TURN Statement on SONGS Back Room Deal

 

April 17, 2015, San Francisco–Recent revelations of back door dealings between former CPUC President Michael Peevey and former SCE General Counsel Steve Pickett raise concerns about Edison’s good faith participation in the San Onofre settlement. TURN was a good faith participant in the settlement negotiations, and was not aware of the Warsaw note, the private meeting, or any agreement between CPUC President Peevey and SCE, at any time before or during the extended settlement negotiations that led to the proposed settlement.

 

In accordance with the rules, TURN did not discuss the proposed settlement with any CPUC Commissioners or staff. TURN’s decision to settle this case was based on its own independently developed litigation positions, its assessment of potential outcomes based on past CPUC decisions, and close coordination with the Office of Ratepayer Advocates. Had the case been fully litigated and decided under the tenure of Mr. Peevey, consumers would likely have been forced to pay a much larger share of the costs for the shutdown nuclear plant.

 

The approved settlement terms were favorable to customers given existing precedents. However, the settlement was a compromise. TURN and ORA took aggressive litigation positions that, if adopted, would require shareholders to pay at least $600 million more than what was included in the final settlement. If the case is reopened, TURN remains ready to litigate the factual and legal issues in pursuit of the best possible outcome for consumers.

 

The settlement was executed and submitted for CPUC approval on April 3, 2014. Afterwards, President Peevey’s office contacted TURN and asked for an ex parte meeting. On April 10th, TURN attended this meeting and articulated our support for the settlement. After TURN’s presentation, Mr. Peevey stated that he had met with Steven Pickett about San Onofre over a year earlier and waved several papers he claimed were notes from that meeting. He did not allow TURN to examine the notes. President Peevey then said he wanted a change to the settlement to require SCE and SDG&E shareholders to contribute to climate change research at the University of California. TURN complied with the CPUC’s ex parte rules and filed a notice of the meeting one day after it occurred.

 

TURN was disturbed to hear that Mr. Peevey had engaged in backroom talks with SCE executives. But TURN was not surprised given that Mr. Peevey routinely had private, unreported contacts with utility executives on a wide array of pending CPUC issues, in blatant violation of his own Commission’s rules. Such meetings were a hallmark of President Peevey’s leadership style.

 

TURN attempted to disqualify President Peevey in other cases due to his private dealings with utilities. In every case, TURN was unsuccessful despite having substantial evidence of Peevey’s improper conduct. In the SONGS proceeding, 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.

 

TURN did not have an opportunity to read the notes until they were recently provided by the Attorney General’s office. The approved settlement is far better for customers than the terms described in Mr. Peevey’s notes. A summary of these differences is being released today by TURN and the Office of Ratepayer Advocates and shows that the settlement saves customers between $780 million and $1.06 billion compared to the notes. The table below summarizes the differences.

 

“The Warsaw meeting was a flagrant violation of CPUC rules governing ex parte contacts,” said TURN staff attorney Matt Freedman. “The CPUC has properly ordered SCE to turn over all documents relating to communications with CPUC decisionmakers about the possible settlement of SONGS. Based on the responses to this ruling, TURN may seek a reopening of the case. At a minimum, TURN will urge the CPUC to assess the maximum sanction on SCE for its ex parte violations and apply any financial penalties toward reducing customer rates.”

 

Theses revelations demonstrate the urgent need for CPUC reforms including prohibitions on ex parte meetings, harsh sanctions for non-compliance, and a meaningful process to disqualify Commissioners who engage in private dealmaking. “TURN is urging the Legislature to enact new laws that would crack down on backroom dealing between the CPUC and utilities”, Freedman said. “TURN will also urge the Legislature to change current laws to ensure that utility shareholders are held fully responsible for the cost of failed power plants.”

 

SUMMARY OF DIFFERENCES BETWEEN SETTLEMENT AND PEEVEY NOTE (full analysis attached)

 

COST CATEGORY RATEPAYER SAVINGS UNDER SETTLEMENT
Base plant >$200 million
Nuclear fuel ≤$65 million
Replacement steam generators $0 – $189 million
O&M costs $80.9 million
Use of decommissioning trust funds ≥ $434 million
Greenhouse gas research $0 – $90 million
NEIL/MHI recoveries TBD based on actual recoveries
   
TOTAL SAVINGS $780 – 1,059 million

TURN/ORA Comparison of Settlement and Note