Facing a $2.25 billion penalty for safety lapses that led to the fatal 2010 gas pipeline explosion in San Bruno, Pacific Gas and Electric Co. is raising the specter of bankruptcy in an effort to scare state regulators into cutting the utility a break.
In its original case before the California Public Utilities Commission, PG&E’s witness said that it could absorb that level of fine. Now PG&E’s CEO warns that it may not be able to sell enough shares to come up with the penalty money.
Why the 180-degree change in strategy? PG&E realizes that its cronies at the CPUC are running out of scenarios in which they can save both PG&E and their own credibility.
Despite the CPUC president’s and his lieutenants’ bluster that they’re prepared to “throw the book at PG&E,” the commission is doing everything it can to give PG&E a soft landing.
Last October, CPUC leadership cajoled its safety division — whose job was to prosecute PG&E — into asking that the utility not answer to cross-examination and instead move into closed-door settlement negotiations. When negotiations collapsed, the CPUC Safety Division, the city of San Bruno and other parties proposed fines of roughly $2.25 billion. The CPUC leaders engaged in a media blitz, descending on editorial boards across the state, taking credit for such a stiff sanction. A month later, however, all the safety division’s lawyers were taken off the case for objecting to PUC leadership’s “clarification” — PG&E would be able to take credit for all past and future safety-related expenses, so its proposed fine in fact would be no fine at all.
Let’s not forget what the National Transportation Safety Board said about PG&E after investigating the San Bruno disaster. The NTSB called PG&E “a company that exploited weaknesses in a lax system of oversight ... to the detriment of public safety.” The problem was “compounded over the years by a litany of failures — including poor recordkeeping, inadequate inspection programs,” the NTSB also said.
The CPUC’s disingenuous attempts to look tough have been exposed, and it can’t let PG&E off the hook and appear honest. Now the utility is running to Wall Street to pressure the CPUC to have mercy.
PG&E is even having community organizations it donates to write guest perspectives in this paper to perpetuate the bankruptcy scare tactics in an effort to get a reduced fine from the PUC. PG&E also invoked the threat of bankruptcy to kill legislation I authored to make PG&E profits depend on safety performance.
The irony is that a majority of the penalties proposed against PG&E are to offset rate increases for testing and replacement programs that you are paying for — increases that wouldn’t be necessary had PG&E appropriately maintained its pipelines over the years.
The reason that we do not have a settlement yet regarding the 2010 explosion that killed eight people, and the reason that the CPUC’s Safety Division and other parties have proposed such a large fine, is PG&E’s unwillingness to admit its shortcomings and own up to the disaster. Under cross-examination before the CPUC, PG&E’s paid witness had the audacity to testify that he believed the utility’s safety programs were effective and that the NTSB got it wrong.
The city of San Bruno, the safety division and ratepayer advocates are doing exactly what they should be doing: advocating a stiff penalty for an unrepentant company.
We’ve been paying our monthly utility bills all along expecting PG&E to properly maintain its gas pipelines. A strong fine ensures that shareholders pay for improvements that have been neglected in favor of profits. This is the only way we can teach PG&E a lesson so it won’t repeat these mistakes in the future.
Jerry Hill represents the city of San Bruno in the California Senate.