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Calls To Overturn San Onofre Settlement Intensify Amid PUC Revelations

Calls To Overturn San Onofre Settlement Intensify Amid PUC Revelations

Consumer advocates say emails and seized notes expose a narrative they have long suspected: The California Public Utilities Commission colludes with the power companies it is supposed to regulate. Credit: Nicholas McVicker

Consumer advocates say emails and seized notes expose a narrative they have long suspected: The California Public Utilities Commission colludes with the power companies it is supposed to regulate.

Audio

Consumer advocates say emails and seized notes expose a narrative they have long suspected: The California Public Utilities Commission colludes with the power companies it is supposed to regulate.

Sorrentino's Pizza owner Patrick Quinn is tired of watching the energy bill at his San Diego restaurant go up each month.

"In 2011, 2012, May or June, the bill ran $1,390 or $1,400,” Quinn said. “This past year, it was running $2,230, $2,250."

Quinn said he’s tried to cut his energy consumption by closing his Clairemont Mesa Boulevard restaurant from 3 p.m. to 4 p.m. each day. He turned off his ovens. He even shut down the pilot lights. But he said his energy bill actually increased — by a dollar.

"What are you going to do?” he said. “We're slaves to the utility industry."

Photo by Nicholas McVicker

Patrick Quinn, owner of Sorrentino's Pizza in San Diego, talks about his energy bill, March 23, 2015.

The San Diego businessman’s rhetoric is stronger than most, but other consumers and advocates in San Diego also are frustrated with utility companies and their regulators. In recent weeks, investigations have turned up evidence of private deal-making between Southern California Edison and some members of the California Public Utilities Commission. The utility owns most of the San Onofre Nuclear Generating Station, which had to shut down one year after faulty steam generators at the plant caused a small radioactive leak.

The utility and the regulator struck a deal on a settlement. The result: no investigation into the failure of the steam generators at the San Onofre nuclear power plant and ratepayers will pay for most of the $4.7 billion settlement. But that settlement is being questioned now that details have emerged about its origins.

Restaurant owner Quinn calls that settlement illegitimate because the Public Utilities Commission allowed it without a full investigation of who was responsible for the plant’s failure and who should be held accountable.

"Where do we find accountability?” Quinn said. “The steam generators — why did they fail? These are simple questions that should be asked.”

The questions have been asked, but answers have been slow to come.

‘I’m not here to answer your questions’

Last May, former PUC President Michael Peevey was still a powerful bureaucrat unaccustomed to being challenged at regulatory hearings.

But attorney Mike Aguirre wanted to know just how did the PUC reach a $4.7 billion dollar settlement with little public input.

Photo by Katie Schoolov

Former San Diego City Attorney Mike Aguirre talks about his fight to overturn the San Onofre Nuclear Generating Station settlement, March 13, 2015.

Aguirre, San Diego’s former city attorney, asked Peevey at a meeting how many times he had talked privately with executives from San Onofre’s majority owner, Southern California Edison. Peevey, a former Edison executive, wasn’t having it.

“I’m not here to answer your goddamn questions,” Peevey yelled from the Public Utilities Commission dais. “Now shut up! Shut up!”

Recently, Aguirre reflected on Peevey’s outburst.

“He really blew up and, of course, now we know why,” said Aguirre, who in November sued to have the settlement set aside.

Peevey stepped down from the PUC in December after the release of emails showing he maintained close contact with Pacific Gas and Electric executives following the 2010 gas pipeline explosion in San Bruno that killed eight people. In the emails, Peevey offered public relations counsel and discussed rate setting, among other topics.

The Poland conversation

One year before Peevey’s blowup, in 2013, he met with Southern California Edison executive Stephen Pickett at the opulent Hotel Bristol in Warsaw, Poland. There, they discussed a framework for a settlement agreement on San Onofre.

Photo credit: Associated Press / Jeff Chiu

California Public Utilities Commission President Michael Peevey is pictured listening to public comments during a meeting of the five-member commission in San Francisco, Dec. 18, 2014.

That Poland meeting only came to light this year, after state investigators found notes about San Onofre’s defective replacement steam generators on Hotel Bristol stationery during a search of Peevey’s home in January. PUC officials and utility executives are the target of federal and state probes for alleged inappropriate contact and possible influence peddling.

Edison never reported the secret meeting to the PUC as required until after U-T San Diego published a story about the seized notes.

The company explained the 23-month delay by characterizing the Poland conversation as an “update” on San Onofre that was “permissible and not reportable.” But the company goes on to say it now appears Pickett may have crossed into substantive communication.

Aguirre’s take on Edison’s belated notice: “Once they were caught, they released it.”

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Late-Filed Notice Of Communication

Late-Filed Notice Of Communication

Southern California Edison Company's Late-Filed Notice Of Ex Parte Communication

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Emails also show Peevey making plans to meet Edison officials for dinner and drinks in the months following the Poland meeting.

All told, PUC officials have had scores of private meetings and other contact with executives at Edison and minority owner San Diego Gas & Electric about San Onofre since the Poland meeting.

Consumer advocates did attend some of those meetings. Two months after the Poland talk, Edison invited Northern California consumer group The Utility Reform Network, known as TURN, to the secret settlement discussions. TURN spokeswoman Mindy Spatt said the closed-door chats were consistent with how other agreements with the PUC had been reached over the years.

Spatt said TURN endorsed a deal that forces customers to bear the brunt of San Onofre costs before a thorough inquiry because there was little choice.

"It was unlikely that the PUC would go back in time and punish Edison for its bad behavior,” Spatt said. There was not a legal precedent to do that."

The effect of the Poland conversation

The launch of the Poland conversation and eventual $4.7 billion settlement effectively put an end to an investigation.

“It wasn't a settlement,” Aguirre said. “It was a plan to end an investigation.”

The PUC had promised a probe into who was responsible for San Onofre’s defective equipment and whether customers should still foot the bill for a plant no longer generating electricity.

The PUC's consultant, nuclear safety expert Robert Budnitz, urged an inquiry because he thought it important to learn what might have been done, by whom, and at what stage to avoid the equipment failure.

Records show Edison knew there were concerns about design flaws with the new steam generators before deploying them. A radiation leak in one of those generators in 2012 ultimately forced the plant’s shutdown. Nuclear safety experts say Edison also failed to go through the proper licensing process with federal regulators to install the new equipment, according to federal documents. And Edison never got permission from the PUC to put the new $700 million steam generators into customer rates permanently.

Taken together, Aguirre said the facts scream for accountability.

“This is one of the biggest white-collar crimes ever,” he said.

But PUC spokeswoman Terrie Prosper maintains that commissioners were not involved in the proposed settlement despite the Poland meeting.

Edison began revising its rules last year for private contacts with the PUC. The company now requires approval from its lawyers before an employee can communicate with regulators about a pending matter.

The company declined an interview request from KPBS. But in a court filing, Edison echoed the PUC's contention that the company and state regulators had to maintain contact for updates and to ensure reliable power supplies after a large nuclear plant went out of service.

Calls to reopen settlement deepen

State Sen. Jerry Hill, D-San Mateo, said the private contacts between Edison and the PUC following San Onofre's radiation leak went beyond regulators engaging with industry to be responsible leaders.

Photo credit: Associated Press

California Public Utilities Commissioner Michael Picker listens to speakers during a meeting of the five-member commission in San Francisco, Dec. 18, 2014.

"When commissioners are making billion-dollar deals with utilities behind closed doors, it's hard for them to say the public is served,” said Hill, who has called for more transparency at the PUC. “The ratepayers are victims here. They shouldn't be the ones who have to pay for the mistakes for the utility. I think it throws into question the (San Onofre) agreement completely."

Meanwhile, Assemblyman Anthony Rendon, D-Lakewood, wants new PUC President Michael Picker to use the commission’s authority to force Edison to turn over all emails related to the San Onofre settlement and to investigate how the deal was reached.

Rendon is chairman of the Utilities and Commerce Committee, which has held oversight hearings into alleged wrongdoing at the PUC.

Picker has pledged to reform the regulatory agency, but there is no word yet on whether the PUC will comply with Rendon's request.

CORRECTION: A previous version of this story identified Robert Budnitz as a consultant for Edison, rather than the PUC.

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