The California Public Utilities Commission voted unanimously Thursday to order an investigation into the corporate culture of Pacific Gas & Electric Co. and its parent company, PG&E Corp., to determine whether the company’s talk about safety as a priority matches its long-term practices.
The fact-finding probe came at the urging of commission President Michael Picker, who broached the idea in April after the commission approved a record $1.6 billion in fines and penalties against PG&E for its role in the deadly 2010 natural-gas pipeline failure and explosion in the Bay Area city of San Bruno. Picker noted that in the five years since the blast, PG&E has continued to experience safety and security incidents at its facilities, such as gas pipelines and electrical substations. One of those was earlier this year, when a natural-gas pipeline at the Fresno Sheriff’s Foundation gun range ruptured and exploded on April 17.
After the commission’s April vote on the penalties, “I think we all recognized that we’d taken a fairly large step, but there was still unfinished business,” Picker said Thursday. “PG&E is safer because of its expenditures replacing gas lines and locating additional pipelines to correct its records, but we still saw problems.”
Picker said he expects the investigation to be “an examination of a culture (that is) not just a discussion of what people say or what people think, but a review of what people do and how they do it at PG&E (and) particularly, how they accord accountability within the organization.”
In some respects, it’s a change in our culture because we are starting to do things differently.
Michael Picker, president, California Public Utilities Commission
Picker explained that the state of New York conducts audits related to corporate culture as part of its regulatory processes and said he hopes California can learn from successes there. “In some respects, it’s a change in our culture because we are starting to do things differently,” he said. “As we move into this, we can (not only) learn a lot about how PG&E conducts its business but help shape how we do our business.”
The Fresno incident, in which a front loader tractor apparently nicked a buried PG&E pipeline while working at the gun range, injured 13 people, including the tractor operator and a crew of jail inmates doing maintenance at the range. One of the inmates died of his injuries almost three weeks after the blast. That incident was in addition to more than a dozen safety or security lapses cited by Picker as part of a pattern of problems since the San Bruno explosion killed eight people and virtually leveled a neighborhood.
Friends of the Earth attorney Larry Chaset praised the commission for taking on the inquiry. “We applaud this initiative because it goes to the heart of the concern that PG&E does not care about safety,” he said. “The same corporate culture that led to the tragic San Bruno explosion has also governed PG&E’s electric power operations.” Chaset added that his organization hopes to present evidence that “PG&E is not putting safety first” in operations at its Diablo Canyon nuclear power plant near San Luis Obispo.
Following the commission’s vote, PG&E issued a statement by spokesman Keith Stephens defending the utility’s actions. “As we have said since this was originally announced, we look forward to a constructive dialogue with the commission and staff and to sharing our commitment to safety and the concrete actions we have taken over the last several years to back it up.”
Among those steps, the utility says, are replacing its CEO in 2011, restructuring its gas operations and hiring “the best natural gas experts in the country to run it”; putting safety training in place for 3,500 company leaders and for every new employee; performing more advanced pipeline testing; decommissioning more than 800 miles of old cast-iron pipe and replacing it with stronger materials; installing more than 200 new automatic or remote-controlled emergency shut-off valves in its gas pipelines; and making more infrared inspections of power lines and replacing more than 200 miles of conductors with a higher probability of failing or resulting in downed power lines.
In addition, “we’ve developed a robust reporting system where employees can share safety incidents and near-hits to help us take appropriate actions,” Stephens said.
Despite PG&E’s assertions, Picker’s concerns include whether the commission’s traditional enforcement tools of fines, penalties and regulatory orders are enough to ensure compliance by the utility or generate an atmosphere of executive accountability for the company’s action or inaction on safety issues, or whether the company’s shareholders have come to accept fines and penalties as “a cost of doing business” instead of a cause for holding executives and directors accountable for missteps.
“While corporate leadership – at least at the executive level – has stated publicly that safety is accepted as an urgent matter at PG&E, it’s not clear that the organization is responding evenly,” Picker said in April when he called for the investigation.
The company is saying the right things. Does the reality on the ground match the rhetoric? … Has there been the kind of progress that we want to see?
Mike Florio, California Public Utilities Commission member
Commissioner Mike Florio said there will be substantial differences between this probe and the types of investigations that the commission has typically conducted involving PG&E in recent years. “All of those are backward looking, looking at events (and) whether rules were broken and penalties required,” he said. “This is looking forward. … I look at this as an opportunity for them to demonstrate progress.”
The investigation will be shepherded by one of the five commission members and an administrative law judge, and the commission authorized the hiring of an expert consultant to assist. PG&E will be required to reimburse the cost of the consultant up to $2 million.