By Jason Fordney
A former California utilities regulator and political insider has been fined after state investigators determined that she failed to register as a lobbyist for ride-sharing company Lyft and San Gabriel Valley Water Co., an investor-owned public water utility.
In a 5-0 decision Feb. 15, the California Fair Political Practices Commission fined former California Public Utilities Commissioner Susan P. Kennedy $32,000 for failing to register as a lobbyist and file quarterly reports from late 2012 to early 2014, when she worked to influence the commission on behalf of the two companies.
Kennedy was chief of staff for former Gov. Arnold Schwarzenegger, deputy chief of staff and cabinet secretary for former Gov. Gray Davis, and previously communications director for U.S. Sen. Dianne Feinstein. She served on the CPUC from 2003 to 2006 and now helms energy storage company Advanced Microgrid Solutions, which was not named in the matter.
At a Feb. 15 meeting in Sacramento, FPPC Chair Joann Remke congratulated her enforcement staff for the investigation, saying lobbying cases are “difficult to prove” and are “few and far between.”
“And I know this was a long investigation and a good outcome,” Remke said.
The state’s Political Reform Act of 1974, the post-Watergate ballot measure that created the FPPC, requires lobbyists and lobbying firms to register with the Office of the Secretary of State and file quarterly reports on their clients, their clients’ interests and how much they were paid.
In the case of San Francisco-based Lyft, Kennedy was able to influence the CPUC beginning in 2012 to open a rulemaking over ride-sharing companies, according to the order. The commission was scrutinizing ride-sharing companies and had previously sent Lyft a cease-and-desist letter in August 2012 because it had not received operating authority.
The decision says Kennedy contacted then-CPUC President Michael Peevey, Executive Director Paul Clanon and other CPUC staff to convince them to work with ride-sharing companies rather than shut them down. The commission opened a rulemaking to address public safety issues and in September 2013 adopted regulations concerning liability insurance, driver licensing and background checks, driver training programs, vehicle inspections and data reporting.
“The efforts of Kennedy and Lyft were successful as the resulting rules and regulations adopted many of the suggestions and positions put forward by Kennedy and Lyft during the rulemaking process,” the decision says.
Kennedy also lobbied Peevey and current CPUC President Michael Picker in the first half of 2014 regarding San Gabriel, the FPPC said. The utility had a general rate case before the commission and was seeking to increase water rates, which were being fought by the city of Fontana and its school district.
“During these meetings, and through emails, Kennedy sought to influence the CPUC’s decision on cost recovery for the Sand Hill treatment plant in the general rate case,” the decision says. The commission sided with Fontana and denied the rate increase and cost recovery for the plant in May 2014 (Decision#15-11-028).
“The CPUC’s decision invalidated much of a settlement San Gabriel had with the CPUC’s Office of Ratepayer Advocate. Subsequently, the CPUC issued a decision on Nov. 24, 2015, that included a modified rate increase agreed upon by all parties,” the FPPC decision says. San Gabriel filed lobbying reports that listed other lobbyists but not Kennedy.
Under terms of the settlement with the FPPC, Kennedy agreed to register Susan P. Kennedy Inc. as a lobbying firm. She also filed reports detailing that she was paid $76,500 by Lyft and $125,000 by San Gabriel.
“While Kennedy maintains she did not intend to qualify as a lobbyist, given her experience and sophistication, she should have been aware at the time that her activity qualified as lobbying,” the decision says.
“Ms. Kennedy moved immediately once the discrepancy was identified to provide the necessary information requested by the FPPC. Integrity and character are hallmark principles in how Ms. Kennedy conducts herself in business, which is why she acted swiftly to resolve the matter,” Kennedy’s attorney James Harrison, of Remcho Johansen & Purcell, said in an email to RTO Insider.
FPPC spokesman Jay Wierenga told RTO Insider that the decision wraps up the commission’s investigation of Kennedy. “There is nothing more on our side regarding any investigation of Kennedy,” he said. “This case is complete.”
The CPUC did not immediately respond to a request for comment on the decision.
The FPPC information request to Kennedy that led to the recent fine also asked for communications between her and other CPUC members regarding the San Bruno gas pipeline explosion and legal, legislative or regulatory actions that might have resulted from them. But the Feb. 15 FPPC decision does not mention anything about the San Bruno communications.
The request had also asked for communications between Lyft and Manal Yamout, a partner with Kennedy in Advanced Microgrid Solutions and Caliber Strategies and a former top adviser to Schwarzenegger and Gov. Jerry Brown. The decision and fine handed down by the FPPC did not mention Yamout.
Attorney General Referral
At the FPPC’s Feb. 15 meeting, Chief of Enforcement Galena West noted that the state’s attorney general had referred the Kennedy investigation to her group. The attorney general’s office did not respond to a request for more information on what spurred the referral.
Pacific Gas and Electric in September disclosed new emails of discussions between Kennedy and former PG&E executive Brian Cherry that described “back-channel” communications between the utility and CPUC members regarding the 2010 San Bruno incident that killed eight people. (See Probe Reveals More CPUC-PG&E Contacts on Pipeline Blast.)
The disclosure of the old Kennedy emails and others came as the CPUC was poised to approve an $86 million settlement with PG&E over previously disclosed improper communications with it regarding the accident. The commission at its November meeting delayed a vote on the settlement until June. (See Besieged CPUC Denies SDG&E Wildfire Recovery.)
In delaying the settlement, the CPUC said additional time was needed after parties to the settlement asked for a second phase of the proceeding to explore whether PG&E had engaged in any additional ex parte communications.
“Once a second phase is opened, time will be needed for the parties to address, and for the commission to decide, if PG&E committed any additional ex parte violations,” the CPUC said in the order delaying the vote.
The ex parte case is separate from the $1.6 billion fine, refund orders and gas system improvements the CPUC levied on PG&E for the fatal explosion and fire, record-keeping and safety violations.