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CPUC Regulator Accuses PG&E of 'Dishonesty,' Calls for $17.25M Fine

Within days of a regulatory judge's recommending a lesser penalty, one of the five members of the California Public Utilities Commission (CPUC) late Monday issued an alternate proposed decision, slapping a $17.25 million fine on Pacific Gas and Electric Co. (PG&E) for "calculated dishonesty" related to a natural gas pipeline safety issue.

CPUC Commissioner Mark Ferron issued the alternate proposal with a larger fine for the San Francisco-based combination utility for its "failure to promptly notify" the CPUC of incorrect records it discovered on a natural gas transmission pipeline lateral (Line 147) running through the suburb of San Carlos on the peninsula south of the city. In the earlier proposed decision and in Ferron's, PG&E is said to have delayed and downplayed critical information regarding Line 147's safety.

The location of the misidentified pipeline is within a few miles of the PG&E transmission pipeline segment that ruptured and exploded three years ago in San Bruno. That pipeline segment for years was mislabeled as being seamless when it had a long lateral welded seam (see Daily GPI, Sept. 13, 2010).

"The sanctions I propose are intended to send a clear message to the top corporate management of PG&E that the CPUC will not tolerate being misled," said Ferron, referring to his decision, which included harsh language for the utility and its top executives. "We simply cannot allow deliberate and calculated dishonesty."

Last Wednesday, CPUC Administrative Law Judge (ALJ) Michelle Bushey determined that PG&E violated the regulatory panel's rules of practice and procedure by not promptly correcting a material misstatement in a filing to the CPUC and later worsening the situation by "mischaracterizing" and downplaying the seriousness of the correction when filing it as a routine, nonsubstantive correction.

As a result, Bushey's proposed decision -- usually the first step in getting to a final determination by the five-member panel -- recommended that PG&E be fined $6.75 million for misstating facts (see Daily GPI, Oct. 31).

Both the ALJ's and Ferron's decisions conclude that PG&E violated Rule 1.1 (ethics provisions) by delaying notification to the regulators about the condition of Line 147, and then attempted to disclose, but downplay the information in an "inappropriately" routine filing.

Ferron's alternative proposes to tack on more days to which a maximum daily penalty amount is applied than the ALJ's proposed decision. That is the main difference in making Ferron's penalty more than $10 million larger.

Dating back to late 2011, PG&E was attempting to get maximum allowable operating pressure (MAOP) limitations on Line 147 and a connecting transmission pipe (Line 101) removed following the completion of hydrostatic testing of the line as part of the utility's efforts following the San Bruno explosion.

Through a number of ongoing penalty cases, the largest seeking more than $2 billion in fines from the utility, PG&E maintains that its pipelines are safe, its actions were all in the best interests of its customers, and the proposed fines are unprecedented and excessive.

"Since the pipeline tragedy in San Bruno, PG&E has said repeatedly that it is a 'changed' organization and deserves our trust and confidence," Ferron said. "But actions speak louder than words. While engineers brought this discrepancy [in records for Line 147's characteristics] to management's attention immediately, PG&E's top management delayed reporting significant details of this incident for more than eight months."

Ferron called the utility's actions "a clear attempt to conceal and obfuscate the facts." He called the incident "a shocking display of poor judgment" by PG&E senior management. In the wording of his 22-page alternate order, Ferron said it was inconceivable to him that PG&E's "new senior management team, many of whom  were brought in to [the utility] partially in response to the San Bruno disaster, would fail to monitor closely every discovery in the field in relation to pipeline integrity."

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