PG&E facing big fine for judge-shopping in rate case

Emergency workers sifts through rubble of a burned down home, three days after a natural gas pipeline exploded into a deadly fireball in San Bruno, Calif., Sunday, Sept. 12, 2010. The remains of at least four people have been found, and authorities have said five people are missing. (AP Photo/Tony Avelar) less Emergency workers sifts through rubble of a burned down home, three days after a natural gas pipeline exploded into a deadly fireball in San Bruno, Calif., Sunday, Sept. 12, 2010. The remains of at least four ... more Photo: Tony Avelar, AP Photo: Tony Avelar, AP Image 1 of / 18 Caption Close PG&E facing big fine for judge-shopping in rate case 1 / 18 Back to Gallery

Pacific Gas and Electric Co. could face millions of dollars in fines for the lobbying campaign it waged with state regulators to assign its preferred judge to a rate-setting case stemming from the deadly San Bruno explosion, under a proposed order that the California Public Utilities Commission issued Wednesday.

The commission - which acquiesced to PG&E's request and appointed the company's choice to decide the $1 billion-plus rate case - will now decide whether PG&E broke rules barring such lobbying.

An administrative law judge with the state agency, Hallie Yacknin, ordered PG&E executives late Wednesday to appear before her next month to explain why the company should not be held in contempt for bombarding regulators with e-mails in January urging the appointment of one judge to the rate case and labeling two others as problems.

Three PG&E executives were fired Monday and a top aide to utilities commission President Michael Peevey resigned under pressure over what the state agency called the "inappropriate" back-channel communications between the company and regulators.

PG&E's pick

One of the fired executives urged the regulatory agency to name administrative law Judge John Wong to preside over the rate case, which will determine how much of $1.29 billion in gas-pipeline improvements that PG&E has made since the San Bruno explosion will be passed along to customers.

E-mails from Brian Cherry, who was PG&E's head of regulatory affairs, complained about two other prospective judges. One, Douglas Long, posed a "major problem" for PG&E, and the second, Julie Halligan, had been "very hard on us" and had "royally screwed" the company in other cases, Cherry told Peevey's top aide.

Aide 'working on it'

The aide, Carol Brown, told Cherry that she was "working on it."

The e-mails, which PG&E released this week, also showed that PG&E executives were in communication with Mike Florio, who along with Peevey serves on the five-member utilities commission. In one e-mail, Florio agreed with the executives that "you really couldn't do any worse" than Long and said, "I'll do what I can on this end" to "bump" the judge.

In the end, the commission's chief administrative law judge named Wong to the case.

In her order Wednesday, Yacknin said PG&E may have violated two commission rules. One forbids "ex parte communications regarding the assignment of a proceeding to a particular administrative law judge," and the second requires that "any person who transacts business with the commission agrees to maintain the respect due to the commission's administrative law judges," Yacknin wrote.

PG&E's admission

Her order cites PG&E's own notice to the commission on Monday that it believed it had violated the commission's rules. Yacknin said the utility could face fines, restrictions on its contacts with the commission officials and "other appropriate sanctions."

PG&E spokesman Keith Stephens said the company was reviewing Yacknin's order.

"PG&E initiated a voluntary internal review of 65,000 e-mails, which led to this past Monday's filing with the CPUC that certain officers of the company may have violated ex parte communications rules," Stephens said. "The company took swift and decisive action and those individuals are no longer with the company."

Awkward situation

Yacknin's order sets up what could be a procedural minefield for the utilities commission members, especially Peevey and Florio.

Peevey has already recused himself from a separate case against PG&E, the proposed $1.4 billion in penalties that two administrative law judges levied against the company for violations related to the 2010 explosion that killed eight people in San Bruno and leveled 38 homes. PG&E has said it will appeal the penalty.

The commission noted that the San Bruno case was not directly related to the case involving PG&E's rates, but quoted Peevey as saying he would recuse himself to "ensure the public's confidence in the credibility and objectivity of the CPUC's decisions."

Brown, his aide, resigned at Peevey's request. However, sources told The Chronicle that she retains her previous civil service rank - as an administrative law judge with the commission - and is still drawing her $120,000 annual salary while on leave.

Florio embarrassed

Florio, a former longtime attorney with the consumer watchdog group The Utility Reform Network, professed embarrassment over his communications with PG&E. While insisting he had taken "no action" on PG&E's behalf, he said he "didn't know the rules" and that he had "screwed up."

Most rulings by administrative law judges go to the full commission, which has the final say. It was unclear what Peevey or Florio - who has not recused himself from the San Bruno penalty case - would do if Yacknin fined PG&E for the lobbying campaign and the company turned to the commission.

In Bay Area: Top aide to head of PUC retains civil service rank: administrative law judge. D1