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Is California's Largest Utility Too Big To Jail?

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Is California's Largest Utility Too Big To Jail?

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Is California's Largest Utility Too Big To Jail?

It may seem like a stretch to compare California’s largest investor-owned utility, Pacific Gas & Electric, with one of history’s most notorious serial killer, Charles Manson.

But, when assessing its role in the 2010 pipeline explosion in San Bruno, the Office of Ratepayer Advocates (ORA), a division of California’s Public Utility Commission (CPUC), insists otherwise.

“It is not an overstatement to say that PG&E has the contrition of Charlie Manson – that is to say, it has none,” the ORA argued in a legal brief last year.

At 6:11 PM on September 9, 2010, a 30-inch natural gas transmission pipeline owned by PG&E ruptured about 12 miles south of San Francisco beneath a sleepy suburban street in the city of San Bruno. The rupture triggered the most deadly utility disaster in California’s history.

Eight people died, 66 others were injured and more than 100 homes were destroyed or damaged.

The fatalities included one the ORA’s employees, Jacqueline Creig.

The 44-year-old Creig, who had worked at the ORA for 21 years, was burned alive in the blast along with her 13-year-old daughter.

“She was someone who devoted much of her working life to consumer protection,” said Mindy Spatt, a spokeswoman for The Utility Reform Network, or TURN, a consumer advocacy organization based in San Francisco. “It’s unbelievably sad and tragic that she was one of the victims.”

The video footage featured above show customers’ reaction to the pipeline explosion in San Bruno as recorded by surveillance cameras inside Lunardi’s Markets. Emergency responders used Lunardi’s parking lot as a staging area for battling the massive blaze.

Needless to say, the ORA has expressed support for a proposal to impose $2.25 billion in penalties against PG&E.

In the next week or two, an administrative law judge in California is expected to make a recommendation as to whether the CPUC should impose the proposed $2.25 billion penalty, which several high-profile pundits have described as “excessive.”

Take the recent Op-Ed by Spencer Abraham, a former U.S. Secretary of Energy, that appeared in the San Francisco Chronicle.

“Bay Area residents and indeed all Californians should be concerned that the [proposed $2.25 billion penalty would have] . . . damaging long-term consequences for consumers,” said Abraham.

This is true. Californians should be concerned about the economic consequences of fining PG&E $2.25 billion for its role in the 2010 pipeline explosion in San Bruno.

Doing so could – and probably would – adversely affect PG&E’s credit rating, which would increase PG&E’s cost of capital and ultimately result in higher electric and gas rates for customers.

How significantly rates would rise as a result of fining PG&E $2.25 billion has been heavily disputed? By contrast, the risks resulting from imposing a smaller fine have received far less attention.

Indeed, the only thing Californians should worry about more than potential risk of rate increases resulting from a large penalty is the risk of similar pipeline disasters resulting from a smaller penalty.

Less than two years before the San Bruno disaster, PG&E’s ludicrously inept response to reports of a gas leak was blamed for an explosion in a residential neighborhood in Rancho Cordova, CA.

The explosion killed a 72-year-old man, seriously injured five other people, destroyed one home and severely damaged two other homes.

“The [explosions at Rancho Cordova and San Bruno] are mirror images of each other – just fewer people are dead in one of them,” said Jim Hall, former chairman of the National Transportation Safety Board, in an interview with the San Francisco Chronicle in 2011. “With the information that has come out of these two tragedies, clearly PG&E’s safety culture, safety policies, safety procedures should be of concern to all of the regulatory authorities.”

The CPUC fined PG&E $38 million for its role in the Rancho Cordova explosion. It did nothing to prevent a similar and still more devastating disaster from taking place in San Bruno less than two years later.

“With respect to the fines to be imposed on PG&E for the San Bruno explosion, it is clear that the relatively small fines imposed on PG&E in the past, even for serious safety violations, were ineffective,” argued the ORA in last year’s filing with the CPUC. “This time, a fine must be imposed that is large enough to have a deterrent effect.”

A growing number of people have expressed concern about the integrity of the CPUC’s oversight of PG&E and its independence in managing the litigation that associated with the San Bruno gas pipeline explosion.

In June 2013, U.S. Rep. Jackie Speier, D-San Mateo called for a federal investigation into the CPUC regulation of PG&E.

“The CPUC appears to be rife with conflicts of interest between its role as a guardian of public safety, its role as a rate setter and its role in ensuring the ongoing financial stability of the utility,” said Speier in a letter to the Pipeline and Hazardous Materials Safety Administration.

Source: Forbes


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