BIG UTILITY'S EVER-SHRINKING FINE FOR FATAL EXPLOSION

CALIFORNIA FOCUS

FOR RELEASE: FRIDAY, OCTOBER 2, 2015, OR THEREAFTER

BY THOMAS D. ELIAS

    “BIG UTILITY'S EVER-SHRINKING FINE FOR FATAL EXPLOSION”

          Some were mystified when, moments after the California Public Utilities Commission assessed the state’s largest utility company a record $1.6 billion fine for violating state and federal natural gas pipeline standards before the 2010 San Bruno natural gas pipeline explosion, Pacific Gas & Electric Co. announced it would not appeal the decision.

          Even now, about six months later, PG&E still has not said why it simply accepted the largest penalty ever assessed against an American utility company.

          But a relatively unpublicized vote last month in the state Senate gives a new hint about why. So does PG&E’s latest filing with the utilities commission, best known as the PUC, which sets rates for all privately-owned utilities in California.

          The Senate vote effectively ended a legislative effort to prevent PG&E from using most of the fine as a tax deduction, despite the fact that the company has been found negligent by federal agencies in the deadly 2010 San Bruno gas line explosion.

          There is some consumer comfort in the fact that PG&E will pay something, while Southern California Edison Co. and the San Diego Gas & Electric Co. will not be penalized at all for actions leading to the failure of the San Onofre Nuclear Generating Station, for which the PUC has assessed Edison and SDG&E customers more than $3 billion. Then again, nobody died at San Onofre, while San Bruno saw eight fatalities.

          Allowing PG&E to write off $1.3 billion of the fine as a business expense will allow the company to recoup about $115 million, according to some calculations. That’s a bit like a motorist being able to take the bulk of a speeding fine as a tax deduction. Anyone who tried this would trigger red flags at the Internal Revenue Service.

          The writeoff means PG&E will actually pay just over 40 percent of its fine to customers and the state. Yes, $400 million will be refunded to customers. Another $300 million will go to the state’s general fund and $50 million to pay for a variety of PUC safety activities. But the deduction gives the big utility part of those amounts back.

          The Senate’s inaction also lets PG&E deduct the bulk of the $850 million of this “fine” that will be used to repair and improve its gas transmission system. Of course, it makes no sense for any of the fine to go for this, since the utility has collected payments monthly from all customers for pipeline maintenance and safety for more than six decades.

          Because the PUC never tracked how that money was used until after San Bruno, no one knows what PG&E actually spent on maintenance and how much it just kept. The PUC has never explained why it’s allowing the company to use fine money this way.

          The Senate actually voted by a wide margin not to let PG&E get away with at least some of this. The vote was 25-14 to disallow the tax deduction. But a two-thirds majority of 27 votes was needed, and all 14 Republicans voting went in PG&E’s favor, so the big utility won out.

          The no-deduction bill’s sponsor, Democratic Sen. Jerry Hill of San Mateo, called the vote a demonstration “of political influence by a major utility which spends a lot of money…on campaigns and lobbying.”

          Almost simultaneously came PG&E’s latest filing with the utilities commission, an application for a $2.7 billion rate increase over three years. If the decades-old dance pattern of the PUC and the utility ensues, PG&E will end up getting about $2 billion, and the PUC will brag about saving consumers $700 million – when the company hasn’t shown it deserves any new profit at all.

          Worse, any big rate increase would essentially pay PG&E back in less than a year for the approximately $640 million in San Bruno fines it will actually pay. The net result will be that PG&E comes out ahead, just as Edison and SDG&E figure to come out ahead in their questionable San Onofre settlement with the PUC, one the commission so far shows no sign of rescinding despite the questionable legality of how it was reached.

          All of which would demonstrate there’s been no real change at the PUC, despite talk from the commission’s new president, Michael Picker, who has said he means to make his agency more consumer-oriented and transparent. Stay tuned.

    -30-       
    Elias is author of the current book “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It,” now available in an updated third edition. His email address is tdelias@aol.com