PUC’s firecracker ignites final salvo

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The San Diego Union-Tribune

Loretta Lynch’s legacy on the California Public Utilities Commission may long be debated, but one point is resolved: She’s going out with bang.

Within the last month, San Diego’s Sempra Energy accused Lynch of a vendetta against the company and blamed her for a PUC investigation that concluded it rigged natural gas prices during the power crisis.

At the same time, a Sempra executive sued Lynch for invasion of privacy and said she may have violated state law for her role in a covert videotaping that captured him talking of political payments to influence the PUC.

What’s more, Lynch’s central role in an investigative television report about energy company influence at the PUC — a report that included the covert videotaping — sparked protests from the PUC president and others about unfair journalism.

“I don’t go along to get along,” said Lynch, stating the obvious.

The 42-year-old attorney has a rapid-fire, fact-a-second speaking style that can leave listeners begging for breaks. By most accounts, she takes as good as she gets and expects a similar command of fact and detail from those who advocate cases before her.

She leaves as a commissioner at year’s end vilified by energy companies and applauded by consumer advocates, who note a curious turn in her career.

At the close of 2002, Gov. Gray Davis, who had appointed Lynch president of the PUC, demoted her from that post to be a regular commissioner.

Many officials facing that prospect would instead choose resignation. But Lynch seemed to find liberation in the demotion and took reassignment as an opportunity to abandon any obligation to respect Davis’ agenda.

“What I learned is, I like to fight for what’s right,” Lynch said. “And I slept better.”

All agree that Lynch is unlikely to follow the path of former regulators who migrate to positions within the industry they oversaw. Beyond that, her tenure as a regulator splits observers along a sharp and predictable line — industry and consumer.

“She was Gray Davis‘ worst appointment,” said Gary Ackerman, executive director of the Western Power Trading Forum, an energy industry group.

“She was a breath of fresh air,” said Michael Shames, executive director of the Utility Consumers’ Action Network.

Large loving family

Lynch remembers her earliest years surrounded by a large loving family. The fifth of six children from a working class Missouri family, she labored as a janitor in high school and went through college balancing jobs and study.

A stint as a California Assembly intern turned her onto politics and convinced her to become a lawyer.

She won acceptance to Yale Law School and arrived at the New Haven campus heavily laden with student loans — as well as scholarships — and eager to enter the Ivy League.

But easy entry was not to be.

Yale’s contentious relations with university staff had erupted into a strike, and workers set up picket lines around the campus. Lynch would not cross the lines, while the majority of her class walked past the pickets into their classrooms.

She has no regrets for her support of the workers.

“You can’t straddle the line in a strike,” said Lynch, whose maternal grandfather helped organize a railroad union.

By respecting the picket line, she missed the first 16 weeks of class, struggling to keep up with course work by listening to tape recordings of lectures at her apartment.

“It was a great defining moment,” Lynch said. “You have to take a public stand and abide by the consequences.”

After law school, Lynch clerked for a judge on the Ninth Circuit Court of Appeals and later took a job with an appellate law firm in Washington, D.C.

Despite a heavy contingent of Yalies at the firm, Lynch says it was not the best place for her and she returned to California to work on the failed gubernatorial campaign of John Van de Kamp, a Democrat.

She then spent a year working on a Legal Society of Los Angeles suit on behalf of the homeless.

Joining Bill Clinton’s presidential campaign early in 1992, Lynch helped coordinate the campaign’s responses to the many personal allegations raised about the candidate.

“I was so charmed from the beginning,” she recalled. “This was the smartest and best man I had met in politics. When he told me he had not received a draft notice, I believed him — even though I had seen it.”

Her work with Clinton completed, she returned to a law firm in San Francisco and kept her hand in politics. She worked on Gov. Gray Davis‘ staff and was appointed to the presidency of the PUC in 2000. Lynch, a hard-driving workaholic by all accounts, thought it might be a relatively tranquil assignment.

But the California electricity crisis obliterated any notion of tranquillity.

Advocates had promised that deregulation would bring competition and lower power prices to the state. But by 2000, prices were soaring, supplies tightening, and the PUC was wrestling with the question of allowing state utilities to buy electricity under long-term contracts.

At that point, utilities were securing the vast bulk of electricity they needed with purchases from daily power markets. By signing long-term contracts, suppliers said, California could reduce demand and curb soaring prices in those spot markets.

But the contracts would have locked in electricity prices far above what had been expected under deregulation. The energy industry accused Lynch and others on the PUC of hamstringing their ability to sign such deals because they refused to waive a requirement that would subject the contracts to later PUC review.

Without the contracts and with market manipulation continuing, the crisis raged well into 2001.

“Lynch stood in the way of contracts that would have taken volatility out of the market and that ended up costing consumers billions of dollars,” said Jan Smutny-Jones, executive director of the Independent Energy Producers Association.

Smutny-Jones said that was one of several Lynch decisions that turned out to be “disastrous” for consumers.

Dispute over contacts

But Lynch says she had no problem with utilities signing contracts — provided they were subject to standard regulatory review.

“The law required reasonableness reviews,” she said. “The energy companies were using the crisis as an excuse to blow out reasonableness reviews.”

The PUC commissioner says her biggest regret during the power crisis was not pressing harder for California to take over a power plant, a move she believes would have short-circuited price rigging and the withholding of electricity supply by energy providers.

The physical takeover, she argues, would have sent a message to rogue suppliers and traders that California would not tolerate the market manipulation that was jeopardizing the economy and public safety.

“That was the biggest mistake,” said Lynch, who estimates the crisis cost the state $40 billion. “I had done all the legal research. We had retirees ready to operate the plants. I had the legal strategy, and Gray Davis would not do it.”

Davis responded later, by demoting her.

As president and afterward, however, she aggressively led PUC investigations into market rigging and helped lead the campaign for refunds from energy companies, a campaign yet to yield most of what she says the state is owned.

But if Lynch angered utilities by declining to give them carte blanche for energy contracts, she also angered consumer groups by voting for an electricity rate hike and a bailout plan for Southern California Edison.

“It always astounds me that people point to her as someone who blocked deregulation,” said Douglas Heller of the Foundation for Taxpayer and Consumer Rights, a Santa Monica advocacy group that opposed deregulation. “Early on, she was on the front lines of bailing out the (state’s) utilities through the crisis.”

Heller added that other Lynch votes demonstrated her ambivalence, including her aggressive challenge of non-utility energy companies accused of market rigging.

“She seemed like someone who in her heart believes in public service and was working for a governor who was not committed to the public interest,” Heller said. “As a result, she had a divided loyalty between her heart and her head. But after she was replaced as president, she became one of the most energetic and consistent consumer advocates in public office.”

Heller called Lynch’s recent whistle-blowing in a KCBS television report about corporate influence at the PUC a “heroic” act and said what she did advanced public understanding of the commission’s operations.

That KCBS report included allegations that energy companies are making contributions to Assemblywoman Carol Liu, the wife of PUC President Peevey, as a way to curry favor and that the companies also provide inappropriate gifts to regulators.

Peevey strongly disagreed with the report and said Lynch’s own record as commissioner was “anti-consumer” because she opposed badly need energy projects.

Advocate role at issue

“Is it being a consumer advocate to get a dollar less on a monthly bill or is it in meeting the energy environmental needs of the community?” Peevey said.

He added that Lynch had a “very strong personality and was one that tried to control everything,” traits that also limited her effectiveness as a commissioner.

Sempra continues to ask the commission to exclude Lynch from votes regarding the company, including a possible vote approving or rejecting the natural gas price-rigging investigation report scheduled later this month.

The company has described Lynch as a “disgruntled lame duck” who has spent the last two years trying to “disadvantage” Sempra companies. Sempra declined to comment for this story.

Smutny-Jones says Lynch got “belligerent” when demoted to the ranks of a regular commissioner.

“She is very judgmental and comes to the judgment very quickly,” Smutny-Jones said. “She has assumed a role of Joan of Arc, and I don’t think that’s appropriate.”

Which is exactly the opposite impression she leaves with Michael Shames, the consumer advocate with UCAN.

“She ruffled feathers and asked tough questions right from the start,” Shames said. “And she was demanding. You knew in a meeting with her, you were going to be interrogated and tested.

“But I love that she placed a high regard on facts, which is a lot different from what we see now at the PUC, where facts are less important than who you are connected to and what the political winds are.”

Lynch said some of her actions during the crisis were taken to forestall what she believed would have been even worse alternatives proposed by energy companies or Wall Street consultants.

“I’m the one who read the thousands of e-mails and letters from people who said they were going to lose their houses or had to choose between new school clothes and electricity,” she said.

“Those just stick with me to this day.”

Loretta Lynch
Personal: Born Feb. 22, 1962, in Independence, Mo. Lives in San Francisco. Engaged.
Education: Bachelor of arts, 1983, University of Southern California; juris doctor, 1987, Yale University Law School.
Career highlights: Member of the California Public Utilities Commission (term ends Dec. 31); president of the PUC, 2000-2002; director, Office of Policy and Research for Gov. Gray Davis, 1999; deputy policy director with Bill Clinton’s 1992 presidential campaign; partner, law firm Keker & Van Nest, San Francisco, 1991-99; special counsel, Legal Aid Foundation of Los Angeles, 1990-91.
What’s Next: A book about the California energy crisis and a wedding in 2005.
Contact the author Craig Rose at (619) 293-1814; [email protected]

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