Click photo to enlarge
PG&E workers pass the blast site at Earl Ave. and Glenview Dr. in the Crestmoor neighborhood in San Bruno on Aug. 22, 2011. The neighborhood is mostly barren almost a year after the deadly PG&E natural gas pipeline blast that destroyed thirty-eight homes and left eight dead. (Gary Reyes / Mercury News)

SAN FRANCISCO -- The city of San Bruno on Monday demanded the ouster of the president of the state Public Utilities Commission and sought sanctions against PG&E for what the city claims is illegal and improper contacts between the utility and the agency that oversees it.

The demands, contained in filings with the PUC, come amid deliberations at the regulatory agency about the fines and punishments PG&E should pay for its role in causing the 2010 natural gas pipeline explosion in San Bruno that killed eight people, injured 66 and destroyed 38 homes.

The basis for San Bruno's demands are about 40 emails between PUC officials and PG&E executives about regulatory proceedings that the PUC released to the city on Friday to settle a lawsuit, including one in which a top PUC official gave public relations advice to PG&E and another in which a PG&E executive signed off a note to a PUC official with "Love you. Thanks."

"The communications demonstrate an illegal, inappropriate and unethical relationship between the PUC and PG&E," San Bruno City Manager Connie Jackson said Monday in an interview outside PUC headquarters in San Francisco.


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While not specifying which communications the city regards as illegal, Jackson said the emails show that the PUC received confidential, non-public information from PG&E regarding its internal deliberations and financial conditions. The emails include requests from PG&E for top PUC officials to intervene in the hearing process about matters related to the San Bruno explosion, suggestions from top PUC officials about how PG&E should proceed with PUC staffers and legal experts, and alerts from PG&E to the PUC about Wall Street investment downgrades and opinions about PG&E's financial condition.

San Bruno, as a legal party to the PUC proceedings, in which the regulatory agency is considering fines of up to $2 billion against PG&E, should have been told of the communications without having to file a lawsuit, Jackson added. PG&E also faces federal felony criminal charges in connection with the blast.

PUC President Michael Peevey could not be reached Monday for comment, but the PUC issued a statement saying it would review the San Bruno filings and that it "takes seriously all allegations of bias and rule violations."

Christopher Johns, president of Pacific Gas & Electric Co., the utility arm of PG&E, said in a letter to the city of San Bruno and the PUC that the utility also is reviewing the emails and that, "We are absolutely committed to conducting ourselves in an ethical manner at all times." He added that the utility takes "any questions about the conduct of PG&E employees very seriously."

San Bruno demands that Peevey remove himself from any further decisions or discussions related to any San Bruno cases before the PUC. The city also calls on the PUC to fine PG&E for a series of improper communications with the PUC.

Separately, San Bruno has asked Gov. Jerry Brown to remove Peevey as the head of the agency and has called for the state Legislature, state Attorney General Kamala Harris and the U.S. Department of Justice to investigate the matter.

One email exchange, about state Sen. Jerry Hill, whose district includes San Bruno, has prompted PG&E's chief executive officer to apologize to Hill.

That email exchange occurred after PG&E executives became irked when Hill, as a member of the state Assembly in 2011 and 2012, raised safety concerns about PG&E raising pressure on multiple gas pipelines, and about Peevey's role in the matter.

"Just wanted you to give you some notice that we'd be replying to Hill," the PUC's top staff member, Executive Director Paul Clanon, wrote to PG&E regulatory executive Brian Cherry. Cherry later wrote to Clanon: "Let's just say I have no respect left for Mr. Hill."

In a letter to Hill on Monday, PG&E Chief Executive Officer Anthony Earley wrote: "I am writing to personally apologize for comments made by PG&E's Brian Cherry. His comments do not in any way reflect the company's point of view and are unprofessional."

Hill, in an interview Monday with this newspaper, said he backed San Bruno's demand that the regulatory chief be removed. "Peevey has created a culture of complacency at the PUC," he said. "He needs to step down or be removed."

U.S. Rep. Jackie Speier, whose district includes San Bruno, agreed that the newly disclosed emails show an utter failure of the PUC to fulfill its regulatory role.

"These emails indicate that justice is not blind at the California Public Utilities Commission. It's AWOL," Speier said in a news release. "You can't make this into a good news story for California's consumers. Regulators are supposed to regulate, not cheerlead."

The coziness between the PUC and PG&E was clearly shown in a December 2011 email exchange in which PG&E gave advance notice to Peevey that it was accepting liability for the San Bruno disaster. PG&E regulatory executive Cherry wrote to Peevey, "Mike FYI. Thought you'd appreciate this," referring to PG&E's concession of liability. Peevey replied, "Very good. Tom told me about it at the lunch today," an apparent reference to Thomas Bottroff, a PG&E regulatory executive.

Peevey also provided public relations advice to PG&E in April of this year, telling Cherry that the utility was "inept" in its publicity efforts related to the criminal charges.

Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.