Operating under influence of profits

OpEd by Mark Toney, TURN executive director, Manteca Bulletin Nov. 12, 2014

 

     What happens to a person when their reckless driving while under the influence alcohol kills eight people?  How about if this same person then gets indicted for criminal negligence leading to the accident and for lying about vehicle maintenance records?  And, on top of it all, additional federal charges of jury tampering and backroom deal making?  While confinement and loss of liberty might be expected for an individual whose dependence on alcohol results in death and destruction, what happens if the “person” instead is a corporation hooked on profits?

In April 2014, PG&E was indicted by the federal government for criminal behavior leading to the 2010 gas pipeline explosion in San Bruno, California in which eight people were killed, 66 injured, and 38 homes destroyed. PG&E was charged with having knowingly and willingly violated federal standards for years, failing to keep complete safety records and ignoring threats to pipeline safety. 

After the initial indictment (with no perp walk) the U.S. Attorney added 27 further charges of misleading and lying to federal investigators probing the blast.  And in October federal investigators started looking into emails between PG&E and California Public Utility Commission (CPUC) officials that brought numerous back room deals to light, including judge shopping in a rate case and trading ratepayer funds for political contributions.  Perhaps the most compelling evidence that this reckless behavior is driven by an obsession with profits is found in the CPUC’s proposed decision to penalize PG&E $1.4 billion for the San Bruno explosion.  Even the notoriously lax CPUC estimated that PG&E had reaped $435 million of excess profits on its gas system at the same time it was cutting pipeline safety funding to the bone.

While the U.S. Supreme Court’s ruling in Citizens United portends the ascendance of corporate personhood with seemingly unfettered privileges, the PG&E San Bruno case provides an opportunity to explore appropriate punishments for corporate persons convicted of criminal behavior.  The challenge is how to apply the confinement and loss of liberty experienced by an individual sent to prison to a corporation that cannot be so easily confined.

No one is saying it is going to be easy. Demanding accountability from one of the biggest utilities in the United States requires bold leadership from policymakers at the federal and state level.  The indictment provides a vehicle through which the U.S. Attorney can demand significant and meaningful improvements from PG&E- on the company’s dime, not its customers.

With 40 years of consumer advocacy under our belts, TURN has some ideas for how PG&E could be convinced to reverse its long-standing prioritization of profits. The U.S. Attorney could impose—if PG&E were found guilty of pending criminal charges or, as part of a plea bargain- measures designed to change the corporate attitudes that led to decades of pipeline neglect and mismanagement documented in the National Transportation and Safety Board’s San Bruno investigation.  At the top of the list is to reconstitute the PG&E corporate board of directors by replacing all officers who were serving at the time of the explosion with new directors, which would include consumer advocates, union representatives and public officials.  An independent board of directors is the only entity with the authority to hold corporate management accountable on an ongoing basis.  Any settlement of PG&E’s federal criminal violation could include ethics oversight that would put a stop to PG&E buying community support through television commercials, campaign contributions, lobbying, and charitable gifts, as well as ending its practice of bullying municipal agencies, community choice, and anybody else whose support it has been unable to purchase.

The CPUC has already been urged by TURN to apply $1 billion in state penalties to costs of repairing and testing the mismanaged system, rather than charging ratepayers to clean up the company’s mess.  TURN has joined other consumer groups in calling for independent pipeline safety monitoring as well. 

But the CPUC has the authority to go far beyond what TURN or anyone else has asked for.  While public utility commissions seldom revoke franchises, they possess the authority to do so, and should use it in cases of extreme malfeasance like this one. Few things would get PG&E’s attention more than making it compete with other utilities for the franchise to provide service in northern and central California. Now that’s a CPUC wake up call that even PG&E could hear!

Sadly, San Bruno wasn’t the first fatal explosion on a PG&E line; that happened in Rancho Cordova in 2008.  PG&E apparently didn’t get the message then.  This time, regulators and prosecutors need to drive the message home with creative remedies that will give PG&E no choice but to put customer safety first. 

You can be sure every single utility company in the U.S. is watching closely to see whether PG&E will have to pay for its mistakes.  And every single utility company in the U.S. should get the same message as PG&E.  Mismanagement and neglect that kill customers won’t be tolerated, ever, under any circumstances.

Mark Toney, Executive Director, TURN.  The Utility Reform Network (www.turn.org) is a California-based nonprofit that has been fighting for fair rates and accountable utility companies for 40 years.