A culture of complacency still exists after the Sept. 9, 2010 natural-gas explosion in San Bruno, in which eight people were killed and a neighbored leveled. Seventy homes sustained damage and 18 homes adjacent to the destroyed dwellings were left uninhabitable.

In October, the California Public Utility Commission created an independent review panel of industry experts  to investigate the explosion in San Bruno. The panel’s June report ripped into Pacific Gas & Electric Co.

But nothing has happened since.

Among many allegations, the reportcharged that PG&E and the CPUC are more concerned about filling out reports and “checking boxes” than actual safety.

The CPUC’s Web site says it “serves the public interest by protecting consumers and ensuring the provision of safe, reliable utility service.”  But in a press statement released the same day as the independent report, the CPUC offered a shallow excuse for the lack of oversight of the utility.  “The report concludes that the pipeline rupture was ‘a consequence of multiple weaknesses in PG&E’s management and oversight of the safety of its gas transmission system,’ and that the CPUC ‘did not have the resources to monitor PG&E’s performance in pipeline integrity management adequately or the organizational focus that would have elevated concerns about PG&E’s performance in a meaningful way.”

The same day, however, CPUC President Michael Peevey chose more appropriate words and said the report highlighted a “culture of complacency” at the CPUC, and was “damning of PG&E across the board.” They were tough words and made great sound bites, but appear to have fallen on deaf ears.

With three components to the report, the first was to find underlying reasons for the incident.  The second was to delve into the complexities of pipeline integrity management and regulatory oversight.  The third was to offer recommendations to diminish the likelihood of future incidents.

Shocking Conclusions

Many of the report’s conclusions were devastating, as well as shocking. The National Transportation Safety Board’s findings identified that both the material and the fabrication welds of the section of pipeline that failed did not meet engineering standards for natural gas pipelines.

The independent panel made pipeline integrity management the primary focus of the report. “As a result of our investigation, the Panel concludes the explosion of the pipeline at San Bruno was a consequence of multiple weaknesses in PG&E’s management and oversight of the safety of its gas transmission system,” the panel wrote. The panel even found that PG&E had provided incorrect pipeline data.

However, delivering a one-two punch, the panel also found that “the CPUC did not have the resources to monitor PG&E’s performance in pipeline integrity management adequately or the organizational focus that would have elevated concerns about PG&E’s performance in a meaningful way.” The CPUC actually admitted that it was less effective in dealing with PG&E than any other utility because of the ‘culture’ of PG&E. Critics of the CPUC report that there is a revolving door for employees and executives between the regulator and PG&E, as well as with Southern California Edison.

A story published this week in the San Francisco Examiner highlighted this revolving door: “Exhibit A is Michael Peevey, commission president and onetime CEO of SoCal Edison, one of the utilities his agency regulates. But he’s not alone: the agency’s top lawyer, Frank Lindh, worked at PG&E for 16 years, leading Peninsula Assemblyman Jerry Hill to question Lindh’s involvement in investigating the San Bruno blast.”

And the Examiner found even more incestuousness: “Consumer advocates point to other examples. Delaney Hunter, former CPUC government affairs chief, became an energy lobbyist in 2008. Former Executive Director Steve Larson left the CPUC in 2007 to work at a natural gas company. Ex-Commissioner Jessie J. Knight now leads San Diego Gas & Electric.”

Additionally, according to the independent panel’s report, PG&E management had focused primarily on the safety of its employees, but lacked an equivalent focus on public safety. “But the goals (PG&E) sets for management compensation purposes, its investments, and its practices do not suggest its focus is on achieving an industry leading pipeline safety and integrity program,” the report stated. Unfortunately, PG&E appears concerned with image than safety.

More Findings

Additional findings by the independent review panel include:

* “PG&E has no overall strategy to improve how it assesses the integrity of its system.”

* “In reviewing the pipeline 2020 program, we did not find it to be well-reasoned or based on a thoughtful examination of alternatives. The plan appears to be reactive.”

* “PG&E’s management acknowledged to the panel that the implementation of field force automation is not as advanced as what other companies in the industry have available.”

In 2007, a PG&E Enterprise Risk Management program identified that gas and electric system safety was one of the top 10 catastrophic risks facing PG&E. The report said that the utility acknowledged “a major natural gas transmission accident would  expose PG&E to financial exposure anywhere from $100 million to $500 million, cause significant injury, illness or environmental impact, and national or international attention resulting in a severe negative consequence to the company’s image or reputation with regulators, consumers, or the general public.”

Dysfunctional Culture

The damning report also identified “five factors as contributing to a dysfunctional culture at PG&E: excessive levels of management, inconsistent presence of subject matter expertise in management ranks, appearance-led strategy setting, insularity, (and) overemphasis on financial performance.”

It would appear to anyone reading the report that the CPUC has allowed PG&E to operate with little accountability and perhaps only cursory oversight.

While PG&E is a privately held “Investor Owned Utility,” it is difficult to ignore the utility’s excessive spending practices and failure to invest in important pipeline upgrades.

Last fall, The Utility Reform Network (TURN) released PG&E memos proving that the utility considered the San Bruno pipeline among its top 100 riskiest sections needing replacement.

After the San Bruno explosion, PG&E acknowledged that it took nearly two hours to close the manual shut-off valves on the pipeline. State officials reported that if the valves had been automatic, the loss of life and property damage would have been measured in minutes, instead of hours.

Prior to the explosion, some San Bruno residents had reported smelling gas fumes in the neighborhood numerous times, and had reported this to PG&E.

And Mike Wiseman, a transmission pipeline worker, filed a lawsuit filed before the San Bruno blast, alleging a cover up involving a supervisor who ignored safety procedures as well as grievous safety violations. Wiseman claimed that PG&E management knew about the safety violations.

PG&E Executive Enrichment

Critics of PG&E’s spending say that a great deal of money has gone to personal enrichment at the utility instead of improving pipeline safety. In the Manteca Bulletin, Dennis Wyatt listed some of the excessive spending at PG&E:

* $46 million into the Proposition 16 campaign in a failed attempt to get voters to amend the California constitution to provide PG&E with a guaranteed monopoly.

* $35 million to sweeten departed chief executive officer Peter Darbee’s severance package.

* $12 million to buy a new corporate jet.

* More than $10 million into bonuses paid to top executives as a reward for steering the company to the edge of bankruptcy.

“That’s $103 million in just four instances that could have gone into improving pipeline safety,” Wyatt wrote.

And Wyatt reported, “[T]hat is on top of a $35 million fine for state-imposed building and collection violations, $26 million in fines for a 2009 Christmas Eve natural gas pipeline explosion that killed a customer in Rancho Cordova, and millions more in fines for wild land fires started due to failing to maintain power line right-of-ways.”

It has been alleged by many utility reform activists that the CPUC rarely imposes fines or penalties against PG&E, making the CPUC appear to be just as complicit as PG&E in its blasé attitude about customer safety.

Activists and customers are asking for investigations into the cozy relationship between the regulator and utility, particularly in the aftermath of the San Bruno devastation and revelations of PG&E’s many safety violations. And many hope that the report does not become just another exercise in futility, as do most reports involving state agencies and oversight in California.

– Katy Grimes