Pacific Gas and Electric Co. (PG&E) dropped a grenade on state regulators Monday, admitting a number of inappropriate contacts between utility and regulatory staff over the past five years. The initial fallout has cost the jobs of three PG&E executives and a top aide to the state's chief regulator, Michael Peevey, who himself has been accused of violating ex-parte rules.
PG&E's report to the California Public Utilities Commission (CPUC) on the results of a five-year internal review of 65,000 utility emails has left both institutions red-faced at a time when elected and consumer representatives have been highly critical of what they allege is "too cozy" a relationship between the CPUC and PG&E. The critical breaches of the rules apparently occurred in January.
In announcing transgressions centered on a three-week period last January, PG&E also said it is reorganizing its regulatory affairs department and bringing in former Department of Interior secretary and U.S. senator from Colorado, Ken Salazar, as a special counsel on regulatory compliance matters. The utility is firing its three top regulatory executives: Tom Bottorff, senior vice president for regulatory affairs; Brian Cherry, vice president for regulatory relations; and Trina Horner, vice president of regulatory proceedings and rates.
PG&E has appointed a new head of regulatory relations, Steve Malnight, who previously was the combination utility's vice president of customer energy solutions. In addition, it has begun a nationwide search to fill a newly created role of "chief regulatory compliance officer," reporting to PG&E CEO Tony Earley.
In a letter to employees, Earley and PG&E utility President Chris Johns said the executives terminated had not represented PG&E "in the manner we expect," and they are continuing a company-wide review and will "take additional actions if warranted."
At the CPUC, Peevey asked Chief of Staff Carol Brown to "resign by mutual agreement" and she did so immediately, the commission said. A number of other steps are being taken in response to PG&E's revelations, including consideration of possible penalties against the San Francisco-based utility, which is already facing more than $2 billion in potential penalties pending for its admitted shortcomings leading up to the natural gas transmission pipeline rupture and explosion four year ago in San Bruno, CA (see Daily GPI, Sept. 13, 2010).
Because of the inappropriate contact including his aide, Peevey said he has recused himself from PG&E's pending multi-billion-dollar gas transmission/storage proceeding, which was the subject of the inappropriate contacts in January. Peevey also now will recuse himself from the PG&E San Bruno transmission pipeline penalty case.
PG&E admitted inappropriate contacts centered on the pending pipeline/storage rate case -- not the San Bruno penalties -- Pevey said, adding that "I am recusing myself from any role in considering the administrative law judges' presiding officers' decisions [see Daily GPI, Sept. 2] in order to remove any doubt about my objectivity regarding these important cases."
For months this year, elected officials and consumer advocates have hammered the CPUC and targeted Peevey, asking him to be removed from the San Bruno case (see Daily GPI, Feb. 5). Monday's shock waves come at a time when there is considerable political speculation in Sacramento on whether Gov. Jerry Brown, an overwhelming favorite in the polls to be re-elected this November, will reappoint Peevey to an unprecedented third six-year term to head the CPUC.
When NGI asked a CPUC spokesperson on Monday if Peevey would be willing to be interviewed about his future as the state's top regulator, she said the 12-year incumbent was not currently making any public statements about his future. A Los Angeles Times report Monday quoted Jan Smutny-Jones, head of the Independent Energy Producers Association in California, as saying he thinks Brown will reappoint Peevey to the job.
Peevey also directed CPUC Executive Director Paul Clanon to conduct a review, using independent outside experts of the CPUC's internal procedures to guard against future ex-parte violations.
One of the five CPUC commissioners, Mike Florio, who was part of the email chain with PG&E's executives, said he wanted to make it clear that he never took any action on PG&E's attempts to dictate who the commission assigned as the hearing judge early this year in the pipeline/storage case, which is still ongoing.
CPUC staffer Brown and Florio are featured prominently in attached chains of PG&E e-mails that the utility included in its mea culpa filing to the state regulatory commission. Administrative Law Judge John Wong, for whom the utility lobbied; and Commissioner Carla Peterman are overseeing the PG&E gas pipeline/storage rate case.
Last December, PG&E requested $1.29 billion in increased revenue, or 13%, for its proposed gas system work in 2015 to support an increase in spending over 2014. For the typical residential customer, this hike would cost about $5.23 more each month, and for business customers, increases would depend on the type of service they receive, the utility said at the time.