Editorial California must force PG&E to prioritize safety over profits
Northern Californians will never have the gas and electricity utility they deserve until PG&E puts safety before profits.
It’s shameful that the utility hasn’t done so on its own. Gov. Jerry Brown, the Legislature and the California Public Utilities Commission share the blame for not forcing PG&E to change its culture.
PG&E announced Friday that it was launching a wide-ranging review of its finances and structural options that could include selling its gas division and company headquarters. But those moves won’t address the safety concerns.
Gov.-elect Gavin Newsom must demonstrate the leadership needed to make PG&E address its safety issues. If heads need to roll, so be it. The devastating impacts of California’s wildfires demand a major culture change, as well.
The heart of the problem dates back to 2001, when PG&E filed for bankruptcy protection during the state’s energy crisis. Rather than put an engineer in the top leadership position, the utility in 2005 installed its chief financial officer, Peter Darbee, as president and CEO. PG&E’s primary focus ever since has been on protecting its bottom line.
Darbee helped the utility record annual profits in the range of $1 billion, but PG&E’s lack of attention to safety issues was directly responsible for the 2010 San Bruno explosion that killed eight people and destroyed 38 homes. The utility was found to have diverted maintenance funds into profits for shareholder dividends and executive bonuses.
For that outrage, PG&E became a convicted felon and was fined $1.6 billion for its negligence. Darbee retired in 2011, but the disaster still did not sufficiently get the utility’s attention. In 2017, the consulting firm Northstar reported to the PUC that PG&E’s overall safety performance fell short of expectations.
PG&E last week admitted it had started 18 wildfires since 2017, although the extent of the utility’s role in the blazes remains undetermined. And in November, U.S. District Judge William Alsup asked PG&E for a complete statement of the utility’s connection to the devastating Camp Fire that killed at least 86 people and destroyed 14,000 homes. The judge is seeking to determine if PG&E violated its probation by engaging in negligent or reckless conduct in maintaining its power lines.
Newsom, legislators and the PUC have numerous options to consider, all involving a high degree of complexity.
State Sen. Jerry Hill, D-San Mateo, has suggested that instead of being “too big to fail,” PG&E, the state’s largest utility, may be “too big to succeed,” and, as PG&E is reportedly considering, should separate its gas operations from its electrical operations. Others have advocated that the state government take over and run the utility, which raises the legitimate question of whether that would lead to improved quality of service.
A thorough leadership housecleaning should be strongly considered, both at the board and corporate level. After the San Bruno tragedy, PG&E was required to alter its board so that the utility would put safety before profits. That effort has obviously been ineffective.
Lawmakers should also consider tying PG&E’s rate of return to its safety record: The better PG&E’s safety performance, the higher rate of return it would receive.
In past years, California’s wildfire season typically started in midsummer and ran through late fall. That’s no longer true, thanks, in part, to the impact of climate change. The threat of year-round wildfires and the costs in lives and property damage demand that Newsom, legislators and the PUC take action to force PG&E to dramatically improve its safety record.