Battle brewing over PUC nominee seen as industry friendly

Times Staff Writer

A long-standing dispute about the telecommunication industry’s influence over state regulation in Gov. Arnold Schwarzenegger’s tenure has erupted into a pitched fight for a pivotal seat on the Public Utilities Commission.

Several consumer groups are trying to derail the confirmation of Rachelle Chong, Schwarzenegger’s latest nominee to the five-member commission. They say Chong has been unwaveringly deferential to the industry and inappropriately stands to benefit financially from decisions she makes.

The clash, which will come to a head when a state Senate committee considers the nomination Jan. 3, is highlighting complaints that the Republican administration has gone too far in paring back state oversight of the phone and cable companies that still dominate their markets.

“I think the commission has been in the last two years routinely deferential to the industry,” said outgoing PUC Commissioner Geoffrey F. Brown, an appointee of Democratic Gov. Gray Davis. “The industry wants an absence of regulation and they’ve gotten that.”


Schwarzenegger placed Chong on the commission last January to finish out the term of Susan Kennedy, a Democrat whom he had hired as his chief of staff. By several accounts, Kennedy -- who was also faulted for being too accommodating to industry -- played a crucial role in the selection of Chong, a lawyer for telecommunications companies who had served in a Republican seat on the Federal Communications Commission during President Clinton’s administration.

Chong will be forced off the commission if the Democrat-led Senate does not confirm her nomination by Jan. 12, the one-year anniversary of her appointment.

Opposition to her nomination has centered on Chong’s role in writing the PUC plan that will allow California’s major phone carriers to raise rates at will rather than first having to apply for commission approval. In August, just a few days before the commission was to adopt the final version of the 264-page plan, Chong added a paragraph requested by AT&T;, according to a written dissent filed by Brown and another PUC member.

The addition appeared intended only to further one of the chief goals of the plan, ensuring that no individual phone company would be burdened with responsibilities that others did not share.


But in September, AT&T; informed the commission that the new language freed it from consumer disclosure rules imposed after regulators determined in 2001 that AT&T;'s predecessor company, Pacific Bell, had been misleading customers to sell them more expensive plans than they might want. The company was fined more than $15 million for deceptive marketing practices.

Chong’s chief of staff, Lynn Carew, said Chong had no idea that would be one of the effects of the language, though she acknowledged that in hindsight “things could have been done differently.”

“We were as surprised as anyone else,” she said. “We take strong exception to the suggestion that we pulled the wool over anyone’s eyes.”

AT&T; officials did not respond to a request for comment. Carew said Chong and the commission will review the effects of the provision, but Brown said that when he learned about the implications and complained to Chong, she “seemed nonplused.”


Michael Shames, executive director of the Utility Consumers’ Action Network, a San Diego advocacy group, said Chong’s action was in line with her general pro-industry approach.

“She comes to every proceeding with her decision in advance seemingly established,” Shames said, calling Chong “the worst commissioner” he has seen in more than two decades of advocacy.

“There’s no open mind,” he added. “She is a loyal and consistent proponent of everything the phone industry asks for.”

Chong declined requests for an interview Wednesday. After her chief of staff was asked for examples where she opposed industry, Chong relayed two events, both during her tenure on the Federal Communications Commission. Chong said she supported permitting customers to assign their existing phone numbers to a new cellphone when they switched carriers, and voted in favor of a rule placing new requirements on companies’ E-911 technology, which allows rescuers to pinpoint the location of a cellular call.


Chong’s chief of staff also disputed accusations from Utility Consumers’ Action Network that the commissioner improperly stands to benefit from helping industry because she owns 8,684 shares of Lightbridge Inc., which provides services to phone companies.

Carew said Chong had asked the PUC’s lawyers to examine her holdings, and they concluded they violated no conflict-of-interest rules.

That amount of stock was worth $120,100 at market closing Wednesday.

Julie Soderlund, a Schwarzenegger spokeswoman, declined to address any of the complaints raised about Chong. She said the governor stands by Chong and his other PUC commissioners, who “have decades of experience in the environmental, financial and telecommunication and regulatory fields.”


Chong’s prospects for confirmation are unclear. She needs three votes from the five-member Senate Rules Committee for her nomination to reach the Senate floor, meaning that at least one Democrat will have to support her. Senate President Pro Tem Don Perata (D-Oakland), who chairs the committee, declined to discuss the nomination.

Chong’s nomination is backed by the Natural Resources Defense Council, a prominent environmental group. In a letter of support, the group’s leaders said they “are particularly impressed by her intellect and willingness to listen to all sides.” The group also praised her support of “California’s leadership agenda on critical issues such as energy efficiency, renewable energy and other global warming solutions.”

But another consumer group, The Utility Reform Network, said in its opposition letter that Chong opposed legislation that would require phone companies to inform consumers of their rights to dispute charges, and has sided with industry over rules for video service providers to raise rates.

Lenny Goldberg, a Sacramento consumer advocate, said Chong’s actions in the AT&T; incident should disqualify her. “She abused the process on behalf of a special interest,” he said.