State to investigate PG&E’s corporate attitude toward safety, security
Commission cites incidents since deadly 2010 San Bruno blast
Gas fireball at Fresno gun range among subsequent events. Probe would assess roles of PG&E directors, executives in safety lapses
A series of safety or security incidents at Pacific Gas & Electric Co. facilities in the wake of a deadly 2010 gas pipeline explosion in San Bruno – including an April 2015 pipeline blast in Fresno that killed one person and injured 12 others – have put the utility in the crosshairs of the California Public Utilities Commission.
Commissioners are expected to vote Thursday to launch an investigation into the corporate culture of PG&E and its parent company, PG&E Corp., in the wake of repeated safety concerns since the San Bruno disaster, which was blamed on an aging and faulty PG&E natural-gas pipeline. That explosion in September 2010 killed eight people and virtually flattened a neighborhood in the Bay Area city.
CPUC President Michael Picker called for the investigation in April, after the commission approved a record $1.6 billion in fines and penalties against PG&E in the San Bruno case.
An independent review panel of experts convened by the CPUC after the San Bruno blast issued a scathing assessment of PG&E’s management of its gas pipeline operations and safety, declaring “the rubber did not meet the road” in the company’s implementation of risk-management recommendations. The report blamed PG&E’s board and executives for a “dysfunctional” company culture “whose rhetoric does not match its practices.”
A separate investigation of the San Bruno explosion by the National Transportation Safety Board described the disaster as “an organizational accident” because the utility was already on notice for violations in earlier pipeline explosions. “PG&E, with such knowledge, could have taken proactive steps to correct the violations and prevent the devastating explosion in San Bruno,” the CPUC’s proposed order states, referring to the NTSB’s report.
WHILE CORPORATE LEADERSHIP – AT LEAST AT THE EXECUTIVE LEVEL – HAS STATED PUBLICLY THAT SAFETY IS ACCEPTED AS AN URGENT MATTER AT PG&E, IT’S NOT CLEAR THAT THE ORGANIZATION IS RESPONDING EVENLY.
CPUC President Michael Picker, speaking in April 2015
In the five years since San Bruno, the utility has broadly proclaimed its efforts to improve safety of its facilities and operations through notices to customers and advertising. “Nevertheless,” the investigation proposal notes, “accidents and events affecting the safety of (PG&E) customers, the general public, workers and agents, the utility system and the environment have continued to occur.”
One of the latest such incidents is the April 17 explosion at a PG&E natural gas line at the Fresno Sheriff’s Foundation gun range along the San Joaquin River at Highway 99 in northwest Fresno. A Fresno County employee driving a front loader on a dirt road atop a berm overlooking the shooting range apparently struck the pipeline, rupturing it. The resulting explosion and fireball seriously burned the equipment driver, two sheriff’s deputies and members of a jail inmate work crew doing maintenance work at the range. One of the inmates, 52-year-old Jeremiah Espino of Sanger, died of his injuries several weeks after the blast.
PG&E has filed a claim against Fresno County for more than $3 million in damages, alleging negligence because of the county’s equipment working around the pipeline. The county is suing PG&E, as are some of the inmates who also have filed a claim against the county.
The Fresno incident was one of 58 serious natural-gas pipeline breaches among all utilities in California over the last 20 years and the first to result in any injuries since the San Bruno explosion, according to the federal Pipeline and Hazardous Material Safety Administration.
But gas pipelines aren’t the only cause for CPUC concern. The proposed order being considered mentions at least a dozen separate incidents at a range of PG&E facilities – some of which resulted in citations and fines for PG&E, others that remain under investigation by the CPUC – since the San Bruno disaster. The CPUC considers the incidents to be indicators that the state’s traditional tools of citations, fines and regulatory orders have not been enough to bring about the desired improvement in PG&E’s safety performance.
Those cases include:
▪ Two incidents during the demolition of the Kern Power Plant in Bakersfield. One person was killed as a tank was being dismantled in June 2012, and during the implosion of the plant with explosives in August 2013, flying debris injured five bystanders, including one person who lost a leg.
▪ Two incidents at the Metcalf Transmission Substation in San Jose. In April 2013, the substation was the target of a rifle assault in which gunmen shot at transformers, equipment and gas tanks, affecting service at the substation for almost a month. In August 2014, thieves breached the fence in two places and burglarized the substation.
▪ A March 2014 house explosion in Carmel, one of six incidents that led to a PUC investigation of PG&E’s recordkeeping for its gas pipelines.
▪ Two separate attacks on the same night in March 2015 at the Westpark Substation in Bakersfield. Published reports indicated that after cutting a hole in the chain-link perimeter fence, someone went into the control room and tampered with control equipment and communications systems.
PG&E this week continued to promote the safety of its operations. “We look forward to a constructive dialogue with the commission and staff and to sharing our commitment to safety and the concrete actions we have taken over the last several years to back it up,” PG&E spokesman Keith Stephens said. “We’ve made incredible progress toward our goal of becoming the safest and most reliable energy provider in America, but we have more to do and we won’t rest until it’s done and done right.”
WE’VE MADE TREMENDOUS PROGRESS, BUT WE HAVE MORE TO DO AND WE ARE COMMITTED TO DOING IT RIGHT.
PG&E Corporation CEO Tony Earley
In April, however, Picker announced he wanted an investigation into the company’s culture, adding that he questioned how effective fines and penalties are in influencing PG&E executives and shareholders. Picker was appointed by Gov. Jerry Brown to head the CPUC after its former president, Michael Peevey, stepped down in December. Peevey, who served on the commission for 12 years, departed after the revelation of emails showing that Peevey had numerous private discussions with PG&E officials over pending regulatory issues involving the utility, including rate cases and penalties.
“Here’s our bind: We are now reaching the upper end of fines and cash penalties that the CPUC economic studies … argue that we can make the utility pay without raising the cost to borrow capital, and thus raise costs to ratepayers,” Picker said in April. “If, indeed, PG&E is failing to establish a safety culture, and we continue to see more accidents and violations of safety rules, what are our tools?”
Picker noted that in March, after the proposed fines against PG&E were announced, “PG&E share value went up 3 percent. … Shareholders may simply be abdicating their responsibility to hold their board of directors accountable to state laws and rules, knowing that we have an interest in limiting our sanctions to levels that they, as owners, can live with, so as to avoid impacts on ratepayers as well.” As a result, he suggested, investors “are treating fines and penalties as a cost of doing business.”
He also pondered the accountability of company executives, adding that the corporate CEO in power when the San Bruno blast happened, “and during cuts in funding pipeline replacement and inspection programs, retired with a reported $38 million bonus.”
The order would authorize the commission’s Safety and Enforcement Division to hire an expert consultant to aid in the initial investigation and report and to require PG&E to reimburse up to $2 million of the consultant’s cost. The initial stage would analyze how PG&E’s board members and executives hold themselves accountable for decisions and actions. The order also calls for the consultant’s data and report to be confidential until the investigation moves into its second phase, which could review the CPUC’s own regulatory orders and processes.
Utility watchdog group TURN, The Utility Reform Network, said it is concerned that the order is too vague about how the consultant would be selected. It also questions the broad confidentiality proposed for the consultant’s work.
THE CPUC SHOULD NOT TAKE CONFIDENTIALITY TOO FAR. EMPLOYEES SHOULD BE PROTECTED, BUT NOT MANAGEMENT OR MISMANAGEMENT.
Mark Toney, TURN executive director
“A proposed investigation into the culture of PG&E by the California Public Utilities Commission could result in increased safety and accountability, but not if it were kept secret or subject to utility influence,” the organization said in a statement Wednesday.
“PG&E employees should be free to speak their minds without fear of consequences, hence confidentiality and whistleblower protections may be needed for some aspects of the investigation,” said Mark Toney, TURN’s executive director. “But urgent public concerns about PG&E, and the CPUC’s ability to rein it in, must be addressed in a transparent manner.”
Toney added that the investigation needs “a truly independent investigator with no ties to utility companies, Wall Street or state officials,” and called for the inquiry to include other health and safety issues.