Is TURN’s Relationship with California Utility Commissioner Mike Florio More Important than Consumer Protection?

Is TURN’s Relationship with California Utility Commissioner Mike Florio More Important than Consumer Protection?

Checks and Balances Project did something yesterday we haven’t done before: we requested records from a well-known consumer protection nonprofit. In a letter to California’s The Utilities Reform Network (TURN), we asked the organization to voluntarily provide communications records with Mike Florio, a public utility commissioner under fire for ethical misconduct who had been its employee for decades.

TURN is the leading California consumer advocacy organization that monitors utilities. On its website, TURN declares: “We Hold Utility Corporations Accountable By Demanding Fair Rates, Cleaner Energy And Strong Consumer Protection.” Its tagline is even more concise: “Lower bills, livable planet.”

To its credit, TURN went to court to force the release of emails between the CPUC and PG&E, the state’s biggest utility. The 65,000+ emails that were ultimately released show a pattern of coziness and possibly illegal behavior that then-CPUC President Mike Peevey had with utility executives. Peevey was not reappointed for a third term in part because TURN repeatedly excoriated Peevy. You can read some of the searing news coverage here, here, and here.

In fact, our analysis of media coverage since January, 2011, found 20 unique, negative quotes from TURN about Peevey, including five calls for his resignation.

Commissioner Florio

Is TURN’s Relationship with California Utility Commissioner Mike Florio More Important than Consumer Protection?

Commissioner Mike Florio

Mike Florio was a top lawyer at TURN for 33 years before being appointed by Gov. Jerry Brown to the CPUC in January 2011. Consumer advocacy and reformers rejoiced when he was chosen and California’s utilities were concerned. But the very emails that TURN went to court to have released have led to a series of revelations about Florio, including a federal grand jury investigation.

TURN, however, has been notably muted about its former star attorney. In fact, in our media analysis, we were able to find only four unique comments by TURN, all moderate and forgiving in tone, about the ethical challenges and possibly illegal behavior of Commissioner Florio.

“Foolish Not Captured”

During a research trip to California for our Captured Regulators Initiative, TURN Executive Director Mark Toney was kind enough to meet with me. We talked about the challenges faced by Commissioner Florio. Mr. Toney said “there is a difference between being foolish and being captured.”

This is a curious position for a reform group that was so aggressive with one commissioner, but not another. It leads to an important question: Is TURN’s personal relationship with Florio more important than consumer protection?

Florio’s History with Turn

Mike Florio volunteered with TURN right after graduating from New York University law school in 1979 and was its first staff attorney. He worked there for 33 years, becoming a widely respected expert in utility issues, before joining the commission where his term runs through 2016.

Is TURN’s Relationship with California Utility Commissioner Mike Florio More Important than Consumer Protection?“Consumers in California now have a CPUC Commissioner they can depend on,” said Toney when Florio was appointed. TURN spokeswoman Mindy Spatt, quoted in Global Power Report on Feb. 3, 2011, said, referencing the San Bruno pipeline explosion, “There is obvious need for a commissioner who will stand up to PG&E, demand answers and hold them accountable, and Mike can serve that role.”

Questionable Conduct Begins Early

But once he joined the CPUC, things seemed to change. Florio was assigned by then-President Peevy to oversee an investigation into the natural gas pipeline disaster in Sept. 2010 in San Bruno, California, that destroyed 38 homes and resulted in eight deaths. In 2012, a state investigation revealed that PG&E had diverted more than $100 million in gas safety and operations money collected from consumers and spent it for executive bonuses and other purposes.

In 2014 and early 2015, emails released by PG&E began to reveal disturbing behavior between former Chairman Peevy and Commissioner Florio with the utility.

Judge Shopping:

  • Florio intervened to help PG&E get the judge it wanted to hear a $1.3 billion rate-setting case to pay for safety measures after the San Bruno disaster. When an administrative law judge was assigned that was not to PG&E’s liking, Florio wrote to PG&E regulatory executive Brian Cherry, “I’m horrified!” and “I’ll do what I can” to reassign the judge the utility wanted to avoid.
  • Several of the emails released demonstrate a direct line of communications and appearance of cooperation between Florio and Cherry. The PG&E lobbyist was fired following the release of emails. PG&E was later fined $1.05 million for judge-shopping.
  • In April 2014, PG&E was indicted by the federal government for alleged criminal violations. In Sept. 2014, CPUC levied a $1.4 billion fine against PG&E for safety violations.

In Sept., 2014, TURN’s Executive Director Mark Toney declared:  “We are very disappointed” in Florio’s involvement.  “We very much hope this is a one-time incident that never happens again.”

One month later, Florio recused himself from PG&E rate cases.  In December, San Bruno’s City Manager called for his resignation.

Back Channel Communications with PG&E

  • In February 2015, a new email revealed that Florio circumvented rules in 2012 that requires commissioners to meet with all parties of a rate case when PG&E’s Cherry asked to meet with him. Commissioner Florio scheduled their meeting just three days before the corresponding CPUC hearing, leaving no time for the cities of San Bruno, San Francisco, or TURN to respond. At the hearing, Florio proposed a last-minute change in PG&E’s favor that resulted in a $130 million Christmas 2012 gift for the utility.
  • Florio claimed he was unaware of CPUC rules against back-channel communications with utilities, despite his years as a supervising attorney for TURN.
  • “Amazing how I’ve become ‘an apologist for PG&E’ in just three short years, isn’t it?” Florio wrote to PG&E’s Cherry.

“It seems like Florio has forgotten any code of ethics now that he’s a commissioner,” a former CPUC administrative law judge, who asked not to be identified, told me in an interview. “Florio’s personality is to help utilities. But giving the utility the last word is dishonest.”

Back Channel Communications with SoCal Edison

  • Then in March 2015, a new email was revealed that had been uncovered by former San Diego City Attorney Michael Aguirre, who is suing the CPUC over San Onofre nuclear power plant shutdown costs. It told of how Commissioner Florio held a previously secret, regular 1:30 Wednesday call with the management of Southern California Edison, majority owner of the San Onofre plant.
  • In another, Florio discussed a rate-setting case with Edison Vice President Akbar Jazayeri , when the executive asked if their interaction was allowed under rules that prohibited ex parte communications. “Thank you Akbar – I was just trying to follow through on the training you’ve given me over the years!!” Florio insisted to him it wasn’t a problem.

Sen. Jerry Hill, D-San Mateo, said Florio should know better than to communicate in private with utility officials. He has called for him to recuse himself from rate cases involving SoCal Edison.

Efforts to Keep Conceal Back Channel Communications With Edison

  • As part of the San Onofre nuclear power plant shutdown negotiations, Florio was present at two previously secret discussions during which former President Peevy lobbied Edison executives to contribute $25 million toward greenhouse gas research at UCLA, where Peevy had been named to an advisory board.
  • In a sworn affidavit released this month, Edison Energy President Ron Litzinger said he called Florio after the first meeting to ask whether the meetings should be made public. Florio told Litzinger to keep meetings the meetings secret, “saying he was passing along instructions from [former President] Peevy’s chief of staff.”

On May 25, Commissioner Florio was removed from as the supervising commissioner from the San Onofre investigation.

TURN Went After One Commissioner, Excuses Another

TURN’s stated mission is to protect consumers. When it comes to a member of California’s powerful public utility commission, utility misconduct is incompatible with consumer protection. That’s why we are surprised at TURN’s light treatment of Commissioner Florio’s pattern of ethical lapses.

It is also why we invite TURN to voluntarily release all of its email and text messages with Florio since he took office.

We recognize that there is no legal requirement for TURN to provide the communications we have requested. However, should it become necessary, we intend to use the California Public Records Act force their release.

– – – 

TURN Executive Director responded to my letter with the following email on June 4, 2015: 

Is TURN’s Relationship with California Utility Commissioner Mike Florio More Important than Consumer Protection?

 

Scott Peterson is executive director of the Checks and Balances Project, a national watchdog that seeks to hold government officials, lobbyists and corporate management accountable to the public. Funding for C&BP comes from pro-clean energy philanthropies and donors.

Checks and Balances Project Launches Captured Regulators Initiative

Checks and Balances Project Launches Captured Regulators InitiativeInfluence pedaling in America is a $9 billion a year industry. It’s as big as Major League Baseball or NASA’s Mars spacecraft program, changing from direct meetings with lawmakers to a vertically integrated set of businesses that work every stage of government decision making – including the shaping of public opinion.

Many have charted the size, scope, and growth of the influence peddling industry. There’s the definitive, 25-part Washington Post series on the emergence of modern mega-lobbying firms. Ross and Amter’s definitive history of the chemical lobby The Polluters. Merchants of Doubt, by Oreskes and Conway, that laid bare the growth of the lobbyist-funded think tank industry. There are also definitive books by then-reporter Jeff Birnbaum’s, including The Money Men: The Real Story of Fund-raising’s Influence on Political Power in America – though Birnbaum later joined the influence business himself.

The point is that as a growth industry, influence peddling needs to find new ways to grow to accChecks and Balances Project Launches Captured Regulators Initiativeommodate the ever-expanding ranks for former staff and public officials who want to make big money after their public “service.”

So it was only a matter of time before previously sleepy public offices, such state assembly offices, state public utility commissions, and writers of obscure cost-benefit analyses became part of the influence peddling playbook. That’s particularly true now that the big shifts in the energy industry are under way. Rooftop solar on people’s homes has been declared a “mortal threat” by the lobbying arm of the utility industry, which has launched a very concerted effort to penalize their customers for buying less of their product.

Regulatory Capture in State Agencies

In many states, commissioners have been lured to ally themselves with the industries they are charged with regulating. There is a term for this, created by Nobel Prize winner Economist George J. Stigler over 50 years ago: “Regulatory capture.”

The financial crisis of 2007-2009 can be explained partly as a problem of regulatory capture. Regulators were so enamored by Wall Street’s risk prevention mechanisms and their way of life that they failed to recognize the enormous risks that were being taken right under their noses until it was too late.

In Virginia, the State Corporation Commission (SCC) is charged with regulating Dominion Resources, a monopoly utility and the Commonwealth’s most powerful corporation. Yet last October, two senior staff members of the SCC wrote a comment letter to the U.S. Environmental Protection Agency about the federal Clean Power Plan (CPP). The CPP is intended to reduce carbon pollution. Although it gives states wide latitude in cutting the pollution and independent studies show it will save money and create clean energy jobs, the staffers attacked the CPP as “arbitrary, capricious, unsupported, and unlawful.” They are thought to have taken Dominion’s 2013 Resource Plan as the basis for their frontal assault.

Death Spiral                                                                              

Utilities nationwide have captured Public Utility Commissions, in whole or in part, just like Dominion has enveloped its own in Virginia. This effort is seems to be encouraged by the Edison Electric Institute (EEI), the utility industry trade group based in Washington, DC.

In January, 2013, EEI released a man-the-battle-stations white paper that said solar panels on residential or commercial roofs that are not utility-owned or utility-purchased would lead to a death spiral for the utility industry. Since then, the effort to smother the solar baby in its cradle has been stepped up.

Checks and Balances Project Launches Captured Regulators InitiativeNew Captured Regulators Initiative

With renewable portfolio standards, net metering and the CPP, the next two years will decide how many clean energy jobs and energy efficiency savings Americans will see. The stakes are high.

The Checks and Balances Project has noticed that in a number of states, utility commissioners are acting almost as consultants to the utilities they are charged with overseeing. The range of favoritism is wide – from casual remarks to open assistance to help a regulated utility shop for a favorable state judge. There seems to be an emerging trend, which is why we are launching a systemic look to see what’s going on in state public utility and state corporation commissions. Where the influence is going, so should the oversight accountability.

We’re launching our Captured Regulators initiative by asking questions about these officials:

Are there public utility commissioners, public service commissioners or state corporation commissioners in your state that you think are captured by the utility industry? Or commissioners you have questions about like Audrey Zibelman of New York or Virginia’s Mark C. Christie?

If so, tell us more. Send us an email to capturedregulator@checksandbalancesproject.org.

 

Scott Peterson

Executive Director, Checks and Balances Project