Audit slams PUC’s failure to disclose

Report: Oversight agency failed to guard against appearance of being influenced

— Jerry Hill, state senator, SanMateo County

The California Public Utilities Commission has neglected to guard against the appearance of being improperly influenced by outside interests and has failed to fully disclose key communications with utilities, the state auditor said in a scathing report released Thursday.

The PUC, according to the audit, didn’t ensure that the public was informed of the regulatory agency’s communications with Southern California Edison and the University of California in connection with contracts linked to the shutdown of a controversial nuclear power plant in Southern California. The auditor also criticized the PUC for taking a half-dozen international trips paid for by a nonprofit whose board members are closely tied to major

“The PUC has gotten too big to succeed. Reforms are badly needed.”

utilities, including PG&E and Southern California Edison.

“These unreported communications have cast doubt on whether a multibillion-dollar settlement protects ratepayers, and on the appropriateness of the CPUC’s selection of the University of California for a $25 million contract,” the state auditor wrote in the report.

The University of California and Southern California Edison were awarded a joint contract related to the closure of the San Onofre Nuclear Generating Station in San Diego County.

A former PUC commissioner said the state auditor’s finding come as no surprise.

“For a decade now, the PUC has been above the law,” said former Commissioner Loretta Lynch, a longtime vocal critic of the embattled commission. “The PUC is a rogue agency.”

State lawmakers seeking to impose broad reforms on the PUC embraced the report.

“The PUC has gotten too big to succeed” said state Sen. Jerry Hill, whose San Mateo County district includes the San Bruno neighborhood leveled in a fatal pipeline explosion in 2010. Federal investigators say the San Bruno blast was caused by a lethal combination of PG&E’s poor maintenance and shoddy record keeping of its natural gas delivery system, and the PUC’s lazy oversight of the utility.

“Reforms are badly needed at the PUC,” Hill added.

The state auditor recommended that lawmakers enact new legislation requiring the PUC’s five commissioners — who are appointed by the governor — to recuse themselves from proceedings when their impartiality is reasonably questioned. Additionally, the auditor called for the creation of new rules that require commissioners to publicly report private discussions with any parties to its proceedings.

“Here we have yet another well-researched, unbiased, outside report saying that the PUC is in desperate need of reform,” said Assemblyman Mike Gatto, a Southern California Democrat and one of the leaders of reform efforts.

The PUC has come under increasing criticism in the wake of the fatal San Bruno blast, as well as the disclosure of tens of thousands of internal emails that painted a picture of an agency with cozy ties to PG&E and other major utilities that it’s supposed to regulate.

Gatto had led a major reform effort that would have begun a process to strip the PUC of its authority to oversee telecommunications and transportation companies. Had the reforms succeeded, the PUC eventually would have been forced to focus primarily on gas and electricity providers. Those reforms failed to pass the Legislature in the final hours of its session Aug. 31.

The state auditor also scrutinized — and criticized — a $152 million researchand-development agreement between Lawrence Livermore National Laboratory and PG&E. The auditor found that former PUC President Michael Peevey conducted numerous inquiries and discussions regarding the contract before the PUC’s decision to award the deal.

“We found numerous deficiencies in the CPUC’s approach to contracting, including a lack of market research in 24 cases in which contracts were not competitively bid, $2.4 million in unexplained additional contract funding, and an absence of evidence that the CPUC monitored contractor performance in nearly one-third of the contracts we reviewed,” the state auditor reported.

In an emailed statement, the PUC said it will fully comply with the auditor’s recommendations.

“We have made much progress in bringing our practices into conformity with state procedures, requirements and norms in the past year,” spokeswoman Terrie Prosper said. “We take the audit report of our practices covering 2010-2015 very seriously and we have a plan in place to comply with the recommendations.”

The PUC’s close ties to utilities have created real costs in California, Lynch said.

“There are real consequences for the PUC’s cozy backroom deals, in terms of safety, reliability and excessive costs to ratepayers,” Lynch said.