Mercury News editorial: PUC ruling benefits PG&E at ratepayers’ expense

In its latest and perhaps greatest outrage, the PUC ruled that PG&E can profit from the deadly 2010 San Bruno blast that killed eight people and destroyed 38 homes. This despite the recommendation of an independent administrative law judge that the utility not be allowed to make money on the San Bruno disaster.

The unanimous PUC vote means that ratepayers will pay about $1 billion of the costs of the first phase of PG&E’s work to bring its gas pipelines in urban areas up to standards — as much as 65 percent of the total — even though consumers in good faith already paid for the work. PG&E botched the job, failing to properly construct, maintain and test its pipelines. Instead it padded shareholder profits and executive pay.

This will only change if Brown fires PUC President Michael Peevey. The San Mateo County Board of Supervisors, the San Bruno City Council and state Sen. Jerry Hill have called for Peevey’s resignation, but the governor needs to make it happen.

Brown appointed two board members regarded as consumer advocates, but Peevey apparently has convinced them to join the holdovers in putting Wall Street before Main Street. The governor must act before the PUC makes its ruling on the second phase of the upgrade work, which covers more rural areas and will cost three times as much as Phase I, or roughly $6 billion.

The work for both phases includes replacing hundreds of miles of pipelines and installing automatic shut-off valves to limit the damage from future explosions.

Part of the problem goes back to the utility’s 2001 bankruptcy, after which the PUC guaranteed shareholders an 11.3 percent return on equity, about a percentage point above the industry standard. The idea was to encourage investment and create a healthier utility.

Ever since, consumers have been paying some of the highest rates in the nation, and PG&E has made profits a higher priority than safety. Its profits exceeded $1 billion for each of the last three years, while it was failing to maintain its gas pipelines and keeping shoddy records about maintenance.

Consumer advocates were optimistic that Thursday’s ruling would be fair, based on the administrative law judge’s recommendation. But in a last-minute backroom deal, the PUC substantially bumped up PG&E’s scheduled profit for the work, costing consumers an additional $130 million.

PUC Commissioner Mike Florio called the ruling a "well-balanced, well-thought out decision." On what planet? It’s obscene that the utility is making any profit at all from the San Bruno tragedy. San Bruno Mayor Jim Ruane is furious, and no wonder.

Only Brown can put an end to the PUC’s continual mismanagement of PG&E ratepayers’ money by removing Peevey from its leadership. Public officials and consumer advocates need to turn up the volume.