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California Regulators Set Hearing on Ex Parte Abuses

Stung by last fall's email scandal between regulators and executives at Pacific Gas and Electric Co. (PG&E) (see Daily GPISept. 16, 2014), the California Public Utilities Commission (CPUC) has set a meeting next month aimed at avoiding a repeat of past misdeeds.

As part of an ongoing reorganization under new president Michael Picker, the CPUC has established a commissioner committee for policy/governance, and it will convene the meeting Aug. 12 to discuss ex parte issues and the draft code.

The CPUC has been on the hot seat as concerns were raised in an independent CPUC-initiated report by Michael Strumwasser, a partner in a Los Angeles law firm, alleging that regulatory decision-makers abused limits on their private communications with the companies they oversee to the advantage of the state's major energy and other utilities (see Daily GPIJune 25).

The Strumwasser report, along with a look at the "Key Findings from the CPUC Modernization & Reform Project" by Edward O'Neill, a senior adviser, will be open to public and stakeholder comments at the upcoming public meeting, overseen by CPUC Commissioners Mike Florio and Liane Randolph. A third agenda item will be the draft Commissioner Code of Conduct.

O'Neill concludes in his modernization/reform report that two principal factors contributed to the email scandal: "impaired communications," and inadequate governance and enterprise management. "The [CPUC] will never achieve its potential unless, and until, these two critical deficiencies are remedied."

Strumwasser already had confirmed that abuses of ex parte rules were a "frequent, pervasive part" of the regulatory agency's practice, and they "sometimes" determined the outcome of proceedings. "[The abuses] transformed a legal quest for evidence-based truth [in the regulatory process] into a negotiation with utilities," Strumwasser said in a presentation on his report.

The O'Neill report says impaired internal communications at the CPUC contributed to the PG&E San Bruno natural gas transmission pipeline failure and explosion five years ago. Deficiencies in that utility's gas safety program at the time were well known to CPUC staff in the Safety and Enforcement Division (SED), according to O'Neill's findings. "Commissioners failed to adequately address them," he alleged.

"It is critical to address the communication and governance issues at the CPUC," O'Neill said. "The CPUC will not have a prayer of a chance of achieving its potential if [these issues} are not remedied."

Both regulators and PG&E have been under fire from elected officials and consumer organizations. There are several legislative proposals that will need to be worked into the ongoing discussions of reforms.

O'Neill suggests that reform needs to be aimed at two targets: revising the state’s open meeting law and revising and reforming rules on ex parte communications.

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