Peevey?s Prescript

By Published On: May 15, 2004

Recent demands by consumer groups that Mike Peevey, California Public Utilities Commission president, recuse himself from voting on the pending Otay Mesa energy deal raise thorny questions about where impartiality ends and promoting an individual commissioner?s agenda begins. With the recusal request and a threat of appeal if there?s a split vote on Otay Mesa with Peevey in the majority, consumer advocates are trying to make some forms of regulators? activism off limits. The Utility Reform Network and the Utility Consumers? Action Network aren?t alleging conflict of interest or a violation of regulators? ex parte (lobbying) rules. The groups say Peevey overstepped his bounds by brokering a deal for the Calpine-owned plant with potential contractor San Diego Gas & Electric. Specifically, TURN and UCAN allege that it is impossible for the commission president to determine the reasonableness of the Otay Mesa deal because of his bias in favor of the contract. They point to documents revealing that after a lobbying contact by Calpine, Peevey phoned top SDG&E officials when negotiations for Otay Mesa had broken down over pricing disputes. After this contact, SDG&E appeared to drop objections to the power-purchase agreement with Calpine, the groups assert. There is ?not so much a need for new rules as for [adherence to] existing rules and state court decisions affirming the public?s right to impartial decision making,? said Mindy Spatt, TURN media director. Bob Finkelstein, TURN executive director, said state courts ?affirm the public?s right to impartial decision making. There are examples where officials were found insufficiently impartial to vote on matters they had already been involved in.? He added that ?the exorbitant prices sought under these contracts would be deemed unreasonable and disallowed? if regulators chose cost-of-service pricing instead of the proposed Otay Mesa contract provisions. Peevey?s intervention is ?not a violation of any law that I know of,? said Robert Stern, president of the Center for Governmental Studies. After an initial review of consumer groups? arguments, Stern added, ?If he had been representing one side, and needed to pass judgment, at that point he should step down. But I?m not sure as an arbiter that he?s in the same position.? Commissioner Geoffrey Brown pointed to the balancing act commissioners face. They are sometimes expected not to take positions, yet at other times they?re called on to help resolve differences among competing parties. He suggested that bringing in independent mediators for some proceedings might alleviate problems arising from a job that is not always clear-cut. Commissioner Carl Wood said he?s troubled by the allegations, stressing that if they are true, Peevey?s involvement would make it hard to evaluate the deal on its merits. The behavior goes beyond promoting a commissioner?s agenda to encouraging a settlement outside prescribed CPUC processes among Otay Mesa owner Calpine, SDG&E, and the CPUC, Wood said. CPUC confidentiality rules make it difficult to discover whether any lines have been crossed or whether new lines need to be drawn. The commission can keep secret crucial data on procurement cases, PG&E?s bankruptcy settlement, and other key proceedings. Following an outcry about these limits to public access, legislation was hatched that is now working its way through the Legislature to turn current confidentiality rules on their heads by creating the presumption of openness (see <i>Circuit</i>, May 7, 2004). Ex parte rules also contribute to opaque communications by giving parties latitude to lobby regulators, as long as the dates, names of participants, and summaries of topics discussed are publicly noticed. One example of ex parte documents is a notice last month reporting that commissioner Brown toured the Diablo nuclear plant with advisers and top PG&E officials. According to this document, PG&E discussed the physical challenges, timing, and costs involved in replacing steam generators and made a case for ?interim? approval of the project. Several consumer groups subsequently complained that they were excluded from this tour because PG&E changed the date without informing them (see <i>Circuit</i>, April 16, 2004). Although there is no allegation that Peevey and Calpine violated ex parte rules, commissioners have historically realized that stakeholders? access to their offices is a sensitive matter because it can influence decision making. In the past, commissioners have closed their doors to lobbyists when the time for major final decisions drew near. What?s allowable and legal conduct for commissioners, and what is wise, is a fungible precept. As commissioners can suspend ex parte communications, they can change the rules that govern their behavior. For instance, in 2002, Peevey and Brown pushed through a rule requiring commissioners to explain why they are holding, or tabling, items for a vote. They also decided to refrain from holding items for more than two meetings. In addition to parameters for lobbying, there are rules governing conflict of interest. Peevey?s former business dealings, such as involvement in TrueSolar, which won commission approval of an expensive contract with Southern California Edison?a utility with which Peevey was also connected?have made him a lightning rod for allegations of impropriety. Peevey has not been accused of personally benefiting from commission decisions; the issue is more a matter of perception. Taking a page from journalists? ethics, we?re supposed to avoid even the perception of a conflict of interest, even when there is no direct quid pro quo. Historically, regulators are supposed to influence utilities?that?s their role. The question here is whether they, or the Legislature, need to devise new behavioral rules in this post-deregulation, semi-unregulated market.

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