An alternative to a full-blown regulatory proceeding is a settlement. A settlement is a negotiated solution presented to the regulatory commission by a group of key parties and may be filed at any time during the process. Some regulatory processes may actually start as a settlement rather than being litigated. The settlement typically proposes specific language that resolves some or all of the issues to be litigated in the proceeding. Settlements are simply a recommendation and can be accepted, rejected, or accepted with modifications by the regulatory commission. Settlement rules vary and are set by the appropriate state or federal commission.
The advantage of a settlement is that it gives the parties to a proceeding the opportunity to negotiate mutually acceptable solutions and to avoid the cost, time, and uncertainty of a proceeding. However, regulators sometimes have concerns that only larger participants have the opportunity to fully participate in settlement negotiations and that the resulting terms may not protect all stakeholders or reflect the state commission’s policies. This is why the settlement must still be approved by a majority of commissioners just like any other regulatory proceeding.