Regulators May Crack Down On PG&E Thursday

Lambasted in the past for going too easy on PG&E, state regulators have been talking tougher in recent weeks, and have their biggest opportunity since the catastrophic natural gas-line explosion in San Bruno to transform talk into action. Even commissioners supportive of PG&E are finding a hard time tolerating the company’s “willful noncompliance” following the tragedy.

Lambasted in the past for going too easy on PG&E, state regulators have been talking tougher in recent weeks. Thursday, they will have their biggest opportunity since the catastrophic natural gas-line explosion in San Bruno to transform talk into action.

The California Public Utilities Commission, with three new members on board—including a longtime PG&E critic—will consider endorsing a proposed fine against the utility of up to $1 million a day for not providing pipeline safety documents the agency had requested. Agency officials say that would be the biggest fine they’ve ever issued against PG&E for a safety violation.

“All signs point to a harsher, more adversarial reception for PG&E at the CPUC in the future,” concluded analysts at Bernstein Research, which does detailed financial analysis of various companies, including utilities. In a report last week, Bernstein predicted the fine—which would run until PG&E complies with the records request—eventually could total hundreds of millions of dollars.

The fine would be by far the toughest in a series of steps the commission has taken against PG&E since the Sept. 9, gas-line disaster, which claimed eight lives and destroyed 38 homes. After the blast, the agency ordered the company to reduce the pressure on several gas lines, launched inquiries into PG&E’s operations and created an expert panel to offer recommendations on how the utility—as well as the commission—might be improved.

“San Bruno was the game changer,” said the commission’s executive director, Paul Clanon, adding that his goal is “for PG&E to change its internal culture. Once the CPUC is convinced that PG&E has done that, we’ve achieved a big step on the way to improving safety.”

Although many observers agree that the agency appears to be taking a harsher stance with PG&E, some longtime critics of the regulatory body remain deeply skeptical.

“Fining for failure to produce documents is a side show designed to divert us from the ongoing lack of action where it counts,” said Loretta Lynch, the commission’s president during the 2000-01 energy crisis who was replaced in 2003 by the current president, Michael Peevey.

She contends the agency was slow to investigate PG&E and has shown little incentive to conduct a comprehensive look at the company’s operations, adding, “that’s not action. That’s collaboration of the regulator with the regulated.”

The commission’s proposed fine—which wouldn’t be issued until PG&E has a chance to defend itself at a hearing Monday—is for the company’s alleged failure to fully comply with a Jan. 3 order that it produce records verifying that its gas lines have been set at safe pressure levels.

Specifically, the agency wanted proof that the pipes had undergone water pressure tests, where weak spots are identified by leaks. As an alternative—since many older pipes weren’t required to undergo such tests—the commission asked for documents detailing how the pipes were built, inspected and maintained, which could be used to calculate their proper pressure levels.

The records were sought after federal investigators looking into the San Bruno disaster discovered that the pipe ruptured at a pressure level PG&E had assumed was safe and that an erroneous company document may have misled it into thinking the pipe was stronger than it was.

When PG&E submitted its data for 1,805 miles of urban pipes on March 15, it lacked pressure-test records for about a third of the lines. Instead of providing the alternative documents the commission wanted, the utility said it was still searching for the records or merely provided data that implied the pipes’ pressure levels were safe because they had been at that level for years. The company also said it could take until the end of the year to provide what the commission asked for.

State regulators accused PG&E of “willful noncompliance.”

One big change at the commission has come from Gov. Jerry Brown, who recently named three new people to the five-member body. Among them is Mike Florio, who had battled PG&E since 1978 as an attorney with the consumer group The Utility Reform Network, and who now oversees two commission inquiries into PG&E’s operations.

Some consumer advocates had wanted Brown to name a new commission president because they viewed Peevey—former president of Southern California Edison—as too cozy with PG&E. Nonetheless, Mark Toney, The Utility Reform Network’s executive director, said he sees signs the commission is getting tougher even with Peevey in charge.

“It does seem that the PUC has sent a clear message that they are not going to tolerate PG&E jerking them around,” he said. “I think it’s very possible that things have gotten so far out of hand with PG&E that even someone who wants to be supportive is finding a hard time doing that.”

Peevey said he believes PG&E is trying to improve. But he expressed dismay about its inability to quickly find the documents the agency wanted, adding, “it’s just absolutely astounding. I’m not sure that anybody at that company had a full appreciation or awareness of how incomplete their own records are.”

Asked to comment on whether the commission is getting tougher, PG&E spokesman Joe Molica said only, “we are all intensely focused on public safety, which remains our highest responsibility.”

But among those who sense a change at the commission is Assemblyman Jerry Hill, D-San Mateo.

While the commission has yet to resolve significant issues regarding PG&E—including what gas-line renovations it needs to make and whether its customers will have to pay for any of that—Hill said he’s encouraged.

“The proof is in the pudding, so we’ll have to see,” he said. But so far, following the San Bruno accident, “they’re acting as a responsible regulator would.”