California ALJ boosts PG&E costs 70% for failures in program to prevent damage to underground equipment

Dive Brief:

A California Public Utilities Commission (CPUC) administrative law judge issued a decision Friday ordering Pacific Gas & Electric (PG&E) to pay $110 million for violations related to the utility’s locate-and-mark program, a significant increase over the $65 million settlement that PG&E and other parties had proposed.
The $65 million settlement outlined by PG&E, the CPUC’s Safety and Enforcement Division (SED) and the Coalition of California Utility Employees was “too low for the number, duration and severity of the violations, including PG&E management’s failure to correct the violations,” ALJ Peter Allen said in his decision last Friday.
Parties can appeal the decision within 30 days. If no appeals are filed and none of the CPUC commissioners seeks to review the modified settlement, it will be formally adopted.

Dive Insight:

California utilities are required by law to identify and mark underground infrastructure at proposed excavation sites, to prevent third-party diggers from accidentally hitting a gas pipeline or power-line. In general, locate-and-mark personnel need to complete that process within two working days of receiving notice of the planned excavation.

In December 2018, the CPUC launched an investigation into PG&E’s locate-and-mark protocols after the CPUC safety division found PG&E employees had undercounted thousands of “late tickets” — instances in which a site was not marked within two working days or an agreed upon deadline — due to falsified records. In total, investigators found more than 135,000 potentially inaccurate records, although it is not certain which of these were intentionally falsified and which occurred due to a software glitch, the ALJ's decision noted. The inaccurate records are estimated to have contributed to 67 “dig-ins”, where a third-party struck underground infrastructure — including one which injured an employee of the San Jose city government.

In October, PG&E, the SED and the Coalition of California Utility Employees filed a joint motion outlining a settlement that would have the utility pay $60 million to fund “system enhancement initiatives” — such as hiring additional staff and improving software — and $5 million to California’s general fund. The proposal was criticized by ratepayer advocates, including The Utility Reform Network, which argued that it didn’t require PG&E to “accept the true nature and full extent of the failures here as failures in management.”

Under Allen’s modified settlement, PG&E would have to pay $110 million in penalties, $66 million of which would fund system enhancements and $44 million to the state’s general fund. The previous proposal “is low relative to the scale of PG&E’s wrongdoing,” he said in the decision. According to Allen, even a back-of-the-envelope calculation of PG&E’s potential penalties for inaccurate records and the failure to address the problem points to a figure between $84.2 million and $134.4 million. He suggested that the agency’s safety division had placed an emphasis on PG&E’s financial condition — the utility filed for bankruptcy a year ago due to billions of dollars in wildfire liabilities — rather than benchmarks set by previous penalties issued by the commission.

“We are currently reviewing the Presiding Officer’s Decision in this matter and will be responding within the timeline outlined in the decision,” PG&E spokesman John Kaufman said in an emailed statement.

It is unusual for a commission ALJ to modify the terms of a proposed settlement in this manner, according to Steven Weissman, a former CPUC ALJ and lecturer at the University of California Berkeley's Goldman School of Public Policy.

“It’s almost as if the commission is saying forget about normal process, forget about hearings, etc, we’ll just decide this on our own,” he said.

There have been at least two instances in the last decade where the commission has revised a proposed settlement, TURN Legal Director Tom Long told Utility Dive: once in the case of a PG&E natural gas pipeline explosion, and the other as a result of improper ex parte communications between PG&E and decision-makers at the CPUC.

In this case, Long said the record “cried out” for a change to the original proposed settlement.

“This was a situation where for nearly a decade, top management turned a blind eye to some very serious misreporting of information about whether these requests to mark facilities were being handled on a timely basis,” he said.