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PG&E Improves but More Work Ahead, Says Top Exec

The top gas executive for San Francisco-based Pacific Gas and Electric Co. (PG&E) told NGI last week that the combination utility is less than half way toward becoming a "top quartile" gas distribution and transmission pipeline operation and still needs to fulfill almost a dozen federal recommendations made following the September 2010 explosion of a transmission pipeline in San Bruno, CA.

Progress has been made, but changes in the past year may have been forced too quickly, said Executive Vice President Nick Stavropoulos. PG&E has only fully addressed one of 12 recommendations from the National Transportation Safety Board (NTSB) investigation of the explosion, which killed eight people and destroyed a suburban neighborhood south of San Francisco.

State and federal regulators, as well as citizen stakeholders, have been unsparing in their criticism of PG&E's gas system operations in the past five to 10 years, as well as in the self-reported violations that PG&E divulged to the California Public Utilities Commission (CPUC) this year (see NGI, March 21, 2011).

Natural gas pipeline infrastructure nationwide is aging and there needs to be a way to recover the cost of these programs, Stavropoulos said. Along with billions of dollars to makeover its natural gas pipeline system, PG&E depends on its employees to speak up to identify unsafe equipment, systems and processes, Stavropoulos said. Self-reporting and whistle blowing by rank-and-file employees has made a difference as the utility attempts to bounce back.

"I'm encouraged by our team because individuals are coming forward to identify opportunities for us to improve and get better," he said. "I'm encouraged because if we we're not seeing that...then I would begin to worry. People feel safe now in reporting up [the management chain] what they find."

Despite negative reactions from state regulatory safety staff to problems PG&E has identified (see NGI, June 11), Stavropoulos said the increase in reports on problems within the organization are a sign that the utility is making progress to become a safer pipeline system. "We're being very open, honest and transparent, and extremely conservative in reporting these violations.

"I think we will know that we have 'arrived' when we have closed out all of the 12 NTSB specific recommendations. We have one closed out, and it gives me comfort that we have demonstrated to the nation's number one independent authority on pipeline safety that we have done the things that they felt were important enough for us to do. Right now we have one recommendation closed and 11 that the NTSB calls 'open, but acceptable.'

"This is saying that the item is still open, but we have demonstrated that we have made sufficient progress against those recommendations and also articulated a measurable plan for us to continue to make progress. The feedback we get from the NTSB is going to be another measure of success in determining whether or not we have arrived."

Nationally, major pipeline incidents per mile of transmission and distribution pipelines are going down, he said. "We're starting from a point where the U.S. gas pipeline system on balance is an extremely safe form of transportation. That said, I think the industry is making it clear that it wants to continue to do better." The NTSB, the Pipeline and Hazardous Materials Safety Administration and the CPUC are holding the entire industry accountable to higher standards that call for "verifiable, traceable and complete" records on maximum allowable operating pressure tests in stepped-up pipeline integrity management programs.

After a year on the job heading PG&E's gas system, which now operates separately within the combined utility, Stavropoulos said the utility has "kept its commitments" on hydrostatic testing, installing more automatic shutoff valves and completely overhauling its record-keeping of pipeline maintenance and safety programs. A top priority, which may take years to fulfill, involves "embedding a safety-first culture into this organization...When I talk to other companies [inside and outside the gas industry], the number one thing that every employee needs to understand is that 'safety first' is the top priority. In a short period of time, I think the employees are all seeing that we are a different company."

Even with that success, Stavropoulos said he probably instituted too many improvement programs -- 120 in all -- for the organization to absorb in a year's time. Ultimately, he chalks that up to an improvement mindset that has grown since San Bruno.

California pipeline operators are adhering to a "brand new standard" in generating more self reported incidents to the CPUC, said Stavropoulos, noting that it is supposed to be related to violations of external state or federal regulations, but PG&E has interpreted it to include instances when the utility violates its own internal standards that often are more stringent than the regulatory rules.

"Even if we don't meet our own internal standard that is above and beyond anything required in the regulations, then we report that, too. We're going to the other extreme, trying to self-report everything [that deviates from utility standards]," he said.

Along with developing the internal "safety culture" and brutal honesty, rate support for a $2.2 billion four-year pipeline enhancement program is critical to building a pipeline system that adheres to the highest standards, Stavropoulos said. That's the other critical issue he faces -- getting the CPUC to approve recovery of the vast bulk of the expenditures going forward in retail utility rates. Similar multi-billion-dollar pipeline update programs are under way elsewhere as more states implement updated pipeline safety requirements.

"They are also developing innovative cost-recovery mechanisms to support those programs for pipeline operators to replace aging infrastructure," he said. "I'm very encouraged nationally by all this. Like your highways, assets do age, and they need to be replaced."

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