CPUC Stuck In Culture of Corruption
OCT. 17, 2011
It is shameful to punish the puppy when the pack leader is at fault. It is no different in the workplace and the corporate world — failure and corruption are usually the fault of the top dogs.
Two recent examples are Pacific Gas & Electric and the California Public Utility Commission. The utility company and the state regulator have talented employees, but problematic corporate big-dogs.
In fact, the entire utility regulatory system in California needs a new pack leader.
The first in line for the overhaul is Michael Peevey, the president of the CPUC since 2002. Politically well connected, Peevey is a former senior executive with Southern California Edison. His wife is State Sen. Carol Liu, D-La Canada-Flintridge.
It was on Peevey’s watch that a succession of deadly events took place, including the horrific 2010 San Bruno gas pipeline explosion, which killed eight, injured more than 100 and destroyed 38 homes (pictured at right). Peevey was CPUC President when a gas line exploded in Rancho Cordova on Christmas Eve 2008, destroying a home and killing the occupant, as well as the very recent September pipeline explosion at a Cupertino condominium, which did not receive much press coverage.
After years of approving rate increases earmarked for the San Bruno pipeline upgrades, the CPUC never followed up to make sure that PG&E actually did the work. Instead, PG&E pocketed the rate increases, shined on the pipeline upgrades and kept going back to the CPUC trough for additional rate increase approvals.
‘Culture of Complacency’
Post-explosion investigations by the National Transportation Safety Board, as well as by the CPUC, found irrefutable evidence of wanton negligence by PG&E — but also by the CPUC. Peevey’s arrogance during the investigations was staggering. He even admitted a “culture of complacency,” and a pattern of just “checking the boxes” by his own utility regulatory agency.
But Peevey still has his job. In fact, no one has paid for the gross negligence and lack of oversight by the CPUC and PG&E other than ratepayers and innocent San Bruno and Rancho Cordova residents.
PG&E received a $26 million fine for the Rancho Cordova explosion. For a utility company worth nearly $15 billion, that’s like fining a guy who makes $50,000 a year, $5.00.
The next question on ratepayers’ minds is: Who is going to pay for the fines, repairs and upgrades to PG&E’s pipelines? Ratepayers have already been charged several times over. Perhaps if PG&E’s shareholders had to reach into their own pockets to foot the bill, they would pay closer attention to the unholy relationship between PG&E and the CPUC.
Who Audits The CPUC?
The Senate Office of Oversight and Outcomes, a committee created in 2008 by Sen. Pres. Pro Tem Darrell Steinberg, D-Sacramento, has done great work. But thus far it has not reeled in the CPUC. The committee has done a good job exposing the CPUC and telecommunications industry issues, but needs to take a close look at the tainted relationship between the CPUC and PG&E. Then the Legislature needs to act.
The San Francisco Examiner did a recent analysis of utility rate-hike documents. It found, “PG&E customers had been charged multiple times for at least two dozen natural-gas improvement projects that had not been implemented. Customers were asked to pay more than $320 million for the projects in 2008, and then were asked to pay another $313 million for those same projects in 2011.”
PG&E has an 11.35 percent rate of return. “Pacific Gas & Electric enjoys a near monopoly over 70,000 square miles of Northern and Central California, with 15 million customers,” the New York Times recently reported. “The California Public Utilities Commission allows the company to charge rates 30 percent higher than the national average. As a regulated utility, the publicly traded company’s shareholders benefit from a guaranteed 11.35 percent return on equity, which is also above the industry average of about 10.5 percent.”
But when PG&E is derelict, sloppy or just lax, people die and ratepayers get handed the bill. Without competition, PG&E and the CPUC together appear to decide what policies to follow. The tail is wagging the dog.
Perhaps it is time for the Legislature to review PG&E’s franchise, along with the CPUC’s Rules of Practice and Procedure.
Passing Along the Accountability
The estimates PG&E has provided for the San Bruno pipeline repairs and updates are only for one phase of the improvement plan — approximately $2.2 billion. The cost increase to ratepayers is estimated to be about 4 percent, or about $1.93 each month to the average PG&E bill.
And, if PG&E’s multi-year pipeline modernization plan, recently filed with the CPUC, receives approval, business customers will be facing outrageous rate hikes.
It is ironic that not only is the CPUC dishing out the fines to PG&E for the San Bruno explosion, but the regulator, which failed to prevent the San Bruno explosion, is responsible for approving PG&E’s upgraded safety plan.
Who will fine and hold the CPUC accountable for failing so miserably at its job? Perhaps the place to start is with the top dog and his unruly pack. This culture of corruption, built around the top dogs, is the fox guarding the henhouse.
– KATY GRIMES
June 19, 2013