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Update: Pg&E To Appeal Commission Sanction For Judge-Shopping Emails

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SAN FRANCISCO (BCN)

The California Public Utilities Commission at a meeting in San Francisco today imposed a $1.05 million fine as well as an additional potentially multimillion penalty on PG&E Co. for illegal judge-shopping in a rate case.

The decision, authored by Commissioner Carla Peterman, said PG&E "severely harmed the integrity of the regulatory process" by sending private emails to two commissioners and a top staff member that sought to influence the selection of an administrative law judge.

In addition to the fine, the decision requires PG&E shareholders to absorb the cost of rate impacts to customers of a five-month delay caused by investigation of the judge-shopping in a case concerning the rates to cover the costs of natural gas transmission and storage.

CPUC spokeswoman Terrie Prosper said that amount could be up to $400 million. The amount will be determined by the commission in a later decision after the rate-setting case is concluded next year.

PG&E spokesman Keith Stephens said the utility will appeal the decision.

"It imposes sanctions that aren't warranted and that may go beyond the CPUC's legal authority," Stephens said.

Stephens said PG&E acknowledges that some of the emails violated the commission's rules, but said the company has taken corrective actions, including firing three executives and creating a new position of a chief regulatory compliance officer.

"In our view, the CPUC's decision doesn't appropriately take account of these corrective actions," Stephens said.

CPUC spokesman Christopher Chow said commission decisions can be appealed by first filing an application for rehearing before the commission and then by filing a lawsuit in the state Court of Appeal.

Commission rules prohibit utilities from sending private, or ex parte, messages to the commission concerning the selection of administrative law judges.

The back-channel messages were sent by since-fired PG&E vice president for regulatory relations Brian Cherry in January to Commissioners Michael Peevey and Michel Florio and to Peevey's former chief of staff, Carol Brown.

In one message, Cherry referred to a prospective judge and told Peevey, "This is a problem. I hope Carol can fix it."

In another, he complained to Brown that a different prospective judge "screwed us royally" in a previous case.

When a third judge, whom Cherry had requested, was finally assigned on Jan. 27, the executive wrote to Brown, "Thank you. Thank you. Thank you."

At the same time that PG&E disclosed the messages on Sept. 15, it announced it had fired Cherry and two other vice-presidents. At the CPUC, Brown was removed as Peevey's top aide but remained employed by the agency.

A different administrative law judge, Amy Yip-Kikugawa, was assigned to the rate case, in which PG&E is requesting approval for obtaining $1.29 billion in revenue from customers in its Northern California territory to pay for the costs of natural gas transmission and storage between 2015 and 2017.

The proceeding is now expected to conclude in August instead of the original date of March.

The fine ordered by the commission today includes $50,000 for each of 20 violations of the rule barring communications about judge selection, plus $50,000 for the violation of another rule requiring parties to show respect to judges.

The decision also bars PG&E from sending any individual communications to commissioners and their advisors on any aspect of rate-setting proceedings for at least a year.

Only three of the commission's five members -- Peterman, Catherine Sandoval and Michael Picker -- ruled on the sanction.

Both Peevey and Florio have recused themselves from acting on the sanction or on the underlying rate case.

The proceeding considered only sanctions against PG&E. The commission rules prohibit messages from utilities to the commission about judge selection, but say nothing about communications in the other direction.
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