Public Policy by Settlement of Litigation: A Case Study

Abstract

DOI 10.1515/cjpp-2013-0035 Calif. J. Politics Policy 2014; 6(4): 557–576 Joseph Tanimura and C. Paul Wazzan a, * Public Policy by Settlement of Litigation: A Case Study Abstract: In 2002, the California Public Utilities Commission alleged that a group of energy sellers had overcharged California ratepayers by approxi- mately $14 billion. The case went to trial and was dismissed, appealed, and ultimately remanded to the Federal Energy Regulatory Commission. It remained there until March 2012, when the CPUC and the Dynegy parties, a subset of the original group of defendants, announced that a settlement agreement had been reached wherein the California ratepayer claims (alleged to be almost $1 billion) would be dismissed. In return, NRG, successor to the Dynegy parties, would: 1) pay the CPUC $20 million and 2) invest $102.5 million in California to expand its electric vehicle charging infrastructure. We view NRG’s required investment as a subsidy equal to the expected value of the CPUC’s claims against the Dynegy parties. The agreement and the legal process by which it was arrived at have important legal, economic, and public policy implications. Keywords: CPUC; electric charging stations; electric vehicles; EVCS; public utili- ties commission; utilities regulation Dr. Wazzan was economic expert for ECOtality in ECOtality, Inc., v. California Public Utilities Commission et al., Court of Appeal of the State of California, First Appellate District, Division Two. Christopher Pham provided valuable research assistance. The views expressed in this ­paper are those of the authors and are not necessarily reflective of the views of others at Berkeley Research Group or ECOtality. Any errors or omissions are the responsibility of the authors. *Corresponding author: C. Paul Wazzan, Berkeley Research Group, LLC, 2049 Century Park East, Suite 2525, Los Angeles, CA 90067, USA, e-mail: pwazzan@brg-expert.com Joseph Tanimura: Berkeley Research Group, LLC, 2049 Century Park East, Suite 2525, Los Angeles, CA 90067, USA a 1 Introduction In the wake of the flawed energy deregulation the California Legislature (AB 1890) instituted in 1996, the state faced an energy crisis in 2000–2001 that included