Here’s a thought. Instead of PG&E paying $950 million to the state general fund and zero dollars for pipeline improvements as a penalty for the 2010 San Bruno blast that killed eight people and leveled a neighborhood, they only put $300 million in the general fund and spend $850 million to do the work they should have already done.

It’s only a thought, but appears to be a meaningful one coming from the new president of California’s Public Utilities Commission (PUC), Michael Picker, as the panel gets close to announcing the size and divvy of the billion-dollar-plus penalty about to be levied on the utility. Picker’s $1.6-billion plan, which he detailed last week, is $200 million larger than one recommended by two administrative law judges, and shifts some future pipeline upgrade costs from ratepayers to PG&E shareholders.

Both plans also direct $400 million to customers in the form of lower rates and designate $50 million for specific pipeline safety improvements. San Bruno City Manager Connie Jackson told the San Francisco Chronicle that PG&E would be able to get a tax write-off for $850 million a work on the pipeline but not for fines paid to the state.

“Most of the $850 million penalty will be spent on capital investments which PG&E will not add to its rate base and thus will not earn any profit on them,” Picker said.

PG&E is facing multiple lawsuits, criminal indictments and enhanced regulatory attention since investigations of San Bruno turned up record keeping of gas operations so woefully inadequate that safety testing, maintenance and repair of pipelines were not done in sections of the system. That saved money for PG&E investors and perhaps shareholders.    

The faulty pipeline weld that gave way in San Bruno had not been inspected in 54 years, partially because inadequate records failed to indicate certain characteristics that would have flagged it for attention. PG&E has already been compelled to reassess the entire system and put in place a real inspection and repair system. The utility is in the middle of a process to determine who pays for it, what has to be done and how changes are enforced.

The changing landscape comes months after e-mails released to the public revealed an overly cozy relationship between utility executives and regulators, and improper, if not illegal, backroom strategizing. A few people lost their jobs, the commission president chose not to seek an expected third term and the U.S. Department of Justice and the state Attorney General’s office started investigations of the more egregious improprieties in an unfolding scandal that involves alleged judge shopping in the San Bruno case.  

U.S. District Court Judge Thelton Henderson recently announced that a criminal trial will begin in a year over 27 charges that PG&E violated the pipeline safety act and one allegation that it obstructed a federal investigation into the blast.

Picker’s proposal was applauded by the Utility Reform Network (TURN), a customer advocacy group, for shifting the financial burden to shareholders, and received guarded support from San Bruno officials. Mayor Jim Ruane asked the Chronicle, “What, after all, does this do to revamp the PUC, PG&E and their relationship?” 

–Ken Broder

To Learn More:

San Bruno: PG&E Should Pay $1.6 Billion Penalty as Punishment for Fatal Blast Says Top Regulator (by George Avalos, Oakland Tribune)

PUC Leader’s Plan Would Alter PG&E’s San Bruno Penalty (by Jaxon Van Derbeken, San Francisco Chronicle)

PUC Seeks Higher PG&E Penalties for San Bruno Explosion (by Marc Lifsher, Los Angeles Times)

New CPUC Boss Wants to Slap PG&E with a Bigger Fine For San Bruno Explosion (by Chris Rauber, San Francisco Business Times)

A “Shocking” Find: Culture of “Lawlessness” at Public Utilities Commission (by Ken Broder, AllGov California)