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Nov 20, 2014 3:34 PM

PG&E fined over alleged secret dealings

The Associated Press

SAN FRANCISCO (AP) State regulators Thursday fined Pacific Gas & Electric Co. and required its shareholders to cover as much as $400 million of a planned gas rate increase because of backroom negotiations between the utility and regulators.

The California Public Utilities Commission voted 3-0 in favor of the penalty, which stems from recently released emails that show a PG&E executive and CPUC officials discussing which judge to appoint to a case over gas rates. The executive objects to one judge for having a history of being hard on the utility. The emails are the latest in a series released by the utility and others that allegedly show PG&E executives privately negotiating with CPUC officials.

The commission's decision fines PG&E $1 million for the emails about the judge and requires PG&E shareholders to cover a portion of the proposed rate increase instead of utility customers.

"While this fine alone may not have enough deterrent factor, I think it is important for this commission to continue to signal that violations will be met with our primary tool for compliance, namely monetary sanctions," Commissioner Carla Peterman said.

Shareholders could be on the hook for as much as $400 million, though ratepayer advocates say the commission has discretion to require a much lower figure.

An alternative proposal before the commission did not call for a fine or any shareholder contribution.

PG&E spokesman Keith Stephens said in a statement that the company will appeal the decision. The emails in question were inappropriate and some violated the CPUC's rules, but PG&E reported them, held people accountable and was "making significant and voluntary changes designed to prevent this from happening again," he said.

The company has created a new role of chief regulatory compliance officer and engaged the services of former Interior Secretary Ken Salazar as special counsel on regulatory compliance matters, according to Stephens.

"We fully understand that we are accountable when we fail to uphold high standards," Stephens said. "However, in our view, the CPUC's decision doesn't appropriately take account of these corrective actions. It imposes sanctions that aren't warranted and that may go beyond the CPUC's legal authority."

Thursday's decision also restricts back-channel contact between commission members and the state's largest utility. Commissioner Michael Picker raised concerns that an earlier ruling on such communications by an administrative law judge had made it more difficult for staff members to get information from PG&E.

Commissioner Catherine Sandoval said the approved proposal would create a more workable situation that would allow the commission to continue its oversight role.

Ratepayer advocates have demanded that the commission release tens of thousands of additional emails that they say may also show illegal contact between the CPUC and PG&E, the state's largest utility. The commission did not address that request.

"Where this decision falls short is that it allows PG&E to cherry-pick which emails to release and when to release them," said Mark Toney, executive director of The Utility Reform Network. "As far as we're concerned, the emails that were talked about today are just the tip of the iceberg. And there is so much more waiting to be uncovered."

Commissioner Mike Florio, who was involved in the email exchange over the assignment of a judge, recused himself from the vote as did commission President Michael Peevey. He received a copy of at least one of those emails and has announced he will not seek reappointment when his term ends this year.


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