State investigator lays out developing criminal case against former PUC president

A state criminal investigation into the California Public Utilities Commission centers on former President Michael Peevey's persistent intervention into the process to assign costs for the failure of the San Onofre nuclear power plant, newly released court documents show.

Specifically, Peevey pushed the idea of plant owner Southern California Edison funding $25 million of greenhouse gas research at UCLA as part of the $4.7-billion settlement deal.

The power plant on San Diego County's north coast closed following a radiation leak in January 2012. A deal assigning 70% of the premature closure costs to utility customers has since been repudiated by two of the consumer groups that negotiated it, amid revelations about undisclosed private meetings, known as "ex parte" meetings, between regulators and utility executives.

A sworn affidavit by an investigator for California Atty. Gen. Kamala Harris, unsealed last month, lays out the developing criminal case in detail for the first time.

The 18-page document says improper meetings were held, which might bring misdemeanor charges, but that a conspiracy to commit those misdemeanors could be considered a felony.

"The facts indicate that Peevey conspired to obstruct justice by illegally engaging in ex parte communications, concealed ex parte communications, and inappropriately interfered with the settlement process on behalf of California Center for Sustainable Communities at UCLA," the document says. "Peevey executed this plan through back channel communications and exertion of pressure, in violation of CPUC ex parte rules, and in obstruction of the due administration of laws."

The court document details Peevey's efforts to win funding for UCLA and researcher Stephanie Pincetl, starting with an undisclosed March 2013 meeting in Warsaw, Poland, with an Edison executive. The affidavit cites probable cause that the former executive, Stephen Pickett, conspired to engage in prohibited back-channel communications.

Peevey, who left the PUC a year ago, did not respond to a request for comment, nor did the commission. Edison officials cited a commission determination that the Warsaw meeting was permissible but should have been reported, which it eventually was.

Company spokeswoman Maureen Brown added, "The settlement, which the CPUC unanimously approved, was properly negotiated at arms' length with consumer representatives, remains in the public interest and should not be rescinded."

The court filing was signed by Special Agent Reye Diaz and reviewed by state Deputy Atty. Gen. Maggy Krell. It was submitted Sept. 25 in support of a search of Pickett's personal email account.

According to the document, the investigator interviewed Edison International President Ted Craver about Peevey's efforts to secure Edison grants for UCLA. Edison International is the parent company of Southern California Edison.

Diaz said he "interviewed Ted Craver, who confirmed that Peevey 'went at him hard,' telling him that they (SCE) did not get the importance of combating climate change and this was an opportunity to do something, and if they were smart, they would figure out how to 'wrap this in a cloak' and it would be good for public relations."

The document goes on to describe how Edison never agreed to pay for the research, but it was built in as a requirement in the PUC's approval process for the San Onofre settlement.

The state agent described how Pincetl suggested wording for the grant requirements that gave UCLA an advantage over other research institutions. Commissioner Mike Florio brought the request to Administrative Law Judge Melanie Darling, who was supposed to be overseeing the settlement in an impartial manner.

"Melanie seems to be in a particularly sour mood!" Florio wrote in an email cited in the affidavit. "I don't sense any disagreement about the substance, just another ALJ resisting interference by those pesky commissioners. I am confident we will get there."

According to Diaz, Edison International Executive Vice President Ronald L. Litzinger said the regulatory requirement to give the greenhouse gas grants was debated internally at Edison up to the board level, and the company agreed for the sake of putting an end to uncertainty over the San Onofre matter.

In addition to emails, Diaz's search warrant covered text messages, logs, correspondence and other communications to or from Pickett as well as Peevey, Florio, two of Pickett's bosses at Edison, unspecified PUC judges and three UCLA think tanks.

Los Angeles County Superior Court Judge M.L. Villar agreed to the request, which was forwarded to Microsoft Corp. in Redmond, Wash. The company produced about 1,400 emails that are now being reviewed by state investigators.

Microsoft was directed to keep the search warrants secret so none of the parties would have the chance to destroy evidence prior to the records being retrieved.

"There is probable cause to believe that Michael Peevey, former president of the California Public Utilities Commission, utilized his position to influence SCE's commitment of millions of dollars to UCLA to fund a research program," the affidavit states.

"There is also probable cause to believe Stephen Pickett, former executive president of external relations at SCE, and Peevey knowingly engaged in and conspired to engage in prohibited ex parte communications regarding the closing of a nuclear facility, to the advantage of SCE and to the disadvantage of other interested parties."

The latest search warrant is at least the sixth to be issued in the ongoing criminal probe of the PUC.

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Agents searched the commission's San Francisco headquarters in November 2014 and Peevey's Los Angeles area home in late January. In February, Diaz served a search warrant on Peevey's personal email account.

The state attorney's general's office also sought and received warrants to search Edison offices in Rosemead this spring, as well as emails and other records of 22 commission and utility officials.

No charges have been filed as a result of the investigation, which is proceeding separately from a federal review of PUC practices.

The meeting in Poland was not known publicly until the San Diego Union-Tribune reported on court documents related to the search of Peevey's house in January.

State agents found notes from the Hotel Bristol Warsaw. The "RSG notes," the paper reported Jan. 30, were an apparent reference to replacement steam generators, the flawed equipment that led to the San Onofre shutdown.

According to emails discovered in a subsequent search, Peevey called and emailed Pickett on Feb. 4, "suggesting that they meet for a glass of wine," the affidavit states. "Pickett responded by telling Peevey that he was sorry he hadn't responded to his earlier voicemails and would be willing to meet with him."

Edison filed a public disclosure notice of the Warsaw meeting five days later, saying it had recently become aware of new information. The disclosure came almost two years after the meeting, even though such reports are required within three days.

In its disclosure, Edison said that Peevey initiated the San Onofre settlement discussion and Pickett only listened and took notes.

Edward Randolph, the PUC's energy division director who was also at the Hotel Bristol bar discussing the San Onofre case with Pickett and Peevey, told Diaz something different, the affidavit notes.

"According to Randolph, the second part of the conversation, regarding the financials of a plant closure, was led by Pickett," Diaz wrote.

The affidavit says Randolph thought the meeting was subject to commission ex parte rules and "SCE should have reported it."

Edison spokeswoman Brown declined to comment on Randolph's recollection of the meeting.

jeff.mcdonald@sduniontribune.com

ricky.young@sduniontribune.com

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A version of this article appeared in print on December 30, 2015, in the Business section of the Los Angeles Times with the headline "Former PUC chief is focus of probe - A state investigator details a developing criminal case against Michael Peevey." — Today's paperToday's paper | Subscribe
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