CALIFORNIA PUBLIC UTILITIES COMMISSION ALTERNATIVES TO LITIGATION GUIDELINES (Draft 10/21/94) Introduction These guidelines are intended to assist those who wish to use methods other than litigation to resolve disputes or address issues in Commission proceedings. These guidelines offer a step- by-step approach for determining whether an alternative to litigation before the Commission would be beneficial in a given situation. The chart on the following page compares five common alternative processes. Subsequent sections explain in greater detail the purpose, method, and most common applications of each. In considering these Guidelines, remember that the Commission retains the responsibility to ensure that all significant issues are resolved in a manner that is consistent with the public interest. When the dispute is a disagreement between a utility and one of its customers that is embodied in a formal complaint before the Commission, settling parties may simply choose to withdraw the complaint. In virtually any other situation, parties to a pending Commission proceeding must seek the Commission's approval of a settlement. To better understand the procedures for seeking approval of a settlement, see the Commission's Rules of Practice and Procedure. Remember, as well, that the Commission is not solely a dispute-resolving entity and that in many types of proceedings, the burden of proof is clearly defined. Often, the Commission's determination of the public interest will require it to do more than make sure that disagreements among parties are resolved. Because there is no one right way to resolve a dispute, the suggestions contained in these guidelines should be adopted only to the extent that they are helpful to the parties in reaching their goals in a particular proceeding. [A table in the original version of this document has been deleted for compatibility with the gopher software. The original WordPerfect 5.1 version of this document can be obtained through anonymous FTP at "ftp.cpuc.ca.gov" in the directory "/home/gopher-data/atl/.guideline.dft".] I. NEGOTIATED SETTLEMENT AGREEMENTS 1 DEFINITION Parties enter into negotiated settlement agreements to resolve a dispute or comply with a commission order or policy. Negotiated settlements are characterized by informal discussions between all or some of the parties. Most settlement agreements must be approved by the Commission, subject to Rule 51 of the Rules of Practice and Procedure (discussed below).1 The exception is the settlement of a simple complaint proceeding, in which case the Complainant and Defendant may choose to withdraw the complaint. When parties attempt to reach agreement without the help of an outside party, they are participating in "unassisted negotiations." When a neutral third party helps the parties forge an agreement, the parties are participating in a "Mediation." The differences between each process will be described in greater detail in later sections. This section addresses the general considerations that apply to both types of settlement negotiations. WHEN TO CONSIDER SETTLEMENT NEGOTIATIONS Settlement negotiations are appropriate under a variety of circumstances. The principle pre-condition is that the parties share a genuine desire to resolve the dispute without further resorting to litigation. Participants in negotiations are often surprised that win-win agreements are possible "--not because one group backs down, but because through collaboration they are likely to discover that they value different issues differently and that trading across these issues can produce `packages' that everyone finds attractive."2 Negotiations may be particularly appropriate when the parties have or wish to have an ongoing relationship. At the Commission, parties can choose to settle a disagreement at any time after the first prehearing conference and within 30 days of the last day of hearing. [A table in the original version of this document has been deleted for compatibility with the gopher software. The original WordPerfect 5.1 version of this document can be obtained through anonymous FTP at "ftp.cpuc.ca.gov" in the directory "/home/gopher-data/atl/.guideline.dft".] A. UNASSISTED NEGOTIATIONS 1 The Commission's Rules of Practice and Procedure are found in Title 20 of the California Code of Regulations, which can be found in most law libraries. A copy of the rules can also be purchased from the Commission's Documents Office. 2Lawrence Susskind and Allan Morgan, Improving Negotiation in the Regulatory Process, Electric Perspectives, p.29. 2 DEFINITION: Unassisted negotiation is the least coercive, least formal process that can be used as an alternatives to litigation. Parties can use unassisted negotiations to resolve simple two- party disputes, or complex, multi-party disagreements. EXAMPLES: Diablo Canyon Reasonableness Review, Test Year 1993 SDG&E General Rate Case STEPS TO TAKE Initiating the Process 1. Make The First Contact. Any party may initiate the negotiation process by contacting one or more other parties, orally or in writing, suggesting that they negotiate an agreement. 2. Inform the Administrative Law Judge. Participating parties must inform the assigned Administrative Law Judge that they have agreed to negotiate. The Administrative Law Judge may impose deadlines or other constraints affecting the negotiations. Because time pressure is often an important factor in reaching a settlement, parties may want to solicit the imposition of a deadline by Administrative Law Judge or assigned commissioner. Parties should anticipate the questions that the Commission will want addressed in a settlement. When those questions are unclear, the parties should seek guidance from the assigned Administrative Law Judge. Preparing for and participating in negotiations: 3. Make Sure that Significant Interests are Adequately Represented at the Table. Parties must follow the Commission rules on settlements and stipulations. See Rules of Practice and Procedure, Rule 51; and Decision (D.) 92-12-019 (San Diego Gas & Electric Company General Rate Case).3 The Commission may reject a settlement if it resolves issues significantly affecting the interests of a person or group that is not adequately represented in the negotiating process. 4. Choose Meaningful Negotiators. Whenever possible, those who participate at the negotiating table should have the authority to agree to a settlement (without returning to a "client" to find out if the negotiated terms are acceptable). The ability of each party to provide a negotiator with such authority should be discussed at a point early in the process. 3 Commission decisions can be reviewed in the Commission's Central Files office in San Francisco. Most major decisions are also available through law libraries throughout the state. 3 5. Protect Confidentiality. Negotiators need to know that they have the freedom to test out new ideas without concern that what they say at the bargaining table may be used against them in the future. In addition, it is important to ensure that no party can unilaterally go to the "press" or a Commission decisionmaker and reveal the private comments of other negotiators. Parties must sign a confidentiality agreement protecting all oral or written statements made during settlement negotiations. Such statements must not be disclosed to anyone and are inadmissible as evidence and not discoverable in a litigated proceeding. A sample Confidentiality Agreement is included as an appendix to these guidelines. 6. Establish Negotiating Principles. Whenever parties try to resolve their differences, it is important that they develop a common understanding of the principles that apply to their interactions. In some instances, parties may find that the act of discovering and agreeing on applicable principles is an important part of the negotiating process. For simple disputes, it may be enough to spend a few minutes identifying and acknowledging those principles. In the case of more complex or potentially lengthy negotiations, the parties may want to draft a set of principles that will be available for reference as needed throughout the process. For illustrative purposes, the following are principles adopted by the Canadian Parliament for a consensus process attempting to balance economic and environmental concerns. The principles are contained on a single piece of paper: Principle #1 Reason Based People need a reason to participate in the process Principle #2 Inclusive Not Exclusive All parties with a significant interest in the issue should be involved in the consensus process Principle #3 Voluntary Participation The parties who are affected or interested come to the consensus process voluntarily Principle #4 Self Design The parties design the consensus process Principle #5 Equal Opportunity All parties must have equal access to relevant information and the opportunity to participate effectively throughout the process Principle #6 Respect for Diverse Interests Acceptance of the diverse values, interests and knowledge of the parties involved in the consensus process is essential 4 Principle #7 Flexibility Flexibility must be designed into the process Principle #8 Accountability The parties must be accountable to their constituencies Principle #9 Time Limits Realistic deadlines are necessary throughout the process Principle #10 Implementation Any agreement reached in a consensus process must include a commitment among all participants to implement and effectively monitor the agreement 7. Agree On Ground Rules In any negotiating process, it is important for the participants to agree on a way to proceed. The intent is to provide a framework for fruitful discussion and exchange that guides rather than constrains the parties' interactions. For negotiations that are complex or potentially lengthy, it becomes more valuable to memorialize the agreed-upon ground rules in writing. The ground rules might include: Definitions of relevant terms A statement of purpose A structure for caucuses and caucus meetings, where applicable Procedures to apply to meetings and the determination of when agreement has been reached Procedures for the exchange of information Schedules and Time Lines A description of the expected product of the negotiations A recitation of the adopted principles 8. Set a Schedule. The parties may wish to establish a schedule of meetings and date of conclusion and memorialize them in the ground rules. Parties may also wish to establish an interim date at which time the parties will evaluate their progress and agree by consensus whether or not to continue. During Negotiations: 9. Develop an Information Base; Provide for the Exchange of Information. As an initial step in the negotiation process, the participants may choose to develop a common information base, identifying areas where available information needs to be shared and/or verified, additional interpretation is necessary or additional information is needed. 10. Remember The Invisible Party. Parties should always reflect on the guidance provided by Commission policy and precedent when considering the viability of various settlement options. Consider Commission policy and precedent not as the final word on the subject, but as an invisible party to the negotiations. 5 Where a settlement deviates from Commission policy and precedent, parties must be prepared to identify and justify those inconsistencies. 11. Develop Your Best Alternative to a Negotiated Agreement. Each party should assess what it can realistically achieve on its own. Only by calculating one's best alternative to a negotiated agreement can one begin to evaluate the merits of a settlement offer. 12. Communicate Effectively. Talking is necessary to communicate interests; listening is equally important. (Sometimes it takes a mediator to help the parties communicate effectively.) 13. Clarify Interests. Each participant should continue to ask questions until he or she clearly understands the other party's concerns. 14. Create Options. The parties should work to invent all the options they can. They should be creative and remain flexible. Ideally, the parties will set aside some time for "inventing not committing." 15. Seek Realistic Commitments. Seek to develop realistic agreements that can be implemented and are enforceable. Remember the importance of adopting a solution that will be acceptable to the members of any affected group. 16. Recognize the Value of the Relationship. When negotiating, relationships can become entangled with "the problem". Interest- based negotiation helps parties to separate the substantive problems from the personalities of the negotiators. 17. Draft a Settlement Agreement. If a settlement is reached, the parties should draft a written settlement document incorporating all settlement terms. Each party should have an opportunity to review and amend it as necessary, before the final draft is written and signed. 18. Consider Partial Settlements. Parties should agree in advance as to how to handle unresolved issues. In the absence of consensus on all issues, the parties may elect to draft two agreements, one containing the issues on which the parties did agree, and one describing the areas of disagreement and/or any lack of information and data that prevents agreement. Wherever possible, parties should identify ways of reconciling differences or obtaining needed information. 19. Honor A Party's Decision Not to Negotiate. Any party should be free to withdraw at any time during the negotiations. 6 B. MEDIATION DEFINITION Mediation is a flexible, informal process in which a neutral individual or panel of mediators works with two or more parties to reconcile differences and resolve disputes. The mediator plays an active role in bringing the parties to agreement by guiding communications between them, ensuring that each side hears and understands the interests of the other. In addition, the mediator identifies areas of common ground and helps to build consensus. In order to better understand the interests at stake, the mediator often will meet separately with each party, or meet with parties that have common concerns. The mediator has no authority to impose a settlement. WHEN TO CONSIDER MEDIATION 1. When parties foresee an impasse developing because of conflicts within interest groups, technical complexity or uncertainty, political visibility, or poor communication among the participants. 2. When there are so many parties and issues that a structured negotiation process would be helpful. 3. When the desired settlement may be improved by an expert's ability to conduct frank, private discussions among the parties. WHY USE A MEDIATOR? Differing perceptions often create barriers to settlement. Parties may not understand each other's objectives or may have different views of the facts. Different people may draw different conclusions from the same facts. A mediator can help the parties move past differences that might otherwise create an impasse in an unassisted negotiation. In addition, a mediator can: 1. Help reduce the rancor between adversaries 2. Open the parties' thinking to creative solutions 3. Help provide balance to parties -Assist in phrasing inquiries -Improve the flow of information 4. Sustain the momentum toward settlement 7 5. Enhance the efficiency of negotiations -keep parties progressively focused -establish and stick to a schedule 6. Work effectively with complex facts and technical experts to focus a negotiation on the fundamental interests of parties. STEPS TO TAKE 1. Proposing mediation. Any party may initiate the mediation process by contacting another party or parties, orally or in writing, suggesting the use of a neutral mediator to help them arrive at a resolution. In discussing whether or not to use mediation, the parties should consider what their objectives are and what role they want the mediator to take on. There are a variety of styles and approaches to mediation. Some of those who call themselves mediators might act as a facilitator who arranges meetings in a conducive setting. Some will identify settlement terms and urge the parties to accept those terms. Most mediators will not become advocates of a particular outcome, but will help the parties forge a solution. 2. Selecting the mediator. Once the parties have agreed in principle to obtain a mediator, any party may suggest one or more candidates, or ask a neutral organization to propose candidates. The chosen mediator must be acceptable to all of the negotiating parties. Most mediators will charge fees for their services. An exception is a mediator provided by the Commission's in-house Alternatives to Litigation program. Upon request and subject to availability, the Commission will provide a trained mediator who is also an Administrative Law Judge or other experienced staff member. A Commission-provided mediator offers both mediation skills and agency experience that may be useful in crafting a solution. In at least one instance, a Commission-provided mediator has worked as a panelist with a privately-retained mediator to resolve a complex dispute. Those wishing the assistance of a Commission-provided mediator should contact the assigned Administrative Law Judge. Whenever possible, the assigned Administrative Law Judge will furnish a list of available Commission-provided mediators to choose from. When an Administrative Law Judge is chosen as a mediator, that Administrative Law Judge will not be involved in the Commission's decisionmaking process concerning the matter at issue. In addition to honoring all confidentiality agreements, the mediator will not discuss the substance of the matter with the Administrative Law Judge assigned, or any other decisionmaker. 8 Potential conflicts of interest. Anyone who might be chosen to mediate the dispute should promptly disclose to the parties any circumstances that cast doubt on his or her impartiality. This disclosure obligation should continue until the mediation is concluded. No one with a conflict of interest should serve as mediator, unless all parties agree after having been informed of the conflict. Before appointing a mediator, the parties should agree on a plan for paying the mediator's fees and any other costs related to the process. These costs might be shared equally by the parties, or the parties could agree on another approach. When parties are of unequal means, they may wish to divide the costs proportionally. The parties should agree, in advance, as to how costs will be handled if a party withdraws before the procedure is completed. Before accepting appointment, the mediator should assure the parties of his or her availability to conduct the mediation in a time period acceptable to the parties. 3. The Mediation Process Once a mediator has been selected and has agreed to serve, representatives of the parties should meet jointly with the mediator to discuss the mediation process. The parties should expect the mediator to help the parties undertake all of the steps discussed above, in the section describing Unassisted Negotiations. In addition, the mediator may work individually with the parties prior to the first meeting to "convene" the mediation. During this process, the mediator may seek to learn about the underlying dispute and make sure that the parties will be adequately prepared and adequately represented at the bargaining table. Throughout the negotiations, many mediators will ask to meet separately with individual parties or with similarly-interested clusters of parties. In these private meetings, the mediator can help the parties to identify and express their underlying interests and encourage the parties to look for creative solutions. The mediator should make it clear that everything said in these private meetings is confidential and that the mediator will not disclose the contents of those communications to other parties unless specifically instructed to do so. Parties bear the responsibility for proposing settlements but may also look to the mediator for guidance, suggestions or other proposals. Efforts to reach a settlement might continue until (a) a written settlement is reached, (b) the mediator concludes and informs the parties that further efforts would not be useful, or (c) one of the parties or the mediator withdraws from the process. If there are more than two parties, the remaining parties may elect to continue negotiating even after another party has withdrawn. 4. Settlement. If a settlement is reached, the parties may seek the mediator's assistance in drafting a document incorporating all settlement terms. Each party will have an opportunity to review and amend it as necessary, before the final 9 draft is written and signed. Under the Commission's rules, a final agreement cannot be signed until after an appropriately- noticed settlement conference has been held. 5. Withdrawal of the mediator. Some commonly recognized conditions for withdrawal are (i) overriding personal reasons, (ii) a belief that a party is not acting in good faith, or (iii) a belief that further mediation efforts would not be useful. The parties may want to require written notice stating the reasons for any such withdrawal. 6. Withdrawal of a party. Any party should be free to withdraw at any time during the negotiations. 10 II. FACILITATION DEFINITION A facilitator helps people talk to each other productively. Unlike a mediator, the facilitator normally does not have an obligation to see that the parties come to a final agreement. Rather than focus on the result, the facilitator focuses on the process. The facilitator uses techniques to bring out creative solutions or options, listens to the concerns of all parties, and provides suggestions about how to reach a decision. The parties discuss the facilitator's suggestions and adopt a decisionmaking process. Then, the parties work to resolve the issue at hand. Issues may be as simple as how to define a technical term, or as complex as how to deregulate an industry or preserve public health. At the Commission, the Advisory and Compliance Division staff members often serve as facilitators of meetings called workshops which can be used to clarify or resolve a variety of issues. A workshop may be ordered by the Commission or may be initiated upon request by the parties. In some instances, parties to Commission proceedings have hired private facilitators to help them move toward agreement. WHEN FACILITATIONS ARE APPROPRIATE Facilitations may be most useful in two situations: 1) when Commission policy has been made but implementation involves the resolution of conceptual or methodological issues; and 2) when the Commission intends to address an emerging issue and wishes to have industry and the public help define the problem. In such instances, testimony and cross-examination may not offer the best ways to tap the knowledge of those involved and explore the range of concerns raised by experts. When numerous parties with potentially divergent interests come together, they may find it very difficult to decide upon a course of action, unless someone whom the group respects and trusts takes charge. A facilitator can help focus the discussion and make it productive by: 1. organizing the meeting and helping the parties set an agenda 2. keeping discussion focused on the issue at hand 3. ensuring that all interests are heard 4. helping to break impasses by exploring different approaches with the group 5. keeping a record of the ideas presented At the Commission, facilitations most often occur as workshops. Here is a list of some of the types of workshops that frequently take place. 11 TYPES OF WORKSHOPS (A Partial List) Policy Development. One very useful application of the facilitation process is to develop Commission policy through collaboration, rather than through adversarial, polarized proceedings. (Example: EMF Consensus Group) Scoping/Clarifying. A goal a scoping or clarifying workshop is to define and narrow the scope of issues which the parties wish to address in a particular proceeding, by identifying issues to be resolved and areas of agreement and disagreement. Implementation When the Commission issues a decision, it may ask the parties to develop, for its review, a detailed implementation plan. Modelling/How To Workshops are often used to either seek an agreement or simply improve understanding of the assumptions underlying a particular forecast. For example, when an energy utility was ordered to develop an integrated bid for new resources, the parties worked together to identify the utility's baseline productive capacity. This would be used to assess the effectiveness of various cost saving measures and energy conservation programs. (Example: protocols for demand side management) Negotiation/Settlement Parties may wish to enlist the aid of a facilitator to help them explore options for resolving a dispute, but may prefer to negotiate the final agreement without outside help. In this case, a facilitator may be helpful because a facilitator focuses on the process of gathering information, and follows the parties' directions regarding how to elicit this information and what to do with it. As a result of such discussions, the parties may come to an agreement as to how to resolve their dispute, or comply with a Commission decision. In this case, the parties should follow the guidelines regarding settlement negotiations. STEPS TO TAKE 1. Identify the Task to be Accomplished at the Workshop. 2. Make sure that Significant Interests are Adequately Represented. 3. Provide appropriate notice4. 4Additional steps that parties may take to provide notice to stimulate public involvement: 1) Place notices in appropriate 12 A. FORM OF NOTICE5 1. Written notice should be provided for workshops that are conducted during the course of a Commission proceeding. 2. Written notice may be provided in the form of an Administrative Law Judge ruling, a notice signed by the Executive Director, or a letter from Commission staff. B. TIMING AND DISTRIBUTION 1. Written notice should be mailed at least 10 days prior to the first day of the workshop. 2. Written notice should be mailed to all parties of record in the proceeding, all persons in the "state service" and "information only" categories of the service list, the Public Advisor and any other persons who the Administrative Law Judge directs to be served. 3. Notice of the workshop should appear in the Commission's Daily Calendar at least 7 days prior to the workshop. C. CONTENTS OF THE NOTICE 1. When applicable, the notice should contain the following information. 1. WHEN: Date and time of the first day of workshop 2. DURATION: Indicate if the workshop is expected to run more than one day and the additional dates, if known. Alternatively, the notice may indicate that the workshop may be continued to a date to be set later. 3. LOCATION: Address (and directions if necessary) 4. PURPOSE: Explain, clearly and specifically, the purpose of the workshop. For example, the workshop might be used to identify, clarify, expand or limit issues to be considered in a proceeding; to assist the Commission's Advisory and Compliance Division or Division of Ratepayer Advocates in preparing necessary background information which will be addressed during publications or post notices in public places directly affected by the subject of the proceeding, such as libraries, post offices, community centers, government buildings (city hall, county government buildings); (2) Notify community-based organizations whose interests may be involved; 3) Contact the Public Advisor's office and ask for suggestions of other groups representing interests affected by the matter. 5From Gregg Wheatland's memo to Chief ALJ Mary Carlos, April 24, 1990. 13 hearings; to help parties exchange technical information regarding computer models or other methods of analysis to be used in the proceeding; or to allow the parties to reach agreement regarding technical issues or assumptions which will be used in the proceeding. If an agenda can included with the notice, parties are more likely to bring the right people and information to the meeting. 5. WHO MAY ATTEND: Indicate who may attend the workshop. Where there are a large number of parties and limited amount of time, it may be necessary for the facilitator to establish reasonable rules regarding participation. These rules should be explained in the notice. 6. WHO WILL CONDUCT THE WORKSHOP: State who will conduct or moderate the workshop. Depending on the nature of the workshop, it may be conducted by the Administrative Law Judge, a member of the Commission's Advisory and Compliance Division or someone who is not employed by the agency. Although a representative of a party to the proceeding could serve as facilitator, it would be difficult for someone to be both an advocate and a neutral facilitator at the same time. Similarly, it may be difficult for an Administrative Law Judge to issue a decision based on the evidentiary record if the Administrative Law Judge has moderated a workshop which is not part of the evidentiary record. 7. RECORDING THE WORKSHOP: State how and by whom the results of the workshop will be recorded. Will comments made at the workshop remain confidential? Will the workshop be tape recorded? Will minutes be taken? Will a written report be prepared? When office notes are being kept, it is best to assign the task to someone who does not represent a party in the proceeding. 8. WORKSHOP REPORTS: If a report is going to be prepared, the notice should explain the procedures by which workshop participants may review and comment on the report, and whether written comments will be appended to the report. The notice should also explain how the report is intended to be used in the proceeding. Will the report be entered into evidence, and, if so, who will sponsor it and will its author be available for cross-examination? Will the report be entered into evidence by stipulation, and if so, what are the rights of parties who choose not to stipulate? If the report does not have an evidentiary role, what is its purpose? 9. FOR FURTHER INFORMATION: Include the name and number of a person to contact for further information regarding the workshop. Generally, this person will be the workshop facilitator or the administrative law judge. 14 10. FACILITIES FOR THE DISABLED: Include standard information regarding access and facilities for the disabled. 4. Protect Confidentiality. If parties agree that statements made during the workshop will remain confidential, then participants should be asked to sign a confidentiality agreement. A sample agreement is included as an appendix to these guidelines. 5. Set a Schedule. The parties may wish to establish a schedule of meetings and date of conclusion and memorialize them in ground rules or a facilitation agreement. Parties may also wish to establish an interim date at which time the parties will evaluate their progress and agree by consensus whether or not to continue. 6. Discuss the Ground Rules The facilitator and representatives of the parties should discuss ground rules. The ground rules should clearly state the common expectations with which the participants enter the facilitation process. They should describe the purpose of the process, the manner in which the several interests are structured for effective participation, the responsibilities of the participants to one another and to their constituents, the spirit in which they will seek consensus and the responsibility of the representatives to support the process. The intent is to provide a framework for fruitful discussion and exchange that guides rather than constrains the parties' interactions. 7. Develop an Information Base, Provide for the Exchange of Information. As an initial step in the process, the participants may choose to develop a common information base, identifying areas where available information needs to be shared and/or verified, additional interpretation is necessary or additional information is needed. 8. Clarify Interests. Each participant should continue to ask questions until he or she clearly understands the other parties' concerns. 9. Create Options. The parties should work to invent all the options they can. They should be creative and remain flexible. Ideally, the parties will set aside some time for "inventing not committing." 10. Seek legitimacy. The parties should ask themselves what criteria for selecting among options will be viewed as most legitimate by the community-at-large. 11. Seek Realistic Commitments. Seek to develop realistic agreements that can be implemented and are enforceable. Remember the importance of adopting a solution that will be acceptable to the members of any affected groups. 15 12. Recognize the Value of the Relationship. When negotiating, relationships can become entangled with "the problem". By focussing on the underlying interests of the parties instead of the personalities of the negotiators, parties may be more likely to uncover productive solutions and preserve good working relationships. 13. Draft a Settlement Agreement. If a settlement is reached, the parties should draft a written settlement document incorporating all settlement terms. Each party will have an opportunity to review and amend it as necessary, before the final draft is written and signed. 14. Consider Partial Settlements. Parties should agree in advance how to handle unresolved issues. In the absence of consensus agreement on all issues, the parties may elect to draft two agreements, one containing the issues on which the parties did agree, and one describing the areas of disagreement and/or any lack of information and data that prevents agreement. Insofar as possible, means of reconciling differences or obtaining the necessary information should be identified. 15. Honor a Party's Decision Not to Negotiate. Any party should be free to withdraw at any time during the process. 16 III. EARLY NEUTRAL EVALUATION DEFINITION Early neutral evaluation is a confidential process in which a neutral third party offers a non-binding assessment of the relative strengths and weaknesses of the parties' positions and the value of the case. The parties meet together and present to the evaluator a summary of the factual and legal bases of their litigation positions. The evaluator can present his or her assessment orally, or in writing. WHEN TO CONSIDER USING AN EARLY NEUTRAL EVALUATION PROCESS --Early neutral evaluation can be a cost-saving device when resolution of a dispute involves specific legal issues. --Using early neutral evaluation is a good way to address unrealistic expectations of parties and improve the likelihood of reaching a settlement. --Using early neutral evaluation is a good way to narrow the legal and factual issues for trial-type hearing. STEPS TO TAKE 1. Discuss with the other party(ies) whether early neutral evaluation, or early neutral evaluation in combination with other alternative dispute methods meets their needs. 2. Parties should decide what areas of specialty they wish the evaluator to have. Parties may wish to seek assistance from the assigned Administrative Law Judge in determining an appropriate evaluator. 3. Once the parties have agreed upon the evaluator, parties should meet with the evaluator to set the ground rules, and schedule the evaluation session. Among other things, parties may wish to discuss: a) The possibility of stipulations of fact and admissions by the parties solely for purposes of the evaluation, as well as simplification of document authentication. b) The possibility of parties engaging in settlement negotiations with or without the assistance of a mediator. c) The possibility of developing a common base of information, identifying areas where available information and expediting discovery. 4. It is important that the affected parties attend an oral evaluation whenever possible. While unintentional, attorneys or other agents might filter or re-phrase the evaluator's statements in a way that may not give the parties a clear understanding of the merits of their case. 17 IV. ARBITRATION DEFINITION In arbitration, parties select a neutral person to listen to arguments and issue a binding decision resolving the dispute. Arbitration is more like a court proceeding than any other alternative to litigation discussed in these guidelines. Once parties choose arbitration, they are essentially replacing the Administrative Law Judge and the Commission with a private arbitrator. Parties can use this approach to resolve non- precedential, non-ratemaking disputes. Parties that use arbitration will probably lose some or all rights to appeal the results. EXAMPLES Arbitration has been used on a limited basis by this Commission. One example of Commission-ordered arbitration can be found in D. 93-03-020, in the Commission's investigation to develop a policy on nondiscriminatory access to electricity transmission services for non-utility power producers. (I. 90-09- 050.) In that decision, the Commission said that when a dispute arises concerning a utility's analysis of a bid from a power provider, that dispute can be submitted to arbitration. The Commission limited arbitration to those bidders that could make a prima facie showing that it would have been a winning bidder but for the alleged error. WHEN TO CONSIDER ARBITRATION For disputes for which resolution would not result in a precedent or set rates, parties may wish to consider using arbitration. In some situations, arbitration may enable parties to receive a faster resolution of their disputes. STEPS TO TAKE 1. Select an Arbitrator. Once parties have agreed to arbitrate, the parties should meet to discuss selection of a suitable arbitrator. Parties may wish to choose a panel of three arbitrators, or request the assigned Administrative Law Judge to assist them in selecting one. 2. Provide for the Arbitrator's Compensation. Parties may agree on the level of compensation for which each party is responsible or elect to allow the arbitrator to apportion costs in such a manner as he or she deems reasonable. 18 3. Protect Confidentiality. Typically, all discussions during and pertaining to an arbitration proceeding are confidential and not discoverable. A model confidentiality agreement can be found in an appendix to these guidelines. 4. Hold a Pre-arbitration Conference with the Arbitrator. Matters typically addressed during a pre-arbitration conference are: a)Procedural matters such as the timing and manner of any required discovery; the need for and type of record of conferences and hearings, including the need for transcripts; the amount of time to be allotted to each party for presentation of its case and for rebuttal; the mode, manner and order for presenting proof; the need for expert witnesses and how expert testimony should be presented. b) Early identification and narrowing of the issues in the arbitration; c) The possibility of stipulations of fact and admissions by the parties solely for purposes of the arbitration, as well as simplification of document authentication; and d) The possibility of parties engaging in settlement negotiations with or without the assistance of a mediator. e) The period of time following arbitrator's decision during which either party, with notice to the other party, may request the Arbitrator to correct in an award any errors in computation, any clerical or typographical errors, or any errors of a similar nature. 19 CALIFORNIA PUBLIC UTILITIES COMMISSION CONFIDENTIALITY AGREEMENT "The undersigned participants in the mediation identified below agree that the entire mediation will be treated as a confidential settlement negotiation, under the provisions of Rule 51.9 of the Commission's Rules of Practice and Procedure. That rule provides as follows: "No discussion, admission, concession or offer to stipulate or settle, whether oral or written, made during any negotiation on a stipulation or settlement shall be subject to discovery, or admissible in any evidentiary hearing against any participant who objects to its admission. Participating parties and their representatives shall hold such discussions, admissions, concessions, and offers to stipulate or settle confidential and shall not disclose them outside the negotiations without the consent of the parties participating in the negotiations. "If a stipulation or settlement is not adopted by the Commission, the terms of the proposed stipulation or settlement are also inadmissible unless their admission is agreed to by all parties joining in the proposal. All parties and the mediator agree in writing that the mediator will be disqualified as a witness, consultant or expert in any pending or future investigation, action or proceeding relating to the subject matter of the mediation (including any investigation, action or proceeding which involves persons not party to this mediation); and The mediator and any documents and information in the mediator's possession will not be subpoenaed in any such investigation, action or proceeding, and all parties will oppose any effort to have the mediator and documents subpoenaed. If the dispute goes to arbitration, the mediator shall not serve as an arbitrator, unless the parties and the mediator otherwise agree in writing. [A table in the original version of this document has been deleted for compatibility with the gopher software. The original WordPerfect 5.1 version of this document can be obtained through anonymous FTP at "ftp.cpuc.ca.gov" in the directory "/home/gopher-data/atl/.guideline.dft".] 20