Under fire, PUC chief Michael Peevey to leave

Oct. 9, 2014 5:52 PM PT

SACRAMENTO — For more than a decade, Michael Peevey has held one of California’s most powerful jobs, regulating electricity rates, company profits and energy supplies at most of the state’s biggest utilities. On Thursday, amid calls for his removal, the president of the Public Utilities Commission announced he would step down at year-end.

The surprise announcement came just as protesters and politicians were gathering on the steps of the PUC’s San Francisco headquarters to demand his ouster.

Peevey has been at the center of controversy over the PUC’s handling of a 2010 fatal gas pipeline explosion in San Bruno, the permanent closing of the San Onofre nuclear power plant and pending utility rate hikes.

This week, the scrutiny intensified after Pacific Gas & Electric Co. announced Monday that federal prosecutors were investigating emails and other contacts between the utility, Peevey and other PUC officials. Already, the utility has fired three top officials in connection with the inquiry.

The beleaguered Peevey, 76, the former top executive at Southern California Edison Co., said he would not seek a record third six-year term as head of a five-member panel and a 1,100-employee bureaucracy.

“Twelve years as president is enough,” Peevey said in a statement released at the same moment that a state legislator and two Bay Area mayors held a press conference outside the PUC offices. “The governor, of course, will make a decision as to my successor in due time.”

Gov. Jerry Brown’s office had no comment. Supporters recalled Peevey’s many accomplishments; critics were elated at his impending departure.

Californians “should rejoice knowing that the PUC will now be able to turn over a new leaf and fulfill its mission of serving the public interest by protecting consumers and ensuring safe, reliable and affordable utility service,” said state Sen. Jerry Hill (D-San Mateo), a longtime Peevey critic.

Hill had announced he was preparing a legislative resolution to oust Peevey from office if he had been reappointed by Brown.

The announcement leaves the little known but powerful agency at a crossroads in its 103-year history.

Supporters pointed out that Peevey helped the state weather blackouts in the aftermath of the energy crisis of 2000 and 2001, caused by a faulty electric deregulation law and market manipulation by wholesaler middlemen, including Enron Corp.

Before his appointment to the commission by then-Gov. Gray Davis, he helped line up long-term contracts to ensure sufficient power supplies.

Under Govs. Arnold Schwarzenegger and Brown, Peevey championed energy efficiency, renewable power and the state’s pioneering efforts to curb carbon emissions linked to global warming.

“He’s been president of the PUC for as long as he has because he gets things done,” said Jan Smutny-Jones, executive director of the Independent Energy Producers Assn. He represents independent power plant operators who sell power to utilities. “I can’t think of anyone in public service who has done more to promote renewable energy and address the climate change issue.”

But Peevey’s relationships — even with fellow commissioners — were uneven. He had a negative side, said Loretta Lynch, Peevey’s predecessor as PUC president. She constantly tussled with Peevey during the 2 1/2 years they served together on the commission.

“I think Peevey started his collusion early, and he did it often,” Lynch said. “From the beginning he evidenced a complete disregard for the rules of law and a complete interest in cozying up to utilities.”

That coziness is at the core of the latest criticism and may have been a factor in Peevey’s decision to not seek a third term as president.

Controversy flared over the summer and reached a crescendo Monday in the wake of the release of thousands of emails by the PUC and PG&E. Many of them, the utility acknowledged, violated PUC rules requiring the filing of public notices whenever a regulated company holds a one-sided conversation with a regulator.

One of the PG&E memos detailed a dinner between Peevey and a company vice president at which they discussed a list of issues that directly affected PG&E’s finances. One item was a request from Peevey that the firm donate at least $1 million to a campaign to defeat a 2010 oil firm-backed ballot measure that would have undermined the state’s anti-global warming program.

Another flashpoint at the PUC focuses on who should pay how much of the costs stemming from the June 2013 closure of the San Onofre nuclear power plant near San Clemente, owned by Southern California Edison Co. and San Diego Gas & Electric Co.

Undisclosed emails and other private conversations are representative of the “endemic corruption” in state government created by “the imbalance” in lobbying power between wealthy corporations and advocacy groups that speak for consumers and utility ratepayers, said Robert Fellmeth, a regulatory law expert and director of the Center for Public Interest Law at the University of San Diego.

Regulators like Peevey should not hold “secret conversations” with only one side in a pending case that they eventually will have to rule upon as both judge and jury, Fellmeth said.

“The whole idea is to get information to all sides,” he said. “Not to cozy up to one side.”

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Twitter: @Marc Lifsher

Staff writer Tiffany Hsu contributed to this story