PG&E Still Sails Smooth, And That’s The Rub

For PG&E, 2010 was a horrendous year. What consequences have PG&E and its executives faced for these blunders? None. The stock is doing just fine. When it comes to accountability, PG&E is making Wall Street bankers look good.

For Pacific Gas & Electric, 2010 was a horrendous year.

One of its big gas lines exploded, killing eight people and destroying a neighborhood. Investigators soon discovered that the company lacks even basic information about its gas lines and runs a safety and inspection regime that could generously be described as inadequate.

The company spent $46 million on a cynically self-serving voter initiative to block potential competitors—and lost.

Its initiative to install “smart meters” in millions of homes, to manage electricity distribution more efficiently, is facing a backlash from consumers who fear inaccurate meter readings and possible health effects. Many utilities have had trouble with these meters, and PG&E’s program was earlier and more ambitious than most, but an investigation ordered by the state found that the company’s poor customer service exacerbated its problems.

What consequences have PG&E and its executives faced for these blunders? None. The stock is doing just fine. The California Public Utilities Commission has awarded the company almost $30 million in bonuses for energy-saving targets that weren’t achieved. The company plans to hire a new gas operations executive, but no one has lost his job—except a hapless manager who thought it would be smart to spy on the online discussions of smart-meter opponents.

When it comes to accountability, PG&E is making Wall Street bankers look good.

The company’s incompetence, arguably, has been matched only by the performance of its regulator. The explosion in San Bruno revealed systemic flaws in the way the Public Utilities Commission oversees gas pipeline operators and exposed the revolving door between it and the companies it is supposed to police.

Close relationships between regulators and the regulated are common in the utility business. The commission has many functions, and even critics say it performs many of them well. But it has been slow to open a comprehensive public investigation into the San Bruno explosion, and recently disclosed that it has—of all things—started a foundation to cover some of its expenses with donations from the companies it regulates.

PG&E customers, meanwhile, pay some of the highest electricity rates in the nation. And have you ever tried to get the company to provide routine customer service?

In many ways, utilities like PG&E are throwbacks, vestiges of an industry that enjoyed guaranteed profits for the better part of a century. Even after deregulation and Enron’s fraud forced PG&E into bankruptcy in 2001, it emerged remarkably intact, still enjoying a near-monopoly on the distribution of gas and electricity in its markets and an all-but-guaranteed return on capital.

Its chairman and chief executive, Peter Darbee, has a background in finance, having signed on as chief financial officer in 1999 before being named chief executive in 2005. He has no track record in engineering, public policy, public relations or customer service—and it shows.

“By definition, if the board and the highly placed executives come from a financial background, their focus is going to be on the bottom line and not on operations and safety,” said State Senator Mark Leno, who represents parts of San Francisco and Marin County.

Meanwhile, the Public Utilities Commission is being infused with new blood. Gov. Jerry Brown has appointed two consumer advocates, including the longtime lawyer for the state’s leading utility watchdog, to the five-member panel, and will soon appoint a third. The current president, Michael Peevey, a former utility executive, might be ousted from that post.

Utility regulation is critical in a state trying to lead the way in green energy, a fact not lost on Mr. Brown. PG&E—and the commission for that matter—would argue that they’ve done a good job on renewable-energy mandates and other aspects of the state’s ambitious, expensive energy and environmental policies.

But a regulated monopoly like PG&E, which touches almost everyone in Northern California, has to do more than a couple of things right. For some people here—notably Bruce Brugmann, publisher of The San Francisco Bay Guardian, who has run a decades-long campaign against the company—PG&E is irretrievably cursed by the dubious dealings of its founders and deep ties to the state’s moneyed elite.

For me, it’s simpler: the company screwed up, and someone—the government or the marketplace—ought to hold it accountable.

Jonathan Weber is the editor in chief of The Bay Citizen.