Utility Regulator in More Legal Trouble Over Emails?

Legal trouble appears to be mounting for Michael Peevey, the outgoing president of the California Public Utilities Commission. An NBC Bay Area investigation has uncovered apparent violations of state law at the commission, even as Peevey is under fire for his overly cozy relationship with Pacific Gas & Electric Company, and under investigation by the U.S. Attorney and the state attorney general. 

The NBC Bay Area Investigative Unit has confirmed Peevey failed to file required disclosure forms for hundreds of thousands of dollars he successfully requested from PG&E, the company he is supposed to regulate. This new revelation begins with a May 2010 email from Brian Cherry, then vice president of regulatory affairs at PG&E. 

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The email details a Memorial Day weekend dinner Cherry had with Peevey where promises were apparently made in exchange for favors. According to the email, the two discussed Proposition 23, a measure that would have suspended the law governing California’s fight against global warming. Peevey wanted it to go down and the email shows he wanted help from PG&E. 

Cherry writes that Peevey “stated very clearly he expects PG&E to step up big” and contribute to a campaign to defeat the proposition. “We need to spend at least $1 million,” Cherry writes, adding, “I asked for clarification and [Peevey] said ‘at least’ doesn’t mean $1 million, it means a lot more.”

“That’s a solicitation, as far as I am concerned,” said Jim Ruane, mayor of San Bruno. “It shows there are backroom dealings going on.” 

Ruane has been critical of the CPUC and PG&E since the utility company’s pipeline exploded in San Bruno in 2010, leaving eight people dead. The CPUC initially refused to release the email. It took the city of San Bruno several months and $200,000 in legal expenses for a judge to force the CPUC to turn over the email and thousands more.

Britt Strottman, the attorney representing the city, said Cherry’s email in particular sends a message that the regulatory environment in California is broken. 

“I think that escalates from the word 'cozy' to 'corrupt,'” Strottman said.

In the email, Cherry also writes that the CPUC expected PG&E to contribute $100,000 to a nonprofit engineered by Peevey to fund the Commission’s 100-year anniversary celebration. Cherry said that Peevey told him he was “on notice.” 

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The email suggests an exchange of services. Not only did the email detail what Peevey wanted, it also appears to outline what PG&E needed.

Cherry writes “[Peevey] is aware that we are looking for a good GRC [General Rate Case] decision,” referring to PG&E’s proposed 20 percent rate increase for its customers. The email went on to say that Peevey said to “expect a decision in January [2011]—around the same time of the PUC’s 100th Anniversary celebration. I told him I got the message.” 

“To me that shows, 'You do me a favor, I’ll do you a favor,'” Strottman said. “'Let’s scratch each other’s backs.'” 

Loretta Lynch, the former CPUC president, said the email crosses the line. 

“You cannot say, 'Please pay for my dinner, please pay for my party and please pay for the initiative I like' in exchange for favorable treatment from my state appointment,” Lynch said.

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Campaign disclosure forms obtained by NBC Bay Area show PG&E contributed at least $650,000 to the campaign to defeat Proposition 23—the campaign Peevey suggested. According to the San Francisco Chronicle, PG&E spent at least $20,000 supporting the commission’s January 2011 anniversary celebration at the Julia Morgan Ballroom in San Francisco. PG&E declined requests by the NBC Bay Area Investigative Unit to confirm the amount the utility gave to the CPUC’s party.

After the anniversary celebration, Peevey apparently went to bat for PG&E’s move for a rate increase. In a May 2011 email, Cherry asked CPUC commissioners to vote in favor of a proposal Peevey had written supporting a rate increase. “We encourage you to approve the…decision proposed by president Peevey,” Cherry wrote. 

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The NBC Bay Area Investigative Unit has confirmed that Peevey failed to file a state-required disclosure document called a “Form 803” detailing “behested payments” or successful requests for money from PG&E. California Form 803 is designed to let the public know when a commissioner requests money for legislative, governmental or charitable purposes. The state’s Fair Political Practices Commission (FPPC) has confirmed Peevey did not disclose the $20,000 PG&E paid for the CPUC 100-year anniversary party or the $650,000 PG&E donated to Peevey’s state campaign of choice — in this case, the campaign to defeat Proposition 23. 

“Not disclosing that, not making that information available to the public, I think that’s a huge problem,” said Sarah Swanbeck, policy and legislative affairs officer for the government watchdog group California Common Cause. 

The FPPC has joined the U.S. Attorney and California attorney general in investigating Peevey and the email. A failure to file the required Form 803 with the state can be punishable as a misdemeanor, including a fine and removal from office. 

Peevey has declined multiple requests for an interview, but last month announced that he will not seek another term. His last day as CPUC president is December 31. 

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“I don’t believe he has said anything publically about this at all,” Ruane said. “He just seems to continue feeling that business as usual is going to be accepted. And we won’t stand for it.” 

Lynch said the CPUC has stopped regulating and instead is a “lapdog of the regulated utilities. The system doesn’t work that way. It’s clearly broken and it’s time to fix it.” 

PG&E fired Cherry and two other PG&E executives for what the utility called inappropriate email exchanges with the CPUC. Requests for interviews with PG&E and Cherry have been declined. 

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If you have a tip for the Investigative Unit email theunit@nbcbayarea.com or call 888-996-TIPS.