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Federal prosecutors probe relationship between regulators and PG&E

By Marc Lifsher |

Federal prosecutors in San Francisco have opened an investigation into controversial emails and other contacts between state regulators and Pacific Gas & Electric Co.

California’s largest utility said Monday it was informed by the U.S. attorney’s office that an investigation was underway into emails between the utility and the Public Utilities Commission that have come under fire in recent months.

At issue are hundreds of emails detailing conversations and even a dinner attended by a regulator and a utility official. Many of these contacts involved a major rate-setting case and the 2010 explosion of a natural gas pipeline that killed eight, injured 66 and destroyed 38 houses in the Bay Area city of San Bruno.

Meanwhile, new campaign finance reports show that Gov. Jerry Brown also has sought to distance himself from the utility and the growing scandal.

The governor’s reelection committee returned $9,000 in contributions from the utility’s executives out of “prudence due to inquiry,” Brown campaign spokesman Dan Newman said Monday.

The emails at the heart of the new investigation were first called into question by the mayor of San Bruno. He accused the company and the commission of having “too cozy” a relationship and that it led to lax regulation and unsafe conditions that led to a firestorm that leveled a neighborhood in his city.

The contacts between the utility and the regulator, said Mayor Jim Ruane, were a major violation of PUC rules and flaunted legal principles by allowing one-sided private communications between the regulator and utility — a party in many pending cases before the commission.

The utility, after reviewing its emails last month, fired three top executives. The chief of staff to Public Utilities Commission President Michael Peevey resigned.

The federal investigation, disclosed Monday, follows a federal criminal indictment concerning San Bruno.

The indictment charged the company with negligence and obstruction of justice in connection with the San Bruno blast. PG&E pleaded not guilty in August. The U.S. attorney’s office in San Francisco did not respond to a request for comment.

The latest batch of emails disclosed Monday offer a more detailed look at the deep and ongoing connection between the utility and regulators.

They provide a glimpse into wide-ranging discussions that also include power plant projects, global warming, renewable energy, ballot measure campaign contributions and the 2010 explosion — as commissioners discussed sensitive political and regulatory matters with utility officials.

One involved exchanges between Commissioner Michael Florio and former PG&E Vice President Brian Cherry about gas pipeline pressure in the city of San Carlos.

Another provided a synopsis of dinner conversations between Cherry and Peevey in which the commission president dispenses public relations advice to the company and seeks contributions for a political campaign opposing an initiative to weaken the state’s efforts to curb global warming.

Cherry was one of the executives fired last month.

PG&E said in a statement that it planned to cooperate with federal law enforcement in compliance with an internal code of conduct and a “no excuses” policy.

Company spokesman Keith Stephens said both the previous emails and the latest batch were improper. “We fully expect a fine to come out of this,” he said.

All the emails submitted by PG&E are expected to be reviewed during a hearing set for Tuesday before a Public Utilities Commission administrative law judge.

Both San Bruno officials and ratepayer advocates scheduled news conferences outside PUC headquarters in San Francisco to demand that regulators and law enforcement agencies conduct in-depth investigations of about 65,000 emails covering five years that PG&E said it had reviewed recently.

“The city is outraged that PG&E’s malfeasance extended to an attempt to manipulate decision making,” said San Bruno City Manager Connie Jackson.