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Report Slams California Regulators For Ex Parte Conduct

Decision-makers at the California Public Utilities Commission (CPUC) have abused limits on their private communications with the companies they oversee to the advantage of the state's major energy and other utilities, according to an independent report released Monday.

Consumer watchdog group The Utility Reform Network (TURN) immediately cited the report by the Los Angeles law firm of Strumwasser & Woocher LLP as reason for state lawmakers to pass a pending proposal (SB 660) that would limit "backdoor" communications between utilities and CPUC commissioners.

A CPUC spokesperson told NGI that the state regulators view the report as an "important step forward" and said it is under review at the regulatory body.

"The CPUC retained a third-party regulatory lawyer to independently review ex parte rules and identify best practices regarding communication with regulated entities and stakeholders," said the spokesperson, adding that it is a complicated subject with many stakeholders, and Gov. Jerry Brown is now trying "to bring clarity to this issue."

A Sacramento-based representative for Pacific Gas and Electric Co. (PG&E) told NGI the utility doesn't have any concerns about SB 660, with the caveat that utility officials hope lawmakers will not overreact to the controversy.

Since the revelations of the extent of ex parte communications and how they have influenced CPUC decision-making emerged last fall (see Daily GPI, Sept.16, 2014), both the regulators and San Francisco-based utility have faced criticism from elected officials, TURN and other consumer advocacy organizations.

Retained by the CPUC executive director's office, the law firm's analysis and recommendations come after concluding that ex parte communications are "frequent, pervasive and sometimes outcome-determinitive in CPUC ratesetting cases." And the report categorized the practice as having the "unavoidable effect of moving actual governmental decision-making out of the public eye."

Noting that existing rules don't require disclosure of the substance of communications, exclude ex parte from the legal record and only require disclosure of them happening, TURN senior attorney Thomas Long said the Strumwasser report supports the need for "legislative reform of CPUC practices."

Long contends that "backdoor deals have completely corrupted the CPUC’s process. In private meetings that have become the norm, utility claims go unchallenged." He argued that commissioners should be relying on their staffs -- not the companies they regulate -- for their factual determinations.

Strumwasser's report said ex parte communication "fundamentally undermines record-based decision-making and transforms the very nature of the CPUC rate hearings." Personal relationships become more important than the factual record, the report said.

Among the recommendations for the governor and CPUC are elimination of ex parte communications in ratemaking cases; increasing penalties for regulators and utilities that violate future rules, establishment of clearer separation of advisory and adjudicatory staff functions and appointment of a CPUC “ethics officer" to monitor compliance.

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