One of the more embarrassing scandals in the history of the California Public Utilities Commission appears to have finally concluded with a settlement on how to pay for the costs of shuttering the broken San Onofre nuclear plant – one that’s far friendlier to ratepayers and far harder on shareholders than the original deal.

First opened in 1968, the San Onofre plant was long one of most heavily relied on sources of electricity for both Southern California Edison, which owns nearly 80 percent of the plant, and San Diego Gas & Electric, which owns 20 percent. But severe problems with relatively new Mitsubishi steam generators caused a series of radiation leaks in 2011 that led to the plant being shut down soon after and closed for good in 2013.

In 2014, the California Public Utilities Commission decided that about 70 percent of the $4.7 billion cost of San Onofre’s closure should be borne by Edison and SDG&E ratepayers – $3.3 billion. The decision angered some activists because of the view that San Onofre’s failure resulted from poor management of the plant by Edison officials, not anything ratepayers had done.

But attempts to overturn the decision ramped up in early 2015 with the revelation that the framework of the deal had been worked out in 2013 in a Warsaw, Poland, hotel in a private, never disclosed meeting between then-PUC President Michael Peevey and an Edison executive. After more than a year of intense criticism of the state regulators from lawmakers and activists, the PUC agreed to reopen the settlement in 2016.

Last week, commissioners voted unanimously to lop $750 million off the amount assessed ratepayers, meaning they and shareholders roughly split the cost of San Onofre’s closing. The savings will show up immediately in electricity bills of 6 million customers. That’s because fees that have been included in Edison and SDG&E bills since the settlement was approved in 2014 have been immediately cancelled, retroactive to December.

The deal was agreed on by Edison and SDG&E and by Citizens Oversight, a San Diego-based consumer group that sued in federal court over the 2014 settlement. The lawsuit claimed that forcing ratepayers to pay for a power plant that produced no power was an unconstitutional taking of property. The argument was rejected by a U.S. district court judge. But after the 9th U.S. Circuit Court of Appeals agreed to hear an appeal, the utilities began talks for a new settlement.

Probe of PUC president ends with no indictments

The fallout from the covert way the costs were initially divvied up went beyond forcing open the 2014 settlement. It added a new front in a criminal investigation of Peevey over allegations he traded favors with utilities. The probe ended up without any indictments.

The PUC fined Edison $16.7 million for failing to disclose its executive’s meeting with Peevey.

Meanwhile, Edison and SDG&E’s $7.6 billion lawsuit against Mitsubishi Heavy Industries over its allegedly defective equipment ended in 2017 with a result that deeply disappointed the utilities. The International Chamber of Commerce in San Francisco awarded them $125 million – but also required they cover $58 million of Mitsubishi’s legal fees, leaving them with a net $67 million.

Edison and SDG&E could also face staggering new bills because of San Onofre. That’s because they’re under huge pressure to find a new site to store the 3.55 million pounds of nuclear waste now kept at the San Onofre site. A report in March about basic problems emerging with the canisters storing the waste only added to concerns about the wisdom of having so much highly radioactive material in a heavily populated area.

Unless plans to open a huge federal nuclear waste repository in Yucca Mountain, Nevada, are revived, the utilities could be forced to set up their own remote storage site.

Activists are furious with the PUC’s 2014 decision to make ratepayers of Southern California Edison and San Diego Gas & Electric cover 70 percent of the $4.7 billion cost of shuttering the facility, which had severe problems with steam generators that forced its closure. After the decision, it was discovered that the parameters of the deal had been worked out clandestinely in 2013 in a meeting in a Warsaw, Poland, hotel room between an Edison executive and then-PUC President Michael Peevey.

Both the state and federal governments have launched criminal investigations of Peevey over his failure to disclose contacts with utility executives and his alleged attempts to pressure utilities for favors in return for his support on some regulatory decisions.

But while the criminal division of the state Attorney General’s Office is pursuing the criminal probe, the civil division of the office is supporting Gov. Jerry Brown in his fight against disclosing emails between his office, the PUC and utilities during the period decisions were being made about how to pay for the costs of closing San Onofre.

Recent coverage of the case in the San Diego media has featured sharp criticism of Harris’ dual role in dealing with the scandal.

“In this case, for the [attorney general] to investigate the communications with the [California Public Utilities Commission] while representing a potential witness who is a potential subject of the investigation is a conflict,” former San Diego County District Attorney Paul Pfingst told KPBS.

“One of the problems with the conflict is it invites the attorney general to narrow the investigation to avoid the conflict,” former San Diego City Attorney Mark Aguirre told the San Diego public broadcasting affiliate.

“If the investigation into the Public Utilities Commission involves the nuclear power plant, and that is something that’s the subject of the governor’s emails they are trying to keep secret, then I think there is a conflict,” Georgetown University law professor Paul F. Rothstein told the Union-Tribune. “The Attorney General’s Office should probably turn over one or the other of these cases to an independent counsel.”

“Government works best when it shines light on problems, not seeks to keep the public in the dark,” University of San Diego law professor Shaun Martin told the newspaper, criticizing Harris for helping efforts to keep public records from being released to the media.

‘Ethical firewall’ said to separate AG branches

Harris’ aides deny there is any conflict and depict their actions in working with the governor on email requests as routine:

A Harris spokesman said there’s an ethical firewall between the attorney general’s civil division representing the governor’s office and its criminal section responsible for the investigation into the California Public Utilities Commission and the state’s energy companies.

That’s from KPBS’ coverage.

Now there’s one more story that places the PUC in very unflattering light. KQED has details:

In 2011, Steven and Sharon Vego, along with their 21-year-old son, Jonathan Cole, were killed after a power line went down in their backyard in San Bernardino. …

 

[The Vegos] left behind two kids — one of whom watched from inside the family house as her father, then mother and brother, all died in January 2011.

 

Within a few months, the surviving children filed a lawsuit and asked the CPUC for its investigation report. The CPUC voted in May 2011 to allow the release of that report. It was issued Dec. 17, 2012, and found that the incident was not only Southern California Edison’s fault, but that it could have been prevented if the utility had responded to previous issues on the same electricity circuit.

 

But public records released by the CPUC show the agency didn’t give the report to the Vego family until March 19, 2014 — more than two years after the family settled its lawsuit with Southern California Edison. And the CPUC waited until five days after it had entered into a settlement agreement in which Southern California Edison admitted that it violated state regulations, that there had been similar incidents previously and agreed to a $16.5 million fine.

PUC sides with utility over ‘grieving family’

In a Feb. 16 letter to CPUC President Michael Picker, Sen. Jerry Hill, D-San Mateo, decried how the “commission — which was the only public entity to perform an investigation — effectively took the side of the utility against the grieving family in a civil matter.”

“You know everyone seems to characterize the relationship between the PUC and the utilities as cozy. Well, I think some of this, what we are finding out, shows not just a coziness but a collusion, and that’s the part that I think is most troubling. Collusion gets into what I look at as corruption, what I look at as something that could be dishonest,” Hill told KQED.

The former San Mateo mayor says this is not the only recent example of Edison dealing unfairly with victims of its defective maintenance. He cited the case of Brandon Orozco, an apprentice working for an Edison contractor who was shocked to death at an underground Edison facility in Huntington Harbour in 2013.

Hill said the Public Utilities Commission, especially given that it had formally concluded Edison was responsible for Orozco’s death, should have taken on the utility when it refused to release its internal investigation into the accident. The utility cited attorney-client privilege — even though state law “clearly states that the commission, and each commissioner, and anyone employed by the commission, can at any time inspect the account, book or documents of any public utility,” Hill told KQED.

In San Francisco, federal prosecutors are laying the groundwork for a criminal trial of Pacific Gas & Electric that will begin in March. In preliminary filings, prosecutors paint a scathing picture of PG&E negligence leading to the 2010 explosion of natural gas pipelines in San Bruno, which killed eight and wiped out a neighborhood.

How is that bad for the PUC? Because implicit in the federal allegations that 28 felonies were committed by PG&E is that the utility was not facing serious regulation before the catastrophe in San Bruno, a suburb south of San Francisco. Here is part of the San Jose Mercury News’s recent coverage:

“The government intends to offer proof that PG&E’s willful decisions not to maintain records, conduct proper pipeline assessments, and otherwise comply with federal pipeline safety regulations were part of a corporate culture of prioritizing profits over safety,” federal prosecutors wrote in papers filed on Nov. 2 with the U.S. District Court in San Francisco.

 

“The prosecutors in the trial are being very aggressive,” said Peter Henning, a professor of law with Wayne State University in Detroit. …

 

“They are trying to frame this case for a jury, and the government is attempting to frame this around a single word: greed,” Henning said.

 

PG&E faces a fine of up to $1.13 billion if convicted on the federal criminal charges.

‘Edison was driving the bus’

Meanwhile, in Southern California, politicians and consumer advocates have grown increasingly critical of the PUC-orchestrated, already-approved plan to have ratepayers cover 70 percent of the $4.7 billion cost to close the San Onofre nuclear plant and safely shutter its two reactors, whose 2011 malfunctions led to the release of small amounts of radiation.

Since the plan was approved in fall 2014, it’s been revealed that Peevey had never-disclosed meetings with Southern California Edison executives over how to apportion San Onofre closing costs, including a 2013 meeting in a Warsaw hotel room between Peevey and an Edison official. Edison owns 80 percent of San Onofre and San Diego Gas & Electric owns 20 percent.

But other questions have emerged about the PUC’s stewardship that go beyond the propriety of these undisclosed meetings.

The Los Angeles Times delved into the expert testimony that the PUC reviewed before approving the settlement and reported that one expert blamed Edison’s poor management for the problems with leaking steam generators which are used to cool the nuclear reactors and keep them safe to operate. The expert questioned the utility’s insistence on blaming Mitsubishi Heavy Industries, the branch of the Japanese conglomerate that made and installed the generators.

Arnie Gundersen, a nuclear engineer who served as an expert witness regarding the handling of San Onofre’s generators, said at a minimum both Edison and Mitsubishi are at fault.

 

“When I reviewed all the data it was clear to me that Southern California Edison was the one driving the bus,” Gundersen said.

 

“Mitsubishi wanted the contract and agreed to some very onerous terms in order to get it.”

 

Gundersen said the San Onofre case is similar to two incidents in Florida, where an agreement was reached over the closed Crystal River nuclear plant that led to billions in costs to consumers. In addition, he said, the St. Lucie nuclear plant had similar steam generator problems as San Onofre.

A KPBS report also alleged that Edison acted deceptively in its 2006 meeting with the Nuclear Regulatory Commission, never telling NRC officials of concerns about the steam generators that let Edison to complain to Mitsubishi in both 2004 and 2005. It appears the PUC was unaware that the utility’s concerns about steam generator problems dated to 2004.

‘The same people always get paid’ by PUC

A San Diego Union-Tribune analysis also raised questions about the PUC negotiations that led to the agreement assigning most of the shutdown costs to ratepayers.

The biggest beneficiary of a state program aimed at leveling the playing field between utilities and their customers is a Bay Area consumer group that privately negotiated the deal assigning customers 70 percent of the costs for the failure of the San Onofre nuclear plant.

 

The Utility Reform Network, or TURN, collects millions of dollars a year in so-called intervenor compensation – almost half of all the money handed out by the California Public Utilities Commission since 2013. …

 

TURN receives as much as 90 percent of its operating income from commission awards, so it’s highly dependent on regulators for its livelihood. Whether consciously or not, the group might allow that dependency to shape its advocacy, critics say.

 

“The public really doesn’t have anyone at the commission looking out for them,” said San Diego lawyer Michael Aguirre, who is suing to overturn the San Onofre settlement as an undue burden on utility customers. “They are being charged for advocacy that really is not being performed. The same people always get paid.”

Peevey is facing criminal investigations by both the state and federal government. His home in La Cañada Flintridge, a Los Angeles suburb, was searched by investigators in January.

The deal requires 70 percent of shutdown costs to be borne by ratepayers. It has drawn intense questions in the past year as evidence amassed of a you-scratch-my-back-I’ll-scratch-yours relationship between longtime California Public Utilities Commission President Michael Peevey and Edison, SDG&E and the state’s third investor-owned utility, Pacific Gas & Electric. Emails obtained from the PUC show Peevey frequently linking beneficial regulatory actions with the utilities taking actions he approved, including donating money to fight a 2010 initiative that would have scrapped AB32, the state’s landmark 2006 law forcing a shift to cleaner but costlier energy.

Peevey left the PUC board in December but has remained in the news ever since because of federal and state criminal investigations of his actions as the state’s top utility regulator. The most damning revelation came in February, when documents were discovered that showed the framework for the San Onofre bailout was established in an improper, never-disclosed 2013 meeting in a Warsaw, Poland, hotel room between Peevey and an Edison executive.

This meeting and other undisclosed communications between PUC officials and utility executives led Administrative Law Judge Melanie Darling last week to order a $16.7 million fine against Edison. The edict needs to be approved by the PUC — Darling works for the PUC, an example of the tidy way that regulators and utilities operate in California — but that is considered pro forma.

The fine is seen by some observers as a confirmation of the seriousness of the ethical failings on display in the Edison-PUC back-room relationship. It is certain to trigger fresh interest in the Legislature in adopting PUC reforms.

Six were approved in the most recent session, only to be vetoed three weeks ago by Gov. Jerry Brown on the grounds that they were an “unworkable” mish-mash of changes. The vetoes irked Assemblyman Anthony Rendon, the Lakewood Democrat who is slated to become speaker later this year and who has expressed extreme dismay over how the PUC has acted.

But the fine is considered irrelevant by the consumer advocates and trial lawyers who are the PUC’s loudest critics, given how much Edison will save because ratepayers will have to pay $3.3 billion of the $4.7 billion needed to safely shutter San Onofre.

Mike Aguirre, the former San Diego city attorney, suggested the administrative law judge’s recent hearings on Edison’s relationship with Peevey and the PUC were kabuki — a staged show to prop up the status quo.

“With one hand the CPUC is giving Edison $3.3 billion, with the other hand they’re taking back some extra change,” Aguirre told the Los Angeles Times. “This is all cosmetic.”

Donations to special interests on behalf of statewide officeholders have grown from $250,000 in 2000 to $4.9 million so far

The donations, which can be solicited by the charity or the officeholder, are unlimited and need only be reported when they top $5,000 in a single year.

And no one has used them more than Gov. Jerry Brown, whose most favored charities, the Oakland Military Institute and the Oakland School for the Arts, have received $19.8 million from various donors who gave on behalf of Brown since 2009, records through the first week of September show.

The institute has prospered over that time frame; tax forms show its total revenue jumped from $7.8 million in the 2010 fiscal year to $9.6 million in 2013, the most recent year available. The academy’s assets – land, equipment and buildings – have also increased from $3.4 million to $9.3 million.

The donations, known as behested payments, sometimes go to a candidate’s own inaugural committee. Attorney General Kamala Harris has raised $195,900 for her inaugural committee, although she is currently running to be the Democratic nominee in a bid for the seat of U.S. Sen. Barbara Boxer, who is retiring next year.

Some of those making donations at Harris’s behest are connected to donors to her Senate campaign, which reported more than $4.1 million in contributions through June.

Microsoft in January donated $5,000 to Harris’s inaugural fund, while 14 Microsoft employees donated a total of $15,050 to her Senate campaign so far this year.

Universal Music Group gave $1,000 to the inaugural fund while Ron Meyer, president of Universal Studios, gave $5,400 to her Senate campaign.

And the Lisa and John Pritzker Family Fund gave $9,700 in May to Harris’ fund. Mary Pritzker, using the address of the family’s Pritzker Group Private Capital in Chicago, donated $2,700 in June to the Harris for Senate campaign.

Legally Avoiding State Campaign Finance Law Limits

Behested payments have allowed donors to give to candidates in a fashion that legally avoids the limits in state campaign finance law. In 2014, state Sen. Ricardo Lara had $199,250 in behested payments donated to the California Latino Legislative Caucus Foundation, a nonprofit 501(c)(3). Lara was CFO of the group in 2013. While Lara’s campaign, and that of the other caucus members, must adhere to state contribution limits – for example, $4,200 from an individual per election – donations to the nonprofit foundations are unrestricted.

Perhaps a larger version of helping your interests is that of Senate President Pro Tem Kevin de León, whose behested payments to the California Secure Choice Retirement Savings Investment Board totaled $549,000 for the last two years.

De Leon in 2012 sponsored Senate Bill 1234, which is aimed at requiring all businesses with five or more employees to offer a retirement plan. The plan’s manager? The California Secure Choice Retirement Savings Investment Board.

Donors included the California Teachers Association, the Service Employees International Union California State Council and the Laura and John Arnold Foundation, a funder of research on public pension reform.

And then there is California Public Utilities Commissioner Michael Picker, under whose name $65,000 was donated for a February dinner honoring his predecessor, Michael Peevey.

Donors included several workman’s unions. The money was supposed to go to the Goldman School of Public Policy at UC Berkeley. But the school refused $30,000 of the money, and Picker distanced himself from the funding.

Peevey is being investigated for emails that show he may have made backroom deals with Pacific Gas & Electric Co.

Picker, an official sponsor of the Feb. 12 dinner, later told an assembly subcommittee that the behested funding was not his doing.

“I wish I could say that I could raise $50,000, I actually, because I intend to be as transparent and as ethical as I can be, and because my name was mentioned on the flyer as a sponsor,” Picker explained. ”I simply made the determination that I could not know who was contributing or why. And rather than guess whether somebody made a contribution, based on the fact that I was going there, I just disclosed it.”

Bill Increases Threshold for Conflicts of Interest

A bill passed last month in Sacramento has all the markings of a measure under which the public loses. Assembly Bill 10 increases the conflict of interest threshold for property holdings from $2,000 to $10,000 and in business holdings from $2,000 to $5,000.

But attached to the bill initially was redemption: a provision that would make behested payments made in the name of a departing officeholder subject to reporting in the same year. That is, if you are removed from office, you can’t just petition friends to give to your favorite charity without reporting it on the way out.

It was a step in the direction of reform, the idea that those leaving the public fold cannot direct money that might help them in their private sector endeavors.

The provision, though, was removed in the late stages of the bill.

CPUC – Agency defends communications

A measure that will be heard this summer in committee at the statehouse aims to tighten the reins on private communications between utilities and the commissioners who regulate them at the California Public Utilities Commission.

But even if SB 660 is passed, does it make executives at the commission, which has been pilloried for its tight relationships with select utilities, understand why such legislation is necessary?

At a June meeting at hosted by the Governor’s Office of Planning and Research, branded as the “workshop on government decision-making and open meetings,” CPUC Executive Director Timothy Sullivan said the state’s open meetings law was a deterrent to effective rate making.

“The first major point that I wish to make is that the current form of the discourages the deliberation and involvement of Commissioners in decisions,” he said in prepared remarks. Calling it a “perverse outcome,” Sullivan said the primary reason for “avoiding public deliberation” is a “press of business.”

“If a matter is discussed in a public session during the business meeting and leads to a consensus for change in a proposed decision, then that decision cannot be considered until the next Commission meeting,” Sullivan said.

The review focused on what are called ex parte communications, or contact between the agency and utilities that are held outside of the open meetings act. The contacts are permitted, although several reviews have found that they are exploited in a manner that often gives high dollar utilities an edge in presenting interests to the commission.

An agent from the California Energy Commission noted that the state’s Bagley-Keene Open Meetings Act “constrains candid discussion and collaboration.”

In prepared comments, Kourtney Vaccaro, chief counsel for the CEC, said that 2009 tweaks to Bagley-Keene impaired the ability of commissioners to both license large thermal power plants and compile the required energy policy report, which allows the state to forecast energy demands.

Their cases for keeping things the same regarding the open meetings law were contradicted by a review of the agency’s actions compiled by the Los Angeles law firm of Strumwasser & Woocher.

The review noted secretive communications including judge shopping between the agency and Pacific Gas and Electric Co. that resulted in the ouster of three PGF executives and an aide to former CPUC President Michael Peevey.

Meantime, the legislation from state Sen. Mark Leno, D-San Francisco, seeks to reform CPUC most succinctly by disallowing meetings between commissioners and utility lobbyists concerning ratemaking decisions.

But it would also create standards for when a commissioner should be recused due to undue influence or bias.

“Amazingly, despite substantial evidence of bias and prejudice in the past, CPUC has never once determined that commissioner should be disqualified, based on its current legal standard, that requires a determination that a commissioner has quote, ‘an unalterably closed mind,’ “Leno told the Assembly Committee on Utilities and Commerce earlier this month.

But the ex parte communications are a “safety valve” for parties that cannot be part of utility commission proceedings, said Michael Day, a partner at the law firm Goodin, MacBride, Squeri & Day, which represents energy clients large and small before regulatory agencies.

“Even the parties that we typically represent, cities, counties, environmental groups, consumer groups, developers of renewable resources, these parties have to spend a lot of their own money to participate in PUC proceedings,” Day said. “So for those types of parties, the ability to explain your position to the commission is essential.”

The bill has already gained the support of consumer advocates, some of whom feel that the large utility players have already shown that they have an advantage.

“The PUC is an agency that is unable to figure out whose side it’s on, especially when it comes to the public,” said Richard Holober, executive director of the Consumer Federation of California, which supports reforming the process at the commission. He points to the scandals that have hit the utility in the past several years, with the large utilities skating on both oversight and circumstance.

“It seems pretty clear that the wealthy utilities have unlimited access to as least certain commissioners,” Holober said. “And they have used that access to negotiate deals in private.”

The measure in June moved through the state Senate with a 29-7 vote.

See and read the transcript for the committee hearing here.

Jason Hickey / flickr

California’s powerful, politically connected giant electricity utilities are used to getting their way and to getting help when things go wrong.

When an ineptly designed state power “deregulation” law exposed Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric to catastrophic losses in early 2001, Gov. Gray Davis and the state Legislature jumped in with controversial state-dictated emergency deals that stabilized the companies. Earlier this year, the Public Utilities Commission approved a deal in which PG&E’s $1.6 billion fine for the 2010 San Bruno natural-gas disaster included $850 million for transmission-line safety upgrades and improvements the utility intended to make anyways.

But in San Diego County, there’s been slowly building opposition to the PUC’s November approval of a plan in which $3.3 billion of the $4.7 billion cost of closing both the reactors at the San Onofre nuclear power plant is borne by ratepayers. Edison is 80 percent owner of the plant, while SDG&E owns the remaining 20 percent. As part of the plan, there has been no formal PUC investigation into the problems that led to the plant being shuttered.

The PUC, Edison and SDG&E maintain that the deal was in keeping with established practices in the utility industry and that there is nothing unusual or onerous about how the costs were divvied up. They note that the initial proposal from the PUC staff was modified to make it more friendly to ratepayers.

However, the circumstances of the initial negotiations — in which key decisions were made on March 26, 2013, in a secret meeting between then-PUC president Michael Peevey and an Edison executive named Stephen Pickett in a hotel room in Warsaw, Poland — continue to produce headlines and ongoing civil and criminal investigations. Peevey’s home was raided by FBI agents early this year.

The PUC’s resistance to independent investigators is also adding to the fire. Utility officials have long resisted releasing basic information about the San Onofre decision-making process.

But beyond the veneer of scandal, many San Diego County ratepayers keep returning to the circumstances that led to San Onofre’s closure.

Both reactor units [went offline in] January 2012, after a small leak of radioactive gas prompted shutdown of one unit; the other was already offline for routine maintenance.

 

Unexpected wear was found in the metal tubes that carry radioactive water in all four of the plant’s steam generators, two generators for each reactor.

 

The steam generators were installed between 2009 and early 2011 in a $670 million operation.

That’s from the O.C. Register.

‘Where do we find accountability?’

Dozens of letter-writers and online commentators argue that Mitsubishi, the Japanese conglomerate that made the defective generators, should be forced to pay damages beyond refunds it has already agreed to do in litigation.

These critics also wonder how Edison and SDG&E can only be socked with 30 percent of the San Onofre closure costs when their management of the plant’s upkeep was so poor that huge, costly, essential new machinery started faltering almost immediately.

A reporter for Northern California’s KQED caught the public’s mood in a visit to San Diego this spring:

Sorrentino’s Pizza owner Patrick Quinn is tired of watching the energy bill at his San Diego restaurant go up each month [as a result of SDG&E’s big rate hikes] …

 

Quinn calls [the $4.7 billion] settlement illegitimate because the Public Utilities Commission allowed it without a full investigation of who was responsible for the plant’s failure and who should be held accountable.

 

“Where do we find accountability?” Quinn said. “The steam generators — why did they fail? These are simple questions that should be asked.”

‘I’m not here to answer your goddamned questions’

The San Diego trial lawyer who is targeting the PUC and utilities in a lawsuit — former City Attorney Mike Aguirre — opposed the San Onofre deal from the start. As the Union-Tribune reported, this led to an ugly turn at a May 2014 PUC board meeting.

The president of the California Public Utilities Commission swore and angrily refused to answer questions last week at an unusual hearing at which he was asked about communication with his former employer, Southern California Edison.

 

The president, Michael Peevey, was questioned by former San Diego City Attorney Mike Aguirre about his role if any in reaching a proposed settlement between utility companies and consumer advocacy groups regarding $4.7 billion of shutdown costs for the San Onofre nuclear power plant.

 

Aguirre asked Peevey if he had any meetings with Edison, the company he once headed, regarding the settlement.

 

Such contact would be inappropriate because Peevey and the commission are supposed to be impartial arbiters at public proceedings regarding whether the settlement is fair to all parties.

 

Aguirre is making the case that it’s a bad deal for utility customers to cover $3.3 billion of the shutdown costs, as proposed in the settlement.

 

“I’m not here to answer your goddamned questions,” Peevey told Aguirre. “Now shut up — shut up!”

Eight months later, emails obtained by the Union-Tribune revealed that Aguirre’s speculation was correct: Peevey had met with the Edison executive in Poland in 2013 to talk about San Onofre’s closing and who would pay for it.

Last week, another lawsuit was filed in San Diego federal court, the U-T reported.

A federal lawsuit filed this week accuses two top Edison International executives of harming shareholders by failing to disclose secret meetings with California regulators regarding a $4.7 billion settlement of costs for the failure of the San Onofre nuclear plant.

 

The lawsuit alleges that Edison CEO Ted Craver and Chief Financial Officer Jim Scilacci failed to disclose private communication with decision makers at the California Public Utilities Commission, including a March 2013 meeting at a luxury hotel in Poland.

Meanwhile, civil and criminal investigations of the PUC continue. There are no indications, however, that indictments or fines will be announced anytime soon. The PUC is still deciding which documents to provide investigators, and utilities have also balked at some requests for information.

At last week’s PUC meeting and in recent interviews, Mike Florio depicted the proposal developed by PUC staff, endorsed by PUC President Michael Picker and praised by the state’s electrical utilities as a scheme with hidden motives. Instead of being about fairness for heavy users in hotter inland areas, Florio says its real intent is to discourage homeowners from installing solar panels, which help keep them in the cheapest tier of energy pricing. The PUC will again consider Picker’s plan and Florio’s alternative at a meeting later this summer.

CalWatchdog has covered the maze of politics related to solar power’s growth in the Golden State and reported on utilities’ efforts in some states to actively discourage solar installation.

But Florio’s history of secretly working with Pacific Gas & Electric is sure to hang over any attempt to depict himself as an outside force for change on the state’s utility regulator. A lawyer from Oakland, who once was a senior attorney at The Utility Reform Network, said Florio was deeply embarrassed earlier this year by the release of emails showing his chummy, surreptitious relationship with the giant Northern California electricity supplier.

A “$130 million Christmas gift” to PG&E

Here are key details from the San Francisco Chronicle’s analysis of 65,000 emails involving Florio and PG&E, with some relating to the fallout from a 2010 pipeline explosion that killed eight and wiped out a San Bruno neighborhood. When the PUC deliberated on what punishment to assess over the San Bruno disaster …

… Florio proposed last-minute language that dropped the idea of slashing PG&E’s 2012 profit, arguing that a profit cut would “send the wrong signal that somehow investing in safety is less important than investments in other aspects of the utility’s business.”

 

The commission approved the measure, which critics called a “$130 million Christmas gift” to PG&E. …

 

By January 2014, Florio saw another opportunity to help the company. With a key decision on [a] $1.3 billion rate case looming, [PG&E Vice President Brian] Cherry asked for Florio’s help in getting a particular administrative law judge assigned to hear the case.

 

Florio called the judge who had been named to the matter “horrible,” and told Cherry in an email, “I’ll do what I can on this end.”

 

A judge PG&E wanted was ultimately assigned, but when the emails were released, the utilities commission gave the case to a third judge. It has not been resolved.

 

Florio apologized when his promise became public, saying he had made “some very serious mistakes … in the content and the excessive candor of my email exchanges with PG&E.” He recused himself from voting both on the $1.3 billion rate case and the larger cases related to the San Bruno blast.

PG&E penalty still in the news, still under fire

But the $1.6 billion fine that was ultimately ordered by the PUC in April over the San Bruno tragedy remains controversial. Some of the penalty apparently can be deducted from state taxes that PG&E must pay, prompting attempts at a legislative fix in recent days by two Bay Area state lawmakers.

That’s not the only concern. The $1.6 billion fine is calculated by depicting the $850 million cost of forthcoming PG&E upgrades to its natural gas transmission system as a penalty. Yet the utility had previously acknowledged it was planning to improve the system. This has prompted grumbling in activists’ circles that the PUC was once again coming to PG&E’s aid while portraying itself as coming down hard on the utility.

But at another powerful state agency, what appears to be an open conflict of interest is playing out without objection from its leaders. A CTA lobbyist who sits on the State Board of Education wants the board’s test-giving contractor to pay the teachers it hires to grade the tests more than the contractor thinks is necessary.

John Fensterwald mentions this in a post on EdSource on the board’s decision to award a three-year, $240 million contract to the Educational Testing Service to administer standardized tests required by state law:

ETS will continue to handle the administration and scoring of the new online tests, including the Smarter Balanced English language arts and math tests in the Common Core State Standards, which debuted this spring, and the yet-to-be developed Next Generation Science Standards. … 

In its revised bid, ETS said it will hold summer institutes and weekend trainings for teachers and would pay California certificated teachers $20 per hour to be trained in and score the tests. Ashley acknowledged that’s less than teachers earn per hour, but the primary benefit, he said, would be the knowledge that teachers would gain in both the end-of-the-year tests and the interim assessments that teachers would give during the year.

However, board member Patricia Rucker, who works as a lobbyist for the California Teachers Association, called $20 per hour “insufficient” and predicted that fewer than half of the scorers will end up being teachers. Teachers “carry the greatest burden to see that students are prepared and have the greatest stake” in the test results, and yet still will not be the primary focus of the recruitment strategy for scorers, she said.

Gov. Jerry Brown wouldn’t have appointed Rucker to the state school board without the general expectation that she would take the same positions as the CTA. However, a union official openly using her role as a state board member to push a contractor to help her union members get more money is unusual.

Two state laws spell out conflicts

On city councils, members routinely recuse themselves when contracts come before them in which they have some financial connection. They are heeding Government Code 1090:

Members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.

Government Code 87100 offers a similar injunction:

No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest.

In California, union members and officials are often on governing boards, where they participate broadly in setting policies that affect unions.

But that doesn’t usually apply to matters directly involving pay. For example, in Ontario, a police officer and a senior fire department official served on the City Council in the 1990s. They abstained from contract negotiations or other matters involving compensation and the city agencies that provided their full-time jobs.