California Regulator Recuses Self From PG&E Blast Fine Probe

The head of California’s utility regulator has recused himself from determining a penalty for PG&E Corp.’s deadly 2010 natural gas pipeline explosion after “inappropriate e-mail exchanges” with the company.

California Public Utilities Commission President Michael Peevey, who has been under fire from the city of San Bruno and consumer advocates for alleged bias toward PG&E, said in a statement today he was stepping away from the case to eliminate any appearance of “impropriety.” The chief of staff for Peevey, one of five commissioners, has resigned.

The move is a step toward regaining credibility for the CPUC after two years of political infighting. Two key commission executives resigned earlier this year after being caught up in controversies related to the blast investigation. At least three lawyers were dropped from the case after openly rebelling against their clients, then reinstated weeks later.

Administrative law judges for the agency earlier this month ruled that the company should pay $1.4 billion for the explosion, which killed eight people in San Bruno, California. That decision, which would be the largest safety-related penalty it has ever levied, must be voted on by the commissioners. PG&E, owner of the state’s largest utility, said today it has fired three executives after a review of almost five years of communications between the company and state regulators.

‘Public Confidence’

“The inappropriate contact by PG&E was made in the gas transmission and storage proceeding, not in the pipeline penalty proceedings,” Peevey said in the commission’s statement. Recusing himself from the San Bruno penalty, “should ensure the public’s confidence in the credibility and objectivity of the CPUC’s decisions.”

The e-mails sent to the agency dealt with the assignment of administrative law judges and commissioners to a rate case for its gas transmission system, the San Francisco-based company said. The e-mails, revealed in a regulatory filing today, show PG&E lobbying the commission for certain judges to be appointed to the case.

“This is a major problem for us,” a PG&E executive wrote to Carol Brown, Peevey’s chief of staff, regarding the pending appointment of a judge. “Take a deep breath - I am working on it,” Brown replied, according to the message exchange that the filing exposed. The executive was among those fired, according to Greg Snapper, a spokesman for PG&E. Terrie Prosper, a spokeswoman at the CPUC, didn’t immediately reply to a request to speak to Brown for comment.

New Role

PG&E, which is also facing a federal criminal probe into the blast, said it has hired former Interior Secretary Ken Salazar as a special counsel on regulatory compliance matters. It is also creating the new role of chief regulatory compliance officer, who will report to Chairman and CEO Tony Earley.

The city of San Bruno has criticized the commission for being “too cozy” with PG&E and reiterated its call for Peevey to recuse himself two weeks ago.

“We are thrilled with today’s news out of the PUC,” said San Bruno City Manager Connie Jackson in a telephone interview. “We believe Mr. Peevey has done the right thing by recusing himself from the San Bruno proceedings.”

Peevey, a former president of Edison International’s utility unit, has been head of the commission since 2002. His term is set to expire at the end of this year.

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