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Utility general rate cases are lengthy, expensive and often contentious proceedings, litigated over a period of nearly a year. Several dozen issues are typically in dispute, ranging from the allowed overall rate of return-which can be worth tens of millions of dollars-to minor operating expenses such as the recoverability in rates of a utility's decision to have its chief executive fly to a meeting on a chartered flight instead of a commercial flight. While this may be worth only a few hundred dollars to ratepayers, it can often be of greater value to the opponents of a rate increase in shaping public opinion. Given the hundreds of thousands of dollars that can be devoted by the utility to litigating these cases-which is likely recoverable in rates of utility customers as legitimate operating expenses of the utility-and the hundreds of thousands of dollars of public resources that similarly are spent in scrutinizing and challenging the utility's case by the advocacy staff of the public utility commissions, there is a strong interest amongst state public utility commissions (PUCs) and litigants in encouraging settlement of these cases. In particular, if these cases can be resolved in the early stages of the process, substantial litigation costs can be avoided. Moreover, the litigants (and their constituents) can benefit from the certainty of a settled (versus litigated) outcome and the improved relationships among the litigating parties associated with an outcome achieved through settlement.<br><br>This article will explore the measures that PUCs can take to encourage settlement of utility rate proceedings. To provide a context for this examination, we will discuss the schedule and process typically followed in the utility retail rate-setting process. We will consider the formal steps a regulatory agency can take to create an environment that will promote settlement of utility rate-setting proceedings, such as the adoption of procedural rules governing the settlement process. Just as importantly, the regulatory agency can take less formal steps to promote settlement, such as making a settlement judge or a mediation process available to the litigants, or including a settlement conference as part of the procedural schedule. We will then examine some of the practical considerations of the settlement process, such as the most opportune time for scheduling a settlement conference in the procedural schedule. We will also consider some of the fairness considerations of the settlement process, such as ensuring that any non-settling parties have an adequate opportunity to challenge a settlement and present a case in opposition to a proposed settlement. Finally, we will examine how these concepts and practices may be applied more broadly to proceedings other than the utility rate-setting process.

Preserving the Public Interest Through the Use of Alternative Dispute Resolution in Utility Retail Rate Cases