Guidelines for the post-Peevey era of the CPUC

San Francisco Chronicle (2014-12-19) Loretta M. Lynch

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As California Public Utilities Commission President Michael Peevey and the utilities he regulated extol his legacy of largesse, we should consider what’s needed at the PUC in the post-Peevey era.

The modern PUC was created out of a backlash to the cozy, corrupt relationship between the regulators and the all-powerful railroads and mega-companies of the 20th century. The people and Gov. Hiram Johnson knew that when regulators become captured by the regulated, and in secret do the bidding of powerful corporations instead of the people, the economy suffers, families are gouged, and businesses that won’t “pay to play” are unfairly disadvantaged. So in 1911, a popular initiative gave the PUC power to rein in the private corporations that enjoyed unconstrained monopolies to produce and deliver power.

By statute, the PUC must ensure that utility rates are just and reasonable. In other states, this means calculating power needs and costs through public evidentiary hearings, where utilities testify under oath about their costs, their profits and their compliance with safety and maintenance rules. Opposing parties are encouraged to question the data and call witnesses to verify that utilities provide good service and safe facilities — and to limit extraordinary profits. But not in California.

Under Peevey, the commission ignored the law, the press and the public in order to do the utilities’ bidding. PUC decisions became divorced from facts or science and were unfettered by public oversight. Fueled by illegitimate backroom deals, parties were pressured into settlements instead of examining utility records, cross-examining witnesses under oath, and participating in full evidentiary hearings that develop facts to support the PUC’s decisions.

Taking shortcuts and keeping cozy utility relationships cause critical gaps in regulation and enforcement. When Pacific Gas and Electrict Co. failed to spend the money it had already received to maintain its gas system, resulting in tragedies like the San Bruno explosion, the PUC allowed the utility to keep the money. The PUC’s 2012 audit of PG&E gas pipeline costs detailed how PG&E retained more than $420 million above its authorized profits while failing to meet minimum federal inspection and maintenance requirements. And when utility energy efficiency programs failed to achieve the modest goals it set, the PUC awarded the utilities more than $68 million in unearned profits anyway.

Despite lavish talk about increasing renewable energy and the start of renewable mandates in 2002, the PUC has authorized more fossil-fueled energy than renewable energy during Peevey’s tenure, with prices and terms kept secret. Often these plant approvals are fast-tracked and approved with no demonstrated need. In 2013 alone, California — the PUC and municipal utilities — approved almost 4,000 megawatts in fossil-fueled plants, embedding a long-lasting new fossil infrastructure that impedes California’s transition to a clean energy future. The costs of these plants are built in to rates over 20 years, which means that California businesses and families will be paying for too much fossil power, costing too much for too long.

By contrast, in 2013, California authorized only 2,300 megawatts of renewables. Peevey also pushed through unnecessary, expensive transmission projects that produce big profits for their owners and export their pollution burden to bordering states and nations.

To justify the fossil-power buying binge, Peevey changed the rules: Reducing the amount of clean power defined as available and pushing through increases in reserve power requirements resulted, in 2014, with California having purchased on average 35 percent more power than it needs.

Peevey’s binge comes at a steep price. Overbuilding and overbuying (at high prices) means we have less money to spend on clean energy, safe gas pipelines and critical electricity infrastructure — unless the ratepayers pay billions of dollars more. California’s electricity prices are projected to rise sharply in the future.

It is time we return to what the voters enacted through initiative 100 years ago. We need regulators who will:

• Follow the rule — and spirit — of the law. The Legislature should stop the Peevey backroom deal-making practices and private commissioner assurances that the utilities will be favored. The state Senate should not confirm any commissioner who communicates with the companies in secret or who flouts the Legislature’s rules. Californians must be assured that the commission serves the people, not the corporate interests.

• Require open government. The Legislature should remove the shroud of secrecy that now conceals utility costs and profits and commission actions. It should confirm only commissioners committed to transparent government and robust public participation. The Legislature also should appoint its own independent expert to review the commission’s public documents and communications that it is refusing to disclose. The Legislature should create an inspector general to ensure PUC integrity.

• Stop the fossil buying binge and make comprehensive fact-based choices to construct a renewable energy future.

• Stop the gifts, the partying and the travel with those with financial interests at the PUC, including their agents and their foundations.

More than a century after Californians voted for clean and transparent utility regulation, President Peevey brought back the cozy, co-opted cronyism of earlier eras. His tenure was marked by a disdain for law and a resulting corruption of both legal procedures and results. Now we must rescue our energy future by reviving the sound democratic practices and open government of the past.

Loretta M. Lynch is a former California Public Utilities president.

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