SAN BRUNO — State regulators on Monday took the first steps toward a wide-ranging probe into PG&E’s culture and how the company governs itself, the latest fallout from a fatal explosion in San Bruno, and an effort that could radically transform the company.
PG&E’s principal regulator, the state Public Utilities Commission, on Monday proposed a full-fledged investigation into the utility, whose offerings include gas and electricity service over a vast stretch of northern and central California, including the Bay Area.
A commission vote as soon as Aug. 27 would be the next step to launching the investigation into PGE’s “organizational culture, governance, policies, practices and accountability.”
The state agency doesn’t intend to duplicate prior investigations. Instead, the PUC will undertake a “deeper review” of both PG&E the utility and PG&E the corporate entity, as well as “systemic issues” identified by the National Transportation Safety Board.
“The question is not only how do we make PG&E improve, but also could other companies do a better job — if given a chance,” said Scott Hempling, a Georgetown Law professor and an expert witness on utility issues and regulation, who favors a probe.
The proposed probe is the latest event in the aftermath of a fatal explosion in San Bruno in 2010 that killed eight and wrecked a quiet residential area. Investigators believe PG&E’s shoddy maintenance and flawed record keeping, combined with the PUC’s lax oversight of PG&E, coalesced to cause the lethal disaster.
The PUC in April imposed a record-setting penalty of $1.6 billion on PG&E for causing the explosion.
San Francisco-based PG&E also is facing a trial on federal criminal charges linked to the blast. The utility has pleaded not guilty to the accusations. The trial could begin next spring.
“PG&E’s size, and its combination of gas and electricity, has never been examined critically,” Hempling said. “And for any utility, perhaps the most significant potential root cause of subpar performance is a culture of a entitlement, arising from the fact that the utility does not have to compete to maintain its monopoly.”
The potential of breaking up PG&E was raised at a commission meeting in April, when PUC President Michael Picker, the top official at the powerful state agency, noted that PG&E is spread over a huge geographic area with an array of responsibilities.
“Is the organization simply too large,” Picker asked, “to succeed at safety?”
Numerous public hearings and a panoply of witnesses would be needed before the PUC makes a final decision about how to remedy PG&E’s culture and governance issues.
“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 Nick Stimmel said.
PG&E has been bedeviled by other safety woes besides San Bruno. A March 2014 gas explosion that destroyed a Carmel residence led to a $10.8 million fine against PG&E. The utility also has received smaller fines related to PUC audits of safety violations. And San Carlos officials have raised concerns about the safety of a gas pipeline beneath that city.
Yet PG&E notes that it has undertaken a number of repairs and upgrades to significantly improve the safety of its gas system. The utility has opened a $38 million complex in San Ramon that is the nerve center of its gas operations. Plus, the National Transportation Safety Board in May said PG&E has successfully completed 10 of 12 recommendations from the federal agency to improve gas safety.
The concept of such a wide-ranging probe appealed to a consumer group, The Utility Reform Network, or TURN.
“It is certainly a step in the right direction to figure what needs to change at PG&E to create some accountability with the company,” said Mark Toney, executive director with TURN.
“The big concern we have about the PUC investigation is will the agency talk only to management, which would only scratch the surface,” Toney said. “We hope they will also talk to the whistleblowers at PG&E, and the rank and file.”
It’s not clear which companies or organizations might step in to offer competing utility services. Some cities such as Santa Clara and Alameda offer electricity service within their boundaries.
Some might question whether the PUC even has the authority to go so far as to order a reorganization of PG&E, but Hempling said the state agency is at least justified in opening an examination of the struggling utility.
“Somebody has that authority,” Hempling said. “If it’s not the PUC, then perhaps the state Legislature. That monopoly that PG&E has was not granted by God. It’s not in the U.S. Constitution. It is granted either by the PUC or the state Legislature.”