PUC’s Chong gets closed-door Senate review

Public Utilities Commissioner Rachelle Chong is waging a closed-door campaign to protect her Senate confirmation as Democrats grill her over allegations she surreptitiously sought to ease commission sanctions against AT&T.

Chong, a Schwarzenegger appointee, is scheduled to have her confirmation hearing before Senate Rules next month, and Democratic sources say her job is in jeopardy.

Chong’s political problems stem from allegations that she slipped 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. 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 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 in there.”

“It let them do the very things that we fined them for in 2001,” noted former PUC President Loretta Lynch, who followed the proceeding.

Chong’s telecommunications specialist, Tim Sullivan, said the language was prepared well in advance, and that he included a memo to the commissioners that said, in effect, “There were extensive changes throughout this document, and you should pay attention.”

Sullivan said commissioners have only their own laziness to blame. “Some people are famous within the Commission for poor staff work and for not reading the documents. Saying we failed to follow the Commission’s process is nothing but a lie,” Sullivan said.

Chong, a Republican attorney from Stockton who was picked by former President Bill Clinton as the first Asian-American for the Federal Communications Commission, spent Monday in the Capitol meeting with Senate members and staffers. She attended two meetings, at which she was questioned closely about the paragraph insertion. She said the language came from her staff and that its insertion was inadvertent, sources said.

Senate President Pro Tem Don Perata personally headed one of the meetings with Chong. He did not publicly characterize his findings, but he is said to be concerned about the failure of the PUC to follow disclosure rules. He is also not convinced that the insertion was inadvertent. Consumer activists opposed to Chong and staff members in both the Capitol and the PUC believe the insertion was planned.

Chong’s role in the procedure has captured the attention of a skeptical Perata, who heads the committee that will decide on Chong’s confirmation.
“Between now and January 12, this is what we’re going to be looking at,” one Senate staffer said.

Chong clearly has her critics. Among them is Brown, who has served six years on the PUC and is viewed by consumer groups as an ally but is not likely to be reappointed after his term expires next month.

Chong, 48, a strong proponent of telecommunications deregulation and free-market policies, is a political ally of Schwarzenegger’s chief of staff, Susan Kennedy, who was put on the PUC by former Gov. Gray Davis. Chong and Kennedy share similar philosophies and they remain in close touch, Capitol sources say.

Indeed, Capitol and PUC staffers say privately that Kennedy is interested in telecommunications issues and regularly contacts the PUC, an independent state regulatory agency whose members are appointed by the governor to fixed terms. One of the few who will discuss the matter publicly is Brown.

“She makes calls to the commissioners,” said Brown, who noted that he and Kennedy had a falling out. “She calls and she reigns in appointees of that commission like nobody’s business. When she was appointed chief of staff, I called her the ‘Sixth Commissioner.’ And she is. She calls all of the important shots. All she has to do is snap her fingers for telecommunications interests, and they do exactly what she wants,” Brown said.

Another who discussed Kennedy’s role was Michael Shames of the Utility Consumers’ Action Network. “Susan Kennedy has for much of this year continued to play a very important role in PUC policy, and has frequently contacted commissioners to monitor and ensure that the PUC’s actions are consistent with the governor’s office,” Shames said.

Earlier chiefs of staff often called the PUC or other independent agencies with gubernatorial appointees to push policies, and that the practice is not unusual.
“It is common for administrations to have an ongoing dialogue with the PUC on regulatory and policy matters,” said administration spokeswoman Julie Soderlund.
What was unusual was the stinging dissent penned by Brown, who blasted the insertion last month. In language that two PUC observers called unprecedented in recent memory, Brown flatly called the insertion “clandestine” and “a headlong march toward ineffectual and impotent general consumer protection.”

“The insertion of the crucial [paragraph] was done in a way that could not better be designed to escape notice. It was added in changes circulated late in the afternoon of August 23, only one day before the August 24 morning Commission meeting. … Nothing in the decision’s text gave a clue to this Commission that AT&T was about to get absolution from rules that were hard fought and widely embraced by staff and consumer groups.”

Contact John Howard at

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