An agency that advocates for ratepayers within California’s Public Utilities Commission (PUC) has dropped its support for the $4.7-billion San Onofre settlement that would saddle customers with 70% of the costs for the shuttered nuclear plant.  

The Office of Ratepayer Advocates (ORA) joined The Utilities Reform Network (TURN), another advocacy group that was a party to the settlement, in flipping its support after e-mails surfaced about backchannel talks between top PUC and Southern California Edison officials over how to structure a deal.

The e-mails, along with state and federal criminal investigations, have lent credence to longstanding allegations that the agency was far too cozy with the utilities it regulates. The PUC rivals the state Division of Oil, Gas, and Geothermal Resources (DOGGR) in the suspicions and accusations it generates from watchdogs over improper cooperation.

The ratepayers office did not call for reopening negotiations between the PUC, Edison and San Diego Gas & Electric back in April when it denounced the secret talks that preceded last year’s divvy. Instead, the office said the customers should get an additional $648 million back from the utilities.

But the PUC has given no indication it is going to re-open the deal when it considers two procedural steps to implement it, much less sweeten the pot for ratepayers. ORA interim Director Joseph Como told the San Diego Union-Tribune, “I’m disappointed that we have to get to this point. I would rather go back and litigate this case than expect the commission to do the right thing.”  

The office may also have been influenced by a ruling (pdf) last week from Administrative Judge Melanie M. Darling that Edison’s communications with the PUC over San Onofre violated important regulations at least 10 times. The judge also found that two Edison executives subsequently gave statements to the commission about their roles in the setting of settlement terms “which I find may reasonably be viewed as misleading the Commission.”

But Como said the judge also seemed to validate the PUC’s backchannel negotiations and didn’t go far enough in shutting that down. He told the Los Angeles Times the judge hedged on certain kinds of one-way communications and said, “That leaves holes that you can drive a truck through. It’s like she’s saying, ‘You can game the system, and that’s OK.’ ”

San Onofre closed in January 2012 after a leak of radioactive steam was discovered. Subsequent testing found hundreds of eroded steam tubes, damaged by vibration caused by new steam generators. Edison blamed manufacturer Mitsubishi, which blamed computer problems and bad math for the misdesigned equipment.

Edison is suing Mitsubishi for $7.6 billion. There is evidence that both knew the design was problematic. Questions have also been raised about the PUC’s due diligence in assessing responsibility for San Onofre’s overnight demise and properly documenting its own role in the permit process.  

Much of the scrutiny aimed at the PUC can be attributed to e-mails revolving around a single meeting in Warsaw, Poland, between then-PUC President Michael Peevey and Edison executive Stephen Pickett in March 2013 at which they sketched out a framework for settlement. Those kind of ex-parte gatherings—outside the presence of others involved in an issue’s resolution—are frowned upon by the law.    

They also probably happen all the time in many government agencies, where employees shuffle back and forth between industry and its regulators. This time, with hundreds of millions of dollars at stake and political tensions running high, the public got a peek behind the scenes.

Back in April, the ratepayers office said, “To simply invalidate the settlement and go back to the hearing room would essentially give Edison the opportunity to litigate for an outcome that may be worse than the settlement. Edison should not be given a second bite at the apple.”

Is it crunch time?

–Ken Broder

To Learn More:

Ratepayer Group: Scrap San Onofre Deal (by Jeff McDonald, San Diego Union-Tribune)

State Consumer Advocate to Pull Out of San Onofre Nuclear Plant Settlement (by Ivan Penn, Los Angeles Times)

Judge Says Edison Illegally Talked to PUC about San Onofre—Repeatedly (by Ken Broder, AllGov California)