An independent monitor concluded that while PG&E Corp. and beleaguered subsidiary Pacific Gas and Electric Co. have improved natural gas operations since 2017, wildfire mitigation missteps and executive turnover remain enormous hurdles to adequate performance.
Kirkland & Ellis LLP, which was appointed as the utility's federal monitor in 2017 following a U.S. National Transportation Safety Board investigation of the 2010 San Bruno pipeline blast, applauded decreasing gas overpressure events and the utility's enhanced response to them. On the electric side, however, speeding up efforts to prevent wildfire fatalities still requires a more "substantial" and faster approach, the law firm said Nov. 19.
Specifically, the monitor pointed out that PG&E Corp. CEO Patti Poppe's plan to bury 10,000 miles of the utility's distribution lines in high-fire threat districts lacks sufficient clarity.
"Some serious questions and issues remain regarding PG&E's implementation of the undergrounding initiative," Kirkland & Ellis noted in the report. "Notably, there is substantial skepticism among PG&E field personnel that PG&E can feasibly underground more than 500 miles per year using current technology and hardening methodologies."
PG&E Corp.'s proposal, which could cost $15 billion to $20 billion, aims to eliminate the $1.4 billion per year the utility spends on trimming and removing trees in close proximity to all power lines throughout its sprawling, wildfire-imperiled 70,000-square-mile service territory in Northern and Central California.
"We welcome the feedback provided in the federal monitor's report, as we have throughout the probation period," PG&E Corp. said Nov. 24 in an emailed statement. "We also recognize that we have more work to do."
As part of their $58 billion bankruptcy restructuring concluded in July 2020, the utility and its holding company agreed to pay $25.5 billion in wildfire claims from insurers, cities and counties and more than 70,000 individual wildfire victims. But post-bankruptcy wildfire-related liabilities have continued to accrue despite repeated commitments to end utility-ignited infernos.
Kirkland & Ellis also cited PG&E's infrastructure inspections record as a major cause for concern even though the company has beefed up its wildfire planning resources and prioritized that work.
"In no year has PG&E met all of the inspection commitments in its [Wildfire Mitigation Plan]," they said. "[The utility] lacks a clear execution plan to address the increasing backlog in a timely way. ... [C]onditions that are meant to be addressed within six months per PG&E guidance could sit unmitigated for several years."
Additionally, the utility's enhanced vegetation management work in high-fire threat districts is too slow and "should not limit its ... targets to 1,800 miles per year out of the 25,500 [high-fire threat district] miles," the monitor said.
Executive turnover is another threat to PG&E's operability, according to the report, given the utility has had five CEOs and 45 different board members since the monitor's appointment.
"No organization can sustain long-term progress if there is substantial turnover of senior leaders, with each wave of leaders having their own particular priorities, even if each wave and individual operated during their respective brief tenures in good faith," Kirkland & Ellis wrote.
The report also called on PG&E to improve recordkeeping and contractor management and urged policymakers to consider whether state regulations and oversight can be reformed.
"We do not doubt the sincerity of efforts, but doing 'more of the same' may not be enough on its own, given that often PG&E substantially complied with state mandates and goals, in important respects at least, and terrible fires, deaths and destruction nonetheless occurred," Kirkland & Ellis said.
The California Public Utilities Commission, or CPUC, on Oct. 7 voted unanimously in support of a proposed order to develop a framework for assessing the safety culture at state electric and gas utilities and natural gas storage operators. The assessments will seek to determine whether each company's values, principles, beliefs and norms prioritize safety and produce a record of safe operation.
The order stems from recent legislation that required the CPUC to assess the safety culture at electric utilities within the context of wildfire safety efforts. Lawmakers in Senate Bill 901 later asked the CPUC to more broadly evaluate the companies' safety culture. The CPUC opted to extend the requirement to gas utilities and gas storage facilities.
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