That could wipe out half the $30 billion in liabilities that the state’s largest power utility feared it faces because of brutal wildfires linked to its power lines and transmission facilities over the past three years.

PG&E’s stock went up 75 percent after the Cal Fire report on Thursday before slipping 16 percent on Friday.

Former CPUC leader: Bankruptcy a ploy to win bailout

The ruling was cited in a Los Angeles Times analysis that questioned whether PG&E really needed to go into bankruptcy on Tuesday, as it had previously announced it would. Former California Public Utilities Commission President Loretta Lynch told the newspaper that the utility had “created this crisis” as part of a corporate strategy to scare the state Legislature into approving a sweeping bailout to minimize disruptions for its 16 million customers.

Yet Lynn’s view was at odds with several recent developments. Credit rating agencies only continued to see PG&E as in near-deathbed condition and last week, S&P Global Ratings downgraded the state’s other two investor-owned utilities – Southern California Edison Co. and San Diego Gas & Electric Co.

S&P said PG&E’s travails showed the risks that California utilities face because of “inverse condemnation” – a state law which says utilities are financially liable for damages from fires caused by their equipment even if the utilities had not been found negligent.

Meanwhile, PG&E’s contentious relationship with the federal judge overseeing its probation stemming from its six felony convictions in the 2010 natural gas pipeline disaster that killed eight people in San Bruno (pictured) took a sharp turn for the worse. There is relatively little precedent for federal judges to play such oversight roles in complex cases. This had led to speculation that San Francisco-based U.S. District Judge William Alsup might be cautious in drawing conclusions after announcing in late November that he was reviewing PG&E’s role in recent wildfires in Northern California. Alsup was seen as lacking the background and experience of agencies like the CPUC and Cal Fire to evaluate the utility’s claims and evidence from wildfire sites.

Instead, the judge has already issued a preliminary ruling directly asserting that PG&E’s failure to properly insulate power conductors contributed to fire disasters in Northern California over the last two years, including the November blaze in Butte County that killed at least 85 people. A hearing is scheduled in Alsup’s courtroom Wednesday on his ruling, which could lead to the judge ordering PG&E to broadly upgrade its transmission equipment.

PG&E: Rates could go up five-fold

The San Francisco Chronicle reported last week that PG&E officials believed that compliance with a far-reaching Alsup order “could cost between $75 billion and $150 billion, requiring a one-year rate hike – at the low end of the spectrum – of more than five times current rates in typical bills.”

In its formal response to Alsup’s tentative ruling, PG&E indirectly questioned his expertise. The utility wrote that it is “committed to working aggressively and expeditiously with state and federal officials on system maintenance and upgrades and on wildfire mitigation efforts.”

“But the path forward to mitigating wildfire risk is best designed not through probation conditions, but rather through careful coordination with state and federal regulators, after appropriate consultation with other interested parties, based on the best science and engineering advice, with policy analysis that accounts for the full range of important but often conflicting social goals,” PG&E concluded.

State Sen. Jerry Hill, D-San Mateo, told the Bay Area News Group that he welcomed Alsup’s actions.

“A federal judge is actually saying things and hopefully will do something about the lack of maintenance at PG&E,” he said. “No one else has required that.”

Hill, whose district includes San Bruno, has long ripped the state Public Utilities Commission for what he sees as lax oversight of PG&E.

A California Public Utilities Commission report that Pacific Gas & Electric failed to fulfill its responsibilities to properly maintain

On Dec. 21, the CPUC released a dramatic statement saying it would consider drastic steps to address the “serious safety problems” it says the utility has long condoned. The commission said a break-up of the agency into smaller regional utilities or a state takeover would be among the possible changes it examined.

“This process will be like repairing a jetliner while it’s in flight. Crashing a plane to make it safer isn’t good for the passengers,” said CPUC President Michael Picker. “This is not a punitive exercise. The keystone question is would, compared to PG&E and PG&E Corp. as presently constituted, any of the proposals provide Northern Californians with safer natural gas and electric service at just and reasonable rates.”

CPUC looking at seven possible major changes

The CPUC statement said seven possible changes would be considered.

– Having “some or all of PG&E be reconstituted as a publicly owned utility or utilities.”

– Replacing some members of PG&E’s Board of Directors with members “with a stronger background and focus on safety.” 

– The replacement of existing corporate management.

– Adoption of a new corporate management structure with regional leaders overseeing regional subsidiaries.

– Linking PG&E’s “return on equity” – the profits it shares with its investor-owners – to its safety performance.

– Breaking the utility’s natural gas operations and its electric transmission operations into separate companies.

– Ending the arrangement in which PG&E is controlled by a holding company so it becomes “exclusively a regulated utility.”

Picker’s statement was a remarkable turnaround from his comments on Nov. 15, when his upbeat remarks about the ability of PG&E to survive its fourth consecutive year of devastating wildfires in Northern California led the utility’s stock price to spike.

It reflected the anger among CPUC officials over a staff report released Dec. 14 that found the utility had systematically neglected natural gas infrastructure despite being fined $1.6 billion and convicted of six felonies in federal court over the 2010 disaster in San Bruno, a suburb of San Francisco.

Utility facing 500 lawsuits relating to fires it may have caused

Even if PG&E survives in something like its present form after the CPUC’s review, its future is still very cloudy.

Because of claims that PG&E was responsible for the devastating Camp Fire that killed 85 people in Butte County in November, U.S. District Judge William Alsup announced he was reviewing whether PG&E had violated terms of its federal probation in the San Bruno case.

PG&E also disclosed to the U.S. Securities and Exchange Commission that it is facing roughly 500 lawsuits with more than 3,100 plaintiffs over claims the utility was responsible for many of the dozens of wildfires in Northern California since 2016.

It is also facing wildfire-related lawsuits from the state Office of Emergency Services, Cal Fire, Calaveras County and other government agencies.

But while the CPUC is apparently ready for major changes at the utility, it’s not clear yet how state lawmakers feel.

On Nov. 19 – even as criticism of PG&E swelled as confirmed deaths grew in the Camp Fire – Assemblyman Chris Holden, D-Pasadena, was reported to be considering introducing legislation to help the utility deal with wildfire costs.

Holden helped pass a law earlier this year that allowed PG&E to spread out the costs from the liabilities it faced from 17 wildfires in 2017.

California’s three large investor-owned utilities are renewing efforts to allow them to make ratepayers cover the costs of wildfires that authorities blame on utilities’ mistakes or poor maintenance.

Pacific Gas & Electric officials made this clear last week when they announced they expected to have at least $2.5 billion in liabilities from the wildfires that scarred the wine country of Northern California last October. That sum is only for 12 relatively small blazes that the state blames on PG&E’s failure to maintain equipment and clear brush near power lines. Authorities are still looking at what caused the biggest blaze – the Tubbs fire – which torched more than 3,000 homes in Sonoma County and is blamed in the deaths of 22 people.

PG&E CEO-President Geisha Williams used a conference call with analysts to make the case for state legislation to protect electricity utilities from bankruptcy in an era in which huge wildfires – blamed on hotter, drier weather – are more common than ever. PG&E only has an estimated $840 million in insurance coverage to deal with the 200 and counting lawsuits from the wine country conflagrations.

Williams said “flawed” state laws made utilities responsible for fire risks that were beyond their control. But in a decision-making process that began last summer – before the wine country blazes – and ended after they were finally put out, the California Public Utilities Commission rejected a similar argument put forward by San Diego Gas & Electric. In August, CPUC staff recommended that commissioners reject an SDG&E request to pass along to ratepayers $379 million in unrecovered costs from 2007 wildfires that ravaged San Diego County. After three months of wavering, the CPUC board voted unanimously in late November to deny the request.

Williams said negative media coverage of the October fires complicated utilities’ efforts to get help from the California Legislature. But some utility watchdogs are still wary of state lawmakers, whom they see as sending out mixed signals on wildfire liabilities.

On the one hand, the state Senate voted 39-0 in May and an Assembly committee voted 15-0 last week for Senate Bill 819. It would ban the CPUC from allowing utilities to pass along to ratepayers the costs of fines or penalties as well as the cost of damages that were “caused” by a utility’s infrastructure. Only costs the CPUC deems “just and reasonable” can be shifted from shareholders to ratepayers under the legislation. PG&E and Southern California Edison expressed “concerns” about the bill without formally opposing it, according to a legislative analysis.

Benign bill pushing responsibility – or stealth bailout?

But another bill that had similarly lopsided support in the Senate is drawing a very mixed response. Senate Bill 1088 passed the Senate 34-2 in late May and survived an Assembly committee vote last week with eight lawmakers in support, two in opposition and five declining to vote.

It would require utilities “to submit a safety, reliability and resiliency plan to the California Public Utilities Commission every two years.” It would also require the state Office of Emergency Services “to adopt standards for reducing risks from a major event and requires the office to update the standards at least once every two years.”

Supporters – including PG&E, SDG&E, labor unions and some counties hit hard by last year’s blazes – depict the measure as a benign attempt to make sure utilities are prepared to handle their responsibilities.

But critics see the language requiring the state to regularly “update” how it evaluates risks posed by the biggest blazes as potentially giving legal ammunition to the utilities – specifically, to their arguments that emerging, more dangerous conditions should change what costs can be shifted on a “fair and reasonable” basis to ratepayers.

Formal opponents of SB1088 include groups which have standing to challenge utilities’ proposed rate hikes (The Utility Reform Network and the Office of Ratepayer Advocates); business interests (the California Manufacturers and Technology Association, the Western States Petroleum Association and farm groups); and green activists (most notably the California Environmental Justice Alliance).

This price system, critics say, results in unforeseen consequences. A recent investigative report found that California’s utility companies have been involved in a power-plant building spree, even though Californians have significantly cut their electricity usage over the same time period. In three years, the state is projected to be producing 21 percent more electricity than it needs, without counting the growth in rooftop-solar applications, reported the Los Angeles Times.

Last year, the California Independent System Operator had 24 percent in actual reserves – far above the targeted 15 percent goal. Even that 15 percent goal is 50 percent higher than what’s necessary to protect the system from disaster and blackouts, according to some experts.

As the Times’ report put it, “California has a big – and growing – glut of power.” It’s a matter of incentives. Because utilities are guaranteed a 10.5 percent rate of return on each new plant they build, regardless of whether customers actually need it, they can make more money building new plants than they could buying power from existing competing plants.

In an open marketplace, gluts of products or services lead firms to slash their prices dramatically. If, say, car manufacturers produce too many vehicles, they will provide rebates or be stuck with lots full of unsold inventory. With California’s regulated utility system, by contrast, gluts in electricity actually raise prices for consumers because of the way utilities are paid for their investments. They need only get the approval from the Public Utilities Commission to build new plants and pass on costs to ratepayers.

The regulated utility model, which dates back to the 19^th century, puts government regulators in charge of looking after consumers’ best interests. But a fairly recent California utility scandal has illustrated the dangers of what Nobel Prize laureate George Stigler refers to as “regulatory capture,” when the oversight agencies are dominated by the industries they regulate.

As the Mercury News reported in 2015 regarding the investigation of a deadly 2010 explosion of a PG&E natural-gas pipeline in San Bruno:

“Additional evidence of the close relationship between PG&E officials and leaders of the agency that regulates the utility emerged late Friday in a new batch of emails long sought by the city of San Bruno … .”

Some say the current system also crushes the emergence of a functioning electricity market. The Times article tells the story of an energy company that built a $300 million privately funded facility in Sutter County:

“Independents like Calpine don’t have a captive audience of residential customers like regulated utilities do. Instead, they sell their electricity under contract or into the electricity market, and make money only if they can find customers for their power.”

But soon after the construction of that plant, the California Public Utilities Commission approved PG&E’s application to build its own power plant. PG&E gets paid no matter the consumer demand, so it was hard for a true private enterprise to compete with that subsidized model. Calpine shuttered its facility halfway into its useful life.

“A monopoly franchise removes the incentive to innovate to increase market share,” explains my R Street Institute colleague Devin Hartman, in an August study of the nation’s electricity markets. “Guaranteed cost recovery for ‘prudently incurred’ expenses diminishes the incentive to control costs. The regulated model also insulates utilities from market risks and most policy risks, such as changes in fuel prices or government subsidies.” This provides a safe place for investors, he added, but gives them little incentive to manage risks or control costs.

These analyses also highlight a point that might seem counterintuitive to many environmentalists: competitive markets often lead to better air-quality outcomes. Here, we see utilities overbuilding natural-gas-fired power plants even as consumer demand suggests the plants aren’t necessary. Because of the utilities’ rate-of-return-based payment, they can stick with older technologies and avoid looking at alternative-energy models that might trim their costs.

The current distorted market is, to some degree, a reaction to the botched energy deregulation plan former Gov. Pete Wilson signed into law in 1996, which provoked a statewide crisis in 2000. The state deregulated the price of wholesale energy, but capped its retail price. The population had been growing and regulators had not approved the construction of new power plants for years. After a hot summer and market manipulations by energy companies gaming the new system, the state’s wholesale prices soared above those retail caps.

The end result: Rolling electricity blackouts, a statewide crisis that led to the bankruptcy of PG&E, and the recall of Gov. Gray Davis. Though Wilson signed the legislation, Davis was blamed for indecision as parts of the state went dark. Since then, state officials have avoided anything smacking of deregulation or market competition and have been cranking up supply even if it’s not necessary. Other states, such as Texas, deregulated their electricity markets and have watched electricity prices go down as California’s have increased.

The Times only touches on another issue of long-term importance: solar energy and the utility companies’ fear of a “death spiral.” California law allows for net energy metering. “Customers who install small solar, wind, biogas and fuel cell generation facilities … to serve all or a portion of onsite electricity needs are eligible for the state’s net metering program,” explains the Public Utilities Commission. “NEM allows a customer-generator to receive a financial credit for power generated by their onsite system and fed back to the utility.”

Utilities must buy back the electricity at market rates, but they still have this vast – and growing – infrastructure of power plants and utility lines to finance and maintain. The more the utilities raise their rates to pay for these “stranded costs,” the more consumers opt out and install solar panels. That raises the per-capita costs of maintaining that infrastructure, which raises electricity prices – and leads to more people opting out of the system. Advances in battery storage could further diminish the need for power plants that are financed 30 or 40 years into the future.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.     

Short-term pain with ACA repeal

Good morning! TGIT. Republicans in Washington appear poised to repeal the Affordable Care Act, better known as Obamacare, some time after Donald Trump is sworn in as president.

With premiums on the rise and consistently poor polling, repeal is music to the ears of many, as evidenced by every federal election since the measure was passed in 2010. But California would suffer major economic consequences if Congress repeals the ACA without an adequate replacement, according to a new study by the UC Berkeley Labor Center. 

A partial repeal (as a full repeal still seems out of reach) would cause Californians to lose hundreds of thousands of jobs, billions of dollars in annual federal funding and kick millions out of coverage. Some of the losses would be offset by gains elsewhere, but it’s impossible to give a complete analysis of the offsetting effects without Republicans’ replacement plan.

CalWatchdog has more. 

In other news:

• Budget: “California’s state auditors recently released an unflattering look at the state’s finances, part of their annual report. Issued several years in arrears, the assessment showed nearly $2 billion in deficit spending for the 2011-2012 fiscal year, piling more borrowed money onto what Gov. Jerry Brown has called a figurative ‘wall of debt.’” CalWatchdog has more. 

• CPUC: “Gov. Jerry Brown has chosen two of his closest advisors on environmental and climate change issues to fill positions on the California Public Utilities Commission, the powerful state agency that regulates energy companies and the telecommunications industry.” The Los Angeles Times has more. 

• Trump Transition: “Abel Maldonado, California’s former lieutenant governor, the Central Coast’s former assemblymember and state senator, and Santa Maria’s former mayor, was in Florida on Wednesday, reportedly interviewing with President-elect Donald Trump to discuss a possible appointment as Secretary of Agriculture.” Santa Barbara Independent has more. 

• Lobbying: The Sacramento Bee looks at how a top Democratic donor pushed a major environmental bill through the Legislature. 

Legislature:

• Gone till January. 

Gov. Brown:

• No public events announced. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @LGullyborn

Voter fraud in CA?

Good morning! Legislators are back in Sacramento today for the swearing in of their new colleagues. But at the same time, top Republicans are questioning the integrity of some of the state’s election results, forcing the state’s top election official to dismiss the allegations.

Leaders in the state party are concerned about local elections, particularly in one important Orange County state Senate race.

But President-elect Donald Trump fanned the flames by tweeting California was one of three states with “serious” voter fraud. His Sunday tweet followed another sent hours earlier claiming that he’d “won the popular vote if you deduct the millions of people who voted illegally.” 

So far, Trump has offered no proof to his claims, which were dismissed in great detail by PolitiFact California. Secretary of State Alex Padilla immediately sent a press release disavowing the claim: “It appears that Mr. Trump is troubled by the fact that a growing majority of Americans did not vote for him. His unsubstantiated allegations of voter fraud in California and elsewhere are absurd.”

California Republican Party Chairman Jim Brulte told party officials in an internal email obtained by CalWatchdog that the state has a history of “anomalies” that “deserve further scrutiny.” Brulte added that he believed “most of the government officials charged with ensuring voter and ballot integrity are good people who want to do the right thing.”

CalWatchdog has more. 

In other news:

• “A day after halting plans for a strike, state government’s largest employee union announced that it had reached a tentative agreement for a new contract. Neither SEIU Local 1000 nor the state’s Human Resources Department would disclose the deal’s highlights Saturday morning.” The Sacramento Bee has more. 

• “Bay Area elected officials are calling on Rep. Xavier Becerra, named by Gov. Jerry Brown to be the state’s attorney general, to prioritize a criminal investigation into the California Public Utilities Commission,” reports the San Francisco Chronicle. 

• “With President-elect Donald Trump’s campaign rhetoric on illegal immigration still fresh on their minds, legislative Democrats have readied a pair of proposals they believe will offer some immigrants additional legal help. The bills, set to be introduced on the first day of the new legislative session Monday, primarily aim to bolster the legal representation of immigrants who are in the country illegally and threatened with deportation.” The Los Angeles Times has more. 

• “Ahead of next month’s inauguration of President-elect Donald Trump, more than two dozen returning and new Democratic members of the California Senate on Friday asked President Obama to enact a ban on new oil drilling off the state’s coast.” The Los Angeles Times has more. 

Legislature:

• New legislators will be sworn in today at the Capitol at noon. 

Gov. Brown:

• Hosting the 85th Annual Capitol Christmas Tree Lighting Ceremony today at 4:30 p.m. on the west steps of the Capitol.
• Press conference with Rep. Xavier Becerra, D-Los Angeles, at 11:15 a.m. in the governor’s office in Sacramento. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @mwstafford

What happened to CA oil exploration?

Good morning. Hopefully everyone enjoyed the return of NFL football this weekend and is excited about the Rams/49ers game tonight.

But that’s tonight. This morning we’re talking about oil. 

It took some time, but a 2011 report by the Federal Energy Information Administration that estimated that California’s Monterey shale underground land mass formation had 15.4 billion barrels of accessible oil and a follow-up study that put the figure at 13.7 billion barrels of oil — about twice as much as the rest of the nation combined — got plenty of folks’ attention.

Advances in hydraulic fracturing, known as fracking, made extracting the oil cost-effective. … But it’s been all downhill ever since for those enthusiastic about oil exploration in the Golden State.

It’s not just that low oil prices have left energy companies facing a “world of hurt,” in the words of the Houston Chronicle, and without the resources to pursue large new drilling programs in California or elsewhere. It’s specific, daunting developments.

CalWatchdog has more.

In other news:

• “When key bills aimed at reforming the California Public Utilities Commission died last month, much of the blame was placed publicly at the feet of a Republican floor leader — someone not typically seen as a make-or-break figure in a Democrat-dominated Legislature. It turns out, the CPUC itself had some last-minute concerns about the overhaul that contributed to its demise.” The San Diego Union-Tribune has more.

• “In a sign that California’s pot initiative is getting national attention, a Pennsylvania millionaire has contributed $1.3 million to a nonprofit group that is raising money to oppose Proposition 64 on the November ballot,” reports the Los Angeles Times. Meanwhile, “California supporters of the statewide measure to legalize marijuana filed a complaint late Friday with the state’s political ethics watchdog alleging that an outside committee opposing Proposition 64 filed campaign finance reports months after the deadline,” reports The Sacramento Bee.

• The Orange County Register looks at the curious alliance between Republican Rep. Darrell Issa and Democratic Rep. Loretta Sanchez. The two Southern Californians are gambling on bipartisanship helping them through tough races.

• “Dr. Robert Sears is one of the leading voices in the anti-vaccination world, a hero to parents suspicious of childhood immunizations that public health officials say are crucial to preventing disease outbreaks. So when the Medical Board of California announced last week that it was moving to pull the Orange County pediatrician’s medical license, it immediately set the stage for a new battle in the long-running fight over whether schoolchildren should be vaccinated.” The Los Angeles Times has more. 

Legislature:

• Gone ’til December.

Gov. Brown: 

• Presenting Medal of Valor to eight public safety officers in his Capitol office at 11 a.m. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @Sachealth

Legislators asking for hike in gas tax to fund transpo plan

Good morning. Happy Monday. And welcome to the final stretch in Sacramento, where the legislative session ends on the 31st. 

One of the biggest items left unresolved is a transportation plan. The top transportation legislators in each chamber — Assemblyman Jim Frazier, D-Oakley, and Sen. Jim Beall, D-San Jose — are pitching a 17-cent-per-gallon gas tax increase to fund a $7.4 billion transportation program. They also want to increase the tax on diesel fuels by 30 cents a gallon and to make it easier to get approvals for transportation infrastructure improvements. Their proposal exceeds what Gov. Jerry Brown pitched last year.

Brown’s proposal — which went nowhere in a special session — was built on a 6 cent per gallon tax increase and other provisions that would have funded a $3.6 billion transportation plan.

CalWatchdog has more. 

In other news: 

• Speaking of a transportation plan, it’s one of several big items that will likely go unresolved this session, causing finger pointing and frustration. The San Jose Mercury News has more. 
• “For years, state lawmakers have been trying to crack down on private meetings between utility companies and members of the California Public Utilities Commission after revelations that top officials and industry executives had frequent dinner dates, shared talking points and even sketched out details of the multibillion-dollar closure of a Southern California nuclear power plant during a secret rendezvous in a luxury hotel in Poland.” But some worry that a package of bills under consideration by the Legislature to overhaul the commission won’t go far enough. The Los Angeles Times has more. 
• One senator upset someone on the other side of the Capitol, so they removed her name from her bill in retaliation. The Sacramento Bee has more. 
• And in a few days, the Legislature will say goodbye to one of its most accomplished members. The Los Angeles Times has more. 

Assembly:

• In at 1 p.m.

Senate:

• In at 1 p.m.

Gov. Brown:

• No public events announced. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @SophiaBollag

From water storage to road repair and beyond, legislators have not met Brown eye to eye, raising the prospect of a protracted conflict that continues well into next year, with elections looming next November.

Diminishing returns

Brown had prided himself on a relatively hands-off approach to Sacramento’s fractured political configuration, which has seen moderate Democrats sink strict environmental regulations and Republicans adopt an on-again, off-again approach to negotiations with the governor’s office. “This particular approach of mine has worked in the past,” Brown said, according to the Los Angeles Times. But between California’s drought and its challenges in shifting away from the gas tax to maintain public roads, that comfortable attitude has begun to show diminishing returns.

“Administration officials estimate that $59 billion is needed for state roads, and local officials say an additional $78 billion is required for cities and counties. The longer it takes to reach a deal, the bigger the price tag will be,” the Times reported.

Analysts and opinion writers, long frustrated with the low quality of California’s roads, have homed in on the latest round of infrastructure troubles. “Traffic accidents in California increased by 13 percent over a three-year period — the result of terrible roads and worse drivers,” as Victor Davis Hanson wrote in the San Jose Mercury News. Hanson and others have held up roads as a barometer of the state’s broader political and economic health. “Why is California choosing the path of Detroit,” he asked, “growing government that it cannot pay for, shorting the middle classes, hiking taxes but providing shoddy services and infrastructure in return, and obsessing over minor bumper-sticker issues while ignoring existential crises?”

Looking for leadership

Brown has even taken some implicit heat on infrastructure from within his own administration. The state’s treasury secretary John Chiang recently revealed his belief that the governor needs to launch a new, transparent and top-to-bottom review of California’s infrastructure needs.

“Chiang wants to use the treasurer’s office to foster long-term thinking that California is sorely lacking and arguably has lacked since Pat Brown was governor in the 1960s, Chiang said at his keynote address to the California Debt and Investment Advisory Commission’s event before the Bond Buyer’s California Public Finance Conference,” according to Bond Buyer.

“One of the challenges the state faces is to persuade people of the importance of long-term investment in an environment where many of them distrust the financial markets, Chiang said. That’s where transparency comes in. The state has made progress in governance and management evidenced by its boosted bond ratings, but people still ask what the long-range plan is, Chiang said. […] Such a study would need to come from the governor and the state Legislature, however, not the treasurer’s office, Chiang said. His office’s role would be to provide education.”

Winter worries

Clouding the picture further, Congressional Republicans in Washington have taken Brown to task on plans for shoring up the state’s water infrastructure. “The Republican members of California’s delegation are demanding a government plan to store the deluge of water that could come with El Nino this winter,” the Sacramento Bee reported. “Fourteen GOP lawmakers will send a letter to President Barack Obama and Gov. Jerry Brown on Thursday asking for specifics about how federal and state agencies expect to capture, save and transport water. […] Rep. Devin Nunes, R-Calif., said the governor has opposed a plan approved by the House, and the Senate hasn’t proposed one of its own.”

Meanwhile, the public utilities have joined in the chorus. In an op-ed at the Los Angeles Daily News, California Water Association executive director Jack Hawks warned that “we cannot build a reliable water supply on conservation alone. Customers have been doing an outstanding job during the current drought emergency, but this level of conservation is not sustainable over the long term.”

Brown said the six bills had several worthwhile ideas. “Unfortunately, taken together there are various technical and conflicting issues that make the over 50 proposed reforms unworkable. Some prudent prioritization is needed,” he wrote.

Sen. Mark Leno, D-San Francisco, and Sen. Ben Hueso, D-San Diego, who co-sponsored Senate Bill 660, the most sweeping reform measure, expressed disappointment and dismay. So did Assemblyman Anthony Rendon, the Lakewood Democrat who will take over as speaker in coming months.

The measures were intended to limit back-room dealings in which PUC officials and board members met surreptitiously with representatives of the state’s powerful investor-owned utilities. The most notorious example was a 2013 meeting in a Warsaw, Poland, hotel between then-PUC President Michael Peevey and a Southern California Edison executive at which the parameters were set for a later-approved deal in which ratepayers bore 70 percent of the $4.7 billion cost of the shutdown of the San Onofre nuclear plant. Southern California Edison is San Onofre’s majority owner and San Diego Gas & Electric is the minority owner. The meeting and its central role in the bailout approved by the PUC wasn’t disclosed until February of this year.

Ex-PUC president’s home searched by investigators

Peevey is the subject of state and federal criminal investigations over the San Onofre deal and other PUC decisions. He left the PUC under pressure in late 2014. Soon after, his La Canada Flintridge home was searched by investigators looking for evidence of improper relationships with the utilities he used to govern.

Within weeks after the raid, the PUC released emails that raised troubling questions about the cozy ties between Peevey and top officials at Pacific Gas & Electric, the giant Northern California utility. This is from a February CalWatchdog account:

Emails show Peevey pressured PG&E to give money to oppose Proposition 23, the failed 2010 ballot measure opposing AB32; appeared to link his support for rate hikes to PG&E actions on unrelated issues; and was open to PG&E efforts to influence inquiries into a San Pedro pipeline explosion that killed eight people. … He sought to prop up a project by the Hydrogen Energy California (HECA) firm by constantly reminding PG&E how much he had done for it.

The Brown administration promised to work with lawmakers on a more streamlined reform proposal in coming months. But in the meantime, as Hueso told the Union-Tribune, the PUC has “little incentive to work toward a culture of openness and accountability.”

The agency has been accused of being excruciatingly slow in releasing crucial documents, whether to criminal investigators, the Legislature or journalists. It also appears to be shrugging off growing calls to scrap the deal on how to cover the $4.7 billion cost of closing San Onofre.

Michael Aguirre, the San Diego attorney who led testimony against the San Onofre plan last fall, had the sharpest reaction to the governor’s decision. He told the Union-Tribune that “Jerry Brown’s vetoes show he is helping — not stopping– the dishonest practices known to the people of California.”

Brown chose aide to replace Peevey, not outsider

A previous decision by the governor already suggested he doesn’t share the prevailing view in Sacramento that the PUC is badly in need of a culture change. When Peevey was forced out in December of last year, Brown could have appointed an outside energy expert with a history of independence. Instead, he named PUC board member Michael Picker as president. Though Picker has only been on the board since January 2014, he is an energy establishment insider, working for Brown — and with the utilities  — from 2009 as a senior energy adviser until joining PUC management.

Despite continued criticism of PUC secretiveness, Picker’s selection as board president was ratified by the state Senate a month ago.