TO: Dr. Mark Toney, Executive Director of The Utility Reform Network
FROM: Kelly Foley

DATE: March 10, 2015

Dear Dr. Toney,

Thank you for reaching out to me regarding the review of the rules and practices governing Ex
Parte communications at the California Public Utilities Commission (CPUC).

I have spent my career working as an attorney in the utility sector. My experience includes 6
years as an attorney with Paci?c Gas Electric Company and over 6 years at Sempra Energy. I
have also represented the Vote Solar Initiative and served as an advisor at the California Energy
Commission. I am currently employed as the General Counsel of California Clean Power. I

write you, however, as a concerned energy industry professional and am not representing any
organization.

I write with the hope that the information I provide in this letter supplements your review of Ex
Parte Communications and the CPUC Rule Making Process. Speci?cally, I witnessed a direct
intervention in a utility solicitation by then-CPUC President Michael Peevey to assist a private
generating company in obtaining a costly and unneeded power purchase contract with San Diego
Gas Electric Company Although some of the facts surrounding President Peevey?s
intervention were disclosed in the course of litigation regarding the approval of the contract, I
believe this may be the first time the underlying intervention has been discussed subsequent to
the original occurrence.

In the Spring of 2003, I was an attorney assigned to represent Sempra Energy Resources in an
request for prOposals (RFP) seeking new local electric generating capacity that would
be available by 2007. Sempra Energy Resources, which is an unregulated af?liate of 
planned to submit a bid into the RFP for the sale of the proposed 500 MW gas-?red Palomar
Energy Center in Escondido (Palomar). Palomar was expected to come online in 2006.

During the course of the RFP, Calpine Corporation sought to secure a long-term power purchase
agreement (PPA) with for a 590 MW gas-?red power plant under development in Otay
Mesa (Otay Mesa). The Otay Mesa plant had a 2008 expected completion date, over a year later
than the RFP requirement, and also required considerable costly transmission upgrades.

Because RFP identi?ed a need for less than 300 MW by 2007, it seemed clear that
either Palomar or Otay Mesa, but not both, would be selected by Because Palomar was
further along in the development process and did not require costly transmission upgrades,
Palomar was deemed the superior least cost/best ?t project under bidding rules.

Because its 2008 completion date was well past the time when new resources were originally
needed, Otay Mesa did not technically qualify as a conforming REP bid. Sempra Energy
Resources ?led a number of pleadings at the CPUC making these points.

In the Summer of 2003, in the middle of the controversy over the choice between Palomar and
Otay Mesa, I participated in a conference call that included representatives of Sempra Energy
Resources, Calpine and the CPUC. I do not know how the call was initiated and did
not know the call would occur until a few minutes before it started. Participants on the call
included CPUC President Michael Peevey and CPUC Administrative Law Judge Carol Brown.
President Peevey ran the call.

During the call President Peevey made the following points:

First, he said that if wanted to buy Palomar from its af?liate, would also need
to make a deal with Calpine for Otay Mesa. If did not reach an agreement with Calpine,
the CPUC, based on utility af?liate transaction concerns, would not approve the proposal to
acquire Palomar.

Second, he directed Sempra Energy Resources to cease making CPUC ?lings that were critical
of the Otay Mesa project. I was the attorney who had been responsible for making these critical
?lings on behalf of Sempra Energy Resources.

Third, he indicated that concerns regarding the lack of need for both projects and the
need for a signi?cant new transmission line to interconnect Otay Mesa would be resolved to

satisfaction.

I am unaware of the ?ling of any ex parte notice or any other public disclosure of the events of
the conference call.

After this call, executed agreements with Otay Mesa and Palomar, and submitted them
for CPUC approval as part of a package. When proposal to acquire Palomar and
execute a PPA with Otay Mesa was brought before the Commission later that year, ALJ Carol
Brown, who had been on that original call, was assigned to oversee evidentiary hearings and
write a proposed decision.

Although there was substantial opposition to the Otay Mesa contract from consumer groups, and
evidence in the record that CPUC President Peevey had intervened in the solicitation process to
assist Calpine, ALJ Carol Brown wrote a proposed decision supporting proposal for
both plants that was approved by the CPUC on a 3-2 vote, with CPUC President Michael Peevey
providing the decisive vote in favor of approval.

Clearly, the events I describe above raise problematic concerns. But I write you not to pass
judgment on any of the conference call participants, including the CPUC. Rather, I bring this

up twelve years after the fact to help demonstrate that the more recent revelations pointing to the
dire need for CPUC reform are not new, surprising or limited to a few circumstances or speci?c
participants. For years I (and I believe many of my colleagues) have well known that regulatory
loopholes were being exploited but, sadly, I also believe that it was so common place as to seem

normal. This is not an excuse for my or anyone else?s past silence, but rather a contextual
explanation.

To the extent that I can assist you in your effort to ensure CPUC transparency, accountability and
oversight in the future, I suggest at least two potential reforms. First, a ban on ex-parte
communications in ratesetting proceedings would have made this type of conversation, and other
similar discussions that were noticed in the proceeding, unequivocally impermissible. Second,
any Commissioner who directs a utility to enter into speci?c commercial deals should be
disquali?ed from voting on whether the deal is reasonable. In the case of Otay Mesa, efforts to
have CPUC President Peevey disquali?ed based on bias were denied because, unfortunately,
there are no clear rules prohibiting decision makers from engaging in this kind of behavior and
then voting on the resultant outcome.

Very Truly Yours,



Kelly Foley