Ex-CPUC boss says regulators should have held hearings

More than a decade after her departure from the California Public Utilities Commission, Loretta M. Lynch has waded into a challenge of the state’s wildfire liability fund, arguing regulators failed to hold evidentiary hearings before saddling ratepayers with a $13.5 billion bill.

Assembly Bill 1054 was enacted July 12, 2019 and created a $21.5 billion fund for private utilities to dip into to offset liabilities from future wildfires, even if they are proven to have imprudently managed their equipment. Customers and taxpayers will contribute $13.5 billion to the fund, according to the law. CPUC does not typically allow utilities to socialize liability to ratepayers unless they prove they were prudent managers of their infrastructure when disaster struck.

Michael J. Aguirre and Maria C. Severson, partners at Aguirre & Severson LLP in San Diego, sued the state and CPUC on behalf of ratepayers to invalidate AB 1054. The government colluded with utilities to pay for an unlawful gift of public funds, the lawsuit alleges. Cannara et al v. Dept. of Water Resources director Karla Nemeth, et al 3:19-CV-04171 (N.D. Cal., filed Jul. 19, 2019).

“CPUC’s denial of an evidentiary hearing relating to the imposition of a nonbypassable charge imposed upon ratepayers in the amount of billions of dollars runs counter to the Commission precedent and Constitutional protections that the Commission is sworn to uphold,” Lynch wrote in her declaration Monday to Judge James Donato, of the Northern District of California.

Last month, Donato refused to throw out Aguirre’s lawsuit, despite the state urging him to do so. Instead, he asked Aguirre to point out how CPUC failed to provide reasonable notice and hearing of its plans. Donato also invited the state’s lawyers to outline what happened at the hearings.

Lynch, who was appointed to CPUC by former Gov. Gray Davis, is a longtime and vocal critic of energy behemoths, most famously of now-defunct Enron Corp. and its corporate directors’ manipulative business practices in the early aughts. At CPUC, Lynch fought for renewed regulation to keep rates down. She has also supported a state takeover of Pacific Gas & Electric Co.

Aguirre is a former federal prosecutor and city of San Diego attorney who sued Enron and other energy companies in 2000 on behalf of California residents and then-Lt. Gov. Cruz Bustamante for price manipulation over power plants when it sought to cash in on the energy crisis.

Lynch’s declaration supports Aguirre and Severson’s supplemental brief outlining every occasion CPUC denied the public an evidentiary hearing over the $13.5 billion charge and questioned the Commission’s reasons for denial.

CPUC’s rules of procedure say parties can request the presence of an assigned commissioner at a hearing or specific portion of a hearing during any ratesetting proceeding, Lynch wrote.

The requested evidentiary hearing is considered a “rate-setting” procedure, which the Commission must conduct to ensure the imposed charges are just and reasonable, Lynch wrote in her declaration.

The hearing would’ve tested the claims of lower rate costs, according to Severson. It would also have given customers a chance to contest CPUC’s assumption that continuing credit downgrades for private utilities would be accompanied by increases in ratepayer costs to finance utility investments, Severson wrote.

According to transcripts, Severson and Aguirre documented 10 instances over six months where CPUC denied their requests for evidentiary hearings after the passage of AB 1054.

CPUC argued no meeting was necessary as parties didn’t raise material issues of disputed fact. Instead, CPUC said it would evaluate records provided by the governor’s office in the form of judicial notice to justify the $13.5 billion charge passed onto ratepayers.

The evidentiary hearings would’ve gotten to the bottom of PG&E’s mismanagement that began the devastating Northern California wildfires from 2015 to 2018, Severson wrote. PG&E was already a criminal probationer for the 2010 San Bruno pipeline rupture and yet pleaded guilty to 84 manslaughter charges for the 2018 Camp Fire just a few weeks ago, she added. Once again, evidentiary hearings would’ve served its purpose to prove PG&E didn’t make any real safety reforms as promised, and would continue incurring liabilities with customers footing the bill, Severson argued.

Representatives for CPUC could not be reached for comment Friday. Department of Water Resources spokesman Ryan Endean declined to comment.