PG&E using fear tactics to reduce blast penalty

Three years after the fatal San Bruno explosion, PG&E is attempting a last-minute end run around the legal process

Three years after the fatal San Bruno explosion, and two years after my organization and other parties began making the case for meaningful penalties at the California Public Utilities Commission, Pacific Gas and Electric Co. is attempting a last-minute end run around the legal process. Having failed to convince the commission that a $2.5 billion penalty is unwarranted, PG&E is running to Wall Street threatening bankruptcy.

The CPUC should not permit PG&E’s scaremongering to dictate outcomes and instead must base its decision on its legal record.

The penalty recommendations now being considered by the CPUC are the product of painstaking efforts by The Utility Reform Network’s legal team and other consumer representatives to develop a complete record of PG&E’s violations and the amount of appropriate financial penalties.

Our goals are simple: to protect consumers by making sure the pipeline system is made safe, PG&E is justly punished for its violations, and ratepayers are not made to pay to remedy PG&E’s gross mismanagement of its pipelines.

Under California law and CPUC rules, all parties have a full and fair opportunity to respond to the evidence every step of the way. PG&E’s army of high-price attorneys have not hesitated to object whenever they believed PG&E’s due process rights were not being observed, and some of PG&E’s objections have been honored.

Now, the five CPUC commissioners must base their decision only on the exhaustive evidence and arguments in the record – based on public hearings and written pleadings that are available to any interested person. Clearly worried that this record shows that severe penalties are warranted, PG&E has engaged in a back-channel strategy to circumvent the record and subvert the decision-making process.

The strategy is for PG&E to proclaim that the financial sky is falling – in back-door meetings with its friends on Wall Street that are immune to public scrutiny. That fear was addressed and dismissed in the record PG&E now wants to ignore.

One of the issues given a full airing in the public hearings at the CPUC was how big a financial penalty PG&E could afford without impairing its ability to raise the capital necessary to provide gas and electric service. An independent analysis from highly respected experts concluded that PG&E could sustain penalties totaling $2.45 billion, an analysis PG&E attempted, unsuccessfully, to disprove.

In contrast to this public evidentiary record, PG&E has privately enlisted Wall Street to help it raise the specter of bankruptcy. For example, PG&E has apparently told Wall Street that the proposed penalties are $4 billion. But this is a number with no basis in fact and includes at least $1.3 billion in speculative forecasts that were explicitly rejected by the commission. And the public record shows that PG&E would not need to add a single dollar of debt to pay a $2 billion penalty, meaning that PG&E’s ability to pay its creditors should not be affected at all.

TURN and other parties have no opportunity to explore on the record the financial entanglements between PG&E and its Wall Street mouthpieces.

In contrast, in CPUC proceedings, TURN and other parties were able to take advantage of the CPUC-mandated discovery process to reveal that PG&E’s testifying financial expert was employed by Wells Fargo, a PG&E shareholder that stands to lose money if PG&E is hit with a large penalty.

PG&E should stop its cynical fearmongering and start taking the CPUC process seriously. We at TURN and all the other parties have worked tirelessly to give the five CPUC commissioners the legal record they need to reach the right decision.

Our efforts should not now be tossed aside in favor of an outcome dictated by the power of Wall Street rather than the rights of Main Street.

Tom Long is the legal director for TURN, a consumer advocacy organization. Long has also served as legal adviser to a CPUC commissioner and a deputy city attorney for San Francisco.