PG&E acknowledges it broke the rules

PG&E released a second batch of private emails between its staff and the California Public Utilities Commission Monday and said it believes both sets of messages violated commission rules.

The new messages, which the utility filed with the PUC in San Francisco and also announced in a news release, were exchanged between Commissioner Michel Florio and a now-fired PG&E executive in December. They concerned whether the pressure in a disputed natural gas line in San Carlos could be restored to normal operating level.

Florio, who was a lawyer for the consumer organization The Utility Reform Network for 33 years before being appointed to the PUC in 2011, was seeking information on why PG&E was contending it needed the full pressure to operate the line effectively.

Florio commented in a Dec. 18 message to former PG&E vice president Brian Cherry:

“Amazing how I’ve become ‘an apologist for PG&E’ in just three short years, isn’t it?”

The next day, Florio and the other four commissioners voted unanimously to restore the San Carlos line to its normal pressure. PG&E said in its news release it believes the messages violate a commission rule that prohibits utilities from sending off-the-record messages, known as ex parte communications, to PUC commissioners and staff.

The release came on the eve of a hearing before a PG&E administrative law judge on the first batch of emails, which were released on Sept. 15. Those messages were exchanged between Cherry and PUC President Michael Peevey, Peevey’s former chief of staff and Florio in January.

They concerned alleged judge-shopping by PG&E for an administrative law judge to preside over a gas transmission and storage rate case. At Tuesday’s hearing at the PUC’s headquarters in San Francisco, Administrative Law Judge Hallie Yacknin will consider what penalty to impose on PG&E for the messages.

In a Sept. 17 order, she said the penalty could be a fine and/or “other appropriate sanctions.” In a filing with the PUC last week, PG&E acknowledged the messages violated the commission’s rules and said it expects a penalty.

PG&E spokesman Keith Stephens said Monday:

“There are no excuses. We’re accountable and expect to be fined for the Sept. 15, 2014 filing.”

Tuesday’s hearing is not slated to address the new batch of messages. But Mindy Spatt, a spokeswoman for The Utility Reform Network, known as TURN, said the group’s attorneys will ask Yacknin to consider those as well. Spatt said TURN is also asking the CPUC to examine all of the 65,000 emails sent by PG&E staff to the commission since 2010.

Spatt said:

“We don’t think PG&E should be able to cherry-pick the emails.”

PG&E voluntarily culled through those emails and came up with the two sets it identified in notices filed with the PUC Sept. 15 and today. The utility’s review came after the city of San Bruno in July obtained an earlier exchange of emails between PG&E executives and Peevey and his former chief of staff concerning three PUC proceedings, including a probe of a fatal pipeline explosion in San Bruno in 2010.

In San Bruno, a defectively welded pipe that was incorrectly listed in PG&E records as seamless exploded, killing eight people. San Bruno, which will also participate in the administrative hearing on Tuesday, has asked the commission to impose not only a fine but also orders requiring PG&E to hire an independent ethics monitor and provide ethics training for its staff.

San Bruno told the PUC in a filing last week:

“PG&E’s illegal ex parte communication disclosures show the expected business relationship between the commission and PG&E is broken. The system must be changed to rebuild the public’s trust in it.”

San Carlos officials questioned the safety of the pipe in their city, Line 147, after learning that three of its segments were, like Line 132 in San Bruno, incorrectly listed in PG&E records as seamless.

After San Carlos leaders learned that a PG&E engineering consultant had written an email expressing concerns about thin walls and corrosion in the pipe and asking, “Are we sitting on another San Bruno situation?” the PUC last fall reduced the pressure in the pipe to 125 pounds per square inch while conducting a safety probe.

In December, PG&E requested approval to restoration of a normal pressure of 330 psi, arguing that the line had been proved safe and was needed to deliver natural gas to the Peninsula in the winter.

In his email to Cherry on Dec. 18, the day before the PUC hearing on Line 147, Florio wrote:

“Brian — this situation is still touch and go given the full court press by San Carlos. I am planning a lengthy explanation in my presentation of the item. It would really help if I had a bit more technically sophisticated explanation…”

Cherry then sent a longer explanation and Florio responded, “I’m good to go unless you find out anything different than this.”

At the Dec. 19 public hearing before the PUC, Florio said of the 240 psi proposal, “Unfortunately, that is not a feasible option. … Without the pressure at 330, there simply won’t be enough gas to serve Northern California” during cold winter weather, Florio told the hearing audience before he and the other commissioners voted to restore the stronger pressure.

Asked to comment on the former TURN lawyer’s role as a commissioner, TURN Executive Director Mark Toney said Florio’s messages in both sets of emails were “ill-advised” and “overly friendly,” but said there was no evidence Florio acted illegally.

Toney said the PUC’s current regulations forbid ex parte communications from utility staff to the commissioners and their staff, but do not prohibit such communications from the commission and its employees to utilities. He said TURN is asking the PUC to revise its rules to prohibit ex parte communications from as well as to the commission.

The PUC said in a statement today:

“As announced on Sept. 15, the CPUC is retaining an independent third-party expert to conduct a review of internal procedures regarding ex parte rules and compliance. … This review will include a retrospective look at the CPUC’s interaction with regulated utilities to help ensure that the agency guards against future ex parte violations.”

PG&E is also facing criminal charges in federal court in San Francisco. It is accused of one count of obstructing justice in a National Transportation Safety Board investigation of the San Bruno explosion and 27 counts of violating a federal pipeline safety law.

The San Francisco-based utility said in today’s news release that federal prosecutors have notified it that they have begun an investigation of the ex parte communications. It said it will cooperate.

After the Sept. 15 disclosure of e-mails, PG&E fired Cherry and two other executives. Peevey, who had previously declined to do so, voluntarily stepped down from participating in a commission’s future decision on whether to uphold two administrative law judges’ recommendation of a $1.4 billion penalty for PG&E for the San Bruno explosion.

His chief of staff, Carol Brown, resigned from that position but remains a PUC employee.

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