A report and public comment address the Agencies’ ties to the utilities
SAN FRANCISCO – California utility regulators, coping with repeated
scandals over decisions that are costing utility customers billions of
dollars, took the unusual step Wednesday of fielding public comments on
how to reform their operations.
The Public Utilities Commission’s two-part hearing opened with reports
about how its practices have broken the public’s trust and given
unfair advantage to the “wealthy,” in particular the very
utilities that the commission regulates.
Michael Strumwasser, author of a report commissioned by the PUC, said regulators’
talks with utility executives and others outside of public view, referred
to as ex parte communications, have made the regulatory process unfair.
“Ex parte communications have come to undermine record-based decision
making,” Strumwasser said. Such communications give a “huge
advantage to well-funded parties.”
Commission President Michael Picker, who took over at year-end, promised
reforms after revelations of secret dealings between his predecessor on
the commission and the state’s investor-owned utilities.
But Picker’s efforts may be trumped by reform proposals under consideration
in the state Legislature.
After the report, the commission then moved on to hear from the public.
“The bottom line is the private and secret communications need to
stop,” Thomas Long, legal director for the Utility Reform Network,
said during the hearing.
Commissioner Mike Florio said it would take time to implement changes,
given that there has been a “culture” of how business at the
PUC is conducted. But he said things already have been improving.
“The culture has already changed in light of everything that has
happened,” Florio said. “It certainly hasn’t been fun
to go through.”
The report commissioned by the PUC found that the commission for years
has based multibillion-dollar decisions not on public debate or evidentiary
records but rather on secret meetings with the companies it regulates.
The report to the commission found that the wholesale lack of compliance
with the rules and inclination to favor private corporations over the
public good began at the very top of the organization.
“Where were these officials’ ethical compass?” asks the
report, which was released in late June. “What made them think this
was appropriate conduct for a CPUC commissioner or a member of a commissioner’s
The 178-page report includes dozens of recommendations aimed at balancing
the scales between utilities and consumer groups and restoring public
trust in the commission.
One major recommendation is a prohibition on most ex parte communications.
The trouble with regulators’ secret talks with utilities was highlighted
in an Aug. 5 ruling by state Administrative Law Judge Melanie Darling.
She ruled that Edison representatives engaged in 10 unreported communications
with one or more commissioners or their personal advisors.
The communications, she said, related to the payment of costs related to
the January 2012 shutdown of the San Onofre nuclear plant.
Darling’s ruling, which recommends that Edison pay penalties as high
as $34 million, sparked new questions about the San Onofre cost settlement
as well as the apparently cozy relationship between the commission and
the companies it regulates.
Starting last year, PUC commissioners and officials, including former President
Michael Peevey, were criticized for improper communications with executives
at Pacific Gas & Electric Co. The conversations included how much
to fine PG&E for the 2010 explosion of a natural gas transmission
line that killed eight people in the Bay Area city of San Bruno.
Thousands of emails also revealed that Peevey, who retired as PUC president
at the end of 2014, involved himself personally in internal decision-making
at PG&E, extending to matters such as the utility’s corporate
leadership, public relations and rate-setting cases affecting billions
of customer dollars.
Before his retirement, Peevey denied wrongdoing and defended his record.
He has not been available for comment since then.
Peevey’s involvement with executives of the businesses he regulated
has prompted probes by the U.S. attorney’s office in San Francisco
and the California attorney general’s office.
In January, state law enforcement authorities searched the La Cañada
Flintridge home of Peevey and his wife, Democratic state Sen. Carol Liu.
Also searched was the Bay Area residence of former PG&E executive