When PUC commissioner Michael Picker, a former senior aide to Governor Jerry Brown, was appointed PUC president by Brown, he claimed that he would make the agency “fair, open, accessible and effective” in the wake of scandal-tainted Michael Peevey’s retirement.
According to a stunning new 39-page filing by the Imperial Irrigation District written by San Diego attorney Mike Aguirre, Picker has made the commission open, accessible and effective for Wall Street, but far from fair or transparent to the public. It's a must read for anyone who really wants to understand how Wall Street invaded San Francisco's 505 Van Ness Avenue and captured public utilities commissioners.
A cache of Public Records Act emails and other documents obtained by Aguirre also reveals many new details of PUC-gate. They show Picker spends a lot more time rubbing shoulders with Bank of America Merrill Lynch, UBS, or Credit Suisse at spots like San Francisco’s Vietnamese restaurant, the Slanted Door, than he does meeting with the public. Peevey began this tradition before him, and introduced Picker to the same bankers.
These relationships come with a price tag. According to Aguirre's calculation, the PUC has allowed the three investor-owned utilities, Southern California Edison, Sempra (parent of SoCalGas), and Pacific Gas & Electric, to charge their customers more than $117 billion since 2012. That kind of cash flow generated over $7.5 billion in dividends in the same period. That comes at the expense of a pipeline explosion in San Bruno that cost eight lives, and radioactive leaks from steam pipes at San Onofre.
Back in 2012, investment bankers from B of A met with Peevey to find out about how the disastrous San Bruno pipeline disaster that killed people and levelled a neighborhood would impact the cost of capital in California, according to the emails. Would it be more expensive now for Pacific Gas & Electric to borrow? How might that affect stocks?
They were anxious to know if the commission was opening a formal, public investigation into the matter. Perhaps that’s why a “public” investigation was put off for months, while in the end a large part of PG&E’s “fine” came in the form of what amounted to a tax deduction that allowed the utility to come out ahead by some calculations.
Aguirre's filing argues that Picker continued a tradition that Peevey started in 2004 when he threw out "reasonableness reviews" on utility capital expenditures for steam generator replacements at Diablo Canyon and San Onofre nuclear generating stations. When San Onofre failed, costing $4.7 billion, Peevey negotiated--and Picker "ratified"--an ex parte deal with SCE in a Warsaw hotel room in 2013 to make ratepayers and not shareholders swallow most of the cost. In the face of a criminal investigation, "under Picker the CPUC authorized over $5,000,000 to block both the investigation and requests for public records," according to the filing.
And is this why, according to Aguirre's filing, Picker rejected the idea of developing cheaper and cleaner geothermal energy in favor of dirtier natural gas to replace lost power from San Onofre with no public input? Anything for utility investors over utility customers.
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.” On the list were ten investment companies, including Goldman Sachs and Prudential.
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."
One can only imagine how malleable and obsequious Picker must be when it comes to promising Wall Street a light regulatory hand. Could this be partly why the PUC is so far refusing to open a public investigation into the biggest methane blowout in US history at SoCalGas’s Aliso Canyon? Is this why Picker is making the case to the legislature that the LA Basin can't do without Aliso? After all, Sempra, parent company of SoCalGas, is investing millions in new natural gas compressors at Aliso to stuff in more gas to feed SoCalEdison's new natural gas-fired electric plants. Investors want their returns.
What exactly is Peevey doing enmeshed in meetings with key Wall Street institutional investors and the analysts that work for them following the scandals at San Bruno and San Onfore? Why do these analysts inundate PUC commissioners’ email inboxes with their utility analyses free of charge? It looks like today regulation is about reassuring Wall Street they won’t lose money on utility screw-ups and that the ratepayers are going to pay for utility mistakes.
Regulation that is made on the basis of buy, sell, or hold, is not regulation. It started under Peevey and these documents show it's continuing under Picker.
