Regulators Put PG&E on Probation for Wildfire Safety Shortcomings

California regulators on Thursday placed beleaguered utility Pacific Gas and Electric in the first stage of an enhanced oversight process that could lead to the state’s largest provider of power and natural gas losing its license to operate in California.

The California Public Utilities Commission unanimously approved a resolution to move PG&E into the first stage of a six-step enhanced oversight process, citing its failure to prioritize wildfire prevention work in areas that posed the greatest risk of fire last year.

“I appreciate that we are invoking this enforcement process” CPUC Commissioner Genevieve Shiroma said during the meeting Thursday. “This surely puts PG&E on notice to comply.”

PG&E will be required to submit a corrective action plan to the CPUC by May 5 and further updates every 90 days after that.

PG&E inspected, trimmed and removed trees at risk of hitting electric equipment from around 1,800 miles of power lines in 2020 as part of its enhanced vegetation management work as outlined in a wildfire safety plan it is required to submit to regulators each year.

Less than 5% of that work was done on what was identified as the 20 highest-risk power lines, CPUC Executive Director Rachel Peterson told commissioners Thursday. Out of the 1,800 miles worked, 92 miles were part of 20 highest-risk circuits, she said.

“PG&E’s lower-risk circuits received the utility’s greatest focus in 2020,” Peterson said. “This is the opposite of the desired result from PG&E’s safety and risk-driven investments approved by the CPUC.”

Those findings, identified in a Feb. 8 audit by the CPUC’s Wildfire Safety Division, followed a similar report by a court-appointed monitor who is reviewing PG&E’s fire prevention work as part of its federal criminal probation for convictions related to the 2010 San Bruno gas pipeline explosion.

The CPUC developed the enhanced oversight process as a condition of approving PG&E’s plan to emerge from Chapter 11 bankruptcy last year. PG&E faced a potential $30 billion or more in liability for a series of destructive wildfires allegedly sparked by its equipment in 2017 and 2018.

If PG&E fails to address shortcomings in its wildfire prevention work, the commission could move the utility to step 2 of enhanced oversight, which would involve increased inspections and possible periodic audits of rates it charges customers. Step 3 would require the appointment of an independent monitor to oversee the company’s corrective action plan. Step 4 authorizes the appointment of a chief restructuring officer to assume full management responsibility for implementing a corrective action plan. Step 5 enables the CPUC to appoint a receiver to control and operate aspects of PG&E’s business that serve the public interest. The final stage — Step 6 — would trigger a process to revoke PG&E’s license to operate as a utility in the state of California and potentially lead to a state takeover of its facilities.

In a statement Thursday, PG&E said it has already started making changes to ensure higher-risk areas are given a higher priority when it decides where to conduct tree trimming and other vegetation management work.

“We take this feedback from the Wildfire Safety Division and others seriously, and as a result we have already implemented significant improvements to our Enhanced Vegetation Management program and will continue to do so as outlined in our 2021 Wildfire Mitigation Plan,” the company said. “It is in all of our best interests to work together to improve our safety performance for the benefit of our customers and the communities we are privileged to serve.”

Also on Thursday, a ratepayer advocacy group blasted the commission for refusing to vote on the issuance of a safety certificate that enables PG&E to access a multibillion-dollar wildfire insurance fund partially paid for by ratepayers.

The commission’s Wildfire Safety Division granted PG&E’s request for a safety certificate on Jan. 14, finding the utility met the minimum requirements for obtaining one under a state law passed in July 2019.

The Utility Reform Network (TURN), a ratepayer advocacy group, filed a petition in late January asking the commission to review that decision. TURN argued that “numerous shortcomings,” including PG&E’s conviction last year for 85 felonies related to the November 2020 Camp Fire, make it clear that the utility is not in “good standing” as a safe operator of its facilities as required by law.

The CPUC had issued a draft resolution approving the safety certificate, but on Wednesday, that proposal was withdrawn. CPUC Executive director Rachel Peterson informed TURN in a letter that the law does not require the commission to ratify the Wildfire Safety Division’s issuance of the certificate.

During public comments Thursday, TURN Executive Director Mark Toney denounced CPUC’s eleventh-hour decision as an affront to basic principles of due process and fairness. The lack of a CPUC vote means his group cannot appeal the issuance of PG&E’s safety certificate in state court because there is no final decision to appeal.

“The right to go to court to appeal a decision of a government agency is a bedrock principle of democracy,” Toney said. “Refusing to vote on the draft resolution at the last minute while refusing to identify another process for appealing the safety certificate denies ratepayers their constitutional rights to go to court, to seek review of an administrative decision.”

The safety certificate confirms that PG&E is in “good standing” and can therefore gain access to a multibillion-dollar insurance fund to cushion private utilities from the risk of future wildfires. The fund, established by Assembly Bill 1054 in 2019, is subsidized by a $2.50 surcharge on ratepayers’ bills that will add up to $13.5 billion over the next 15 years.