The California Public Utilities Commission (CPUC) will consider at its upcoming meeting Thursday whether to order Pacific Gas and Electric Co. (PG&E) to face a show-cause hearing over what the regulators consider the utility’s lack of compliance in the state and federal investigations of the Sept. 9 natural gas transmission pipeline rupture in San Bruno, CA.
Regulators announced last Friday that an order will be considered to have PG&E show cause why it should not be found in contempt and why penalties should not be imposed for [its] failure to comply with the CPUC’s data requests earlier this year. If the measure is adopted, the San Francisco-based combination utility will be ordered to appear at a hearing to argue why it should not be fined and held in contempt by the regulators.
Following a PG&E submittal last week of the review of more than one million paper records on the maintenance and testing of its 1,800 miles of natural gas transmission pipelines in heavily populated areas, the CPUC said that PG&E allegedly was in “willful noncompliance” that could jeopardize public safety. The CPUC staff then recommended that the five-member panel consider imposing fines and penalties on the utility.
As part of earlier announcements, the utility admitted that it still has work to do on the recording and testing of more than 400 miles of its pipelines in high consequence areas (HCA), while separately the CPUC released a previously postponed proposed decision that would set the PG&E utility rates for gas pipelines and storage at more than half-a-billion-dollars annually for the next four years.
In addition, Standard & Poor’s Ratings Services (S&P) changed its credit rating outlook on PG&E to negative and lowered in business profile rating, citing the utility report to the CPUC as “missing key records needed to document safe operating pressures for portions of its pipelines…this development may lead to heavy fines for the company…and in our view, indicates management inattentiveness to utility operations.” S&P concluded that the company’s credibility has been compromised by what the ratings service called “a series of miscues.”
The proposed strong state regulatory action facing PG&E stems from an interim report in early January from the National Transportation Safety Board (NTSB) and the CPUC’s subsequent order for PG&E to thoroughly review its system records to determine if pressure testing had been completed on all of its pipelines in heavily populated areas (see NGI, Jan. 10). Concerns were raised as to whether there was sufficient testing to support the maximum allowable operating pressures (MAOP) for the pipelines.
After seeking and getting a delay from Feb. 1 to March 15 for submitting its records review, PG&E filed its latest report with the CPUC, and the regulators almost immediately pushed back, contending the MAOP documents “do not appear responsive to [our] order to comply with the NTSB directives to compare installed pipe to as-built drawings and calculate MAOP based on the weakest section of the pipeline or component.”
Based on PG&E’s latest submittal, the CPUC said it concluded that the utility is currently operating 8% of its natural gas transmission pipeline system “without documents supporting the purported MAOP.” The utility report further raised red flags for the regulators regarding an apparent inconsistency between “strength test pressure reports” and records for 270 miles of high-consequence area (HCA) pipelines.
“PG&E admits that for 270 miles out of 1,018 miles it claims to have complete pressure test records, the reported strength test footage tested does not correspond to the HCA pipeline footage,” the CPUC proposed show-cause order said. “Again, the lack of consistency between these data raised additional questions.”
The accuracy of PG&E’s pipeline records was initially called into question last December in an interim NTSB report that cited utility records that indicated that the ruptured pipe section in the San Bruno explosion was seamless when NTSB discovered that it had a welded seam.
“PG&E failed to comply with [our] demand,” CPUC Executive Director Paul Clanon said in a letter sent last Wednesday to PG&E President Christopher Johns. Clanon told Johns that state regulators “must be certain that PG&E knows the types of pipes it has in the ground in order to know the maximum pressure under which those pipes can operate safely.” Clanon’s letter demands that the utility provide the documents and analysis required by both the state and NTSB.
Clanon called PG&E’s actions as reflected in its March 25 data submittal “particularly inexcusable in the wake of the tragedy at San Bruno.” The CPUC is particularly concerned by PG&E’s interpretation of its records search as being to either find pressure test records for pipes or a “determination of maximum allowable operating pressure [MAOP] based on the historical high operating pressure” of a given pipeline.
“PG&E has no legitimate or good-faith basis for [that] conclusion,” said Clanon, who characterized the whole purpose of the NTSB’s urgent safety recommendation and the CPUC directive as “finding, to the extent possible, a basis for setting MAOP by means other than the grandfathering method described in the PG&E [data filing] response.” Clanon directed the utility to “forthwith comply, fully and in good faith, with the terms of the commission ruling.”
The latest PG&E-generated data on its pressure testing review of more than 1.25 million records covering its pipelines going back to July 1, 1961 did not satisfy Johns. Acknowledging that the utility has made progress, he said PG&E “is not satisfied with the results to date and will continue to search for and review our files for additional pressure test records.”
Johns said PG&E plans to pressure test or replace approximately 150 miles of transmission pipe with records similar in vintage or other characteristics to the records of Line 132, a portion of which ruptured Sept. 9 last year in San Bruno, killing eight people and destroying a residential neighborhood. “Most of the additional segments will be hydrostatically pressure tested; shorter segments will be replaced,” he said.
The PG&E report was prompted by a combination of the severity of the San Bruno incident and subsequent interim NTSB reports. The NTSB reports criticized PG&E’s alleged incomplete and in one case, contradictory record keeping on the pipeline that ruptured, which along with two parallel 30-inch diameter pipelines runs from the southeast corner of San Francisco Bay up the peninsula and into San Francisco, about 50 miles to the north.
Separately, the regulators released a proposed decision from CPUC Administrative Law Judge (ALJ) Randy Wong recommending adoption of a gas pipeline/storage rate settlement for PG&E that originally was filed with the commission before the San Bruno incident. The case was subsequently expanded to look at the aftermath of the pipeline disaster on the case. As part of Wong’s proposed decision, PG&E is required to make twice-a-year reports to the regulatory commission on safety of its pipeline/storage operations.
Under the ALJ’s recommended decision, PG&E revenues for gas pipeline and storage operations would increase to $514.2 million from last year’s $461.8 million, and would reach $581.8 million by 2014. Rates for gas transmission and storage services would increase for all of PG&E customers.
S&P moved the corporate and utility ratings outlook for PG&E to “negative” from “stable,” and its business profile to “strong” from “excellent.” San Francisco-based S&P analyst Anne Selting said “the ongoing San Bruno, CA, pipeline explosion investigation, combined with disputes over advanced metering and the failed [June 10] ballot initiative PG&E heavily backed, have weakened the firm’s business profile.”
PG&E said it is looking to make further assessment of some 435 miles of its transmission pipelines that cross HCAs and for which the utility still has not located pressure test records to back up current MAOPs.
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