California regulator suggests utility is too big to be safe

ByEllen Knickmeyer, Associated Press

California's top utility regulator says repeated natural-gas accidents, including a 2010 pipeline explosion that killed eight people, suggest that PG&E could be too big to operate safely

SAN FRANCISCO (AP) — Repeated natural-gas accidents — including a 2010 pipeline explosion that killed eight people — suggest that California's largest power utility could be too big to operate safely, the state's top utility regulator says.

California Public Utilities Commission President Michael Picker said he would ask the commission's staff to study "the culture of safety" and the structure of Pacific Gas & Electric Co. (NYSE:PCG), which has its gas and electricity operations under a single corporate board and chief executive.

He also wants staffers to review the possibility of the state claiming bonuses given to executives of PG&E, one of the country's largest power utilities with 9.7 million gas and electric customers.

The Associated Press obtained Picker's prepared statement ahead of a commission meeting Thursday, where the panel is expected to vote on a record $1.6 billion penalty against PG&E for a deadly gas pipeline explosion in a San Francisco suburb.

PG&E officials said Wednesday that the utility has redoubled safety training, changed top executives and carried out extensive safety improvements to its natural-gas system.

"We look forward to hearing any comments from President Picker and we welcome an ongoing discussion focused on safety," PG&E spokesman Keith Stephens said in an email. "Since the 2010 explosion of our natural gas transmission pipeline in San Bruno, we have worked hard to do the right thing for the victims, their families and the community of San Bruno.

"We've made tremendous progress but we have more to do and we are committed to doing it right," he said.

Picker's statement cited what he said were rising numbers of state safety citations against PG&E's natural gas operations and said it appeared the utility, with $1.6 billion in earnings in 2014, was able to shrug off financial penalties.

"If, indeed, PG&E is failing to establish a safety culture, and we continue to see more accidents and violations of safety rules, what are our tools?" Picker asked.

Another state official said the staff would study whether the commission could split the company's gas and electric operations, if it chose to do so. The official spoke on condition of anonymity because the official was not authorized to publicly speak about potential next steps to address the utility's problems.

"Is the organization simply too large — spread across a sizeable portion of a large state, and encompassing diverse functions such as both gas transmission and gas distribution, as well as electric service — to succeed at safety?" Picker said in his statement.

The commission planned to decide Thursday between the $1.6 billion penalty and another proposal with a lower penalty for the 2010 pipeline explosion in San Bruno.

The National Transportation Safety Board faulted repeated safety failures by PG&E, as well as lax regulation by the commission, in the blast. The fiery explosion from a broken pipeline engulfed a neighborhood on Sept. 9, 2010, killing eight people and destroying more than three dozen homes.

San Bruno officials have kept pressure on utility regulators and PG&E in the years since. Legal actions taken by city led to the release of 65,000 emails between the utility and regulators over the past two years. The emails included exchanges that showed commission staffers and members coordinating to find judges favorable to PG&E on rate cases.

Another email described Picker's predecessor, Michael Peevey, pressing a PG&E executive over dinner for $1 million in donations to a ballot initiative backed by Gov. Jerry Brown and for $100,000 to help pay for a commission gala.

The U.S. attorney's office and state attorney general have since informed PG&E that they are investigating possible corruption between the commission and the utility, PG&E says. The utility said the executives accused of improper dealings no longer work for PG&E.

The criminal investigations into the utility commission's backchannel dealings with PG&E led the governor to put Picker, his former energy adviser, in charge of the panel this year.

Since the blast, survivor John P. McGlothlin said PG&E television commercials and full-page newspaper ads describing the company's care for Californians make him skeptical the utility understands the gravity of safety problems.

"It looks like at some point they decided to spend the money on what I'll call propaganda, rather than action," said McGlothlin, who had been cooking dinner with his wife in 2010 when he heard what he thought was a plane coming apart overhead.

"I looked over my shoulder, and there was a fireball. Literally, the fireball looked like it was in our backyard," he said.

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