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PG&E Neglected Maintenance for Years Despite Known Fire Risk; Judge Demands Prompt and Clear Answers to WSJ Expose

Summary:
Even though one of our regular lines is that “Everything is like CalPERS,” sometimes “Everything is like Boeing” is more apt. PG&E has become a prime, if not the number one, case study in the human cost of corporate penny pinching. But not only have more people died and been injured at the hands of PG&E than at Boeing, the utility also had a much longer history of regulators choosing to ignore its corners-cuttting. And again unlike Boeing, it’s not as if PG&E was an admired institution in recent memory and could therefore run on brand fumes. Yesterday, the Wall Street Journal published a major story based on extensive Freedom of Information Act disclosures, providing evidence of PG&E’s systematic, willful neglect not just of maintenance but even of inspections of its transmission lines,

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Even though one of our regular lines is that “Everything is like CalPERS,” sometimes “Everything is like Boeing” is more apt. PG&E has become a prime, if not the number one, case study in the human cost of corporate penny pinching. But not only have more people died and been injured at the hands of PG&E than at Boeing, the utility also had a much longer history of regulators choosing to ignore its corners-cuttting. And again unlike Boeing, it’s not as if PG&E was an admired institution in recent memory and could therefore run on brand fumes.

Yesterday, the Wall Street Journal published a major story based on extensive Freedom of Information Act disclosures, providing evidence of PG&E’s systematic, willful neglect not just of maintenance but even of inspections of its transmission lines, despite knowing full well that their decrepit state constituted a serious fire risk. At least some officials appear to have labored under the misapprehension that making a point of not knowing about the condition of many of their assets would somehow absolve them of responsibility.

The raw facts are appalling and led a judge tasked to monitor PG&E after past safety violations to demand answers, pronto. From a Wall Street Journal story mere hours after it broke its account about the PG&E’s willful negligence:

A federal judge on Wednesday ordered PG&E Corp. to respond, “on a paragraph-by-paragraph basis,” to a Wall Street Journal article that said the company has failed to upgrade hundreds of miles of high-voltage power lines despite knowing they could fail and spark wildfires.

William Alsup, a U.S. district court judge in Northern California, is overseeing PG&E’s probation after the company was convicted of safety-related violations following a natural-gas explosion that killed eight people in 2010. After an online version of the article was published Wednesday, he gave the company until July 31 to file a “fresh, forthright statement owning up to the true extent of the Wall Street Journal report” not to exceed 40 double-spaced pages.

“In the past, the offender has responded to some of the Court’s questions by filing thousands of records and leaving it to the judge to find the needles in the haystacks,” the judge wrote.

Now to the account that got Judge Alsup so riled up. From the Journal:

The failure last year of a century-old transmission line that sparked a wildfire, killed 85 people and destroyed the town of Paradise wasn’t an aberration, the documents show. A year earlier, PG&E executives conceded to a state lawyer that the company needed to process many projects, all at once, to prevent system failures—a problem they said could be likened to a “pig in the python.”

Even before November’s deadly fire, the documents show, the company knew that 49 of the steel towers that carry the electrical line that failed needed to be replaced entirely.

In a 2017 internal presentation, the large San Francisco-based utility estimated that its transmission towers were an average of 68 years old. Their mean life expectancy was 65 years. The oldest steel towers were 108 years old.

Even as fire risks increased starting in 2013 due to sustained droughts, it kept putting off upgrading its oldest transmission lines. But at least as bad is that PG&E was grossly, one might even say deliberately, ignorant of the state of its network. How can you be in the business of operating a network and not have basic information about its historical and current condition?

A key paragraph comes in the middle of the account:

Documents show that PG&E is unaware of the exact age of many of its transmission towers and wires. In 2010, PG&E commissioned consulting firm Quanta Technology, a subsidiary of Quanta Services Inc., to assess the age and condition of transmission structures throughout its 70,000-square-mile service area.

The firm was unable to determine the age of about 6,900 towers in the 115-kilovolt system. It found that nearly 30% of the remaining towers in that system, more than 3,500, were installed in the 1900s and 1910s. About 60% of the structures in the 230-kilovolt system were built between 1920 and 1950.

Do a little math. If 3,500 towers = “nearly 30%,” assume 29%, which gives a total of the portion that were dated of roughly 12,100. The formula for the portion that Quanta had to punt on was 6,900/(6,900 + 12,100), for a stunning 40%. Even after hiring a consultant, PG&E didn’t have a clue as to the age of about 40% of its system, and it’s a safe guess that it didn’t know bupkis about its condition either.

And why was PG&E so colossally ignorant about the state of its network? It’s hard to fathom how PG&E wouldn’t have historical records about its assets. And as to keeping tabs on their current, condition, well, that costs money. Again from the Journal:

Until recently, PG&E hadn’t regularly climbed its towers to inspect their condition, despite the suggestion of an outside consultant it hired…It began detailed inspections of its transmission lines only after the Camp Fire that destroyed Paradise.

In addition to those inspections, PG&E said it began using drones and helicopters earlier this year to capture images of its transmission structures to analyze their condition, identify potential points of failure and prioritize repairs.

State fire officials concluded in May that a failure of PG&E equipment on a line known as the Caribou-Palermo, built in 1921, caused the fire, the deadliest in California history…

The company in December began “enhanced inspections” that included climbing towers, some for the first time in decades.

After completing those inspections, the company disclosed June 19 that it needs to make thousands of repairs. And it decided to permanently shut down the Caribou-Palermo line after assessing the amount of work it would take to operate it safely…

Elizaveta Malashenko, the safety and enforcement chief for the California Public Utilities Commission, said that after reviewing the inspection results, she “would not be comfortable making a statement that [the Caribou-Palermo] was an outlier.”

Ms. Malashenko said the CPUC’s safety auditors have historically relied on utility records rather than field inspections, which are far more costly to conduct. After the Camp Fire, the agency has asked the state for $25 million to create a three-year program to put its own inspectors in the field, in part because of the problems PG&E has discovered within its system.

California reader DS added:

This is the sheer idiocy of prosecuting a corporation instead of a person. Someone needs to be in jail (multiple someones). Corporations are people too, my friend. People hiding behind a legal fiction intended at common law to protect them from CIVIL liability, not to immunize their criminal conduct.

The WSJ reports that 30 percent of PG&E’s transmission infrastructure is over a century old, and that 90 percent of the transmission infrastructure is at least 70 years old. They have simply been extracting rents ever since. The executive compensation and dividends should be clawed-back. Shareholders should be stripped of ownership and managers jailed for voluntary manslaughter — or perhaps even murder.

The WSJ might have added a brief refresher on why PG&E no longer has the cash flows that were the basis for the creation of investor-owned utilities in the first place (hint: classic California “soft” corruption):

In the mid-90’s, under Republican Governor Pete Wilson, California began changing the electricity industry. Democratic State Senator Steve Peace was the Chairman of the Senate Committee on Energy at the time and is often credited as “the father of deregulation”. The author of the bill was Senator Jim Brulte, a Republican from Rancho Cucamonga. Wilson admitted publicly that defects in the deregulation system would need fixing by “the next governor”.

The new rules called for the Investor Owned Utilities, or IOUs, (primarily Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric) to sell off a significant part of their electricity generation to wholly private, unregulated companies such as AES, Reliant, and Enron. The buyers of those power plants then became the wholesalers from which the IOUs needed to buy the electricity that they used to own themselves.

So the crown jewels were sold and the utilities were left with sprawling, and in the case of PG&E, old, networks to operate. This program wasn’t quite as balkanized as the deregulation of British Rail, but the sorry effects, measured in death counts and loss of property, have been worse. And who knows how long it will take for PG&E to run a much safer operation.

As former CalPERS board member JJ Jelincic, who lives in PG&E’s service area, said, “As usual, the rate payer will bail out the bad management at PG&E.” But even though this is a sadly predictable result, how bad will the damage be? Californians got a taste during the state’s electricity crisis of 2000 and 2001 of short-lived but severe pain. They now face a long-term choice between paying up and burning up.

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