Intervenor Compensation Reform Consensus Process The purpose of this paper is to enlist those who would like to participate in an effort to propose changes to the Commission's intervenor compensation process. A year ago, many of us met with the Commissioners in a public forum to discuss ways to encourage appropriate settlements between contesting parties to Commission proceedings. There was almost universal agreement among parties that the intervenor compensation process prescribed by statute and implemented in Commission rules often forms a significant barrier to settlement. Under Public Utilities (PU) Code  1801 et seq. and related rules, a public utility customer who can demonstrate a significant financial hardship related to its involvement in a Commission proceeding can receive compensation for its involvement if it makes a substantial contribution to the Commission's decision. President Fessler commented that the Commission's compensation rules were framed in the context of trial-type hearings, with the merits of awarding compensation being determined by reviewing a party's "on-the-record" contribution. He recognized that in negotiating a settlement, an individual who is "highly cooperative" is "likely to leave little in terms of distinct footprints" on the record, offering him "little predicate upon which he could claim any form of compensation." In 1993, the Legislature amended the applicable statute to define a "proceeding" for which compensation may be received to include "alternative dispute resolution procedures in lieu of formal proceedings as may be sponsored or endorsed by the Commission" (PU Code  1802(f)). However, in order to receive compensation for participation in such a proceeding, a party still must demonstrate having made a "substantial contribution", defined as having "substantially assisted the commission in the making of its order or decision because the order or decision has adopted in whole or in part one or more factual contentions, legal contentions, or specific policy or procedural recommendations presented by the customer" (PU Code  1802(h)). Although the Commission has awarded compensation to parties that have signed settlement agreements that were adopted by the Commission, a participant has little assurance that such a signature will demonstrate a substantial contribution. 1 On the other hand, the "substantial contribution" test might encourage a party to endorse an unsatisfactory settlement. When other parties have agreed to settle, a party that withholds its signature in dissent does so at its own risk. If the Commission adopts the settlement, it is likely that the dissenting party will be unable to demonstrate that it made a substantial contribution and will be unable to receive compensation. Thus, when a settlement is pending, a party that entered a proceeding with the hope of representing a broader set of interests may face a direct financial conflict encouraging it to protect its own pocketbook at the expense of the broader group. This is a serious concern because it may encourage the pursuit of inferior agreements and leave the Commission with the false impression that a settlement is enthusiastically endorsed by all participants. Many intervenors argue that utilities carry an advantage into litigation or negotiation because they have substantial ratepayer-supported funds to pay for lawyers and technical experts. They argue that the intervenor compensation rules magnify this advantage because the ability to receive such funding is uncertain and any actual payments take place long after the expenses are incurred. Several commenters stated that this time lag limits an intervenor group's ability to participate in Commission proceedings. One commenter said that it is hard to retain good experts because they fear that they are not going to get paid. It is argued that this is often a fatal blow to attracting experts who also risk being "ostracized" by the utilities that they would be testifying against. Most utility commenters agree that the statute and rules, which were designed to support litigation activities, must be revised to encourage settlements. An exception was General Telephone of California, which sees no need for a change in the rules. Some emphasized the importance of containing intervenor compensation costs and the preferability of being able to plan for the next year's compensation payments. Southern California Gas Company questions whether rules that require intervenors to seek funding after-the-fact based on billable hours is consistent with encouraging alternative dispute resolution. Pacific Bell suggests that when a mediator is used, the mediator could assess the level of participation of intervenors and recommend compensation where appropriate. Pacific Gas and Electric Company (PG&E) agrees that the rules must be changed, but expresses the concern that if a mediator could decide who would receive compensation, an intervenor might feel a need to speak or introduce arguments in the negotiating session just to make its presence known and to makes itself look valuable to the process. PG&E argues that an intervenor that just sits through the negotiating process and then agrees to a settlement may be just as valuable. Last April, the Commission met again to discuss these and other issues related to alternatives to litigation. The Commission has not expressed a formal opinion as to whether or not the intervenor compensation process should be changed, or whether any particular new approach would be successful. However, recognizing that so many participants in Commission proceedings see a need to change the way that intervenors receive compensation, the Commission invited interested parties to seek a consensus on a new approach. A new approach might require changes to statutes and rules. After receiving suggestions for change, the Commission would consider whether or not to endorse those changes and seek any needed new legislation. In response to this paper, please let me know if you are interested in participating in an effort to arrive at a consensus proposal. As participants, you will have a voice in determining how the group will proceed. However, if you choose to participate, please be prepared to attend several meetings and to draft and review some written materials. You are welcome to let me know by letter or E-mail and I ask that you do so no later than November 22, 1994. I anticipate convening an initial meeting in early December. If you are interested in participating in the Intervenor Compensation Consensus Process, please let me know no later than November 22, 1994. Steven Weissman 505 Van Ness Avenue San Francisco, California 94102 Internet Address: saw@cpuc.ca.gov Please note: Most documents related to the Alternatives to Litigation Program are now available on Internet through the Commission's "gopher", which can be reached at "gopher.cpuc.ca.gov".