Consumer Watchdog, the publisher of Capitol Watchdog, has launched the first searchable website with hundreds of thousands of emails and other files uncovered from corruption scandals at the California Public Utilities Commission.
www.PUCpapers.org allows the public, journalists, advocates, litigators, students and policymakers to search and uncover evidence about inappropriate relationships between regulated utilities, their regulators, their investors, and public officials.
The documents in the database were obtained from the City of San Bruno following a 2010 gas explosion and Pacific Gas & Electric’s inappropriate dealings with PUC officials, the law firm of Aguirre and Severson from its litigation over the decommissioning of the San Onofre Nuclear Generation Plant, and a case to stop a natural-gas powered electricity plant in Carlsbad brought by the Protect Our Communities Foundation and Center for Biological Diversity.
The documents, obtained through the Public Records Act, have already uncovered cozy dealings between regulated utilities and the government that go far beyond former PUC President Michael Peevey and one disgraced PG&E executive, to extend throughout the PUC, the governor’s office, and other government agencies. We launched the PUC papers to allow reporters, advocates, and the public to mine it for connections and corruption that have yet to be uncovered.
The database provided the evidence Consumer Watchdog used for its ethics complaint to the Fair Political Practices Commission that Governor Brown’s executive secretary, Nancy McFadden, violated disclosure laws and conflict of interest rules by participating in decisions that would benefit PG&E while she held PG&E stock.
Searches have uncovered never-before-seen documents, including those documenting a chummy relationship between former PUC President Michael Peevey, current President Michael Picker, the utilities and Wall Street:
•In May 2014, Picker asked Peevey for a list of names in the New York investment community he could meet on a trip to New York. Peevey responded via his assistant Carol Brown that he should “meet with the rating agencies Moody’s and Standard and Poors.” He went so far as to suggest that the utilities that depend on these credit ratings to attract investment set up some meetings. “You may wish to have one of our utilities arrange, through their Investor Relations operation, set up a meeting with investors. If so, I suggest asking Sempra, not either of the other two (too much [business] before us by each of them.)” Through such meetings, investors and rating agencies like Moody’s can pressure regulators to go easy on utilities or credit downgrades will boost the cost of borrowing, discouraging investors. Last week, Moddy's downgraded So Cal Edison's outlook given the PUC's reopening of the San Onofre settlement that was tarnished by corruption.
•In May 2014, Peevey asked a Bank of America banker to treat fellow commissioner Michael Picker to lunch in New York “to get a read on the investment community views of California regulation, etc.” In June 2014, Picker went on a personal Wall Street road show, complete with an investor-supplied sedan, for a “full day of 1X1 meetings + intimate group meeting.” Picker continued to meet with bankers like UBS in Sacramento. In August 2014, Picker wrote an email expressing "my deep gratitude" to UBS honcho Julien Dumoulin-Smith, "whose many research products already reach my inbox in great profusion daily." Dumoulin-Smith would later write, "It's been described that you are cut from a different cloth from other CPUC folks. I tend to agree." He thanked Picker for his "insight," calling it a "refreshing change from a lot of folks we meet with."
•Hundreds of pages of stats for fantasy baseball tournaments passed between PUC staffers and PG&E employees showing just how familiar relations were.
•Emails between PG&E lobbyist Brian Cherry and former PUC President Michael Peevey showing Governor Brown’s executive secretary Nancy McFadden, a former PG&E vice president, orchestrating the selection of a pro-utility Commissioner to help boost PG&E stock. She held up to a $1 million in stock options and got a $1 million cash bonus on her way out the PG&E door.
“Investors fear the Governor could have swung the commission too far in the consumer-oriented direction with the appointments of Mike Florio and Catherine Sandoval,” wrote PG&E lobbyist Brian Cherry to Peevey. Peevey responded, “This info should go to the Governor’s office, probably best to Nancy McF.” Cherry writes back, “Nancy asks if you have any names you could recommend. You can call her directly if you’d like.” Commissioner Mark Ferron, a former Deutsche Bank executive was appointed weeks later.
•Cherry described a way to help promote PUC staff to an employee in the Office of Ratepayer Advocate who wanted to advance. “Typically, support letters from the utilities are the kiss of death for appointments,” Cherry wrote. “We never do it for Commissioner appointments. Instead, we go the back door route. I’d be happy to do that with Nancy….your choice.”
•Cherry himself advocated for promotion of pro-utility staffers, telling one he would recommend him to to PUC Commissioner Michael Picker. Cherry states, “Great. I have breakfast with him Monday. I will put in a good word.”
•After being appointed to the PUC, Commissioner Mark Ferron’s emails show his close ties to Wall Street investors. In one email, Ferron requested valuable investment research data from a Morgan Stanley analyst in exchange for a meeting about PUC regulation of utilities. “While I enjoy meeting with equity analysts and investors, I have only one stipulation before agreeing to a meeting: that I am put on the distribution list for research pertaining to California utilities,” he wrote.
•Morgan Stanley’s analysis of the meeting with Ferron suggests information was inappropriately shared about what the fine might be for PG&E’s fatal San Bruno pipeline explosion. The analysis states, “A settlement relating to the San Bruno explosion is progressing. We believe that our $500 mn fine estimate remains appropriate.”
•PG&E’s lobbyist Brian Cherry used his relationship with PUC executive director Paul Clanon to negotiate down the fine that PG&E would incur for the fatal San Bruno explosion. “Compare their size to ours…” Cherry writes Clanon about a billion dollar fine imposed on multi-national companies like Pfizer.
•Clanon fished for how much of a fine PG&E was willing to pay by asking what number PG&E reported to the SEC for a potential penalty. Cherry responded that PG&E reserved $200 million.
The documents reveal a sad historical record of how a regulated entity hijacked the regulators. Unfortunately, it's an era that appears to be far from over. The PUC papers are our way of shining a light on the corrupting influences and disinfecting the PUC.
