Michael Peevey

Michael Peevey, president of the state Public Utilities Commission listens to the speakers at the California Public Utilities Commission meeting, Thursday January 27, 2011, in San Francisco, Calif. (Photo: Lacy Atkins / The Chronicle / SFC)

By Jaxon Van Derbeken
Monday, February 16, 2015 – Updated 9:07 am

A Pacific Gas and Electric Co. executive exploited former state Public Utilities Commission President Michael Peevey’s intense interest in a Kern County alternative-energy project in making a backroom deal to win favorable treatment for the company, newly released e-mails show.

Among the 65,000 e-mails that the company made public last month was a string of contacts between Peevey and since-ousted PG&E Vice President Brian Cherry that could prove pivotal to state and federal prosecutors probing possible wrongdoing at the agency.

A Chronicle review of the e-mails shows that in late 2013, Cherry went so far as to tell Peevey that “you owe” another PG&E executive for keeping alive the struggling $4 billion project near Bakersfield. A month later, Cherry called on Peevey’s top aide to repay the debt by intervening to appoint an administrative law judge he wanted to oversee a $1.3 billion rate case.

State agents searched the homes of both Peevey and Cherry last month, looking for evidence of bribery, influence peddling and other felony conduct at the state agency.

In their search warrant affidavit, state investigators said that among the items they were looking for was evidence related to the Kern County alternative energy plant known as Hydrogen Energy California, or HECA. It would convert coal and petroleum refinery waste into power and fertilizer and inject greenhouse gases into nearby depleted oil fields.

The project has been criticized by local farmers and environmentalists, who say it would use large amounts of water and spew mercury and smog-causing compounds into the air of one of the most heavily polluted areas in the country.

Anxious to get plant built

The e-mails between PG&E and the utilities commission, which cover a five-year period, show how anxious Peevey was to get the energy plant built.

In April 2010, the president of the project — a partnership between energy giants BP and Rio Tinto — e-mailed Peevey to urge him to persuade PG&E and two other state utilities, Southern California Edison and San Diego Gas and Electric Co., to buy power from the proposed plant.

“The need to keep this project on schedule is critical,” the project president, Jonathan Briggs, told Peevey. In September 2010, Briggs e-mailed Peevey again to say the power-buying agreement was desperately needed to demonstrate “commercial feasibility” for the untested and costly technology.

“In short, without getting (a power purchase deal) in place by the end of September, Hydrogen Energy will not be able to justify material decisions including final site and land payments in the first week of October,” Briggs wrote.

‘Really need this’

In October 2010, Peevey reached out to Bruce Foster, then lobbyist for the company Peevey once headed, Southern California Edison, telling him that he was particularly “concerned … about HECA. Really need this.”

Cherry, for his part, told the utilities commission’s executive director, Paul Clanon, that same month: “Just got an earful from Peevey on HECA — and we support the project.”

He also e-mailed to Peevey that PG&E’s vice president of energy procurement, Fong Wan, had told a federal energy official who was promising $400 million for the project that the company was working on terms “we can live with.”

But Wan had added that PG&E was not interested in signing “a blank check for HECA,” Cherry wrote.

Peevey began lobbying hard for PG&E President Chris Johns to take part in the power purchase talks.

“As you know, the HECA project is of great importance to me, the governor, and (U.S. Energy) Secretary (Steven) Chu,” Peevey told Cherry in an e-mail in October 2010. He said it was “very important” that Johns attend a meeting at the end of the month to come to an agreement about buying power.

But with still no power purchase deal by late 2011, a Massachusetts company, SCS Energy, assumed control of the foundering project from the BP-Rio Tinto venture.

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