Only minutes after an announcement that the California Public Utilities Commission would fine the state’s largest utility company $1.6 billion for violating state and federal gas pipeline safety standards, Pacific Gas & Electric Co. said it would not appeal the decision.
But PG&E never said why it’s happy to accept the largest penalty ever assessed by regulators against an American utility company.
Maybe it was because the fine in reality is not quite half as large as it looks, in fact mostly a cosmetic move by a regulatory commission desperate to restore its image after many months of scandal, with at least two criminal investigations in process.
This so-called fine fits with what industrialist and philanthropist Andrew Carnegie observed early in the last century: “As I grow older, I pay less attention to what men say. I just watch what they do.”
Here’s why this fine is less than half as large as it looks:
The “penalty” is split into four parts: $400 million to be refunded to customers, $300 million going into the state’s general fund and $50 million to pay for a variety of PUC safety activities. But more than 53 percent of the money – $850 million – will be spent to repair and improve PG&E’s gas transmission system.
Huh? How is it a fine when PG&E spends money on needed pipeline maintenance and improvements? Remember, for more than six decades, the company has collected payments monthly from each of its natural gas customers to maintain pipeline safety.
The total comes to billions of dollars; no one knows just how many billions. Because the utilities commission did not track how this money was used until after the fatal 2010 San Bruno pipeline explosion, no one knows how much was actually spent to fix or replace pipelines.
But the PUC did find recently that PG&E used at least some maintenance money for executive salaries and bonuses. Commissioners did not respond when asked why the $850 million in pipeline repairs should be considered a penalty rather than a business expense.
So, as Carnegie suggested long ago, watch what the PUC does, not what it says. Each one of the corrupt-seeming rulings for which it is now being investigated by the FBI and the state attorney general’s office was couched in terms at least as pious as the announced “fine” of PG&E.
One example of the PUC misleading utility customers: The commission said last fall that it painstakingly reached a “compromise” settlement in which customers of Southern California Edison and San Diego Gas & Electric Co. will pay $3.3 billion – more than two-thirds of the cost – for retiring the San Onofre Nuclear Generating Station, even though the retirement was caused by Edison decisions the company knew in advance were flawed.
But customers had been dunned monthly for the eventual retirement of SONGS since the early 1970s, and documents seized from the home of former PUC President Michael Peevey show he arranged the essence of the settlement with an Edison executive during a junket to Poland about one year before the settlement was announced last fall.
The PG&E fine is equally misleading, even though it was accompanied by an announcement from current President Michael Picker that he’s ordering an investigation into whether PG&E “is simply too large…to succeed at safety.”
The bottom line here is that PG&E collected many billions over many years for maintaining its pipelines, but federal investigators found after San Bruno that the company was criminally negligent in its maintenance practices – and that the PUC did not police it adequately. At least some of the money went to corporate executives and the fate of the rest is unknown.
So PG&E now has to spend money to fix or renew its pipeline system, really an ordinary cost of doing business, one for which its customers paid long ago. How is this a fine?
The answer is that it’s not, or the PUC would answer questions about it. Rather, this “fine” is a public relations ploy. Which emphasizes that in dealing with the PUC and PG&E, it’s wise to bear in mind what 1970s-era Manager Billy Martin said of baseball Hall of Famer Reggie Jackson and New York Yankees owner George Steinbrenner: “One’s a born liar and the other’s been (indicted).”