Editorials

Record fine is a good start, but PG&E is too big

A massive fire roars through San Bruno after a PG&E natural gas pipeline exploded in 2010. The state recently levied a record $1.6 billion fine against the utility for the disaster, but the new head of the California Public Utilities Commission is asking if PG&E is too big.
A massive fire roars through San Bruno after a PG&E natural gas pipeline exploded in 2010. The state recently levied a record $1.6 billion fine against the utility for the disaster, but the new head of the California Public Utilities Commission is asking if PG&E is too big. Associated Press file

Five long years after the gas explosion that killed eight people and destroyed 38 homes in San Bruno, the California Public Utilities Commission last week finally – finally – took Pacific Gas and Electric Co. to task.

The $1.6 billion fine was a record. PG&E’s chief executive somberly released a statement saying the utility was “deeply sorry.”

But in truth, the fine scarcely registered with the massive utility or its shareholders. Share prices took a 1.6 percent dip on the day of the announcement and recovered hours later. The company didn’t bother to appeal.

And its management scarcely suffered a whit, new PUC President Michael Picker noted. “The CEO who held that position at the time of the San Bruno incident, and during cuts in funding pipeline replacement and inspection programs, retired with a reported $38 million bonus,” Picker told the commission. “The president of PG&E at the time of the San Bruno incident is still the president.”

The problem may be that PG&E is just too big, as Picker suggested.

It’s the largest investor-owned utility in the state, providing not only natural gas but also electricity to a vast swath of California. Its gas-delivery operation is one of the nation’s largest, serving nearly 10 million customers across Northern California and the Central Valley. Its electrical operation is similarly sweeping and includes the Diablo Canyon nuclear plant.

After the San Bruno explosion, investigators found that PG&E’s pipes had deteriorated, that the company had skimped on maintenance, and that its record keeping was shoddy. They also found that PUC had inadequate oversight.

When the commission handed over thousands of emails – the result of a lawsuit filed by the city of San Bruno – the PUC came off looking less like a fierce watchdog than a Corgi trying to ride herd on Godzilla.

And though the former commission head, Michael Peevey, was a lightning rod for blame, drawing criticism for alleged back-channel dealings and general coziness with the company he was supposed to be regulating, the record also shows that the PUC was simply overmatched by the utility colossus.

The latest audit of the PUC, prepared at its own request, found that the commission’s gas safety enforcement branch is still hobbled by antiquated technology, backlogged investigations, insufficient staff and conflicting directives. Obviously, Picker and state lawmakers need to fix this.

But even the huge fine levied against PG&E illustrates the larger limits of the state’s regulatory system. Picker noted that the PUC had to be careful to make the fine big, but not too big, because if PG&E were forced to do extra borrowing, rates would rise and customers, rather than the utility and its shareholders, would be punished. Even so, the market appears to have treated the record penalty as a mere cost of doing business.

So while the company may talk a good game, it continues to be hard to tell whether PG&E actually is creating a safer culture. In fact, problems and fines have persisted since the San Bruno accident.

At last week’s meeting, Picker asked the PUC staff to look into the commission’s options, and this week, he met with utility analysts on the East Coast. He has talked about breaking up PG&E.

That would be a big deal. But if it can be done, the PUC should seriously consider it. As it is, three massive and vulnerable systems – electrical, nuclear and gas – are under the control of one giant utility that barely flinched when regulators hit it with the worst they could offer. With dangers from terrorism to climate change on the horizon, that’s an untenable situation for California.

Kudos to Picker for making it clear that there’s a new dog in town now. But we’re going to need a far more powerful sentry if PG&E can’t be brought back to a human-sized scale.

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