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Pacific Gas & Electric gave short shrift to pipeline safety for at least 12 years prior to the 2010 natural gas explosion in San Bruno, spending $135 million less than it claimed was needed, according to a California Public Utilities Commission staff report released Jan. 12. Instead of spending the money on pipeline safety-related measures, the utility used the funds for a variety of other purposes, the report said, including possible payments to shareholders and executives. The utility was busy “emphasizing profits over safety,” states the report by the CPUC’s Consumer Protection & Safety Division. Upon receiving the report, commission members opened a proceeding aimed at potentially penalizing PG&E for violations alleged in the report. The utility’s pipeline system caused a gas explosion, killing eight people, destroying 38 homes, and damaging 70 others in San Bruno Sept. 9, 2010. Commissioner Mark Ferron pledged “to impose very significant penalties on PG&E if staff’s allegations of wrongdoing by PG&E are proven on the record.” The report found that as utility revenues bulged and pipelines aged, PG&E deferred planned expenditures of $39.3 million on operations and maintenance of its system and $95.4 million on capital improvements. The utility also terminated staff. Simultaneously, the report pointed out that PG&E boosted shareholder dividends and paid out $170 million in bonuses between 2008 and 2010, the year of the pipeline explosion. The report suggested some of the money for dividends and bonuses possibly stemmed from deferred pipeline maintenance and upgrade work, although it acknowledged it could not trace the exact uses of the money. In a corporate statement, the utility promised to correct past deficiencies in pipeline safety at a cost of up to $1 billion “out of the pockets of PG&E’s shareholders,” acknowledging its “past gas operations practices weren’t what they should have been.” PG&E president Chris Johns stated that the utility is “committed to raising the level of pipeline safety to new, higher standards.” In addition to the utility’s plan to spend $1 billion of its own money to address past deficiencies, it is seeking a rate hike to spend an additional $2.2 billion to meet future pipeline safety requirements. It says that would add $1.85/month to the average residential customer’s gas bill. Pipeline safety improvements come after the company in the 12 years before the 2010 blast collected $430 million more from its gas transmission and storage operations than needed to meet its authorized 11.2 percent rate of return, according to the report. The report did recommend that the commission require PG&E to spend the extra revenue and deferred operations and maintenance and capital improvement funds on upgrading its pipeline system before approving any rate increase for future safety work. At their confirmation hearing this week (see story page 6), both commissioners Mike Florio and Catherine Sandoval voiced tentative support for spending that money first before tapping ratepayers for additional funds for pipeline safety. In other findings, the report claimed PG&E failed to follow industry standards when it built the pipeline that exploded, failed to follow federal pipeline integrity management requirements, kept inadequate records, was deficient in collecting and reporting data to authorities, and had a deficient emergency management system. Despite the findings, commissioner Florio said, “I think we’re still out ahead of the rest of the country on pipeline safety.”

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