BUSINESS

PG&E officials removed for improper email communications with California regulators

09/15/2014 05:43 EDT | Updated 11/15/2014 05:59 EST
SAN FRANCISCO - Four senior officials with Pacific Gas & Electric Co. and the state commission regulating it were removed or resigned over emails released Monday showing the utility and state regulators appeared to negotiate which judge would be assigned to hear one of the utility's rate cases.

The emails show the commission ultimately assigned to the case a judge for whom PG&E had expressed a preference, rather than another judge who PG&E said "has a history of being very hard on us."

Also Monday, California Public Utilities Commission president Michael Peevey, who was included in part of the January email exchange, removed himself from involvement in that rate case and in another, bigger case pending before the utility commission involving PG&E, California's largest utility.

The developments deepen the growing controversy surrounding the state utilities commission's oversight of the utility in the aftermath of a 2010 explosion of a PG&E natural-gas pipeline that killed eight people in the San Francisco suburb of San Bruno.

In July, earlier emails released at the request of San Bruno city officials showed Peevey and his staffers consulting with the utility on matters including how big PG&E's fine should be in the blast. The commission's decision on that fine is pending.

On Monday, PG&E released a January email exchange featuring Brian Cherry, PG&E's vice-president for regulatory relations, asking repeatedly for Peevey's chief of staff, Carol A. Brown, to change the administrative law judge who was assigned to hear an unrelated rate case involving PG&E.

"Let's just say she has a history of being very hard on us," Cherry said, referring to the judge that PG&E wanted removed from the case.

"I can see if anything can be done," Brown answers at one point. "Take a deep breath — I am working on it," she wrote in another.

Cherry separately emailed Peevey, the commission's chief, on PG&E's desire for a change of judges in the rate case. "This is a problem. Hope Carol can fix it," Cherry wrote. There was no record of a response from Peevey to that email.

Utilities commissioner Michael Florio also was involved in the email exchange over the assignment of judges. Asked in an interview why neither he nor Peevey nor Peevey's chief of staff appeared to report the email exchange at the time, Florio said he had not known of a commission rule forbidding that kind of unofficial discussion on the selection of state administrative law judges to decide utility cases.

"We're all going to take a refresher course on the rules," Florio said.

Asked how the public should take the latest exchange, Florio said, "It really looks bad at the immediate sense but I think in the long term it will be better and more transparent."

PG&E released the emails following what it said was an internal investigation of communications between the utility and state regulators.

PG&E said Monday that Cherry and two other senior officials ended their employment with the utility as a result of the emails released Monday. The utility also has engaged former U.S. Interior Secretary Kenneth Salazar to advise it on developing a best-practices model for regulatory compliance, PG&E said in its statement.

"As a company, we must be committed to complying with both the letter and the spirit of the law and PG&E's own code of conduct at all times." PG&E President Chris Johns and parent company CEO Tony Earley wrote in a joint letter to employees Monday, according to a statement released by the utility.

Brown, Peevey's chief of staff, resigned, the utility commission said in a separate statement.

Attempts to reach the departed PG&E and utilities commission officials were not immediately successful Monday. The utility and the utilities commission also did not immediately respond to requests for current contacts for the four.

The Utilities Reform Network, a consumer group pushing for action against PG&E in the wake of the 2010 blast in San Bruno, called on Peevey to resign, saying the emails showed "PG&E was calling the shots in Peevey's office."

There was no immediate comment from Gov. Jerry Brown. The state attorney general's office would not comment, spokesman Nick Pacilio said.

The PG&E pipeline explosion in San Bruno was in the worst utilities accident in California in decades. A National Transportation Safety Board investigation faulted what it said was negligence by PG&E and lax oversight by the utilities commission.

The utilities commission currently is weighing financial penalties against PG&E in the blast, including a proposed fine of $950 million. Federal prosecutors separately have charged PG&E with obstruction of justice over alleged misstatements made to the NTSB in that investigation. PG&E denies that charge.