Exemption for California PUC Chief Stalls Budget Finalization

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SACRAMENTO — Under a provision tucked into budget legislation by the state Senate, the president of the California Public Utilities Commission would be exempt from a proposal intended to prevent commissioners from spending agency-related funds that receive less public oversight. 

A dispute over the proposal pits the two houses of the Legislature against each other and threatens to hold up other measures aimed at increasing scrutiny of the commission, which regulates the energy, telecommunications and transportation industries.

It’s also stalling finalization of the state’s $96.3-billion spending plan — the bill is the only budget measure that wasn't sent to Gov. Jerry Brown’s desk.

The proposal would end a controversial practice in which the commission sets up nonprofit organizations as part of agreements reached with companies it regulates — and Commission President Michael Peevey serves as chairman of the nonprofits.

Opponents of the practice say it allows Peevey to use his position at the commission to fund organizations by directing money with little scrutiny because the separate nonprofits aren’t subject to the same disclosure rules as the PUC itself. They say the nonprofits increase commissioners' power rather than advance public policy. 

"Members of the PUC have a public duty to uphold, and when they’re creating these nonprofit groups that they can sit on, they’re not serving the public anymore," Assemblywoman Nora Campos (D-San Jose) said in a statement. "They’re serving themselves." 

The Senate, where Peevey's wife, Carol Liu (D-La Cañada Flintridge) serves, wants to hold off on prohibiting the practice until Peevey's term ends in December 2014.

The Assembly doesn't want to wait that long, and one activist said the Senate seems to be doing a favor for one of its own.

“It’s really unseemly to be doing a favor for the spouse of a senator when it seems there will be no benefit to the state,” said Jamie Court, president of Consumer Watchdog.

Peevey defended the nonprofit arrangements in an interview, saying there are no conflicts of interest in his actions and that the organizations fund worthy causes such as expanding Internet access and investing in clean energy projects.

Lawmakers want to use the budget process to change the rules, putting a provision in one of the related bills to allow the Legislature to remove PUC commissioners for simultaneously serving on the board of nonprofits created by the PUC. The effort became muddled in the rush to pass the budget package last week.

One version of the measure, approved by the Assembly on Saturday, would take effect Jan. 1 and apply to existing nonprofits. The Senate version, approved the same day, would not take effect until January 1, 2015 — shortly after Peevey’s second term ends. He said he does not plan to seek a third term.

Liu did not vote on the Senate bill, and she did not respond to a request for comment.

Peevey, asked if he requested the change in the Senate version, said only, "Obviously, I’m not opposed to it."

Lawmakers appear to be at an impasse.

Rhys Williams, a spokesman for Senate leader Darrell Steinberg (D-Sacramento), defended that chamber's version, which the Assembly rejected Thursday. He said it would give nonprofits needed time to adjust to the new law.

A spokesman for the governor, Evan Westrup, said Brown has not taken a position on either bill.

Peevey, who has been PUC president since 2002, chairs the boards of two nonprofits created by the PUC. He said he does not receive salaries for his roles on the boards.

"I think that these programs that we’ve created are very much in the public’s interest and benefit the general public," he said. "I think anyone who looks at them would come to the same conclusion."

One of the nonprofits, the California Clean Energy Fund, or CalCEF, was created in 2004 with $30 million from Pacific Gas and Electric, part of the settlement in the company’s bankruptcy.

Another nonprofit, the California Emerging Technology Fund, was created after two 2005 mergers involving telecommunications companies. Verizon and AT&T were required to contribute $60 million to the organization over five years.

Apart from the nonprofit issue, the budget bills would reduce funding for one of the commission’s research projects from $150 million to $35 million. It also would require the PUC to adopt a stricter accounting process and would increase the Division of Ratepayer Advocates’ independence from the commission.

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