Eric Risberg/2011 AP file photoPG&E shareholders will be on the hook for part of a rate increase after the company was fined Thursday over inappropriate emails between officials and regulators over the rate increase proposal.

Eric Risberg/2011 AP file photoPG&E shareholders will be on the hook for part of a rate increase after the company was fined Thursday over inappropriate emails between officials and regulators over the rate increase proposal.

PG&E fined over alleged secret dealings

State regulators Thursday fined Pacific Gas & Electric Co. and required its shareholders to cover as much as $400 million of a gas rate increase because of backroom negotiations between the utility and regulators.

The California Public Utilities Commission voted 3-0 in favor of the penalty, which stems from recently released emails that show a PG&E executive and CPUC officials discussing which judge to appoint to a case over gas rates. The executive objects to one judge for having a history of being hard on the utility. The emails are the latest in a series released by the utility and others that allegedly show PG&E executives privately negotiating with CPUC officials.

The commission's decision fines PG&E $1 million for the emails about the judge and requires PG&E shareholders to cover a portion of the proposed rate increase instead of utility customers.

Shareholders could be on the hook for as much as an estimated $400 million, though ratepayer advocates say the commission has discretion to require a much lower figure.

The decision also restricts back-channel contact between commission members and the state's largest utility.

Ratepayer advocates were demanding that the commission release tens of thousands of additional emails that they say may also show illegal contact between the CPUC and the state's largest utility. The commission did not address that request.

An alternative proposal before the commission did not call for a fine or any shareholder contribution.

PG&E spokesman Keith Stephens said in a statement before the vote that the emails in question were inappropriate and some violated the CPUC's rules. But he said PG&E reported them, held people accountable and was “making significant and voluntary changes designed to prevent this from happening again.”

Commission member Mike Florio, who was involved in an email exchange over the assignment of judges, recused himself from the vote as did commission President Michael Peevey. He received a copy of at least one of those emails and has announced he will not seek reappointment when his term ends at the end of the year.Bay Area Newsjudge sharingPG&ESan Bruno

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