Shortly after his almost certain reelection in November, Governor Jerry Brown must decide whether to reappoint Michael Peevey as president of the California Public Utilities Commission. Peevey’s term runs out at the end of the year.
In mid-August, Brown voiced strong support for Peevey in an interview with editors of the San Jose Mercury News. A month earlier, that newspaper had editorialized, “If Gov. Jerry Brown persists in backing his outrageously unethical appointee [Peevey], he might as well change the name to the Pro Utility Commission.” Around the same time, the San Francisco Chronicle called for Brown to oust Peevey. The Modesto Bee, citing Peevey’s “overseas junkets” paid for by utilities, said it was time for Peevey to go because he “regards utility company executives as peers and partners.”
The Southern California press has also been hard on the commission’s president.
Peevey is suspected of pulling strings in such matters as San Diego Gas & Electric’s attempt to make ratepayers pick up the tab for uninsured expenses of the 2007 fires, caused by the utility. Recently, emails between commission and Pacific Gas & Electric officials have shown that the company said it didn’t want administrative law judges who would recommend tough penalties for the company’s role in the 2010 San Bruno pipeline explosion. The commission complied, and the recommended penalties were much less than the staff had suggested. Indignant Bay Area politicians want the attorney general to investigate the commission for its pro-utility behavior.
The governor and Peevey (both in their mid-70s) are old friends, dating back to the years in which Peevey was active with organized labor and the Democratic Party. After getting two degrees in economics at the University of California/Berkeley, he worked for the federal government in labor economics and then became chief economist for the American Federation of Labor/Congress of Industrial Organizations (AFL-CIO). In 1984, he joined Southern California Edison. He was a senior vice president and chief lobbyist for the company in Sacramento. Edison’s chief executive, Howard Allen, himself a former lobbyist, had a fondness for executives with political connections.
Peevey shortly became an executive vice president. Another executive vice president was John Bryson, who also had political connections. He was a former president of the California Public Utilities Commission, a graduate of Stanford with a law degree from Yale, and smooth and oily — like politicians. “Howard Allen played the two against each other,” says Carl Wood, a former commissioner, now director of regulatory affairs for the Utility Workers Union of America.
“Peevey is not Bryson’s kind of guy, or the other way around. Bryson is Ivy League–looking and educated, suave, friendly, sophisticated. Peevey is crude but intelligent,” says a former commission executive. Says a former Edison executive, “They were oil and water.”
As executive vice president, Peevey in the late 1980s was put in charge of Edison’s attempted hostile takeover of San Diego Gas & Electric. To many in San Diego, Peevey did not appear so intelligent in his speeches and radio and TV appearances. Edison lost big. San Diegans were surprised when, in 1990, Peevey was named president of Southern California Edison. He also served as president of the parent, Edison International.
But — and it’s a big but — Peevey was not chief executive officer. That job went to his foe, Bryson. Peevey lasted less than three years. In 1993, barely in his mid-50s, he “retired” from Edison and walked out with a bundle of stock and possibly severance pay, too; my sources disagree on the latter point. There is agreement on one point, as described by a former Edison executive: “He didn’t want to work for Bryson,” and Bryson didn’t want Peevey around, either.
Peevey, not permitted to compete with Edison for two years, went with a public relations/lobbying firm, then began taking equity interests in smaller energy firms. After he raked in a $10 million capital gain from selling one firm, he and his wife Carol Liu, now a state senator, lined up a kinky tax shelter. He was told he would pay almost no taxes using the scheme but would pay $3.5 million if he played it straight. The government went after the tax shelter — and Peevey and his wife took the accounting firm to court for giving them bad advice.
Peevey championed competition in the energy business. Unabashedly, he favored deregulation, although he said it had to be tweaked in California. He told others that he had made a bundle of money trading energy contracts.
Oh, yes. He also had stock in Enron, the corporate hoax that fleeced California in the 2000–2001 energy crisis before collapsing. Peevey dumped his Enron stock.
Despite these black marks against him, in March of 2002, Peevey was named a commissioner of the California Public Utilities Commission. Consumer groups howled that a former Edison president and deregulation yahoo would be named to the commission. At the time, Loretta Lynch was president of the commission and was tough on the utilities and a champion of re-regulation. Carl Wood, then a commissioner, was her steady ally in demanding responsibility of the utilities. “We were unpopular with big business, which had a venomous hatred for Lynch,” recalls Wood. “To mollify the corporations,” then-governor Gray Davis named Peevey as president of the commission at the end of 2002, even though he had been there only about eight months. Pro-consumer groups howled again.
Peevey’s supporters pointed to his longtime association with labor unions. Insiders knew better. “The only time Peevey is pro-labor is…when he is using labor to maximize revenue for the utilities,” says a former commission official. “He is a corporate liberal. He is not responsive to consumer interests,” says Wood.
Brown and Peevey are buddies “because Peevey does what Brown tells him to do,” says Lynch. “Peevey has always been close to PG&E and [Southern California Edison]. So has Brown.”
Indeed, Brown’s executive secretary is Nancy McFadden, who joined the governor after serving as senior vice president to the chief executive officer of Pacific Gas & Electric. In essence, she is Brown’s chief of staff without the title.
In 2011, Brown hired Dana Williamson, Pacific Gas & Electric’s director of public affairs, as senior advisor for cabinet and external affairs. Two years later, she was named cabinet secretary — the person to whom other agency secretaries report. It’s often considered the second-most-powerful post in the gubernatorial administration.
When Lynch was deposed, Peevey threw a party, to which he invited utility executives. Lynch wasn’t invited.
Asked what another Peevey term as head of the California Public Utilities Commission would be like, Lynch had one word: