The Political Playbook of a Bankrupt California Utility

SAN FRANCISCO — Eight years ago, federal investigators announced that a “litany of failures” by California’s largest utility had caused a massive gas explosion that killed eight people, injured 58 and incinerated a neighborhood in the San Francisco suburb of San Bruno.

Two days after that announcement, under blue skies at a baseball diamond on the edge of San Francisco’s financial district, the city’s mayor, Ed Lee, threw out the first pitch for a charity event sponsored by that same utility, Pacific Gas & Electric.

“PG&E is a great local company who gets it,” the mayor, who died in 2017, said at the event.

For critics of PG&E, Mr. Lee’s praise was a symbol of a recurring frustration: Despite evidence that the company was responsible for repeated safety violations and involved in deadly wildfires, lawmakers in California continued to benefit from political donations from the company.

Investigators are now determining whether PG&E equipment was responsible for the state’s deadliest wildfire, the November inferno in and around Paradise that killed 85 people and destroyed more than 13,000 homes. A PG&E spokeswoman on Saturday confirmed that the company had canceled a plan to pay $130 million in bonuses after an outcry by the families of fire victims.

With the state’s tech giants focused on their influence in Washington, perhaps no company in California is more entangled with local Democratic politics than PG&E, which in January filed for bankruptcy.

PG&E’s restructuring — a process that directly affects 40 percent of the state’s residents — will test whether Gov. Gavin Newsom and other Democratic leaders can push to create a company free from what critics say has been a culture of cronyism between regulators and the regulated.

“Their tremendous political influence at the state and local level has led them to believe that they are above scrutiny and reproach,” said Aaron Peskin, a member of the San Francisco board of supervisors and a Democrat. “If Pacific Gas and Electric spent as much time and money and effort running their gas and electrical facilities as they did on politics they wouldn’t be in this mess right now.”

Filings with the California secretary of state show that PG&E, which serves 16 million customers, spent $10 million on lobbying last year. While it is not unusual for energy companies to lobby, PG&E spent roughly twice as much last year as another investor-owned utility, Southern California Edison, which has around 15 million customers.

Over the past decade, filings with the California secretary of state show that PG&E spent $9 million on around 900 in-state campaign contributions. The company gave to a diverse group of candidates running for offices ranging from county board of supervisor to state treasurer. PG&E gave to both the state Democratic and Republican parties.

Mr. Newsom, who was elected governor in November, received a total of $208,400 from PG&E during his campaign last year. But the final destination of PG&E’s campaign donations are in many cases unclear: Over the past decade the company contributed around 245 times to political action committees which in turn made their own donations.

There is recognition in California that PG&E, the largest electric and gas operation in any state around the country, has an increasingly difficult job.

The company delivers dangerous commodities — gas and electricity — to homes in many semirural areas made more vulnerable to wildfires by a changing climate. Under California law, the company is liable for fires caused by its equipment even if it was not negligent.

As with many large for-profit companies, lobbying for more favorable regulations is seen as an essential cost of business. The company says its political contributions and lobbying expenses are paid for with shareholder funds, not utility customer dollars. The same is true, the company says, with its charity program: Since 2000, the company and its foundation have granted more than $100 million to nonprofit organizations.

And as part of its wildfire-prevention efforts, the company has spent $2.3 billion over the past six years to trim vegetation around power lines. “Our most important responsibility is safety, and that continues to be our primary focus,” said Melissa Subbotin, a spokeswoman for the company.

Yet California officials whose communities were devastated by the San Bruno explosion and the spate of fires that have been linked to Pacific Gas & Electric equipment say they have been frustrated in their efforts to hold the company accountable.

After the pipeline explosion, the City of San Bruno sued to obtain thousands of emails between PG&E executives and the state’s utility regulator, the California Public Utilities Commission.

The emails revealed that a PG&E executive complained to the commission about a judge assigned to determine who should pay for pipeline upgrades, a case with major financial consequences.

In what became known as the judge shopping scandal, PG&E was granted the administrative judge of its choosing. The company was fined $1 million after the scandal became public, a sanction that critics said was a slap on the wrist for a company with annual revenues of $17 billion.

Other emails obtained by San Bruno described how company executives socialized and casually discussed company projects with the official meant to be regulating them. A 2010 dinner between a top PG&E lobbyist, Brian Cherry, and Michael Peevey, who was then president of the Public Utilities Commission, took place at Mr. Peevey’s vacation home and became famous for the “two bottles of good Pinot” that they drank. Mr. Cherry and two other executives at the company were fired after the emails became public.

Jim Ruane, the former mayor of San Bruno, tried to have the staff of the California attorney general at the time, Kamala Harris, bring charges for what he said was illegal cooperation between the company and regulators.

“They just blew us off,” said Britt Strottman, a lawyer who represented San Bruno after the pipeline explosion.

A year later, a state senator, Jerry Hill, wrote to Ms. Harris to renew calls for an investigation.

“The response we got was ‘thanks for the letter — go away,’” Mr. Hill said.

Chris Harris, the head of communications for Ms. Harris, who is now a United States senator and a 2020 presidential candidate, said an investigation was opened while she was attorney general.

“There is no way for us to know the current status of that ongoing investigation, but she believes that if there is evidence to support them, charges should be filed against any and all bad actors so they can be held fully accountable for their actions,” Mr. Harris said. The office of the current attorney general, Xavier Becerra, would not confirm whether an investigation was still open.

Ms. Harris did not receive any contributions from PG&E for her successful campaign for Senate, her spokesman said.

The larger question in the restructuring of the company, critics say, is how much political links will be tolerated.

SCRB Strategies, a political consultancy that helped run campaigns for Ms. Harris, Mr. Lee, Governor Newsom and Jerry Brown, the previous governor, received more than $1.1 million from PG&E last year for research and consulting.

Willie Brown, a longtime Democratic power broker and a former mayor of San Francisco and speaker of the California Assembly, said in an interview that he has consulted for PG&E for the past decade, and recently approached Mr. Newsom with a message that the company paid him to deliver.

Mr. Brown declined to give details on the discussion or when it occurred, but said he hoped to continue lobbying for PG&E, even in bankruptcy.

“I hope that they call me because every call generates an invoice,” he said.

A spokesman for Mr. Newsom said he had no comment. But the governor has said PG&E lacks public trust.

“I can assure you when it comes to our engagement with PG&E, it’s trust but, dare I say, verify,” Mr. Newsom said shortly after the bankruptcy filing.

PG&E representatives have acknowledged that the company has a “credibility problem” and that it must change.

Mr. Hill, the state senator, and others are skeptical.

“I have heard this story so many times — we are a new company, we have changed, safety is our new culture — I don’t believe a word they say at this point,” Mr. Hill said. “They are going to have to show me that they’ve learned from these tragic episodes.”

Anthony Rendon, the speaker of the California Assembly, says it is too early to know what the company will look like after it emerges from bankruptcy.

“Their power has certainly waned,” Mr. Rendon said. “And honestly I think a number of our colleagues feel let down by them.”

In a hearing last month, William H. Alsup, a federal judge who has ordered a sweeping overhaul to the company’s wildfire-prevention practices, also sounded skeptical of the company’s ability to change.

“There’s a very clear-cut pattern here — that PG&E is starting these fires,” Judge Alsup said to a packed courtroom. “What do we do? Does the judge just turn a blind eye and say, ‘PG&E, continue your business as usual. Kill more people by starting more fires?’”

When company representatives said it would take eight years for the safety overhaul, the judge shot back.

“We can’t sustain an eight-year delay,” he said. “This is an emergency.”