Brown Vetoes Package of Reforms for Utilities Agency

Update, Oct. 9: Gov. Jerry Brown on Friday vetoed six bills that would have changed how the California Public Utilities Commission conducts business.

In rejecting the measures, the governor issued a statement saying, "I support the intent of these bills and many of their proposed reforms, however some additional work is needed to ensure that they achieve their intended purposes and can be effectively implemented."

One of the vetoed bills, by state Sen. Mark Leno, D-San Francisco, would have tightened rules on private communications between utility executives and state regulators. It also would have tightened conflict-of-interest rules and limited the CPUC president’s powers.

"I think there has been great credibility lost as a result of some of the shenanigans that has gone on in recent years. I know the governor understands there needs to be reform. On the other hand I don't know if he's willing to go as we are in getting to the core of the problem," Leno said.

Legislators whose bills were vetoed intend to take this up in January, Leno said.

"There will be sufficient two-thirds support to include an urgency clause so that we could have our work in January become law within a very short period of time," he said.

Two bills from state Sen. Jerry Hill, D-San Mateo, would have set performance criteria, included commission meetings under the Bagley-Keene Open Meeting Act and expanded public participation online and in meetings.

Assemblyman Anthony Rendon, D-Lakewood, authored three bills that would have established new oversight measures, including creating an "inspector general" with independent authority to investigate the CPUC.

Update, July 13: A bill that would set new rules on private communications between state utility regulators and the companies they oversee unanimously passed a key Assembly committee Monday afternoon. The bill, SB660, now goes to the Assembly Appropriations Committee.

The measure passed the state Senate last month in the wake of a series of embarrassing disclosures about ex parte communications between PG&E and the California Public Utilities Commission.

"Now is the time for PUC reform, and this is the bill to make it happen," said Matthew Freedman, speaking on behalf of The Utility Reform Network.

Three groups spoke in opposition to the bill before the Assembly's Utilities and Commerce Committee, saying that while the reforms are needed, the limits on ex parte communications would make it hard for small groups to have one-on-one time with commissioners.

Sen. Mark Leno, a San Francisco Democrat, countered, saying an independent study found that the private communications overwhelmingly favor utilities.

Original post, June 19

Is it possible to change the culture of a regulatory agency by enacting a new law?

“I can’t tell you I know that it can be definitively done,” state Sen. Mark Leno (D-San Francisco) acknowledged in a recent interview with KQED. “But we’ve got to start somewhere.”

Leno’s starting with Senate Bill 660, legislation he co-sponsored to restructure the way business is handled at the California Public Utilities Commission.

“They have lost their way -- seriously lost their way,” Leno said of the agency, which oversees safety and enforcement in utility operations and has come under close scrutiny in the years since the fatal 2010 San Bruno pipeline explosion. “And so it’s time for reform.”

The proposal, co-authored by Sen. Ben Hueso (D-San Diego), seeks to impose stricter controls on ex parte communications, private contact between utilities and regulators held outside the formal public process. It won approval in the state Senate in early June and is now headed to the Assembly.

CPUC President Michael Picker agreed that the agency needs to change the way it does business. Picker said that the CPUC is currently examining how other states handle ex parte communications.

"You don't overcome 20 years of erosion overnight," he said. "We're going to have to consciously rebuild that."

Deborah Behles, a law professor at Golden Gate University, said she was surprised to discover how lax California’s ex parte communication laws are in comparison with those of other states.

“California is an anomaly,” Behles said. “There are only a few other places that have such a broad allowance for ex parte contacts, and especially in a rate-making setting.”

And as a trove of emails PG&E was required to release under court order clearly demonstrate, even these relatively low standards have sometimes been ignored.

A flurry of news reports in recent months highlighted a scandal in which a PG&E executive lobbied Commissioner Mike Florio and then-Commission President Michael Peevey’s chief of staff regarding  the appointment of a judge in a case pending before the commission.

That executive, Brian Cherry, repeatedly pushed for an administrative law judge he felt would be more likely to rule in the company’s favor. A host of other email exchanges between PG&E executives and high-ranking regulatory officials documented social engagements, frequent information sharing, and plans Peevey and Cherry made to visit together and drink wine on holiday getaways.

While three PG&E executives were fired for the emails, CPUC staff have either left or been disciplined. Only state lawmakers can remove CPUC commissioners.

Behles co-authored an academic paper on ex parte communications and also represents clients who weigh in on CPUC proceedings from an environmental or consumer advocacy perspective. Under existing rules, public interest advocates “can expend significant resources and energy” to weigh in on CPUC decisions, she said, “and in the end, it could all be undone by a few closed-door communications. That is absolutely a concern, and it has led to questions about the fairness of the process.”

Aside from handling safety issues, the CPUC oversees rate-setting for gas and electricity service, monitors utility spending, and decides on energy projects and policies with far-reaching implications for California’s energy future. Decisions are made by five commissioners appointed by the governor.

“We’ve been rather lax,” Leno said, “and we’ve seen the unfortunate results,” including “the serious tragedy of San Bruno.” He added, “We know that the record keeping of the upkeep of their infrastructure was not only lax, it was nonexistent. That’s not only the fault of the utility, it’s the fault of the commission.”

Leno’s bill also seeks to tighten conflict-of-interest rules that currently give each commissioner the sole power to determine whether he or she should be barred from voting due to bias. It would also limit the CPUC president’s powers.

The legislation had been drafted with input from The Utility Reform Network (TURN), a consumer advocacy organization that has been one of PG&E’s most vocal critics. Mindy Spatt, a spokeswoman for TURN, said she was hopeful the bill would bring about systemic change at the CPUC, but she questioned why some high-ranking regulatory staff never faced consequences.

“What’s been really disturbing is how many people at the PUC have basically been let off the hook,” Spatt said. “It’s a strange form of housecleaning, to sort of just let people off the hook. But just the same, we want to see the house cleaned.”

Criminal investigations at the state and federal level are focused on allegedly improper ties between CPUC regulators and PG&E executives. And close public scrutiny of these cozy ties has been followed by a series of departures of CPUC officials.

PG&E fired Cherry, his supervisor, and another company vice president last year. In late May, PG&E President Chris Johns announced he would retire by the end of the year. Meanwhile, Peevey stepped down after his term came to an end in December 2014, and Carol Brown, Peevey’s chief of staff, also retired last year. CPUC Executive Director Paul Clanon, who exchanged dozens of chummy emails with Cherry, also resigned last year, announcing plans to study music.

CPUC spokeswoman Constance Gordon told KQED that internal policy reform is also underway at the regulatory agency.

“We have commissioned an independent report that will come out soon that is reviewing best practices that would strengthen ex parte rules,” Gordon said.

She added, “Our new president and executive director have stated their goal of moving the CPUC forward with openness, transparency and a commitment to safety.”