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Inside The Deal That Shaped San Diego County’s Power Picture

June 22, 2016 1:19 p.m.

Inside The Deal That Shaped San Diego County’s Power Picture

GUEST:

Chris Young, reporter, inewsource

Related Story: Inside The Deal That Shaped San Diego County’s Power Picture

Transcript:

This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

This is KPBS Midday Edition. I'm Maureen Cavanaugh. There's so much dissatisfaction with the agency that regulates California's private utilities, the tran -- PUC . There's been a series of failures related to the San Onofre nuclear plant, as well as questions about who will pay for fixes that Aliso Canyon in Los Angeles. Chris Young from inewsource reports that as far back as the crisis. Michael Peevey was the force behind a backroom deal that gave our region its two largest sources of electricity.
Back to the power crisis in 2001, when no one could depend on the light staying on.
There trying to reduce the number of television use because the supply of electricity in California is vulnerable.
It is definitely lights out in Hollywood today, a rolling lockout sweeps through California.
Coming out of that crisis, policymakers faced a question --
How do we keep the lights on?
Scott Anders directs the energy policy initiative center.
We are focused on stemming the hemorrhaging, reliability was very much top of mind.
Much of the crisis was caused by severe market manipulation, many felt the state needed new power plants. In 2003, San Diego Gas and Electric let out its first request and years for new electrical generation. 300 MW, enough for 300,000 homes. It ended up buying four times that much. Most of it wrapped up into new gas-fired power plants. Matt Freedman is an attorney for The Utility Reform Network, an advocacy group.
We were stunned, they came in for limited need and they left with arm. Power plants.
In the deal SDG end he got too large power plants. One in Escondido and one in no time a set, the Otay Mesa was far from the grid it required $200 million in new power lines, the plant wasn't needed. The story of how both plants were proved can now be told, things to witnesses who have come forward, records pieced together by Friedman and documents obtained by inewsource. The show the chief of the public utilities, Michael Peevey intervened and gave SDG&E an ultimatum. Sign for Otay Mesa or Escondido won't be approved.
We have such a great trail of documentation to demonstrate Mr Peevey's direct involvement in making a deal happen, over the objections of the utility itself and forcing a series of power commitments, that had questionable value.
SDG&E hired James Boothe, to observe Novick -- negotiations, he recalls a Stafford demanding a deal for overtime a set -- Otay Mesa.
That is the role of the commission, to be reined in.
Some say the deal shows Peevey was picking winners and losers as soon as he became the president. It set the stage for the tainted agreements that have engulfed the agency and scandals and sparked multiple criminal investigations. Loretta Lynch is a former commissioner who voted against the deal.
This was Peevey, being very clear at sending a message to everyone who wanted to do business in the California power market, come to me and I will decide, whether or not you get a present under the tree.
Lynch believes decisions like this amounted to a buying binge that explains why San Diegans have some of the highest electricity rates in the country.
We will be paying for that inch, for the next 20 to 30 years.
Another commissioner, Geoffrey Brown had concerns about Peevey's involvement in negotiations. In the end he approved the deal, he says the decision has to be seen in light of the energy crisis.
The city was getting desperate. My bias was towards action.
SDG&E declined a request for an interview in an email a spokeswoman says both the Escondido and the Otay Mesa plant help utility meet the power needs of San Diego. Escondido has been generating power since 2006, Otay Mesa -- Otay Mesa has been running since 2009.
Down at the bottom in the state of California, up against the hills that overlook the one across the bottom -- border the Otay Mesa powerplant is the biggest source for the state's second-largest city. It's also San Diego County's largest greenhouse gas emitter. It's a symbol of a major buildup of natural gas power plants that some now question and of decisions made by regulatory agency now under intense scrutiny.
Joining me is Chris Young from KPBS media partner, inewsource. The deal for the power plants in Escondido and Otay Mesa was approved 12 years ago. Why is this an important story to tell now? This deal helps shape the power picture of the San Diego region. It gives the two largest sources of electricity. Is one that is bigger, Carlsbad, people here get more of their electricity from the Otay Mesa and Escondido plants we don't know if we have the right plants. Are they the best we could've gotten, many we spoke with said they are not the least expensive options. They believe we have over played 500 of millions, we're overpaying to this day. That's a big reason why we want to take a look at the steel today.
In the wake of the natural gas storage disaster Aliso Canyon, is there concern that our region realize now, too heavily on natural gas.
Yes since Aliso Canyon there's been discussion about whether we rely too heavy on natural gas. The plants in Escondido and Otay Mesa are cleaner, they are much cleaner than coal fire power plants, the question is how different would our power picture look like today, if the CPUC didn't approve this purchase more than a decade ago. Might we be paying less, if something different was done?
At the center of your story is Michael Peevey, a former utility regulator, who's been in the headlines, a lot lately. How does his earlier deal tie into the scrutiny he and the commission are currently facing?
State and federal authorities are investigating the CPU sees -- CPUC's cozy relationships. Many San Diegans are most familiar with the San Onofre power plant closure settlement, instead of going through a formal public process, through the Public Utilities Commission Peevey was found and sketch the deal out with Southern California Anderson during a meeting in Warsaw Poland. Some people might assume the issues that are being investigated currently our new issues, these are just arose more recently. The deal we examined shows that Peevey was overstepping his bounds. This deal started in 2003 and stretched until tenure, some advocates and former colleagues told us brokering this deal in the face of widespread criticism, it made possible some things that have happened since. They say it sent a clear message to players in the power market if you're going to do business at the CPUC, you're going to have to cut a deal with the president.
Has there been an effort to examine the legality of these actions and maybe pursue charges against the CPUC's former leader?
Advocates and other companies that were involved at the time, appear to have done everything they could have through the formal CPUC process and trying to fight this. They didn't manage to overturn the deal but we aren't aware.
State lawmakers are unusually fired up about changing this powerful commission what are they trying to do?
They really are kind of fed up with all the scandals that have taken place at the CPUC and reform is a boring word. It's not something that gets people fired up. Some legislators have made it a priority to watch the CPUC, Governor. Brown caught flak for vetoing reform bills that would've addressed issues, one bill would of a just issues that did plague this very issue, the deal that we took a look at it would've restricted what they call ex parte meetings or private munication's between regulators and utility executives. It also made it easier to remove the commissioner if it was thought that he was biased in some way. In the case of Peevey, in this instance, repair advocates point of formal issue so that he could not vote. It was Peevey who was able to deny that motion. Conflict of interest, comes up when you're talking about that. Aside from that, other lawmakers are interested in tinkering with reforms, they want to blow the agency up.
What would replace it?
The agencies responsibilities would be reassigned to other state agencies. That would be a huge undertaking, it's such a huge agency the CP's -- CPUC is, it raises questions about what would happen to different sections of the CPUC, an office of right pair advocates. In this case if CPUC was blown up and distributed, how would that be parceled out?
Lots of questions. I've been speaking with Chris Young come --, from inewsource.