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California Regulators Target PG&E in Two Penalty Cases

Following a stinging rebuke of its natural gas pipeline operations from an independent review panel, Pacific Gas and Electric Co.'s (PG&E) electric utility operations face two new penalty consideration cases for alleged violations of California Public Utilities Commission (CPUC) rules. State regulators said last Friday they were opening the cases, one of which is recommending a $7.1 million fine.

The latest action came a day after severe criticism of both PG&E and the CPUC for their handling of natural gas pipeline safety programs prior to the pipeline failure of a PG&E line in San Bruno, CA, last September (see Daily GPI, June 10).

A CPUC-appointed independent review panel's examination of the San Bruno disaster, which killed eight people, concluded last Thursday 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," along with the finding 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."

In the first electric penalty case, the CPUC staff alleged that the San Francisco-based combination utility failed to comply with certain environmental mitigation measures in its construction of the Seventh Standard Substation Project. The regulatory staff alleged that the utility did not complete required surveys during a specific time period and failed in other aspects of the projects, making it impossible for the CPUC to ensure that the project complied with state environmental quality laws.

The action is taken in response to reports from the CPUC Consumer Protection and Safety Division (CPSD), which is the same regulatory branch struggling with PG&E's response to the San Bruno pipeline incident.

A second power penalty consideration case centers on the CPSD's allegations that PG&E violated the state regulatory commission's resource adequacy requirement program rules by failing to satisfy its electricity procurement obligations in March, April and July last year. The resource program is supposed to ensure the safety and reliability of the state grid.

"CPSD's report presents evidence that PG&E failed to comply with its resource adequacy procurement obligations by not securing the resources [for the three months noted] by the time those resources were required to be procured, and recommends that PG&E be fined $7.1 million," the CPUC order said.

For both proceedings, CPUC staff and PG&E will present their cases to an administrative law judge who will then prepare proposed decisions for the five-member CPUC to consider in determining if fines or penalties are warranted.

In response to the gas pipeline review panel's work CPUC President Michael Peevey said he will recommend that the full CPUC adopt all of the recommendations specific to the regulatory panel "to the best of our ability and in an expeditious manner." Peevey said the state regulators are "committed to improving our internal processes and refining pipeline regulations in order to safeguard the public."

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