For the first time since the 2010 San Bruno gas pipeline disaster, the California Public Utilities Commission appears poised to step up and do the right thing.
The PUC's staff recommended Monday that PG&E pay a $2.25 billion penalty for its role in the explosion and that shareholders should pay those costs. The proposed penalty is nearly identical to the amount Overland Consulting, in a 2011 audit, indicated PG&E could absorb without impacting ratepayers.
The proposal is subject to a final vote by the five PUC commissioners, and given PUC President Michael Peevey's cozy relationship with PG&E, anything remains possible. PG&E's new CEO, Tony Earley, is already lobbying for a lesser amount, calling the penalty excessive and "far exceeding anything that I have seen in my 30 years in the industry."
Gov. Jerry Brown, the Legislature and ratepayers must hold the PUC commissioners' feet to the fire. The regulatory agency needs to follow through on its staff's recommendation.
Earley's claim that the penalty is extreme is embarrassing. PG&E remains unwilling to acknowledge full responsibility for its gross incompetence.
Eight people died in the San Bruno gas pipeline tragedy. Fifty-eight people were injured, and 38 homes were destroyed. Investigation after investigation showed PG&E for years has been putting profits before safety.
The utility repeatedly failed to properly install and test gas pipelines throughout its system, including the San Bruno pipeline. Instead, it took the ratepayer money that was designated for that purpose and used it for management bonuses and to embellish its profits. In the three years before the San Bruno blast, according to the Overland report, PG&E spent more than $150 million on an executive incentive plan that has been criticized for encouraging staffers to ignore significant safety issues. Hardly the way to treat customers who your goofy advertising message says you "believe in."
Following the San Bruno blast, PG&E continues to rack up more than $1 billion a year in annual profits. The PUC staff clearly believes -- with ample reason -- that the utility has the capacity to handle the penalties without going to ratepayers.
The only real question for the staff was whether the money should go directly to the state's general fund or be plowed back into the utility's fund to improve its gas pipeline system. The PUC proposes allocating the money for improvements because if it doesn't, PG&E is likely to charge ratepayers for work they already paid for once, even though it never got done. This way shareholders will be paying those costs, as they should.
Trust in PG&E and the PUC is all but nonexistent after decades of gross mismanagement of both. PG&E's insistence that ratepayers pay the price of the utility's incompetence remains a black mark on its integrity. For the PUC, its staff proposal to hold PG&E responsible for its actions could be a good first step in the commission's long road back to respectability, if the utility-friendly commissioners approve it.