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San Onofre Deal Concocted in Secret

Read the original story at the San Diego Union TribuneWarsaw was not the only undisclosed gathering while nuclear plant shutdown pact took shape

San ONofre Secret Deal

By Morgan Lee 3:48 p.m.  May 23, 2015

The public was none the wiser.

All the key parties in the room for the only public hearing on the $4.7 billion settlement agreement for shutdown costs at the failed San Onofre nuclear plant knew that the pact had its origins at a secret meeting in Poland.

The consumer advocate and power company executive who agreed to the settlement, and two regulators who would sign off, all knew about handwritten notes laying out a framework on the stationery of the luxury Hotel Bristol Warsaw.

Even as iconoclastic San Diego attorney Michael Aguirre grilled them about suspected backchannel communications at that May 2014 hearing in San Francisco, the meeting remained a secret.

When California Public Utilities Commission members went to approve the agreement last November, assigning 70 percent of costs to utility customers, they did so by approving a document that repeatedly asserted there was no collusion baked into the deal.

A trove of emails and corporate correspondence released in the past two months shows the extent to which the parties knew about the encounter between top regulators and a Southern California Edison executive during a study trip to Poland in March 2013. They participated in subsequent private gatherings of their own.

The documents reveal at least 45 more previously undisclosed confidential conversations, phone calls and email exchanges among senior regulators and utility executives, not including minor scheduling matters.

The private communications date back to November 2012, shortly after the agency opened its investigation into costs and responsibilities for the radiation leak that forced the shutdown of the 44-year-old twin-domed power plant on San Diego County's north coast.

They include a business lunch, numerous dinners, phone calls and chance encounters like a shared car ride from the San Francisco airport. They extend to a private meeting in the offices of then-commission President Michael Peevey on the morning of May 14, 2014, just before the hearing.

None of the communications - even the meeting that same day - were disclosed under questioning at the hearing. None of the communications were reported on disclosure forms for behind-the-scenes communications, and Edison says they did not have to be.

'Nice lunch with Peevey'

At the May 14 hearing, Edison President Ron Litzinger testified on behalf of the regulated utility monopoly. Litzinger was well acquainted with the Poland meeting. He and other senior executives had debriefed their colleague, Stephen Pickett, upon his return to the United States.

At the hearing, Litzinger was asked repeatedly about whether Edison had unreported meetings with utilities commissioners. Behind-the-scenes communications are required to be disclosed to ensure a fair public process for all parties interested in commission decisions.

"How many times have you spoken to Mr. Peevey since November 2012?" Aguirre asked, in one of a series of questions trying to get at the issue.

"Objection, your honor, relevance," said a private counsel for Edison.

"Sustained," said the administrative judge oversee the hearing.

The one answer Litzinger did give was limited in scope.

"The only ex parte communications I had with commissioners was following the Phase 1 proposed decision," Litzinger said, referring to a meeting of all San Onofre stakeholders in January 2014 in San Francisco. "And it was noticed."

The San Diego Union-Tribune reviewed documents released by Edison as part of a commission investigation into possible sanctions against the company for failing to disclose the meeting in Warsaw.

According to the records, Litzinger had 30 meetings, phone calls or email exchanges with commissioners or staffers regarding San Onofre between January 2013 and June 2014. He met directly with Florio and Peevey while formal settlement negotiations were underway.

For instance, according to an eyewitness account by an Edison colleague, Litzinger engaged in a discussion of settlement details with Peevey over lunch at Lucille's Smokehouse BBQ restaurant in Chino Hills on Sept. 6, 2013.

"Nice lunch with Peevey. Friendly and cordial," wrote Les Starck, senior vice president of regulatory affairs for Edison, briefing a colleague by email. Peevey "said that the boundaries of any decision would be that we get all our capital and no replacement fuel (costs), or none of our capital and all replacement fuel. Ron (Litzinger) responded that it would be a combination of disallowances of the two."

A colleague warned Starck not to put such information in emails.

On May 2, 2014, Litzinger met in private with Peevey and Commissioner Michel Florio for a discussion of possible settlement modifications.

At that meeting, Peevey waved around pages of notes - apparently the outline from Poland. He wanted settlement modifications for a $25 million contribution to the University of California for research on reducing greenhouse gas emissions, a provision discussed in Warsaw. The modification would eventually make its way into the agreement.

Edison later consulted with Florio about whether that meeting needed to be disclosed. By Edison's account the meeting was not disclosed on the advice of Peevey aide Carol Brown.

Edison says the Warsaw meeting with Peevey did not sway its settlement negotiations with consumer groups and that the president of the electric utility testified truthfully at the hearing.

The company says its executives were passive listeners at such meetings as the barbecue lunch, staying mute or avoiding any substantive response.

The state's Office of Ratepayer Advocates says Edison officials appeared to be using the concept of one-way communications or "listen only mode" to avoid reporting requirements and gain an unfair advantage in commission deliberations.

"The notion that an interested person can consistently listen to such information, without responding in any fashion, appears to be a fiction," attorneys for the office wrote.

Finding of no collusion

The May 2014 evidentiary hearing was attended by commissioners Florio and Peevey, whose role was as impartial arbiters of a deal worked out between utility companies and consumer advocates. They were peppered with questions about whether they secretly meddled.

"You have an obligation to put on the record if you had any knowledge of the settlement negotiations or in any way participated in them while they were underway," Aguirre said. "Did you?"

The question was dismissed as out of order by the judge but Peevey and Florio spoke up anyway.

"At numerous points on the record of this proceeding, I urged the parties to pursue settlement and I was pleased when one was achieved," Florio said. "I had no part in formulating the settlement and was not aware of it until it was published online."

Edison executives have reported several meetings with Florio. One of them was in San Francisco while formal settlement negotiations were underway, in June 2013, described as a brief update on San Onofre employee severance bargaining efforts.

Florio was removed last month as the commissioner in charge of overseeing the San Onofre investigation, without explanation.

As for Peevey, he erupted when asked about his possible communications with Edison at the hearing.

"I'm not here to answer your goddamned questions. Now shut up - shut up," Peevey told Aguirre, who once served as city attorney for San Diego.

After the hearing, Peevey explained his outburst, in a response to the Union-Tribune.

"The proposed settlement was conceived and agreed to by the settling parties without any knowledge by me of its contents," he wrote.

His statement is contradicted by numerous written records that have emerged since then.

In addition to the meeting in Poland, Peevey gave advice to several Edison executives as they shut down the plant and initiated settlement negotiations.

With talks underway, he discussed details with Litzinger over lunch. Peevey dined on a Friday night with Ted Craver, CEO of the parent company Edison International, providing public relations advice and discussing legal claims related to San Onofre.

The utilities commission approved the settlement in a 5-0 vote on Nov. 20, 2014. At the time, it dismissed several allegations of collusion as "misstatements of evidence and rulings, and opinion which lacks foundation."

"No party has made a showing of 'collusion' by the commission, utilities and ratepayer organizations to avoid hearings on allocation of steam generator replacement project costs and the reasonableness of Edison's conduct," the decision stated.

Peevey left the utilities commission at the end of a second term in December of last year and remains the focus of state and federal criminal investigations that grew out of revelations of his relationships with utility company executives he was charged with overseeing.

Notes from the Poland meeting were seized by law enforcement in a raid on Peevey's home in January of this year, as first reported in the Union-Tribune.

No access to notes

The first order of business after the Poland meeting was to find a consumer group with which to reach agreement on a settlement of San Onofre shutdown costs.

The Utility Reform Network, a San Francisco-based nonprofit, was entrusted with negotiating settlement provisions on behalf of utility customers.

The group learned of the secret meeting in Poland on April 10, 2014. On that day, Peevey met with TURN's lead settlement negotiator told him about the meeting and waved in the air several papers he claimed were notes from the meeting.

At the May 2014 hearing, a representative for TURN sat in silence through heated exchanges about possible private communications between Edison and the utilities commission.

In a news release last month, TURN explained why the group never spoke out.

"TURN did not have access to the notes or any other specific evidence to demonstrate, in the event of denials by Mr. Peevey, that the Warsaw meeting had actually occurred," it said.

© Copyright 2015 The San Diego Union-Tribune. All rights reserved.

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