelabrator's capacity as a customer of Edison was erroneously debited to the QF Subaccount of the TCBA. Edison credited the TCBA in the amount of $82,754.45, plus interest, to reverse the error. Said TCBA entry should be reviewed in the 2000 ATCP.
14. The interest owed to Edison on capacity payments Edison has withheld from San Gorgonio Farms and Section 7 Trust, $53,749.27, was erroneously debited to the TCBA. Edison credited the TCBA in the amount of $53,749.27, plus interest, to reverse the error. Said TCBA adjustment should be reviewed in the 2000 ATCP.
15. Edison's QF contract executions and QF contract administration activities during the record period are reasonable.
16. Edison's scheduling and dispatching costs associated with QFs and Interutility contracts during the record period are reasonable.
17. Amounts recorded in Edison's Fossil Sunk Costs Subaccount and Fossil Generation Subaccount of the TCBA for the record period are reasonable.
18. Amounts recorded in Edison's Power Exchange Revenue Memorandum Account, Independent System Operator Revenue Memorandum Account, Hydro Generation Memorandum Account, and the Unavoidable Fuel Contract Costs Memorandum Account for the record period are reasonable.
19. Amounts recorded in Edison's Regulatory Assets Subaccount of the TCBA for the record period are reasonable.
20. Amounts recorded in Edison's Biennial Resource Plan Update (BRPU) Subaccount of the TCBA for the record period are reasonable.
21. Edison provides benefits to its represented employees who are negatively impacted by electric industry restructuring under its WPB Agreements with IBEW 47 and UWUA 246. Edison provides benefits to its non-represented employees under the ISP.
22. ORA reviewed the WPB and ISP Agreement for reasonableness in the proceeding.
23. The programs and benefits in each of the WPB Agreements and ISP provide employee benefits comply with Section 375(a) and the costs incurred pursuant to them qualify for transition cost recovery through the TCBA.
24. The Alternative RIF procedure contained in the WPB Agreements is reasonable, including the bumping process.
25. The WPB Educational and Retraining Benefit costs for represented employees working at divested plants are eligible employee-related costs pursuant to Section 375(a).
26. For employees working at a non-divested plant or work location, the Settlement provides that Edison may recover, as employee-related transition costs, 50% of the WPB Educational and Retraining Costs incurred by that employee since January 1, 1998, if that employee takes a WPB severance package.
27. The Settlement meets the criteria set forth in D.92-12-019 for the review of all party settlements. Edison represents the interest of its shareholders and employees and ORA represents the interests of all ratepayers.
1. The Settlement is reasonable in light of the whole record, consistent with the law, and in the public interest as required by Rule 51.1(e) and should be approved.
2. Ordering Paragraph No. 6 of D.00-02-048 specifically provides that assets jointly owned with other utilities, which include Edison's coal fired generating stations, are not subject to market value re-estimation requirements of that decision.
3. Edison should recover the NUIP amounts, plus applicable interest, by booking these amounts into the TCBA.
4. The record period revenue requirement associated with Edison's off-site generation-related retained assets should be recovered through the TCBA, since this equipment is (a) used to service Edison's remaining generation facilities, (b) stranded, or (c) used to support activities required under AB 1890.
5. The balance in the Increased Return on Equity Memo Account as of June 30, 1999, plus interest, are reasonable and should be transferred to the TCBA.
6. The balance in the Reduced Return on Memorandum Account as of June 30, 1999, plus interest, are reasonable and should be transferred to the TCBA.
7. The balance in the Transition Cost Memorandum Account as of June 30, 1999, plus interest, should be transferred to the TCBA.
8. The adjustments recorded in the ISO/PX Implementation Delay Memorandum Account after March 31, 1998 should be transferred to the TCBA.
9. The amounts recorded in the SONGS 2 & 3 Sunk Costs Subaccount, the SONGS 2 & 3 ICIP Subaccount, Palo Verde Sunk Costs Subaccount, and the Palo Verde Incremental Costs Subaccount for the record period are reasonable.
10. Review of future costs incurred under the WPB Agreement and ISP shall consist of reviewing: (1) whether the employee whose employee benefit costs are being reviewed was an eligible employee pursuant to Section 375; (2) that the costs were accurately recorded; (3) were costs associated with the WPB Agreements and the ISP; and (4) are consistent with the terms of the Settlement.
11. Edison should recover the employee-related costs requested in its application consistent with the terms of the Settlement adopted herein.
12. Edison's Eastwood Plant Pumped Storage Energy Costs for the 1998 and 1999 Record Periods and the other costs recorded in the Hydro Subaccount are reasonable and the $13.232 million credit shown for the Hydro Subaccount for the record period should be accepted as filed.
13. Edison's calculation of its NUIP reward of $3,434,530 for Palo Verde Unit 2 Fuel Cycle 8, and $3,179,322 for Unit 3 Fuel Cycle 7 is reasonable and the reward amounts should be booked into the TCBA.
IT IS ORDERED that:
1. The Settlement Between Southern California Edison Company (Edison) and the Office of Ratepayer Advocates (ORA) in the 1999 Annual Transition Cost Proceeding (ATCP) is adopted, as set forth in exhibit 30.
2. Edison is authorized to record the Nuclear Unit Incentive Procedure (NUIP) rewards in the amounts of $3,434,530 and $3,179,322, plus interest, associated with the operation of the Palo Verde Nuclear Plant, Units 2 and 3, to the Transition Cost Balancing Account (TCBA).
3. Edison is authorized to transfer the balances recorded in the Non-Nuclear Generating Capital Additions Memorandum Account (NGCAMA) except for the agreed upon adjustment, Increased Return on Equity Memo Account, Reduced Return on Memorandum Account, Transition Cost Memorandum Account, ISO/PX Implementation Delay Memorandum Account, as of June 30, 1999, plus interest, to the TCBA.
4. Edison is authorized to recover the costs and transfers to the TCBA requested in its application consistent with the Settlement approved herein.
5. Within 30 days of the effective date of this decision, Edison shall file and serve a compliance advice letter to confirm the adopted Settlement and adjusted entries in its TCBA and related memorandum accounts required by the Settlement. The advice letter will become effective after appropriate review by the Energy Division. The adjustments required herein shall be reviewed in the next ATCP.
6. This proceeding is closed.
This order is effective today.
Dated , at San Francisco, California.
APPENDIX A
LIST OF APPEARANCES
Applicant: James P. Scott Shotwell, and Janet K. Lohmann, Attorneys at Law, for Southern California Edison Company.
Interested Parties: Mark R. Huffman, Attorney at Law, for Pacific Gas & Electric
Company; and; Steven C. Nelson, Attorney at Law, and Tom Whelan, Sempra Energy, for San Diego Gas & Electric Company; Ellison & Schneider, by Andrew Brown, Attorney at Law, for California Dept. of General Services; Bruno Gaillard, for Enron Corporation; Grueneich Resource Advocates, by Dian Grueneich; Attorney at Law, for City and County of San Francisco; Ellison & Schneider, by Douglas Kerner, Attorney at Law, for Independent Energy Producers; Ronald Liebert, Attorney at Law, for California Farm Bureau Federation; Sutherland, Asbill & Brennan, by Keith McCrea, Attorney at Law, for California Manufacturers Association; Adams, Broadwell, Joseph & Cardozo, by Katherine S. Poole, Attorney at Law, for Coalition of California Utilities; James Weil, for Aglet Consumer Alliance; Norman J. Furuta, Attorney at Law, for Federal Executive Agencies; and Goodin, MacBride, Squeri, Ritchie & Day, by James W. McTarnaghen, Attorney at Law, for himself.
Legal Division: Darwin Farrar, Attorney at Law.
Office of Ratepayer Advocates: Donna-Fay Bower.
Energy Division: Kayode Kajopaiye.
Public Advisor's Office: Rosalina White.
(END OF APPENDIX A)
