PG&E: Utility agrees to pay penalty in aftermath of deadly San Bruno blast.
Pacific Gas and Electric Co. has agreed to an $86.5 million penalty to settle allegations that the utility engaged in improper backdoor communications with state regulators in the wake of the deadly San Bruno pipeline explosion.
While the agreement would see PG&E pay $6 million each to the cities of San Bruno and San Carlos, most of the settlement takes the form of PG&E forgoing $63.5 million in revenue it otherwise would have collected from all of its customers in 2018 and 2019. The average PG&E residential customer would see monthly bills fall about 22 cents as a result, according to the company.
PG&E will not be permitted to pass on to its customers any of the costs associated with the agreement. Those costs must instead come out of the company’s earnings. The utility, California’s largest, made $1.4 billion in profits last year.
PG&E negotiated the settlement with the safety and ratepayer divisions of the California Public Utilities Commission, as well as the cities of San Bruno and San Carlos and The Utility Reform Network, a consumer group. The commission’s five-member governing board must approve the agreement for it to take effect.
“This settlement demonstrates that PG&E is willing to take responsibility for its backchannel communications with the (commission) and that it will take the necessary steps to make sure it doesn’t happen again,” Connie Jackson, San Bruno’s city manager, said in a written statement.
The settlement comes less than a year after a federal court jury convicted PG&E of violating pipeline safety codes and impeding a federal investigation into the blast. It also arrives after a cold winter in
which many PG&E customers were shocked by a sudden jump in their natural gas bills. The utility’s average residential gas bill increased to $122.48 in January, a 24 percent increase from a year earlier.
Meanwhile, the commission is scheduled to vote next week on a PG&E request to raise the amount of revenue it collects from customers this year, as well as in 2018 and 2019. That request, if approved, would boost monthly bills by an estimated 50 cents. It is not specifically related to San Bruno; PG&E has requested the money for improvements such as modernizing the grid and helping it to withstand and recover from natural disasters.
The allegations that led to this week’s settlement involved improper talks and emails between PG&E and two former PUC commissioners and their staff.
The back-channel talks — formally called ex parte communications — came to light in the wake of the Sept. 9, 2010, explosion of a PG&E natural gas pipeline beneath San Bruno, a blast so powerful that it killed eight people and destroyed 38 homes. The city, in court, forced PG&E to disclose thousands of emails between its executives and the commission, and some messages showed a close relationship between the company and the government regulators entrusted to oversee it.
In one exchange, for example, a high-ranking commission staff member advised a PG&E executive on ways to evade a public records request related to San Bruno. The PG&E executive replied, “Love you.” Another exchange described the commission’s former president Michael Peevey discussing business with PG&E’s vice president of regulatory affairs at the time, Brian Cherry, over some “good pinot” at a Sonoma County resort.
The ensuing scandal cost Cherry and several other PG&E executives their jobs. Peevey stepped down when his term expired at the end of 2014.
Under the agreement, PG&E would admit to violating the commission's ex parte rules, through communications that were either barred outright or not properly reported to the commission. “PG&E is committed to interacting with our regulators in a completely transparent and ethical manner,” utility spokesman Donald Cutler said in an email Wednesday. “For more than a year we’ve been working cooperatively and constructively with the other parties in this proceeding and we’re pleased to say we’ve come to a settlement agreement that was filed yesterday.”
PG&E has already forgone collecting a total of $72 million in 2016 and 2017 in connection with specific ex parte communications related to gas transmission and storage rates. In addition, under the new agreement, PG&E would:
Pay $1 million to the state’s general fund.
Pay $6 million each to San Bruno and the city of San Carlos. (The San Carlos payment concerns another PG&E pipeline that runs under that city. An internal PG&E email received by city officials in 2013 raised questions about the line's safety, prompting the city to demand that the line be tested and repaired.)
Forgo collecting $63.5 million in revenue to cover the costs of its gas transmission and storage system in 2018 and 2019.
Cut by $10 million PG&E’s revenue request to cover its gas transmission and storage costs during the next ratesetting procedure, which will cover the years 2020 through 2022.