Wednesday, December 13, 2017

Probe Reveals More CPUC-PG&E Contacts on Pipeline Blast

By Jason Fordney

California ethics officials have obtained new evidence of apparent back-channel communications between Pacific Gas and Electric and the state Public Utilities Commission in the wake of the fatal San Bruno gas pipeline explosion.

The disclosure comes as the CPUC is poised to consider a proposed $86.5 million settlement agreement over previously disclosed improper communications between commissioners and PG&E, the pipeline operator blamed for the 2010 accident that killed eight people.

PG&E CPUC california

The CPUC is poised to approve an $86 million settlement between PG&E, its enforcement staff and other parties

REV BGE natural gas pipelines Havex

Kennedy | Linkedin

Jay Wierenga, spokesman for the California Fair Political Practices Commission (FPPC), confirmed to RTO Insider that the agency is seeking communications since 2012 between the CPUC and Susan P. Kennedy, a former commissioner and aide to former Gov. Arnold Schwarzenegger. He provided no further details on the probe, which was first reported by The San Diego Union-Tribune.

But in late September, KNTV, the San Francisco Bay Area’s NBC affiliate, quoted a 2013 email in which one commissioner urged PG&E to take a tough stand during secret settlement talks over the San Bruno explosion, which killed eight people. In April 2015, the CPUC ordered the company to pay $1.6 billion in fines and penalties for safety violations.

CPUC spokesperson Terrie Prosper confirmed the agency is responding to an Aug. 21 data request from the FPCC. PG&E said it had no comment on the investigation.

New Violations?

A spokesperson for The Utility Reform Network (TURN) told RTO Insider last week that the newly disclosed emails should be considered separately from the settlement proposed by a CPUC administrative law judge on Sept. 1, which is awaiting action from the commission. TURN is a party to the settlement, negotiated over the past two years between PG&E, CPUC enforcement staff, the cities of San Bruno and San Carlos, and the Office of Ratepayer Advocates.

“The commission needs to take a look at these new ones that appear to show more violations,” TURN spokesperson Mindy Spatt said. “PG&E may well think ‘you’ve seen one email, you’ve seen them all,’ but each of these emails involve separate violations.”

ALJ Robert Mason approved most of the settlement, which includes $63.5 million in foregone revenue requirements for 2018 and 2019; a $10 million penalty to be amortized in the company’s next general rate case cycle; and $6 million each to San Bruno and San Carlos. But the judge said the commission rejects a $1 million fine to the state general fund as too low.

“Given the flagrant and pervasive nature of PG&E’s actions that were not only illegal, but tainted the commission’s regulatory process and undermined public confidence in the integrity of the commissioners and their staff, the commission has determined that a larger fine should be imposed,” Mason wrote.

“This proceeding shall remain open pending the resolution of whether PG&E shall agree to pay the increased fine of $12 million to the state of California General Fund,” Mason wrote.

Kennedy, a longtime member of the California political elite, is a partner in San Francisco-based Caliber Strategies, a public affairs consulting team, and founder of Advanced Microgrid Solutions (AMS), an energy storage company whose investors include Schwarzenegger.

Aside from a broad request for all communications from 2012 to present, the FPPC data request specifically seeks correspondence between the PUC and Kennedy and others at Caliber Strategies that mention PG&E, the pipeline explosion “or any related legal, legislative or regulatory actions that resulted from said explosion.”

The FPCC also requested communications between Kennedy and former Commissioner Catherine Sandoval; former CPUC Executive Director Paul Clanon; current CPUC Communications Advisor Lester Wong; current CPUC Director of Planning Marzia Zafar; former CPUC President Michael Peevey; Carol A. Brown, Peevey’s former chief of staff; and Brigadier General Emory “Jack” Hagan, former director of the CPUC’s Consumer Protection and Safety Division.

The document seeks “any and all verification applications, including all supporting documents, submitted to or through The Supplier Clearinghouse,” a company that certifies minority- and women-owned businesses under a CPUC diversity program.

The FPPC was created by the state’s Political Reform Act of 1974, and its enforcement division has power to take civil actions, not criminal prosecutions, which are under authority of local district attorneys or state attorneys general.

A veteran of the California political scene, Kennedy has worked as chief of staff for Schwarzenegger, cabinet secretary to former Gov. Gray Davis, communications director for U.S. Sen. Dianne Feinstein and executive director of the California Democratic Party.

Kennedy’s spokesman James C. Harrison told RTO Insider in a statement last week: “Ms. Kennedy is aware of the information request and is providing the Fair Political Practices Commission with all of the necessary information regarding the inquiry.”

Kennedy Discusses Peevey, Sandoval with PG&E

The newly disclosed emails reveal Kennedy, then a PG&E consultant, discussing the San Bruno case with PG&E Vice President of Regulatory Relations Brian Cherry in 2013. PG&E said in January 2015 that it had provided 65,000 emails to the CPUC, fired executives including Cherry and implemented new compliance programs to address the improper ex parte contacts.

PG&E CPUC california

The site of the 2010 PG&E gas pipeline explosion in San Bruno, California

KNTV reported in September that PG&E had made a regulatory filing stating that it discovered additional emails in response to a search requested by an “unspecified government agency.”

The TV station quoted from an email in which Kennedy related to Cherry how Sandoval told her PG&E should advise their critics “to take a hike.”

“First, she said she heard the settlement parties wanted [information redacted] … she would advise us to tell them to take a hike because no one is going to [redacted] without convincing evidence by the other side. I found this interesting given that [Hagan] is suggesting we need to do more work with the prosecutors,” Kennedy said in the email.

Sandoval did not immediately respond to a request for comment.

In a Jan. 9, 2013, email, Kennedy discusses meeting with Peevey and recounts his criticism of the CPUC’s “mishandling” of the San Bruno case.

“He hopes [Hagan] can bring something home — but that the crazies are so far out there it may not be possible. Blamed most of the craziness on the locals in [San Bruno] and his personal prosecutor, Jerry Hill. Sounds like a settlement was highly unlikely but not completely off the table.”

Kennedy discusses a “second date” with Hagan in Los Angeles to see a Schwarzenegger movie and that “if I can bring it up without it pushing him the wrong way, I will.”

Hill, now a state senator representing San Bruno, last December questioned why an investigation launched in 2014 by then-Attorney General Kamala Harris into Peevey’s private communications with PG&E was never resolved.

Peevey, appointed president of the CPUC in 2002 by Davis, and reappointed by Schwarzenegger in 2008, stepped down from the CPUC on Jan. 1, 2015.

FPPC Seeks Yamout Communications

PG&E CPUC california

Yamout | © RTO Insider

The FPPC data request also sought communications of Manal Yamout, a partner with Kennedy in Caliber Strategies who is also senior vice president of policy and markets for AMS. The request seeks Yamout’s communications with the San Francisco-based ride-sharing company Lyft.

Yamout is a former top adviser to Schwarzenegger and Gov. Jerry Brown. She also has served as California’s assistant secretary for international Trade, and special assistant to former First Lady Maria Shriver.

Yamout was the topic of a November 2014 report by the U.S. Department of the Interior’s inspector general regarding her romantic relationship with former DOI Senior Counselor Steven Black when she was a lobbyist for Florida-based NextEra Energy. The U.S. Attorney’s Office for the District of Columbia declined to prosecute the case. Black recused himself from matters involving NextEra and resigned from the department in May 2013.

Both Black and Yamout were members of the Renewable Energy Policy Group, created in 2009 by Schwarzenegger and Interior Secretary Ken Salazar, under whom Black served. The group was formed to improve federal-state coordination in siting renewable energy projects.

Yamout did not respond to a request for comment regarding the investigation.

Strong Growth for Advanced Microgrid Solutions

AMS has grown into a major player in California’s burgeoning energy storage market since its founding in 2013. Kennedy started the company with the late Jackalyne Pfannenstiel, a former PG&E executive who also served on the CPUC and the California Energy Commission.

AMS is not mentioned in the FPCC information request.

The company and Macquarie Capital have teamed up to deploy a 50-MW fleet of energy storage batteries in the service territory of Southern California Edison.

Last year, Macquarie announced a $200 million investment to fund AMS projects in California. The company is also funded by Southern Co.; DBL Partners; GE Ventures; AGL Energy, Schwarzenegger; and an investment firm named Energy Impact Partners.

Energy Impact Partners’ Advisory Board counts among its members Steven Chu, secretary of energy under President Barack Obama; Spencer Abraham, secretary of energy under President George W. Bush; and Rodney Slater, secretary of transportation under President Bill Clinton.

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