In 1911 the Railroad Commission of California was established because an outraged public demanded there be some regulation of the powerful rail barons that had repeatedly proved they were incapable of regulating themselves.
A century later, that agency — redubbed the California Public Utilities Commission — would come under fire from a once-again outraged public for not adequately regulating a different powerful industry. This time the results were deadly: Eight people died on Sept. 9, 2010, when a PG&E gas transmission line exploded and reduced a San Bruno neighborhood to ash.
Commission leaders initially defended the agency’s oversight of PG&E, but after federal investigators and an independent panel created by the commission both condemned the regulator for a host of inadequacies, even the agency’s leadership has come to agree it bears some responsibility.
The CPUC could have helped avert this disaster, concluded the National Transportation Safety Board, which just wrapped up a yearlong investigation into the pipeline blast. An adequate regulator would have known that PG&E lacked documentation about its pipe system, that its inspection programs were feeble, and that it had an inadequate emergency response plan, NTSB investigators testified in a hearing last week.
Worse, even when they did realize PG&E was violating regulations, the commission simply took industry leaders at their word when they promised to fix the problems, rarely imposing fines or enforcing major changes.
NTSB Chairwoman Deborah Hersman said PG&E “exploited weaknesses in a lax system of oversight” and that regulators placed “blind trust in an operator that doesn’t deserve that trust.”
Earlier this year, the independent panel formed by the CPUC to investigate the San Bruno accident concluded that the state regulatory agency hadn’t been doing its job. The panel’s report said that though well-meaning, the commission’s staff was plagued by a culture satisfied with making sure PG&E was in compliance with regulations — filing paperwork, meeting deadlines, and “checking off boxes.” Meanwhile, the agency’s true mandate to ensure public safety had been obscured. Even when the staff auditors and inspectors did find problems, as they did in an audit months before the San Bruno blast, those concerns were given such low priority that the staff failed to bring them to the full commission for months, the independent panel found. Often, when concerns were brought to the commission, nothing was done and no fines were imposed.
Among other recommendations, the NTSB has urged Gov. Jerry Brown to authorize CPUC safety staff to directly impose fines on the industry, rather than waiting on the full commission to impose penalties.
This host of regulatory failures could result in at least one lawsuit against the agencies overseeing the energy industry. San Francisco City Attorney Dennis Herrera has threatened to sue the CPUC and its federal counterpart, the Pipeline and Hazardous Materials Safety Administration, for failing to enforce gas pipeline safety standards.
Because major gas transmission lines run through San Francisco, these regulatory failures placed the people who live and work in The City at risk, Herrera argues.
“It has become increasingly obvious that blame must be shared by regulators who were either asleep at the switch or too cozy with the industry they’re supposed to regulate,” Herrera said in a written statement.
CPUC Executive Director Paul Clanon acknowledged his agency has “some responsibility to learn the lessons of San Bruno.”
“Eight people died — nobody at the PUC thinks that we are immune from some responsibility for that,” he said.
And it has already beefed up its oversight, by doubling the number of pipeline safety inspectors it had a year ago, and creating a new unit whose sole responsibility is to ask hard questions about safety.
Rep. Jackie Speier, D-San Mateo, noted that historically the CPUC conducted “desk audits,” where they rarely conducted site visits or dug more deeply into safety issues than necessary. She said auditors once “were easily persuaded by the utility to cut corners,” but that has now drastically changed.
And the makeup of the commission itself has changed, she said. Three of the five members on the board last year have since been replaced by appointments from Gov. Jerry Brown, bringing a more consumer-oriented bent to the board.
Among the new commissioners is Mike Florio, who spent much of his career fighting for consumers as the general counsel of advocacy group The Utility Reform Network. He said the agency must accept “a fair share of the blame” for San Bruno.
“It’s not that people were slacking off, but I think they weren’t asking the right questions, or asking the hard questions,” he said. “I think it’s in the process of being transformed. I think the whole situation really shook people here. All of us had become a little bit complacent.”
San Bruno has already inspired a host of regulatory changes:
9: Number of CPUC safety inspectors before blast
11,000: Average miles of pipeline per safety inspector before blast
18: Number of safety inspectors now
5,500: Average miles of pipeline per safety inspector now
Source: California Public Utilities Commission
Ask Paul Clanon whether his agency deserves the reputation of being too cozy with the industry it regulates, and you can feel his temperature rising.
“I think it’s completely off-base. It’s completely wrong in every way,” said the executive director of the California Public Utilities Commission.
But those people don’t seem to be going away. For the past year, the regulator has been under the microscope after a San Bruno neighborhood was maimed by an exploding PG&E natural gas pipeline. Those looking through that microscope — media, residents and lawmakers — have continued to question whether the regulator was complicit in the tragedy because it was too trusting and permissive with the industry it was tasked to put limits on.
Clanon’s outright dismissal of these concerns did not sit well with Assemblyman Jerry Hill, D-San Mateo.
“If he believes that then it’s time for him to go, because he’s living in a dream world,” Hill said.
Hill was among those who have questioned whether the commission and its staff are too enmeshed in the industries it regulates. He has repeatedly asked the commission about its staff general counsel, Frank Lindh, who worked for 16 years as an attorney for PG&E. Lindh is now participating in an investigation into PG&E, and Hill has asked whether there may be a conflict of interest.
Lindh has many defenders, even among consumer advocates who faced him when he worked for PG&E.
Sam Kang, general counsel of consumer advocate Greenlining Institute, described Lindh as a “great resource” for the advocates of the underserved who is “extremely well-respected by the industry, within the PUC and by consumer advocates.”
But as The San Francisco Examiner reported last month, Lindh is hardly the only person who has traveled between the industry and its regulator: the last executive director now is an energy consultant. The current commission president is a former utility executive. A former commissioner now is the executive of another utility. One Arnold Schwarzenegger-appointed director of government relations was an industry lobbyist before taking the position and went directly back into lobbying afterward.
Judy Nadler, a government ethicist at Santa Clara University, called such interconnections a “family tree syndrome — put everybody up there and you could link them all, one way or the other.”
She said this can be particularly problematic for an agency like the Public Utilities Commission, which runs under the public radar until something like the San Bruno tragedy occurs.
As The San Francisco Examiner reported last month, critics have accused the California Public Utilities Commission of being “too cozy” with the energy industry it regulates. Here are a handful of leaders who have leadership positions from both the commission and the industry on their résumés.
Worked as an attorney for PG&E for 16 years before being named general counsel of the CPUC in 2008.
Has served as president of CPUC since 2002. Earlier in his career, he was president of energy company NewEnergy Inc., and prior to that led the utility Southern California Edison.
Worked as energy lobbyist before being CPUC’s director of governmental affairs in 2005. Left commission in 2008 to return to energy lobbying.
Served as CPUC executive director from 2005 to 2007 and was director of its energy division for eight years before that. Left to become executive for a natural gas company.
JESSIE KNIGHT JR.
Knight was appointed in 1993 to the CPUC, where he served until 1999. Years later he would go on to become the CEO and chairman of San Diego Gas & Electric.