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PG&E CORPORATION

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PG&E's Wildfire Mistakes Followed Years of -2-

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09/06/2019 | 02:51am EDT

The incident that led to PG&E's federal probation was a 2010 pipeline explosion and fire in San Bruno, Calif., that killed eight people and destroyed or damaged more than 100 houses. PG&E told a court that nearby sewer-line work could have damaged its "state-of-the-art pipeline." In fact, PG&E's pipeline was so defective the company must have overlooked or ignored welding standards when building it out of scraps a half-century earlier, the National Transportation Safety Board said after an investigation.

One of 2,425 violations for which the state utilities commission penalized PG&E $1.6 billion was impeding its investigation and giving it false information.

PG&E said it was unaware of records inaccuracies before the accident, and said its violations weren't intentional.

The state utilities commission found in 2008 that PG&E had engaged in improper back-channel communications with regulators. In lieu of penalties, it let the utility create a program to prevent future violations.

The commission later learned that improper communications had resumed a short time afterward. In 2018, it fined the utility $97.5 million for violations of fair-contact rules from 2010 to 2014, including trying to influence judge selection.

PG&E said three executives left after the latter set of infractions came to light, and it created a new post of chief ethics and compliance officer.

PG&E's program for marking spots where contractors plan to dig might never have been investigated but for the way the company dealt with employees who raised alarms.

In a nationwide system, contractors planning to dig in streets or yards must first call 811 to make sure they won't hit a pipeline or electrical cable. Local utilities then have two working days to mark any such locations with spray paint or flags.

At PG&E, this task fell to employees called locators. About 200 of them plus seasonal workers had to process up to 900,000 "Locate and Mark" work orders a year, a job with high stress and turnover, a former PG&E superintendent named Katherin Mack told state utility investigators, according to a transcript of her sworn interview with the California Public Utilities Commission's Safety and Enforcement Division.

Locators discovered they could freeze the clock, preventing a work order from registering as late, by methods such as saying they had negotiated a later excavation date, according to several employees as well as consultants PG&E hired to investigate problems with the program.

PG&E's quality-assurance team looked at the program in 2009 and told higher-ups the next year that "incorrect data is being used to report on-time results," said a report by the Safety and Enforcement Division. In 2011, PG&E's Internal Audit team similarly warned company executives that on-time results "cannot be relied upon."

Around 2013, the Locate and Mark unit came under the oversight of Joel Dickson, director of PG&E's Gas Operations and Compliance Programs, a local celebrity as a former defensive captain for the University of California, Berkeley football team. Ms. Mack said Mr. Dickson soon announced there were to be "zero late tickets." She said he grew angry at supervisors when locators missed deadlines, resulting in late tickets, sometimes asking her, "Do I need to fire them?"

The number of late tickets plunged to 44 in 2016 from 13,547 in 2013. Despite the internal audit saying on-time results couldn't be relied on, PG&E provided them to the state regulator when it began asking questions in 2017. Consultants to PG&E later came up with far higher numbers.

Ms. Mack told regulators she and several supervisors informed PG&E's senior director of gas operations, John Higgins, that locators were entering false data because they were overworked and feared for their jobs.

Mr. Higgins, she said, replied that he hadn't directed anybody to cut corners.

Ms. Mack lost her position as a superintendent in the Locate and Mark program in early 2017, which she told investigators she thought was because of her complaints. She later found a job in the company's electricity division, swallowing a demotion and pay cut.

Around the same time, PG&E promoted Mr. Higgins to vice president of safety and health. He has since left PG&E and didn't return calls seeking comment.

The company promoted Mr. Dickson to senior director of transportation services in early 2017. He also has since left PG&E and declined interview requests.

A lawyer for Mr. Dickson said his client "never pressured PG&E employees to falsify documents. What he did was encourage PG&E employees to comply with California law" requiring prompt execution of work orders.

A senior manager in quality management named Jennifer Burrows also said she told superiors about problems with locators violating procedures, according to a transcript of her interview with investigators. After that, Ms. Burrows told investigators, she was excluded from meetings at which she formerly presented her findings. In early 2017, PG&E eliminated her position and she took a lateral assignment in the electricity division.

David Appelbaum was a manager PG&E recruited in 2013 from the federal Pipeline and Hazardous Materials Safety Administration. He formed a unit at PG&E to investigate causes of "dig-in" accidents in which excavators strike buried pipelines or electrical cables.

He was disturbed by some PG&E practices, such as going after contractors to pay for dig-in damage when the company bore some responsibility because it hadn't marked a site on time or had made mistakes, according to a transcript of what he told investigators. He said he complained to Mr. Higgins and others.

After he complained, his unit was put under Mr. Dickson's oversight, Mr. Appelbaum said. From then on, he said, the team was pressured to go easy on PG&E and he was reprimanded for sharing information with regulators.

PG&E fired Mr. Appelbaum in September 2015, saying he had violated its code of conduct. Mr. Appelbaum denied that and filed suit, invoking California law's whistleblower protections and alleging wrongful discharge, which PG&E denied. Court records show the suit was settled in 2018 with a PG&E payment to Mr. Appelbaum.

Mr. Appelbaum returned to the federal pipeline-safety agency, where his boss asked him about his stint at PG&E and he wrote a memo about it, according to the California utilities commission. This memo formed the basis of an investigative referral to the commission.

After months of interviews by its safety and enforcement arm, the commission opened a formal investigation at the end of last year. In March, PG&E filed an 832-page response. Among other things, it disputed assertions by state investigators and its own consultants that it was "common knowledge" the Locate and Mark system was being abused.

PG&E acknowledged the program was understaffed and said it was hiring more people. It denied that upper management understood the depth of the problem and said that workers' fudging on-time results, in fact, had the effect of hiding the program's problems. Once "the issues came to the attention of PG&E leadership in March 2017," it said, the company took "aggressive and quick actions."

It also said it thought software fixes in 2012 had solved the problem, but now is designing its own work-management software.

PG&E said there were 67 dig-in accidents involving gas facilities from 2012 to February 2017 where late tickets "may have been a contributing factor," although it said it still doesn't know for sure how many tickets were doctored.

The utility declined to comment on the three midlevel managers who said they raised alarms about the program. It said it doesn't comment on personnel matters.

PG&E said it encourages employees to speak up if they perceive a safety issue or some form of misconduct. It added, "Fostering this culture takes continual effort."

Stocks mentioned in the article
ChangeLast1st jan.
LIGAND PHARMACEUTICALS INC. -0.66% 104 Delayed Quote.-22.85%
PG&E CORPORATION -4.84% 11.61 Delayed Quote.-48.63%
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