PG&E knows how to generate power and distribute it where it's needed. The utility is using its considerable resources to do that now -- but we're not talking electricity. It's marshaling the muscle of Wall Street in a campaign to minimize the penalty it will pay for the 2010 San Bruno tragedy.
The California Public Utilities Commission has to stand up to this power play. PG&E shareholders -- not ratepayers -- should take responsibility for the utility's fatal errors. They're the ones who profited from the failure to invest in improvements that could have prevented the gas explosion that killed eight people and destroyed 38 homes.
Claims that the penalty will plunge the wildly profitable utility into bankruptcy are overblown.
The PUC has had a cozy relationship with PG&E over the years and appeared to be on the same track after San Bruno. But thanks to a courageous stand by its in-house lawyers, the staff reversed course in July and recommended PG&E pay an eye-popping $2.25 billion penalty. This was backed up by a comprehensive, independent audit of PG&E that found the utility could absorb the full penalty without affecting ratepayers or its future solvency.
If the fine is approved by the appointed five-member commission later this year, it would be the largest imposed on a utility in U.S. history. That sounds right. Investigations have shown that PG&E took money collected from ratepayers for gas pipeline maintenance and instead used it for shareholder dividends and executive bonuses. The size of the fine needs to fit the enormity of the misdeeds.
When CEO Tony Earley met with our editorial board in late July, he didn't whine about the proposed penalty, but he has been fearmongering ever since.
Earley went to New York on Aug. 20 and told Wall Street that imposing the penalty "may force the company into bankruptcy." Moody's Investors Service and Standard & Poor's immediately said they will need to review California's regulatory system if the full penalty is assessed.
Then, a few days later, PG&E told the PUC the fine would make it harder to raise capital, so it may seek a rate hike of as much as 4 percent for customers. If it does, the commission needs to refer to that independent audit and say no. This is not ratepayers' responsibility.
Earley views the penalty as $4 billion because of the money it has already spent on safety work since the death and destruction in San Bruno. What chutzpah. Safety is what ratepayers had been led to expect all along.
Shareholders and executives benefited from the utility's failure to invest in safety, and they should pay for it.