Grand jury probes PG&E’s relationship with state regulators
Updated 8:11 pm,Thursday, May 21, 2015
Connections
The Cherry Letter Strikes Again
A federal grand jury is probing potentially illegal ties between Pacific Gas and Electric Co. executives and regulators with the California Public Utilities Commission, The Chronicle has learned.The investigation is looking into "PG&E’s relationship" with state regulatory officials, according to a May 15 letter to the utility from federal prosecutors.
The probe is separate from the federal court case charging PG&E with violating pipeline safety laws and obstructing justice in connection with the 2010 pipeline explosion in San Bruno that killed eight people. Prosecutors in that case are seeking more than $1 billion in fines from the company, but have not charged individual executives.
In the letter disclosing the grand jury investigation, Assistant U.S. Attorneys Kim Berger and Hallie Hoffman told PG&E’s lawyers that they plan to use some of the evidence from the probe in the prosecution of the San Bruno case against the company. They did not specify what that might be.
The letter came in response to a PG&E request that federal prosecutors turn over San Bruno-related evidence and notes gathered by state regulators with the utilities commission.
Officials with the U.S. attorney’s office in San Francisco declined to comment on the letter, and representatives of the utilities commission did not immediately respond to a request for comment.
A PG&E spokesman, Greg Snapper, said in a statement: "We’ve publicly reported that state and federal attorneys have begun investigations in connection with these communications. We’re going to keep cooperating with officials as the process moves forward."
The state attorney general’s office opened its own investigation last fall. It has not filed criminal charges.
As part of the probe, state agents served search warrants on the commission’s San Francisco headquarters, at Peevey’s home in Southern California and at the Orinda home of a former PG&E vice president, Brian Cherry. It was Cherry who sent many of the PG&E e-mails that prompted the state and federal probes.
One focus of the state investigation is an apparently secret deal that Peevey outlined in 2013 to an executive of the utility he used to head, Southern California Edison, regarding costs related to the shutdown of the troubled San Onofre nuclear power plant.
Notes that investigators seized from Peevey’s home showed that the deal included provisions for directing utility money into research to reduce greenhouse gas emissions.
When the final deal had no such funding, Peevey pressured Edison to put up money, according to a sworn statement by one company executive. Peevey separately indicated to officials at UCLA that they could be in line for a greenhouse-gas funding windfall, e-mails between them show.
When the utility apparently did not budge, Commissioner Mike Florio — who joined Peevey during meetings with Edison — proposed in late 2014 that the commission set aside greenhouse research money from San Onofre for the University of California system. The same month Florio proposed that funding, Peevey landed a seat on an advisory panel at UCLA’s Luskin Center for Innovation.
Additional e-mails involving back-channel communications between utilities and the state commission continue to trickle out. The most recent came Thursday, when PG&E released an e-mail that Cherry sent in March 2014 to PG&E colleagues recounting a conversation he had with Florio involving a regulatory matter.
Cherry said he had asked Florio whether PG&E should seek to have an administrative law judge, Steve Roscow, recused from a case, which records show concerned PG&E’s efforts to obtain customer money to conduct seismic studies at the Diablo Canyon nuclear power plant. Florio was the commission member assigned to oversee the matter.
"I spoke with Florio about Roscow," Cherry wrote. "Mike believes there is no need to bump Steve if he is the assigned commissioner. He understands Steve’s bias."
Florio figured in another instance of apparent PG&E judge-shopping, telling Cherry in a January 2014 e-mail that he would "do what I can on this end" to "bump" a judge PG&E didn’t want on the $1.3 billion rate-setting case. Florio, an attorney for a utility customer-advocate group before Gov. Jerry Brown appointed him to the commission in 2011, later explained that he "didn't know the rules" against back-channel communications between regulators and utilities and that he had "screwed up."
Florio did not respond to a phone call seeking comment Thursday about the latest e-mail.
Jaxon Van Derbeken is a San Francisco Chronicle staff writer. E-mail: jvanderbeken@sfchronicle.com
