Capitol fight brews over PUC confirmation

A behind-the-scenes Capitol battle is heating up over the confirmation of a key appointment to the Public Utilities Commission, Rachelle Chong, who is backed by telecommunications companies and Gov. Schwarzenegger, but bitterly opposed by consumer activists.

Also up confirmation is PUC President Michael Peevey, who, like Chong, is close to Schwarzenegger’s chief of staff, Susan Kennedy.

If the two are confirmed by the Senate, their terms would long outlast Schwarzenegger’s governorship. Commissioners serve staggered, six-year terms.

Chong, considered an expert on broadband and telecommunications, was appointed by the governor in 2006 to fill the seat vacated by Kennedy — who left to become Schwarzenegger’s chief of staff — and reappointed last year. Peevey, a former president of Edison International, was first appointed to the PUC in 2002 by former Gov. Gray Davis and later reappointed by Schwarzenegger. 

Both must be confirmed by the end of the month, Capitol sources said, in order to remain on the commission. Their hearings before the Senate Rules Committee are scheduled for Dec. 16, nongovernment sources said, although there was no immediate confirmation from the Senate. One Senate source said only Peevey’s hearing had been scheduled. As of Monday afternoon, there was no listing of a Senate Rules Committee meeting in December.

The Utility Reform Network, or TURN, a San Francisco-based consumer group, has opposed Chong for taking the lead role for what they described as industry-friendly regulations deregulation, including rules to boost basic rates by $3.25 last January, $3.25 next next month and a removal of the rate cap in January 2011.  Telecommunications companies have supported her.

“In spite of strong evidence to the contrary… Chong has doggedly insisted that the telecommunications market in California is robustly and that such competition will protect consumers’ interests,” TURN wrote Senate Leader Darrell Steinberg.

“What does it tell you when the top priority of the regulated company is to support the confirmation of a regulator who helps them so completely?” said TURN lobbyist Lenny Goldberg.

Capitol sources said Chong’s confirmation is a top political priority of telecommunications companies, who have been aggressively lobbying the Senate about her confirmation. Kennedy, too, has aggressively been pushing  her confirmation.

Chong has been instrumental in “facilitating fair competition, and encouraging investment,” Verizon told Senate Leader Darrell Steinberg, D-Sacramento, in a Nov. 23 letter. Chong “has the knowledge, experience, and judgment to navigate the complex and changing landscape of the intermodal marketplace for the benefit of California consumers.” Verizon also urged support for Peevey.

“We believe both Commissioner Chong and President Peevey have been doing a good job for the state of California and for Californians and as a result we are supportive of their confirmations,” said AT&T spokesman H. Gordon Diamond.

Chong drew fire at her first confirmation hearing in 2006 for inserting last-minute language into a complex, 282-page proposal dealing with telephone-company deregulation.

That language was later interpreted by AT&T as a green light to alter some of its marketing practices, according to published reports. Those practices had come under scrutiny five years earlier when the company — then PacBell — faced a $40 million-plus fine and had been sanctioned by the PUC for abuse-marketing conduct. The sanctions, still in effect, were aimed at halting practices that included targeting customers who inquire about routine service or billing issues with full-blown marketing pitches.

But the PUC, its members unaware of the obscure language, approved the plan in August  2006 by a 5-0 vote.

“At the last minute, and at the last day, this particular paragraph was inserted that let AT&T out from under. The way this was slipped into the decision was not acceptable,” said Commissioner Geoffrey Brown, who later co-authored an impassioned, scathing dissent. He voted in favor, he said, “but I didn’t know what was in there. Nobody knew what was i there.”

At the time, Chong’s staff said the language had been prepared well in advance and that it included a memo to the commissioners that said, in effect that there were major changes in the document. In private meetings in the Capitol, however, she was questioned closely about the paragraph insertion and said the language came from her staff and that its insertion was inadvertent, sources said.

Chong, a Republican lawyer from Stockton, is the first Asian-American member of the PUC and a former member of the Federal Communications Commission. She specializes in regulatory law, and describes herself as a “strong advocate of competition in all communications markets.”

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