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  • HECTOR AMEZCUA / Bee file, 2009

    Michael Peevey, president of the California Public Utilities Commission, put himself in charge of deciding how much to fine PG&E for the San Bruno fire.

  • PAUL SAKUMA / Associated Press file, 2010

    Fire erupts from a ruptured PG&E gas pipeline in San Bruno in September 2010. The blast and fire killed eight people and destroyed 38 homes.

  • Dan Morain

Dan Morain: San Bruno blast puts PUC chief in spotlight

Published: Sunday, Mar. 11, 2012 - 2:00 am | Page 1E
Last Modified: Monday, Mar. 12, 2012 - 1:30 pm

In the coming weeks and months, the California Public Utilities Commission will assess penalties against PG&E for the gas explosion that killed eight people and leveled 38 homes in San Bruno in 2010, and decide how much PG&E customers must pay to test and replace hundreds of miles of old gas pipelines.

Michael Peevey will be in the middle of it all.

Peevey has spent the past decade as president of the California Public Utilities Commission, a role that gives him ultimate responsibility for overseeing California's largest privately owned utility, PG&E.

The company has done well. By commission order, PG&E shareholders have been guaranteed an 11.35 percent rate of return. PG&E's stock price increased from $29 a share in 2004 when it emerged from bankruptcy to roughly $45 a share now.

Some PG&E customers haven't fared quite so well.

On Christmas Eve 2008, a PG&E gas pipeline exploded in Rancho Cordova, killing a man. PG&E went about its business, under the purportedly watchful eye of the Public Utilities Commission.

On Sept. 10, 2010, gas leaking from a 30-inch transmission line installed in 1956 in San Bruno exploded, killing eight people, severely injuring many more, and destroying 38 homes.

The National Transportation Safety Board issued a report in September that criticized PG&E and lax federal regulators, but also leveled special criticism at the California Public Utilities Commission.

"The CPUC, as the regulator for pipeline safety within California, failed to uncover the pervasive and long-standing problems within PG&E," the report said.

"Consequently, this failure precluded the CPUC from taking any enforcement action against PG&E. The CPUC lost opportunities to identify needed corrective action and to follow through and ensure that PG&E completed the prescribed corrective actions in a timely manner."

Such harsh words might be enough for some people to quit in shame. The words certainly led to calls for Peevey to step down.

"Peevey could have created regulatory priorities and he didn't. He needs to go," said Assemblyman Jerry Hill, a Democrat whose district includes San Bruno and who has made Peevey's departure his cause.

Peevey shows no signs of intending to leave, not until he is ready. In fact, Peevey appointed himself as the commissioner most responsible for assessing the fine against PG&E, a move that elicited howls from consumer advocates and politicians including Hill who represent San Bruno.

Gov. Jerry Brown, the one person who could force a change, isn't anxious to engage, as he made clear when I asked him about the situation during his stop at The Bee's editorial board on Thursday.

"He is a strong force. He knows the utilities. I think people may be jumping to judgment," Brown said of Peevey.

Brown and Peevey go back decades, to when Brown was governor the first time and Peevey was a Southern California Edison executive. They crossed swords then. These days, Brown places high value on experience.

Brown lauded Peevey for pushing utilities to generate more renewable energy, but said he is aware that Peevey faces criticism for presiding over the proceedings to assess penalties against PG&E.

"You have to enjoy public confidence," Brown said. "You haven't seen what the result is … what the fine is going to be. I haven't moved on it as yet, and I don't know that I should. But I'm going to give it some thought."

PG&E would not comment on Peevey's self-appointment, other than to say in a statement: "We will continue to fully cooperate with the CPUC's investigations, regardless of which commissioner has been assigned."

Peevey, 74, became a multimillionaire in the 1990s by trading electricity during the height of energy deregulation, the same deregulation that led to the energy crisis in 2000 and 2001. Then Gov. Gray Davis turned to Peevey to help navigate the crisis, and appointed him to the public utilities commission in 2002.

In any room on any topic, Peevey does most of the talking, as he did when Brown recently sat down with him to talk energy. He can be charming, but also gets short with people who cross him. He gaveled down Hill at one PUC meeting.

Peevey has supporters in high places. His wife is Sen. Carol Liu, D-La Cañada Flintridge, which limits the willingness of other Democratic senators to challenge Peevey in any serious way.

He generally is allied with the powerful electrical workers union, and his defenders include K.R. Sridhar, chief executive of Bloom Energy, the high-profile Sunnyvale fuel-cell provider.

"He is a titan in California in the energy space, and we're all glad that he is where he is," Sridhar told the San Francisco Chronicle in January 2011.

A month after Sridhar publicly sang Peevey's praises, details emerged about how Bloom received more than $200 million in subsidies for its technology in a program overseen by the CPUC, aided by Peevey himself.

"He has a pattern of making decisions that put the corporate interests in front of public interests," said Mark W. Toney, executive director of The Utility Reform Network, a consumer organization that has called for Peevey to step down.

One way or another, Peevey's tenure is coming to a close. His term ends in 2014, and he must be thinking of his legacy. As of now, he is president of a commission that, according to the National Transportation Safety Board, had an "ineffective enforcement posture" and "permitted PG&E's organizational failures to continue over many years."

His legacy hinges on decisions that will emerge in coming months. More importantly, the decisions he shapes will affect PG&E's customers' pocketbooks and the future of a utility that serves 15 million customers, not to mention public safety.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Dan Morain, Senior editor



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