Even with strong financials and a stable stock price, San Francisco-based Pacific Gas and Electric Co. (PG&E) and its parent company, PG&E Corp., seem to run into trouble around every corner, and at the end of April it was looking for a new CEO and trying to regain the intangible of public trust.

By last Thursday it was clear that relations are increasingly strained between PG&E and the California Public Utilities Commission (CPUC) after the head of the CPUC’s Consumer Protection and Safety Division (CPSD), Richard Clark, pushed back against PG&E’s plans by insisting that the utility hydrostatically test up to 705 miles of pipeline in high-consequence areas (HCA).

The combination utility was stung by another sudden setback when its CEO for the past six years, Peter Darbee, announced that he was retiring early and the PG&E board accepted his resignation. Lead outside Director Lee Cox, a former telecommunications CEO, assumed Darbee’s chairman/CEO/president role on an interim basis effective last Saturday.

Darbee and the utility have been under increasing regulatory and consumer heat, first with unrelenting customer backlash to the state-mandated shift to advanced “smart” meters, and more recently by the San Bruno natural gas transmission pipeline rupture and explosion that left eight people dead and a suburban neighborhood destroyed (see NGI, April 4).

In the midst of these latest tugs and pulls it didn’t help PG&E’s public standing when it told state regulators that at least 34 miles of natural gas transmission pipelines running through highly populated areas have been incorrectly identified as “seamless,” similar to the section of 30-inch diameter pipe that ruptured in San Bruno.

A PG&E spokesperson told NGI that the utility “will be working with the commission to better understand the impacts [the CPUC’s latest staff mandate] may have on PG&E’s operations, as well as to the natural gas transmission industry as a whole. Meanwhile, we have already taken many steps to further enhance the safety of our system, including an aggressive plan to hydrostatically test or replace 152 miles of gas pipeline in 2011, etc.”

If the staff’s proposal is approved by the five-member CPUC, the additional hydro-testing could cost an estimated $350 million over a five-year period during which significant disruption of service might also result.

A source of friction is the National Transportation Safety Board’s (NTSB) standard for “traceable, verifiable and complete” records on the pressure testing of every section of pipeline traversing HCAs (see NGI, Jan. 10). Increasingly, the CPUC safety staff has criticized PG&E for trying to skirt the standard in terms of the total miles of pipe tested and the thoroughness of the tests.

“CPSD staff has become increasingly uncomfortable with PG&E’s proposal to use assumptions to populate its pipeline features list as an integral part of verifying the maximum allowable pipeline pressure of particular segments of its HCA pipeline segments that do not have ‘traceable, verifiable and complete’ records of all the components of each segment,” Clark said.

Clark said both NTSB and the CPUC are requiring PG&E to provide “direct evidence” of the material condition of all sections of its transmission pipelines. The CPUC wants pressure testing or replacement of all pipe sections for which PG&E used assumptions to validate maximum allowable operating pressure. It does not want substitutes used for hydrostatic testing of these segments.

Regarding the 34 miles of misidentified pipe, Bill Stock, PG&E director of regulatory relations, reportedly did not indicate where those lines are located. They are part of the 152 miles of pipe in HCAs that was of the same vintage and had the same characteristics as the failed segment on PG&E’s Line 132 in San Bruno that the utility in March committed to complete testing and/or replacement by the end of this year.

PG&E identified a separate 118 of the 152 miles of pipe that was 24- to 36-inch diameter and was installed prior to 1962, none of which had strength test records and that may have been manufactured by a certain company. Also in HCA areas, the 34 separate miles of pipe were “recorded (erroneously) as being pipe greater than 24-inch diameter and installed prior to 1974 that had no strength test records,” PG&E said in its letter to the CPUC.

All of the pipe being focused on is double submerged arc welded, as was the segment that ruptured in San Bruno.

In Clark’s letter, PG&E was described as attempting in some cases to use other measures — x-ray, camera inspections or automated ball indentation — in place of the hydro-testing to satisfy ongoing federal and state mandates for operating pressure verification. Clark said the other measures can help in prioritizing pipeline segments for hydro-testing, but they cannot be used as a replacement.

In other instances, according to Clark’s letter, PG&E has proposed using inline inspection (ILI) tools for pipelines with various welded seams that were installed before 1970. The CPUC does not that think that is sufficient testing since the San Bruno segment was found to have a similar welded seam, although PG&E records indicated that it was “seamless.”

“Inline inspection tools, as advanced as they are, are not without the possibility of missing certain defects when run through the pipeline,” Clark said. “While hydro-testing also has its limitations and concerns, CPSD believes these concerns can be addressed through properly designing and performing the tests as PG&E intends to do for the 152 miles of pipeline it intends to hydro-test in 2011.”

Nevertheless, the state regulators indicated they are mindful that requiring hydro-testing of 705 miles of HCA pipelines will be both costly and disruptive to PG&E gas utility operations. Thus, the CPUC will work with PG&E to provide enough time and flexibility, and ultimately “to assure that these activities can be prioritized so as to minimize the possibility of outages,” Clark said.

Even before Darbee’s sudden departure, PG&E utility President Christopher Johns had taken the lead on both the smart meter and San Bruno issues, which are continuing to unfold in various regulatory and political forums. Still Darbee, a long-time financial services industry and telecommunications executive before coming to the energy utility as CFO a decade ago, has been the focus of customer and regulator ire on occasions when he has made public appearances.

The Utility Reform Network (TURN), a San Francisco-based utility watchdog group, called Darbee’s departure “long overdue” as it has criticized the utility CEO for what it called “a series of dramatic and troubling mistakes.” TURN Executive Director Mark Toney said PG&E “has a long way to go to restore public trust.”

While TURN has been calling for Darbee’s resignation for some time, a spokesperson for the consumer group told NGI that TURN did not actively “lobby” for his departure, and it will not be offering any suggestions for a replacement to the combination utility’s board of directors.

CPUC President Michael Peevey, a former president and director of Southern California Edison Co., urged PG&E directors to recruit someone “technically competent” and with “a long-standing history of performance in the energy industry.” In a further slap at the departing utility leader, Peevey said it was obvious that Darbee’s leadership “has been responsible for several poor and consequential decisions.” Nevertheless, he did not question Darbee’s “commitment” to the utility and its constituents.

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