Pacific Gas and Electric Co. (PG&E) is making progress in creating a “safety-first culture” in its natural gas pipeline operations, but in past years the combination utility lost its safety edge with the merger of its electricity and natural gas utility operations, according to Executive Vice President of Gas Operations Nick Stavropoulos.

Stavropoulos made the observation last Wednesday during a California Public Utilities Commission (CPUC) workshop. The San Francisco-based utility recently reported that it spent more than a half-billion dollars last year on natural gas transmission pipeline/storage safety-related work, $81.9 million more than a budget settlement approved at mid-year 2011 by the CPUC. Commissioner Mike Florio said the workshop was a “check-in” point on PG&E’s ongoing pressure testing of its transmission and distribution pipelines, and Stavropoulos and his management team provided an overview of last year’s testing program on more than 160 miles of pipeline, three segments of which turned up a leak and two ruptures.

Florio asked about whistle blowing PG&E employees who have complained about shoddy work during the testing, but Stavropoulos said he found no evidence of that in reviewing past work and interviewing other employees. Among the 97 separate hydrostatic tests completed in 2011, PG&E found a leak in one segment and ruptures near the highest pressures the pipelines were legally able to operate under in two other segments. “So we found those weaknesses in those pipes before the weaknesses found us.”

CPUC President Michael Peevey asked Stavropoulos to use his 30-plus years of experience in the industry to speculate on how PG&E lost its safety-first orientation in its operations. “How did it slip?”

“I don’t think there is any one thing you can point to over time,” said Stavropoulos, who speculated that combining the gas and electric systems may have been a contributor. “Combining the gas and electric operations many years ago probably might have been the beginning [of the problems]. In turn, the process of losing focus on the gas business contributed to the situation because there are very significant differences.”

Stavropoulos pointed to PG&E CEO Tony Earley, who had previously worked for two major combination utilities, as an advocate for keeping the two operating systems separate. When they’re combined, resources tend to be “sucked away” from the gas operations because the electricity operations are much larger and tend to pull away resources, and in some cases, good employees, he said. Over a period of time dating back to PG&E’s three years in Chapter 11 bankruptcy protection (2001-2004) a lot of management talent was lost on the gas side, he said.

Peevey said a concern of state regulators is that in creating the greater “safety-first culture,” utilities find ways to sustain that level of operations. Stavropoulos said he has hired Jim Hall, a former chair at the National Transportation Safety Board, who comes in with an outside team every five weeks and make a complete assessment of how PG&E is doing.

In its report earlier in March to the CPUC PG&E said it spent $512.8 million, with shareholders footing $404.6 million of the bill, according to its semi-annual transmission safety report. State regulators had authorized $430.9 million for 2011 gas transmission expenses as part of a general rate case that pre-dated the September 2010 transmission pipeline rupture and explosion in San Bruno, CA.

CPUC Executive Director Paul Clanon last week called on PG&E to hire independent consultants, paid for by shareholders, to examine the utility’s safety and security proposals for both its gas and electricity systems as part of a proposed multi-billion-dollar general rate case. The gas part would incorporate PG&E’s pending pipeline safety plan and recommendations from the CPUC and federal regulators in the wake of San Bruno. “The CPUC is working on multiple fronts to implement recommendations made by an independent review panel and the National Transportation Safety Board following the rupture,” a CPUC spokesperson said. “As part of this effort, the CPUC began a stakeholder process to integrate safety and security more fully into the ratemaking process.”

In the last half of 2011 PG&E said it surveyed 30,712 miles of pipeline, performing 11,449 facility inspections. These activities included 4,807 miles of pipeline leak surveys performed; 25,616 miles of pipeline patrolled; and maintenance and inspections of more than 3,000 valves and 1,500 district regulator stations. In its highly publicized pressure testing efforts, the utility completed hydrostatic testing of 188.1 miles of pipeline in highly populated areas and completed another 134.5 miles of integrity management assessments. PG&E has been criticized for allegedly not spending all of the monies authorized in rates for pipeline safety and maintenance work, and it accepted responsibility for things that were not done or were done poorly before, during and after the San Bruno pipeline explosion (see NGI, Oct. 3, 2011).

Separately, San Francisco-based utility consumer watchdog group The Utility Reform Network (TURN) blasted the CPUC for excluding some viewpoints, including TURN’s, contending that “transparency” about the pressures being tested and the conditions of the pipes is essential. “We know that high-pressure testing works,” said TURN attorney Marcel Hawiger. “In at least one case, high-pressure testing identified a major problem. We want assurances from PG&E that equally effective methods are used for all potentially dangerous pipelines.”

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