Settlement Criteria
Where parties to a proceeding settle all disputed issues, the Commission applies criteria set forth in Rule 51.1(e) of the Commission's Rules to evaluate the proposed settlement. This rule requires that the settlement be "reasonable in light of the whole record, consistent with law, and in the public interest."
Before we analyze these criteria, we note that the circumstances of the settlement, particularly its endorsement by all parties, generally support its adoption. DRA, whose charge is to represent ratepayer interests, initially protested the application. In addition, parties representing large electric users, retail customers and manufactured housing community owners participated in the proceeding and in the settlement negotiations. Parties prepared and served exhibits on revenue requirement, marginal costs, revenue allocation, and rate design issues. Thus, the Settlement Agreement was reached after careful analysis of the application and through participation of many parties representing a broad array of affected interests.
The record also shows that the Settlement Agreement was reached after significant give-and-take between the parties which occurred over a significant amount of time. This give-and-take is demonstrated by the positions initially taken by parties in prepared testimony, the issues and estimated values listed in the Joint Statement, and the final positions agreed upon in the Settlement Agreement.
The Settlement Agreement is also consistent with Commission decisions on settlements, which express the strong public policy favoring settlement of disputes if they are fair and reasonable in light of the whole record.13 This policy supports many worthwhile goals, including reducing the expense of litigation, conserving scarce Commission resources, and allowing parties to reduce the risk that litigation will produce unacceptable results.14
As long as a settlement taken as a whole is reasonable in light of the record, consistent with law, and in the public interest, it may be adopted. We next analyze these criteria with specific reference to the Settlement Agreement.
1) The Settlement is Reasonable in Light of the Record
The prepared testimony, the Joint Statement, and the Parties' Joint Motion contain the information necessary for us to find the Settlement Agreement reasonable in light of the record. Prior to the settlement, parties conducted extensive discovery, and served detailed testimony on the issues related to revenue requirement, marginal costs, revenue allocation and rate design.
The Settlement Agreement represents a reasonable compromise of the parties' positions. The prepared testimony of the parties and the Joint Statement, comprising the record for this proceeding, contain sufficient information for us to judge the reasonableness of the Settlement Agreement.
2) The Settlement Agreement is Consistent with Law
The parties believe that the terms of the Settlement Agreement comply with all applicable statutes. These include, e.g., Pub. Util. Code15 § 451, which requires that utility rates must be just and reasonable, and § 454, which prevents an increase in public utility rates unless the Commission finds such an increase justified.
We agree. The required showings under §§ 451 and 454 have been made. Further, nothing in the Settlement Agreement contravenes statute or prior Commission decisions.
3) The Settlement Agreement is in the Public Interest
The Settlement Agreement is in the public interest and in the interest of Sierra's customers. The agreed-upon revenue requirement is significantly below Sierra's request. The revenue allocation and rate design proposed in the Settlement Agreement moderate potentially harsh bill impacts but also move revenue responsibility closer to the cost of service. Our approval of the Settlement Agreement avoids the cost of further litigation, and reduces the use of valuable resources of the Commission and the parties.
Finally, we note that the settling parties comprise all of the active parties in Sierra's GRC, and we do not know of any parties who contest the Settlement Agreement. Thus, the Settlement Agreement commands the unanimous sponsorship of all active parties in this proceeding, who fairly represent the interests affected by the Settlement Agreement. We find that the evidentiary record contains sufficient information for us to judge the
reasonableness of the Settlement Agreement and for us to discharge any future regulatory obligations with respect to this matter. Thus, the proposed settlement is consistent with the criteria for all-party settlements set forth in D.92-12-019 (46 CPUC 2d 538).
For all these reasons, we approve the Settlement Agreement as proposed.
13 See e.g., Decision (D.) 88-12-083 (30 CPUC 2d, 189, 221-223), D.91-05-029 (40 CPUC 2d, 301, 326), and D.05-03-022, mimeo., p. 8.
14 See, D.92-12-019, 46 CPUC 2d 538, 553.
15 All references are to the Public Utilities Code unless otherwise noted.
