Capitol Alert

California auditor blasts PUC over spending, conflicts of interest

California Public Utilities Commission needs reform, lawmaker says

On Monday, June 27, 2016, the day Gov. Jerry Brown and lawmakers announced a deal to overhaul the troubled California Public Utilities Commission, then-Assemblyman Mike Gatto, D-Los Angeles, explained why things need to change.
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On Monday, June 27, 2016, the day Gov. Jerry Brown and lawmakers announced a deal to overhaul the troubled California Public Utilities Commission, then-Assemblyman Mike Gatto, D-Los Angeles, explained why things need to change.

California’s energy regulator has lax control over its own spending, fails to disclose public records and allows its board members to travel at the expense of a nonprofit group closely tied to the companies it monitors, according to a stinging report from the state auditor’s office on Thursday.

As a result, the report concludes that the California Public Utilities Commission has failed to protect itself from “the appearance of improper influence” in decisions that impact tens of millions of ratepayers.

“This institution is in desperate need of reform,” said Assemblyman Mike Gatto, D-Los Angeles, the outgoing chairman of the Utilities and Commerce Committee.

The report’s release follows a failed bid in the Legislature this year to revamp the commission, which has sprawling authority to regulate energy and telecommunications.

Auditor Elaine Howle urged lawmakers to try again.

Her audit identified 24 cases in which the utilities did not competitively bid contracts. It found $2.4 million in “unexplained” contract changes since 2010.

It did not find “evidence that the (PUC) monitored contractor performance in nearly one-third of the contracts we reviewed.”

19Number of foreign trips CPUC members accepted since 2010 from nonprofit groups

In one instance, the report noted the commission awarded a lucrative contract for an outreach program to the nonprofit group California Center for Sustainable Energy without seeking bids from other companies. Utility companies objected in 2012, but the commission overrode them. It led to $74 million worth of work between 2012 and 2016.

Len Hering, the center’s director, said the nonprofit did not lobby for the work. Rather, he said, it accepted work the agency offered after it made presentations at public meetings.

“Every aspect of the contract was done completely up and up,” he said.

The audit acknowledged the group did what it was asked, but it noted “the (PUC) could have better justified its choice of the contractor and avoided the appearance of improper influence” if it had solicited bids.

The report also focused on how the agency’s appointed commissioners communicate privately with the companies they regulate.

The commission has faced scrutiny regarding those communications since former PUC President Michael Peevey at a 2013 event in Poland appeared to negotiate a settlement for the closure of the San Onofre nuclear power plant without alerting his colleagues or the public.

His role in the talks with Southern California Edison was not disclosed until after the commission voted on a $4.7 billion settlement, which the audit noted has cast a shadow over the agreement.

This institution is in desperate need of reform.

Assemblyman Mike Gatto

Auditors found that commissioners accepted about $150,000 in gifts from nonprofits in the form of foreign travel since 2010.

Six of the 19 trips auditors identified were paid for by the California Foundation on the Environment and the Economy, an organization whose board members work for PG&E, San Diego Gas & Electric and Southern California Edison, among others.

Howle urged the commission to adopt more stringent policies requiring board members to step down from votes when “their impartiality is reasonably questioned” and to more rigorously disclose their communications with industry representatives.

In a response to the audit, the PUC said it agreed with most of the report’s findings and would work to adopt its recommendations.

“We have a plan in place to comply with the recommendations,” PUC spokesman Christopher Chow said.

Adam Ashton: 916-321-1063, @Adam_Ashton

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