PCG PG&E Corporation

By Katherine Blunt and Russell Gold 

PG&E Corp. falsified natural gas pipeline-safety records over five years, California regulators said Friday, dealing another blow to the state's largest utility as it struggles with mounting lawsuits stemming from devastating wildfires.

The California Public Utilities Commission said an investigation by its safety division found that PG&E lacked sufficient staffing to locate and mark natural-gas pipelines as required by law, and pressured employees to complete the work.

As a result, the agency alleged, PG&E staff falsified thousands of those records between 2012 and 2017. The claims included marking the precise locations of its natural gas pipelines in a timely manner so that the information could be used by construction companies and others for safety purposes.

A report by the commission contends it was "common knowledge" among PG&E supervisors that their staff falsified records to avoid "late tickets" for failing to complete the work on time. The agency alleges the company undercounted tens of thousands of late tickets between 2012 and 2017.

The commission directed PG&E to take "immediate corrective measures" and opened a proceeding to consider penalties against the company.

PG&E said Friday that it is taking actions in response to the state's findings, including enhanced auditing, hiring more employees and improving their training doing the pipeline safety work.

"We're committed to accurate and thorough reporting and record-keeping, and we didn't live up to that commitment in this case," the utility said in a statement. "Once that became apparent, we took and continue to take additional actions to meet the regulatory standards."

The commission said it was tipped to the alleged violations by the federal Pipeline and Hazardous Materials Safety Administration

"Utility falsification of safety related records is a serious violation of law and diminishes our trust in the utility's reports on their progress," CPUC President Michael Picker said in a statement. "These findings are another example of why we are investigating PG&E's safety culture."

The CPUC last month expanded a continuing probe of PG&E's safety practices and said it would explore the way the company is structured and managed.

The commission began the investigation of the company's safety culture three years ago, after a devastating natural-gas pipeline explosion in 2010 killed eight people and caused widespread damage in San Bruno, Calif. The company was fined $1.6 billion by state regulators in connection with that incident. It also was fined $3 million by a federal judge and is on federal probation as a result.

PG&E shares have fallen sharply in recent weeks after the company disclosed that some of its equipment malfunctioned in the area of last month's Camp Fire, minutes before the fire was reported. The Camp Fire killed at least 86 people and destroyed about 14,000 homes, making it the state's deadliest fire.

The utility released new information this week indicating that one of its power lines near where the Camp Fire started Nov. 8 came apart immediately beforehand and fell from the metal tower that held it aloft. Investigators, who are still trying to determine the cause of the fire, removed some utility equipment from the power line and from another line with broken power poles for closer analysis.

PG&E asked state regulators on Thursday to approve a plan to sharply increase revenue for a three-year period, with a rate increase on customers of 12%, or $1.1 billion, in 2020 that would rise to 24%, or more than $2 billion a year, by 2022.

The company said the request reflected anticipated additional spending on wildfire mitigation and insurance costs, but didn't include the largest potential expenses it faces: liability from lawsuits alleging it is to blame for wildfires in recent years. Experts have estimated those liability costs could run into the tens of billions of dollars.

While state fire investigators haven't determined whether PG&E equipment was to blame for the Camp Fire, or the worst fire of 2017, known as the Tubbs fire, they have has found PG&E responsible for 17 major fires in 2017 that destroyed 3,256 structures and killed 22 people. Eleven of those cases have been referred to county district attorneys for possible criminal charges against PG&E.

Michael Wara, director of the climate and energy policy program at Stanford University's Woods Institute, said the allegations that PG&E faked pipeline safety records will put the company in legal jeopardy and sour an already disintegrating relationship with California regulators.

"I think the issue is can the existing management remain in place? The board and the management?" Mr. Wara said. "This is the kind of thing that could lead to a big accident," he added.

Write to Katherine Blunt at Katherine.Blunt@wsj.com and Russell Gold at russell.gold@wsj.com

(END) Dow Jones Newswires

December 14, 2018 20:32 ET (01:32 GMT)

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