In what may be the state’s final arguments to an administrative judge deciding Pacific Gas & Electric’s (PG&E) responsibility for the San Bruno gas explosion, a top California Public Utility Commission (PUC) official blamed the company’s bias toward shareholder interests over safety for a voluminous list of violations that contributed to the disaster.

“The company and the corporation each serve a conflicting purpose,” Raffy Stepanian, PUC safety program manager, wrote in a 68-page point-by-point refutation of a PG&E submission to the judge.

PG&E Corp. was created in 1997 as a corporate parent to the utility during California’s transition to a deregulated energy market―its sole function being a holding company with a bottom-line allegiance. Yet it retains responsibility for safety.

“A publicly traded corporation that relies exclusively on growth derived from the profitability of a single regulated utility will, by its very nature, be biased toward shareholder financial interests when weighed against safety,” Stepanian wrote.

He then outlined the extensive employee financial incentive system which rewards activities that save money but, at best, do nothing to enhance safety. Stepanian argued for restructuring the company, changing the board’s composition, and adding some substance to its claim of having a commitment to “safety and operational excellence.”

PG&E acknowledges there were problems in its operations and has said it expects to pay fines of more than $200 million, but denies its miscues were “the root cause of the pipe’s failure” that killed eight people and leveled a neighborhood. The company also says the PUC should accept responsibility for the utility’s deficiencies because the agency failed to note them during its own inspections and reviews. It also argued that, although it made mistakes, they were done “unknowingly and unintentionally.”

Stepanian ridiculed those assertions. He said the PUC has not asserted, nor does the law care, if factors contributing to the blast were “the root cause.” They need only be relevant. He likened blaming PUC inspections to a motorist blaming his speeding on the CHP not catching every other speeder. 

And Stepanian said that no one cares what PG&E’s state of mind was when it was failing to take reasonable steps to protect the safety of San Bruno residents.

It’s possible that Stepanian had in mind a recent $10 million PG&E advertising campaign, which included a commercial by CEO Anthony Earley—extolling the virtues of his company while waxing poetic about proposing to his wife at the Golden Gate Bridge—in his closing remarks to the judge with:

“Jingles and slogans aside, PG&E Company has not changed its focus from serving the board to serving its customers, captive ratepayers, and people of California. PG&E Company has not delivered real corporate culture change.”

 –Ken Broder

To Learn More:

PG&E Slammed for “Meaningless” Changes (by Jaxon Van Derbeken, San Francisco Chronicle)

Before San Bruno Blast, PG&E Wanted to Downgrade Gas Leaks to Save Money (by Ken Broder, AllGov)

Testimony of Raffy Stepanian (California Public Utilities Commission) (pdf)

Rebuttal Testimony of Raffy Stepanian (California Public Utilities Commission) (pdf)

California's Disaster with Electrical Deregulation (by David Bacon)