“The legal system is rigged for the corrupt [California] Public Utilities Commission and against the ratepayer,” says Loretta Lynch, former president of the commission, who was demoted in 2002 by then-governor Gray Davis because she favored consumers. Utilities had griped vehemently.
Mike Peevey, former president of Southern California Edison, was named to replace Lynch, despite the obvious conflict of interest. Under duress, he retired last December after 12 years.
Lynch (not to be confused with the woman of the same name who has been named United States attorney general) is right. Laws regarding the commission and the commission’s own rules are stacked ridiculously against ratepayers. In March of this year, Matthew Freedman, attorney for San Francisco–based watchdog the Utility Reform Network, testified before the state senate’s Energy, Utilities and Communications Committee. Said he, “A motion seeking to disqualify the commissioner assigned to a particular case for impermissible bias or prejudice is typically ruled upon by the commissioner accused of bias. This sounds absurd, but it is established commission practice.”
Yes, the accused rules on the accuser’s complaint.
Crazy? Yes. But it gets crazier. The standard of disqualification in a rate-setting procedure is whether there is “clear and convincing” evidence that the accused commissioner “has an unalterably closed mind” on matters critical to the proceeding. If you charge that a commissioner has erred, you have to convince that very same commissioner that he or she has an unalterably closed mind. Good luck. No commissioner has ever been disqualified on that basis.
In his testimony, Freedman was discussing a long-running matter that began early in the century. San Diego Gas & Electric wanted to take over an Escondido power plant. In a private phone conference, Peevey told SDG&E that if it wanted the Escondido plant, it had to agree to buy power from an independent producer, Calpine, which was producing it at an Otay Mesa power plant. If SDG&E didn’t draw up that expensive contract with Calpine, it wouldn’t get Escondido. The commission did not file a required ex parte notice, and there was no public disclosure of the secret call, said Freedman.
After uncovering evidence that Peevey had secret meetings with Calpine and SDG&E over the Otay Mesa deal, watchdog groups filed two motions to have Peevey disqualified. He got off the hook by claiming there was insufficient evidence to show that he had an “unalterably closed mind.” He cast the deciding vote in a 3–2 decision approving the smelly deal.
In 2012, the San Francisco watchdog tried to get Peevey disqualified from being the commissioner-in-chief of a California energy systems project. Documents showed that Peevey had worked with Lawrence Livermore National Laboratory in developing the proposal for which he would be the regulatory arbiter. It was another malodorous one, but the Utility Reform Network couldn’t convince Peevey that his mind was unalterably closed.
More recently, emails have shown that Peevey and other topside commission officials tried to get a weak administrative law judge named so Pacific Gas & Electric wouldn’t have to pay a stiff fine for its role in the San Bruno pipeline explosion of 2010. Moreover, Peevey held a clandestine meeting with an Edison official in Warsaw, Poland, and dictated the deal by which ratepayers will pick up 70 percent of the tab for management blunders leading to the closure of the San Onofre nuclear plant.
Shareholders, not ratepayers, should pay for management blunders, but, says Lynch, “From the very beginning, Peevey was having backroom meetings, hobnobbing with utility executives, going on junkets, and terrorizing people on the commission who stood up for consumers.”
If Peevey thought somebody at the commission was agreeing with Lynch — thus, standing up for ratepayers — “he would take his fingers and put an L on his forehead. That was the Scarlet L [for Lynch] — meaning, ‘You won’t be promoted.’ A bunch of people left the commission” as a result of getting the L salute, she says.
“Peevey has always had tremendous contempt for the process and public disclosure,” says Carl Wood, a former commissioner. “He was very casual about his interactions with utility management.”
Peevey harrumphed to a former administrative law judge, “Who pays attention to those [commission] rules, anyway? They are silly rules.” This retired judge was removed from the Sunrise Powerlink case as a result of lobbying by San Diego Gas & Electric.
The dictatorial commission president would give generous intervenor fees to those “who played his game,” says the former judge. San Diego attorney Mike Aguirre and his partner Mia Severson got no money at all for their work on two complicated cases. Reason: Aguirre kept publicly revealing that commission decisions were made in private meetings.
In a public meeting, Peevey cussed out Aguirre but misjudged the former city attorney’s tenacity. Aguirre, along with San Bruno officials, brought Peevey’s backroom deals to the public’s attention, and now Peevey is under investigation by both state and federal officials for his dictation of the noxious deal sticking consumers with most of the San Onofre costs.
Peevey “was acting as an executive officer for every corporation that the [commission] regulates. He was advising them on how to conduct themselves,” says the former judge.
As commission president, Peevey “would get involved in the details of how utilities were run, advise [chief executive officers] about whom they should promote,” says Wood. “He regarded himself as a super-executive for all utilities. It is a violation of law and proper procedures.”
Even if Peevey escapes punishment for his activities, some good may come of all this. A bill in the legislature proposes to eliminate the power of the commission president to manage directly the staff and agency heads. The bill would set new standards on how a commissioner should be recused for bias and clamp down on ex parte communications with utilities.
An Assembly committee will look at a proposal to make it easier for plaintiffs to challenge a commission ruling in superior court. Now, plaintiffs have to go to an appellate court, which might not take the case.
I asked SDG&E whether it denies or confirms the charges that have been made about its actions in the Escondido, Calpine, and Sunrise Powerlink matters. “There are specific written rules and procedures for conversations between parties appearing before the commission and commissioners and commission staff. SDG&E made appropriate filings in compliance with these rules,” said the local utility. Hmm...
But unless utility lobbyists buy off state legislators, these rules and laws could be changed to give consumers a break.