PG&E Could Face Steep Fines for Banned Exchanges With Regulators

The San Bruno neighborhood impacted by a PG&E pipeline explosion, five years later. (Rebecca Bowe/KQED)

The California Public Utilities Commission today announced it will consider levying fines against Pacific Gas & Electric Co. for violating rules that are meant to prevent backroom deals.

PG&E could face penalties for violations concerning ex parte communications -- private exchanges between utility representatives and regulators that had the potential to impact major decisions before the commission in recent years.

One item of business flagged by the commission was an investigation launched in the aftermath of the deadly September 2010 San Bruno pipeline explosion. Another case concerned a commission decision to award millions to PG&E as a reward for satisfying energy-efficiency goals, even though consumer advocates argued that the company hadn’t successfully hit the targets needed to reap financial rewards under the incentive program.

PG&E could either be sanctioned for engaging in ex parte exchanges that are banned under commission rules, or for failing to record legitimate private talks in a timely manner, according to a CPUC statement. In one case concerning gas pipeline safety, PG&E filed a “late notice of ex parte communications” in 2014 for a conversation that actually took place in 2011.

As KQED has previously reported, PG&E started to face major public scrutiny for its cozy ties to utility regulators after a trove of emails were released in court proceedings initiated by the city of San Bruno in the wake of the deadly 2010 pipeline explosion.

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The commission could impose fines ranging from $500 to $50,000 per offense -- and under the regulatory framework, each day that the company is deemed to be in violation is considered to be an offense, so the penalties could amount to quite a lot. Accordingly, the commission has ordered PG&E to “show cause why it should not be sanctioned” for violating ex parte rules.

Mindy Spatt, a spokeswoman with consumer advocacy organization The Utility Reform Network (TURN), said the CPUC’s announcement that it was considering penalties against PG&E was long overdue.

“The CPUC talked about it back in April,” Spatt said. “We’ve said again and again that the rules are much too lax.”

She added that she and other advocates continue to push for legislative reform that would further restrict communications between regulators and utility representatives.

“I think it’s most likely PG&E will resist being fined," Spatt said, "and that we and our allies will be pushing for the maximum penalty.”

PG&E spokesman Keith Stephens said the company had already taken steps to address inappropriate communications. In an emailed statement, he wrote:

“We have produced tens of thousands of emails to the CPUC, TURN, ORA and the City of San Bruno voluntarily and in response to regulatory and legal requirements, and we continue to cooperate with all investigations. Out of the tens of thousands of emails that have been produced, the vast majority of the communications that have been produced have been perfectly appropriate and unremarkable. Communications regarding operational issues are appropriate.

However, in some cases the communications were not appropriate and we want our customers and their families to know that we took action swiftly and decisively. When we first discovered violations of the CPUC ex parte rules, we self-reported them, we held senior-level officers accountable. We have taken numerous actions as part of our effort to achieve the highest level of ethics and compliance possible.

These actions include:
· Three officers are no longer employed by the company.
· A new senior vice president of regulatory affairs was named with the charge to overhaul PG&E's regulatory affairs department.
· The company created a new position of Chief Ethics and Compliance Officer, whose mandate is to help oversee compliance with all requirements governing PG&E's interactions with the CPUC. The position reports to the CEO and to the Audit Committee of the PG&E Board of Directors. The individual selected for the role started on the job on May 18.
· PG&E engaged former Secretary of the U.S. Department of Interior Ken Salazar, a partner in the WilmerHale law firm, as special counsel on regulatory compliance matters to assist in developing a best-in-class regulatory compliance model. Salazar has served as Colorado Attorney General, United States Senator, and Secretary of Interior.”

Here is the CPUC filing announcing that the commission will investigate whether PG&E should be sanctioned for violating ex parte communication rules:

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