Our View: Fine is good but PG&E is too large

We’ve become accustomed to seeing wealthy individuals and institutions buying their way out of accountability. It happened with the investment banks and financial institutions whose activities precipitated the crash of 2008. And it happened again last week when Pacific Gas & Electric Co. agreed to pay a record $1.6 billion fine for the gas line explosion that killed eight people and destroyed 38 homes in San Bruno.

Every penny of that record-breaking fine is justified. But is it enough?

The company’s management was scarcely held accountable. As new PUC President Michael Picker noted: “The CEO who held that position at the time of the San Bruno incident, and during cuts in funding pipeline replacement and inspection programs, retired with a reported $38 million bonus. ... The president of PG&E at the time of the San Bruno incident is still the president.”

Picker, who took over the PUC from the disgraced Michael Peevey in December, rejected previous settlement offers and is directing the money from the fine into pipeline inspections and improvements. Roughly $400 million in expenses PG&E had charged to customers will be refunded.

Regardless, the fine scarcely registered with investors. Share prices fell 1.6 pecent the day it was announced, then recovered only hours later.

The problem might be, as Picker suggested, that PG&E is simply too big. It’s the largest investor-owned utility in the state. Its gas-delivery operation is one of the nation’s largest, serving 10 million customers. Its electrical operation is nearly as large and includes the Diablo Canyon nuclear plant.

After the San Bruno explosion, investigators found that PG&E’s gas pipes had deteriorated, that the company had deferred maintenance, and that its record keeping was shoddy. Investigators also found a far-too-cozy relationship between PG&E and Peevey, and thus the entire PUC.

Instead of a watchdog, the PUC had become a lapdog. If not for a lawsuit brought by the city of San Bruno, the commission would not have seen thousands of emails between PG&E and the PUC. Peevey has taken most of the blame for the back-channel relationship with PG&E. In reality, the entire PUC was overmatched.

An audit of the PUC found the gas safety enforcement branch still hobbled by antiquated technology, backlogged investigations, insufficient staff and conflicting directives.

“PG&E is safer,” Picker told the San Jose Mercury-News. “But I just don’t believe PG&E is safe enough.”

The company controls three massive and vulnerable systems – electrical, nuclear and gas. What would make it safer?

Picker is wondering whether PG&E – which barely flinched at the largest fine in state history – is just too big to remain as a single entity.

There are many challenges facing the state’s utility companies, from terrorism to climate change. After San Bruno, we are forced to add due diligence to the list.

PG&E must invest the capital necessary to improve its safety practices, infrastructure and culture. If not, perhaps smaller companies could do it better.

This story was originally published April 15, 2015 at 11:45 PM with the headline "Our View: Fine is good but PG&E is too large."