Edison Faces Fine of Less than Half the Max for Backroom San Onofre Talks with CPUC

Wednesday, October 28, 2015

What is the penalty for misleading the California Public Utilities Commission (CPUC) on a multi-billion-dollar issue, showing “disrespect for the Commission's Rules,” and undermining “public confidence in the agency?”

Administrative law Judge Melanie Darling put it at $16.6 million, or 0.51% of the $3.3 billion that ratepayers were stuck with after Southern California Edison (SCE) shut down the San Onofre Nuclear Generating Station in 2013 and negotiated a settlement with the CPUC. Edison is on the hook for $1.4 billion unless critics prevail and get the deal revisited.

Judge Darling could have recommended a fine of $41.8 million, but based her lower assessment on a number of mitigating factors. For one, “SCE understands the problem and is acting to reduce or eliminate it.”

The “problem” is Edison holding private conversations about public matters with CPUC officials and not reporting it, as required by law. There have long been complaints about the coziness between the utility and its regulator, but they came to a head when emails unearthed during a federal court proceeding documented numerous suspect exchanges.

Darling found Edison had committed eight violations, including a 2013 meeting in a Warsaw, Poland, hotel between then-CPUC President Michael Peevey and a top Edison executive, where they discussed a framework for settlement of the San Onofre dispute. The framework was largely adopted by the commission.

Edison argued that the rules governing the kind of out-of-sight ex-parte exchanges under scrutiny were vague, and the judge agreed in some instances, but thought Edison should have erred on the side of caution and reported them.

An additional mitigating factor, Edison argued, was the fact that they partied with the CPUC folks a lot—executives were “permitted, if not encouraged, to meet with Commissioners at 'social' occasions, industry activities and other non-office settings”—and it was hard to tell when the party chatter ended and the ex-parte conversations began. The judge thought that an “exacerbating factor,” not a mitigation.

SCE argued that “everybody else does it” and Darling thought it “tempting to treat this as a mitigating factor because it is true that this has been a boisterous, contentious, and complex proceeding in which several parties accused each other of misconduct.” But she decided Edison was a “large company with many resources and a long history with the Commission” and really should have known better.

Many factors were considered, but one big one seemed to be off-limits. Judge Darling wrote:

“We do not need to determine the impact of the violations, if any, on the settlement negotiations or the final decision adopted in the SONGS proceedings because these issues are part of pending Petitions for Modification.”

The CPUC commissioners are expected to consider Judge Darling's recommendation in December. The settlement has been challenged in federal court by consumer advocates who think shareholders should pay more and ratepayers less, and negotiations over the issue should have been in public.

–Ken Broder


To Learn More:

Judge Suggests $16.7M Edison Fine (by Jeff McDonald, San Diego Union-Tribune)

Edison Faces $16.7-million Fine over Unreported Talks with Regulators (by Ivan Penn, Los Angeles Times)

New Questions Raised About Judge’s Contacts with Edison on San Onofre (by Ken Broder, AllGov California)

Decision Affirming Violations of Rule 8.4 and Rule 1.1 and Imposing Sanctions on Southern California Edison Company (Administrative Law Judge Melanie Darling)

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