PG&E Agrees to Fix Troubled Department That Violated Safety Rules

PG&E Corp. PCG 0.73% agreed to pay a penalty and fund a $60 million program to resolve accusations that its employees violated state law at least 170,000 times from 2012 to 2017 by falsifying records showing how employees handled requests to mark underground equipment prior to excavations.

The utility has been under nearly constant investigation over the past decade for safety violations that authorities allege have led to scores of deaths and injuries. It currently is on federal probation for felony convictions from a fatal pipeline explosion in 2010.

The settlement agreement between PG&E and the Safety and Enforcement Division of the California Public Utilities Commission and a group representing its workers has no legal force unless approved by the state commission and a federal bankruptcy judge. PG&E filed for protection from creditors in January, and the enforcement division said it considered the utility’s financial condition in setting the penalty amount. One consumer group said the amount is too low.

Under the proposal, PG&E will pay $5 million to the state general fund and will commit $60 million in shareholder funds to fix deficiencies in its “Locate and Mark” safety program that is intended to prevent accidental damage to underground facilities that, if hit during digging, could result in explosions or electrocutions.

A spokeswoman for the Utility Reform Network, a San Francisco advocacy group that represents utility customers, said her group was unhappy with the settlement. “Given the seriousness of the violations, TURN thinks much larger financial penalties were called for,” said Mindy Spatt, the spokeswoman.

Ms. Spatt said her group is “not sure what it will take for PG&E to get the message that safety has to come first, but we fear this isn’t it.”

State investigators said the penalty was appropriate, when compared against other penalty cases.

Julie Kane, PG&E’s chief ethics and compliance officer, was one of two executives who signed a note addressed to employees late Thursday that said “the events that took place were unacceptable” and the utility takes responsibility “for not living up to our commitment to accurate reporting and record-keeping.” Ms. Kane said the settlement “underscores our commitment to learn from the past and take meaningful steps to change.”

By law, before excavators break ground on construction projects, they are required to call 811 and initiate a process through which local utilities are notified and given two working days to mark any underground facilities. For PG&E, that means it must promptly mark the locations of gas pipes and electrical cables.

But, as early as 2009, internal auditors at PG&E identified problems with record-keeping. By 2013, according to a state investigation, employees of PG&E were receiving pressure from a program manager and supervisors to eliminate “late tickets” that signified tardy responses to work orders. In some cases, the utility later said, employees altered computer records to make it look like they had responded to work requests in a timely way when they hadn’t.

By 2016, the utility’s internal records showed that the problem of late tickets had been nearly eliminated. In fact, state investigators concluded the utility’s workers had systematically gamed the system to undercount tardy responses.

The state’s investigation found the utility didn’t employ enough locators to handle the heavy workload. Workers interviewed by state investigators said records were doctored because employees feared they would be disciplined, or even terminated, if it appeared they were falling behind.

Consultants recently hired by the utility identified more than 170,000 work orders that should have been counted as late—generating an equal number of late tickets—in the study period from 2012 to 2017. Each was considered a potential violation of state law by investigators. In its initial responses to regulators, the utility supplied incorrect information, which authorities said also violates state law.

Problems with the Locate and Mark program, including that PG&E supplied regulators with information it has reason to know was false, was the subject of a front-page investigation in The Wall Street Journal last month.

The falsification of records might never have come to light if the utility hadn’t fired a manager who objected to the deception. He later went to work for the federal pipeline safety agency and wrote a memo outlining problems with the program that was sent to the California utilities commission in April 2016, prompting the inquiry.

A copy of that referral memo was reviewed Friday by the Journal, in response to a Freedom of Information Act request in July.

David Appelbaum, the former PG&E employee and whistleblower, led a team of 21 people who investigated dig-in accidents for the utility. He wrote that contractors whom his team interviewed after dig-in accidents sometimes complained “that PG&E had not responded within the time requirements and that they were forced to balance business needs (e.g. client schedules, crew downtime) against the inherent public safety risk” of digging before PG&E marked the pavement.

Under the terms of the settlement announced on Friday, the utility will increase its locator staff by 25% above 2017 levels for at least three years. The utility also will improve its work-tracking software, will verify records accuracy through third-party audits and will undertake other remedies at shareholder expense. It said customers wouldn’t bear these costs.