Calls for Michael Peevey to be replaced as PUC president have not elicited a public response from Gov. Jerry Brown.

California's Public Utilities Commission faces legislative heat

Published: Sunday, May. 5, 2013 - 12:00 am | Page 3A
Last Modified: Sunday, May. 5, 2013 - 8:58 am

Legislators are turning up the heat on the California Public Utilities Commission, withholding money and lambasting the state agency over the past few months for failing to prioritize its core mission of ensuring safe and reliable utility service.

Calls for Gov. Jerry Brown to replace the commission's top leader, Michael Peevey, have gone unanswered, even as new allegations of mismanagement surface. Peevey's appointment is through Jan. 1, 2015.

Among the issues highlighted during multiple hearings on the commission in the Senate and Assembly were findings from a state audit that exposed lax financial controls, a scandal involving a covert recording of a private meeting and an unanswered demand that Peevey testify in a legislative hearing.

"The only way this commission is going to change the culture of complacency is to change the leadership," said Sen. Jerry Hill, D-San Mateo, who has led the charge to oust Peevey since the 2010 San Bruno gas pipeline explosion killed eight people and injured 60 in his district.

The commission, which did not respond to a call for comment, was criticized following the San Bruno blast for failing to uncover "the pervasive and long-standing problems" within PG&E, owner of the line that caused the explosion, according to a 2011 National Transportation Safety Board report.

In the aftermath of San Bruno, criticisms of the commission, which regulates privately owned public utilities, are appearing from multiple directions:

• The Department of Finance's Office of State Audits and Evaluations found "significant weaknesses with the CPUC's budget operations that negatively affect the commission's ability to prepare and present reliable and accurate budget information." As an example, the auditors said commission records did not include certain fund transactions that ranged from roughly $40,000 to $275 million.

• The commission has created auxiliary organizations in recent years, which some say circumvents legislative authority. A Senate budget committee staff report found the nonprofit and for-profit entities took up considerable time and effort, while using ratepayer funds that are outside the state budget process.

The Senate committee is requesting that the Fair Political Practices Commission look into the nonprofits for possible conflicts of interest or bequesting violations. The same committee approved bill language to prohibit the commission from creating such entities without legislative approval.

Among the nonprofits created by the commission is the California Emerging Technology Fund, which Peevey chairs.

• An Assembly budget subcommittee report said commission Energy Division Director Edward Randolph surreptitiously recorded a closed-door meeting where budget obligations were being discussed. California law forbids recording conversations without consent from the participants.

• An Assembly subcommittee blasted the commission after a commission-requested report questioned the agency's commitment to safety and highlighted a perception among employees that the commission is too cozy with the utility companies it regulates.

Commission Executive Director Paul Clanon said he disagreed with those perceptions. Clanon has held the hot seat during legislative hearings, responding that the commission has worked hard to improve public safety since the San Bruno explosion, which he called a "game-changing event."

"The projects and the programs the commission has implemented around safety since San Bruno have already made us safer and will continue to make us safer," Clanon said during one hearing.

He said the commission is working to fix internal failings, such as in its budget process. The commission has a $1.4 billion budget and oversees a $50 billion-a-year industry.

"What it boils down to is the commission has had not enough people working on the budget; the people that we have had have been inadequately trained; the processes that they have been performing have been inadequately documented; and there has been inadequate oversight in management, including by me," Clanon said.

Legislators approved three additional commission budget positions, but voted to deny several other positions included in Brown's budget proposal.

The Legislature's focus on the commission – and Peevey in particular – has become somewhat awkward because he is married to Democratic state Sen. Carol Liu of La Cañada-Flintridge.

"He does his job, she does hers," said Liu's spokesman Robert Oakes. "They happen to have been married for a long time."

Hill has also questioned Peevey's priorities after the commission's president didn't respond to a letter urging him to attend the April 25 hearing. An NBC Bay Area reporter confronted Peevey on the day of the hearing at an energy conference in Napa. The conference was put on by the California Foundation on the Environment and Economy, a nonprofit group bankrolled by dozens of donors, including labor, energy, environmental and telecommunications interests.

In March, Peevey and six lawmakers went to Poland on an eight-day trip paid for by the same nonprofit.

Several lawmakers have advocated for increased controls and oversight of the utilities commission.

"I think confidence in PUC leadership is at an all-time low," said Assemblyman Bob Blumenfield, D-Woodland Hills and chairman of the budget committee. "There appears to be negligence dealing with their core safety mission. … I intend to do whatever I can to make sure that mission is carried out correctly."

Call Melody Gutierrez, Bee Capitol Bureau, (916) 326-5521. Follow her on Twitter @melodygutierrez.

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