Regulatory Lessons from San Bruno

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PG&E has been battered repeatedly over the natural gas pipeline explosion in San Bruno. Tragic as that incident is from a personal standpoint for those directly affected and from a community point of view, the question before the CPUC is whether the actions of PG&E as a regulated utility subject to the jurisdiction of the California Public Utilities Commission were reasonable, prudent, consistent with the general orders and regulations applicable to natural gas pipeline safety.

Among the lessons from this horrible accident is the skill with which the two regulatory agencies most involved have handled their responsibilities. So it is interesting to consider the differences between how the National Transportation Safety Board has handled this matter compared to the CPUC.

Deborah Hersman, chair of the NTSB, told a Washington DC audience attending the National Research Council’s Transportation Research Board conference of policymakers, researchers, industry officials and academics that Pacific Gas and Electric Co.‘s record-keeping prior to the San Bruno natural-gas explosion indicate the need for “a new perspective on safety culture” throughout the industry. That sweeping indictment of the entire gas industry required that Ms Hersman make a judgment that given its timing and the subsequent results of the CPUC regulatory review of the matter goes well beyond the evidentiary record found in the San Bruno case. In short this was politics not good regulatory management.

Compare that to the CPUC public response in the February 4th Bay Area news group article where CPUC executive director Paul Clanon said, “now that we’re aware that there is some uncertainty about what PG&E knows about its pipes” any new revelations that raise doubts about how the pipeline was managed will be regarded with grave seriousness. “I don’t want to jump to conclusion,” Clanon said.

The CPUC then released the results of its own audits of PG&E gas pipeline operations back to 2004.  The audits for 2009 identified 96 “significant findings” of issues in the San Francisco division of PG&E’s gas pipeline system each of which were corrected to the inspector’s satisfaction.  A separate finding called the utility’s knowledge of operating personnel as unsatisfactory because maximum allowable gas pressure charts were not found in the documentation. Instead, PG&E had posted a wall chart of allowable gas pipeline pressures which was used by the operators.

A 2006 audit report for the Peninsula found 700 gas leaks in 2005 compared to 813 in 2004.  The eight audits released by the CPUC cover 2004 through 2010 for PG&E gas operations from San Francisco to Hollister faulting the utility for recordkeeping problems and mistakes ranging from gas leaks to poor welds.  But the CPUC found PG&E’s overall natural gas pipeline safety performance ”satisfactory”.  The CPUC admitted that its small staff prevents it from performing exhaustive inspections—how many times had I said that myself during my seven years as a state public utility regulator I had lost count.

PG&E admitted that it has periodically increased pressures in the gas pipelines in response to demand including times when pressures exceeded the allowable limits for short periods including on a section of interstate gas pipeline near Needles, California when its supplier TransWestern Pipeline increased pressures.  It took PG&E about one half-hour to bring pressures back within allowable ranges.

So what to make of all of this:

PG&E appears to have wisely chosen to keep its mouth shut in the media about the investigation of the San Bruno by the Federal and State agencies until the matter is concluded.

PG&E chose again wisely to err on the side of getting every piece of information and every failing on the part of the utility staff disclosed and on the table to follow both the letter and the spirit of the regulations. This is smart and shows that PG&E is a focused on maintaining its credibility with the regulatory agencies.

NTSB’s Deborah Hersman embarrassed herself and the agency with her injudicious comments on the pending case before her agency finished its work.

The CPUC did not make that mistake and disclosed its audit results while saying that these inspection findings were record-keeping and procedural infractions the utility prudently corrected when reported.  This happens all the time and every regulator knows that so long as utility operations are run by humans there will be mistakes.  PG&E did the most important things right in full disclosure and correction to assure that its regulatory compliance and accountability.

None of this yet tells us what we want to know—what caused the explosion in San Bruno.  But it does tell us this—PG&E is displaying the behavioral characteristics we most want to see—transparent self reporting and full disclosure, prompt corrective action of mistakes and compliance deficiencies, and a constructive relationship with its regulatory supervisors.