3.1. Background of the OII
The Commission opened the OII to determine whether PG&E "violated any provision or provisions of the California Public Utilities Code [Pub. Util. Code], Commission general orders or decisions, or other applicable rules or requirements in regards to its gas service and facilities, pertaining to a gas explosion and fire that occurred on December 24, 2008 in Rancho Cordova, California." (OII at 1.) The OII provided notice that a hearing would be held to determine whether PG&E violated any statutes or Commission directives, and to determine the penalties or other remedies for any proven violation. The OII also directed PG&E to file a report, respond to certain questions, and to provide the information requested.
The OII is based upon the investigations conducted by the NTSB and CPSD. CPSD's "Incident Investigation Report on Rancho Cordova Explosion and Fire," which was marked for identification as Exhibit 1 at the July 29, 2011 evidentiary hearing, included the NTSB "Pipeline Accident Brief" as Appendix L to CPSD's report.
The NTSB report concluded the following:
The National Transportation Safety Board determines that the probable cause of the December 24, 2008, release, ignition, and explosion of natural gas in Rancho Cordova, California, was the use of a section of unmarked and out-of-specification polyethylene [PE] pipe with inadequate wall thickness that allowed gas to leak from the mechanical coupling installed on September 21, 2006. Contributing to the accident was the 2-hour 47-minute delay in the arrival at the job site of a Pacific Gas and Electric Company crew that was properly trained and equipped to identify and classify outdoor leaks and to begin response activities to ensure the safety of the residents and public. (Ex. 1, App. L.)
The CPSD report stated the following in its conclusion:
The cause of the gas explosion and fire was the gas leak on the main PE gas pipe located in the front yard of 10708 Paiute Way, Rancho Cordova. The gas leak was caused when a segment of yellow 1¼ IPS [iron pipe size] PE pipe separated from a 1¼ IPS coupling. The 1¼-inch pipeline and coupling were installed on September 21, 2006 to repair a gas leak. The pipeline installed was not approved for gas usage according to [American Society for Testing and Materials] ASTM D 2513 standards. The leaking gas migrated into the house at 10708 Paiute Way, ignited and caused the explosion and fire. CPSD also found that PG&E had inadequate rules or implementation of the rules to timely deal with a gas leak such as occurred in Rancho Cordova, so as to promptly find and assess the leak and to prevent harm to life and property. (Ex. 1 at 24.)
As set forth at 24 to 29 of the CPSD report, CPSD goes on to allege certain "key facts," which CPSD concludes led to PG&E's violation of various provisions of Part 192 of Title 49 of the Code of Federal Regulations and Pub. Util. Code §451. 4 These CPSD allegations of violations were also set forth in the November 19, 2010 OII at 9 to 10, and involve the following provisions:
1. 49 CFR §192.13(c), General; 49 CFR §192.59(a)(1), Plastic Pipe; and Pub. Util. Code §451.
2. 49 CFR §192.13(c); and Pub. Util. Code §451.
3. 49 CFR §192.615(a)(3)(i), (a)(4), (a)(5), (a)(7); and Pub. Util. Code §451.
4. 49 CFR §192.615(a)(2), (a)(5), (a)(7), (a)(8), (b)(2); and Pub. Util. Code §451.
5. 49 CFR §199.105(b), Drug Testing; 49 CFR S199.225(a), Alcohol Testing; Pub. Util. Code §451.
The OII directed PG&E to provide a report identifying "all reasons of law and fact currently known to PG&E to establish that the company has committed none of the violations alleged in CPSD's report." (OII at 11 and 13.)
3.2. Background of the Rancho Cordova Events
The following is a description of the events that occurred on
December 24, 2008, and the earlier events which the NTSB and CPSD believed caused the explosion. This chronology of events is based on the various details contained in the CPSD, NTSB, and PG&E reports, as well as the PG&E and CPSD stipulation.
3.2.1. December 24, 2008 Events
On December 24, 2008, a resident of 10716 Paiute Way in Rancho Cordova called PG&E at approximately 9:16 a.m. to report the smell of natural gas outside the house and in the garage. PG&E dispatched a gas service representative at approximately 9:21 a.m., who arrived at 10716 Paiute Way at approximately 10:14 a.m.
The gas service representative was equipped with a Sensit Gold leak detector device, and was trained to identify, classify, and assess indoor leaks. The Sensit Gold device is a combustible gas indicator that takes quantitative readings of the percentage of gas that is present at an indoor or outdoor location. The gas service representative went to the gas meter at 10716 and tested for gas. The gas service representative detected the presence of gas in the water box in front of the house at 10716 Paiute Way. The gas service representative then performed a clock test on the gas meter at 10716 Paiute Way to determine whether there was excessive gas flow, which there was not. The gas service representative also checked inside 10716 Paiute Way, but did not detect any gas leaks.
Pursuant to PG&E's procedures, at approximately 10:25 a.m., the gas service representative contacted PG&E's Customer Contact Center using PG&E's internal line "to request that a case number be issued to the gas M&C [maintenance & construction] case queue for 10716 Paiute Way and that a leak investigator be dispatched to help determine the source of the gas readings at the water boxes." (Ex. 2 at 11.) The gas service representative called for a leak investigator because the leak investigator is qualified to use a flame ionization (flame pack) device, which is used to find outdoor natural gas leaks.5 A case ticket for 10716 Paiute Way was created at 10:28 a.m. by the Customer Contact Center.
The gas service representative then made contact with a female occupant at 10712 Paiute Way who also smelled gas. The gas service representative asked this person to call PG&E about the gas odor. The gas service representative then received permission to check the 10712 Paiute Way residence for the odor of natural gas. The gas service representative found and repaired a minor leak at the water heater. The gas service representative also smelled the odor of gas in a small room in the garage, and found a trace of gas at the water box located in front of 10712 Paiute Way. The gas service representative then performed a clock test on the gas meter, which was normal.
The gas service representative was then directed by a male occupant of 10712 Paiute Way to a patch of dead grass in the front yard at 10708 Paiute Way as the possible cause of the gas odor.6 The gas service representative was informed by this person that a leak had previously been repaired at this location. The gas service representative observed a patch of dead grass in the front yard of 10708 Paiute Way, and detected the presence of gas in that area at about 63 percent of the lower explosive limit of natural gas, or about three percent gas-in-air. At about 10:35 a.m., the gas service representative then called dispatch for the outside gas leak at 10712 Paiute Way, and a case ticket was created at 10:42 a.m. by the Customer Contact Center.
After detecting gas in the area near the patch of dead grass, the gas service representative used the leak detector device along the service line toward the house at 10708 Paiute Way. The gas service representative found no indication of gas near the house. The gas service representative also clock tested the meter at 10708 Paiute Way, but found nothing unusual. The gas service representative then knocked on the front door at 10708 Paiute Way, but no one answered. The gas service representative was not equipped by PG&E to place a sign on the door or to place barrier tape on the outside of the house to warn residents that entry could be hazardous. From approximately 11:10 a.m. to 11:17 a.m., the gas service representative made two calls to PG&E dispatch concerning an outdoor gas leak at 10708 Paiute Way. A case ticket for 10708 Paiute Way was created at 11:22 a.m. by the Customer Contact Center.
At approximately 11:00 a.m., the gas service representative called PG&E's Sacramento Maintenance and Construction (M&C) field office on Florin Road to find out when an M&C crew would arrive. The gas service representative was then given the telephone number of the leak investigator who had been dispatched, and called that number. The leak investigator informed the gas service representative that he would be there before noon.
The gas service representative then parked her PG&E truck across the street facing the home at 10708 Paiute Way and waited for the leak investigator to arrive. When the leak investigator did not arrive by noon, the gas service representative called the leak investigator again, who informed the gas service representative that he was coming.
PG&E's Sacramento M&C field office received the first case ticket for a flame pack leak investigator around 10:30 a.m. At approximately 10:42 a.m., the M&C supervisor who was on duty that morning acknowledged the case ticket for 10716 Paiute Way, and called the leak investigator on duty. That person was unable to respond due to another job in Elk Grove. At about 10:45 a.m., the morning M&C supervisor then called to dispatch a second leak investigator, who was completing a job from the previous evening in the Natomas area of Sacramento. This leak investigator was available, and advised the supervisor that he needed to return to the field office to pick up the flame pack, and then would go to Rancho Cordova. The morning M&C supervisor then informed the Sacramento Division Gas Compliance Supervisor (compliance supervisor) that the leak investigator would report to the site to conduct the leak investigation with the flame pack. The morning M&C supervisor then went home for the day.
The leak investigator completed his work in the Natomas area and then drove to the Sacramento M&C field office to pick up the flame pack and related work papers. On the way to the field office, the leak investigator was apparently delayed on the freeway due to a tanker truck accident. The leak investigator spoke with the gas service representative three times to report his delay, but the leak investigator did not notify his supervisor or PG&E dispatch of the delay. The leak investigator arrived at the Sacramento M&C field office on Florin Road at about 11:30 a.m. to pick up the flame pack, about 45 minutes after his dispatch by the morning M&C supervisor.
After the morning M&C supervisor left work, the afternoon M&C supervisor took over. At approximately 11:26 a.m., the Sacramento M&C field office acknowledged the case ticket for 10708 Paiute Way. Recognizing the need that an outdoor repair might be needed for the three case tickets on Paiute Way, the compliance supervisor dispatched an M&C foreman and an M&C fieldperson to Paiute Way to meet the leak investigator. 7 At around 12:00 to 12:30 p.m., the compliance supervisor saw the leak investigator in the maintenance yard at the Florin Road field office.
Due to a brake problem with the truck the leak investigator had been using when he returned to the Sacramento M&C field office, the leak investigator had to obtain another truck, unhitch the backhoe from the problem truck he had been using, and hitch the backhoe to the replacement truck. The leak investigator then left the yard at about 12:42 p.m. to go to Paiute Way.
The PG&E report states:
The two supervisors on duty that afternoon failed to coordinate a response with each other and with the morning supervisor to ensure that there was an appropriate response to the leak location. One of them could not account for his whereabouts that afternoon and the other took insufficient action to attempt to mitigate the delay being experienced by the dispatched leak investigator. These actions failed to comply with the portion of PG&E's UO Standard S4110 that ...required the supervisors to ensure that all repairs were completed in a timely manner. ... The failure of the supervisors to act to mitigate the delay encountered by the leak investigator resulted in an unreasonable delay in getting the leak investigator and gas crew to the location of the leak. (Ex. 2 at 15.)
The foreman arrived at Paiute Way at approximately 1:14 p.m. and met with the gas service representative. After the gas service representative informed the foreman about the leak in the yard at 10708 Paiute Way, and that no one had answered the door at that address, the gas service representative left the scene after being relieved by the foreman. At about 1:19 p.m., the leak investigator arrived at Paiute Way with the flame pack. The leak investigator's arrival was two hours and 47 minutes after the gas service representative had first called PG&E dispatch to request a qualified flame pack person. The fieldperson arrived at Paiute Way at about 1:22 p.m.
The foreman observed the area where the repair had been done at 10708 Paiute Way. After the foreman talked to the leak investigator about what the gas service representative had detected, the foreman and the fieldperson began to mark off the location of the gas main and service lines in front of 10712 and 10708 Paiute Way.
After the leak investigator warmed up the flame pack at his truck, the leak investigator then knocked on the door of 10708 Paiute Way and made contact with the homeowner's granddaughter. She directed the leak investigator to the garage where the leak investigator spoke with the homeowner of the house. The homeowner informed the leak investigator about PG&E's prior repair at the dead patch of grass.8 The leak investigator did not smell any gas at the front door or in the garage, nor did any of the occupants at 10708 Paiute Way mention any smell of gas inside the house to the leak investigator.
After talking to the homeowner of 10708 Paiute Way, the leak investigator retrieved the flame pack from his truck and began a leak survey along the main in front of 10708 Paiute Way. He obtained natural gas readings of 60,000 parts per million over the gas main at the patch of dead grass, which is just above the lower explosive level range that begins at 45,000 parts per million.9 As the leak investigator walked toward the house along the service line, the readings dropped to 30,000 parts per million. As the leak investigator turned back toward the dead patch of grass to confirm his readings, the house at 10708 Paiute Way exploded at about 1:36 p.m. The ignition source of the gas explosion appeared to be the granddaughter who was inside 10708 Paiute Way when she used a lighter to light a cigarette.
As a result of the explosion, the homeowner of 10708 Paiute Way died, and his daughter and granddaughter were seriously injured. PG&E personnel and a neighbor also sustained injuries from the explosion. The house at 10708 Paiute Way was destroyed, two adjacent houses had severe damage, and other houses had minor damage.
Prior to the explosion, PG&E had not contacted the fire department, and no houses in the vicinity of 10708 Paiute Way were evacuated. After the explosion, none of PG&E's employees were administered drug and alcohol tests.
3.2.2. Subsequent Investigations Into Rancho Cordova Pipe
On December 29, 2008, during the course of the NTSB and Commission investigation, PG&E excavated the 2-inch plastic main pipeline from the patch of dead grass in the front yard of 10708 Paiute Way. This pipe consisted of a 2-inch to 1 ¼-inch transition (reducer) coupling, a 6-inch section of 1 ¼-inch pipe, and a 1 ¼-inch repair coupling. PG&E pressure tested the main pipeline and service lines separately with air to find the location of the gas leak. During the test, the west end of the repair coupling leaked air excessively, which pinpointed the gas leak to the 6-inch section of the 1 ¼-inch diameter repair pipe (spool pipe) between the Metfit repair coupling and the Metfit reducer coupling.
Sections of this pipe and the couplings were sent to the NTSB's Materials Laboratory, where those items were measured, examined, and tested. NTSB's report stated:
The examination of the pipe sections from the accident site revealed that the 20-foot-long inserted section of 1 ¼-inch polyethylene pipe met the requirements of ASTM D-2513. This section of pipe had an outside diameter of 1.662 inches and a wall thickness range of 0.172 to 0.716 inches, and it was marked in accordance with ASTM D-2513. The proper wall thickness of ASTM D-2513 1 ¼-inch SDR 10 polyethylene pipe is 0.166 to 0.186 inches.
The short, 6-inch piece of 1 ¼-inch spool pipe had no markings at all, an outside diameter of 1.662 inches, and a wall thickness of 0.148 to 0.152 inches, significantly thinner than the minimum wall thickness for ASTM D-2513 SDR 10 pipe. The coupling cannot be tightened with sufficient sealing pressure if the wall thickness of the pipe does not meet the minimum specifications. Marks made by the field installer were found on all of the piping installed by PG&E, and they indicated the proper depth for insertion of the pipe into the coupling. (Ex. 1, Appendix L at 11-12.)
This spool pipe repair at 10708 Paiute Way took place on
September 21, 2006, as a result of a gas odor complaint from this address.10 The PG&E crew that was dispatched on September 15, 2006 determined that the source of the odor was a leak in the 2-inch plastic pipe gas main located in front of 10708 Paiute Way. The homeowner at 10708 Paiute Way did not want PG&E to dig-up the entire lawn to make the repair. According to the NTSB report, the September 21, 2006 repair was performed in the following manner:
To make the repair at 10708 Paiute Way, PG&E severed the original 2-inch main at two locations about 22 feet apart and inserted a section of 1 ¼-inch polyethylene plastic pipe inside the older 2-inch Aldyl-A plastic pipe across the leak. The repair pipe inserted into the 2-inch main was a 1 ¼-inch iron pipe size polyethylene pipe manufactured by US Poly that also had a maximum allowable operating pressure of 60 psig [pressure per square inch gauge] and a working pressure of about 55 psig. The inserted pipe sections were joined to the original 2-inch main with two US Poly Metfit 1 ¼-inch by 2-inch reducing couplings and one 1 ¼-inch coupling. Specifically, the main was reconnected by installing a 2-inch to 1 ¼-inch Metfit reducing coupling to join one end of the severed 2-inch main to one end of the 256-inch long 1 ¼-inch polyethylene pipe. On the other end, to obtain sufficient movement to complete the repair, the long 1 ¼-inch insert pipe was then joined by a 1 ¼-inch Metfit straight coupling to an about 6-inch-long piece of 1 ¼-inch polyethylene pipe. This short pipe section, or spool piece, was joined to the other severed end of the 2-inch main by a Metfit 1 ¼-inch to 2-inch reducing coupling.
According to PG&E's report, "During the post-accident investigation, PG&E learned that the 6-inch unmarked non-conforming pipe was packing material used by the manufacturer in shipping gas pipe." (Ex. 2 at 21.)
PG&E had a written procedure in place in September 2006 for the installation of polyethylene pipe. That procedure requires all employees involved in the installation of polyethylene pipe to verify the markings on the pipe, the date the pipe was manufactured, and the pipe manufacturer's name. PG&E employees are to document this information on various forms, and supervisors are to review the repair form documents to ensure accuracy and completeness. The PG&E written procedure also requires that the pipe used for a new installation or for a repair job be pressured tested for a minimum of five minutes, and soap tested for leaks after installation.
The CPSD report states that "the gas crew foreman claims that on September 21, 2006 he had pressure tested the repair at 100 psig for five minutes." (Ex. 1 at 13.) According to the PG&E report, PG&E learned during its investigation that the crew foreman did not properly complete PG&E's "A Form" that was used for the September 2006 repair at 10708 Paiute Way. The A Form did not show that the required pressure test had been performed on all the pipe used in this repair, and "the date recorded for the pipe used did not match what was found in the ground." (Ex. 2 at 21.) PG&E also discovered that the crew "foreman's supervisor failed to follow PG&E's procedures for reviewing the A Form," and may have altered the original A Form. (Ex. 2 at 21-22.)
PG&E's investigation revealed that two supervisors "repeatedly approved improperly completed A Forms and/or improperly added inaccurate information to A Forms." (Ex. 2 at 22.) This investigation led to PG&E's termination of the crew foreman who performed the September 2006 repair at 10708 Paiute Way, and the two supervisors who mishandled the A Forms. According to the PG&E report, these two supervisors are the same supervisors who failed to ensure that PG&E's response on December 24, 2008 was timely.
In February 2009, the CPSD Engineer, Banu Acimis, made a field visit to PG&E's Sacramento M&C field office. In the yard of the field office, the CPSD engineer found two unmarked pieces of polyethylene yellow pipe in a bin marked "Stub Markers Only."11 Since the spool pipe repair used at 10708 Paiute Way also involved unmarked polyethylene pipe, this was brought to the attention of the NTSB, and the unmarked pipe from the Sacramento yard, along with two samples from the Fremont Materials Center, was sent to NTSB for testing.12 The NTSB determined that one of the unmarked pipe samples from the Sacramento yard was not within the specified ASTM D 2513 limits for wall thickness.
3.2.3. 2006 Elk Grove Incident
CPSD's report alleges that the problems that PG&E encountered with respect to the repair at Elk Grove in October 2006, and the subsequent PG&E investigation into the materials used at that site, should have led to the discovery of the September 2006 defective repair at 10708 Paiute Way. The following is a description of the events regarding the Elk Grove repair.
On October 7, 2006, PG&E undertook a repair to a gas main and service line in Elk Grove as a result of a dig-in incident. The pipe that PG&E used for this repair was manufactured for use in providing gas service and had the required markings. The PG&E repair crew also pressure tested the repair pipe before installation. During the course of joining the replaced section to the existing service, the repair piece repeatedly blew out of the Metfit coupling. Different Metfit couplings were used, but the problem reoccurred. Due to this problem, the repair crew completed the repair using a heat fusion technique.
In a belief that the Metfit couplings were defective, PG&E completed its Gas Material Problem Report process for the Metfit couplings from Lot 308420, and removed the fittings with that lot number from further use. PG&E then sent four Metfit couplings, along with pieces of pipe cut from the repair site, to the coupling distributor for analysis. The coupling distributor forwarded the couplings and the pipe pieces to the coupling manufacturer. On November 9, 2006, the coupling manufacturer sent a letter stating that the fittings were manufactured to specification, but the wall thickness of the pipe was out of specification, which explained why the pipe would not stay in the coupling.
CPSD contends that PG&E failed to file a claim with the pipe manufacturer over the pipe that was out of specification. CPSD also contends that PG&E did not excavate any pipe installations between November 2006 and February 2009 in the Sacramento area to investigate whether this out of specification pipe had been used elsewhere. Had PG&E excavated recent installations, CPSD contends that the installation at 10708 Paiute Way "probably would have been discovered." (Ex. 1 at 25.)
PG&E's report contends that the Elk Grove repair and the Gas Material Problem Report associated with that repair were unrelated and different from the September 2006 repair made at 10708 Paiute Way in Rancho Cordova. Unlike the pipe that was used at 10708 Paiute Way, PG&E states that all of the pipe used in the Elk Grove repair was manufactured for use in providing natural gas service, and had all of the required markings. In addition, PG&E states it pressure tested the Elk Grove repair prior to installation.
After learning from the Metfit coupling manufacturer that the repair pipe was out of specification, PG&E personnel searched the yard and all crew trucks for pipe with the same manufacturing date. PG&E states that it measured all of this pipe and determined it to be within specification. The PG&E evaluator concluded that the out of specification pipe was an isolated incident because no other repairs with pipe of a similar wall thickness had failed. Since the piece of pipe installed at Elk Grove had passed a pressure test prior to installation, the evaluator concluded the Elk Grove repair was safe for use and that repair remained in service until 2009 when it was excavated in connection with the Rancho Cordova explosion as described below. PG&E's report contends that the Elk Grove repair did not warrant excavating the 10708 Paiute Way repair, and nothing about the Elk Grove repair "would have reasonably led anyone to discover the unrelated faulty repair job at 10708 Paiute Way." (Ex. 2 at 24.)
After the explosion and fire at 10708 Paiute Way in Rancho Cordova, PG&E conducted an investigation to determine whether PG&E had installed additional non-conforming gas pipe in the Sacramento area. PG&E's investigation covered a three-year period before and after September 21, 2006. PG&E knew that the Rancho Cordova repair used 1 ¼-inch plastic pipe and Metfit couplings, that a portion of the repair pipe did not meet specifications for wall thickness, and that there were no markings on the pipe to identify the date of manufacture, plant code, or other identifying data. Based on what PG&E knew about the materials used in the September 2006 repair at 10708 Paiute Way, PG&E identified 664 locations where the utility used 1 ¼-inch plastic pipe and Metfit couplings.13 Of the 664 locations, 75 were performed in the Sacramento Division. PG&E then leak surveyed all of the locations outside of the Sacramento Division, and excavated 72 of the 75 Sacramento Division locations.14
According to PG&E's report, none of the pipes used at the 72 locations had the date markings of the pipe used in the Elk Grove repair. The 2009 excavation at the Elk Grove site did reveal that the pipe used had a wall thickness below specification, and that PG&E should have removed it from service when the Metfit coupling manufacturer reported in November 2006 that the pipe used during the unsuccessful coupling repair at Elk Grove was out of specification.
3.3. Pre-Stipulation Positions of CPSD, PG&E, and TURN
3.3.1. CPSD Position
CPSD takes the position in its report that PG&E violated various provisions of 49 CFR, and Pub. Util. Code §451.15 These alleged violations are due to the following PG&E actions:
1. The September 21, 2006 installation of a segment of pipe at 10708 Paiute Way in Rancho Cordova did not meet the standards in ASTM D 2513 for use of plastic pipe in supplying natural gas, and PG&E failed to confirm that there were markings on that pipe which would have alerted the installer that the plastic pipe was not authorized for natural gas use.
2. PG&E discovered in November 2006 that it had installed a pipe that did not meet the required plastic pipe specifications for natural gas usage in Elk Grove in October 2006, but PG&E failed to take steps to locate and eliminate hazards from other similar non-conforming pipe that PG&E had already installed. PG&E also failed to take appropriate corrective actions and preventative measures to minimize the risk of similar failures in the future.
3. On December 24, 2008, PG&E failed to take immediate actions to safeguard life and property, as required by PG&E's Work Procedure 6434-01, when an outside hazardous leak was suspected. Also, if PG&E properly secured and placed warning notices at 10708 Paiute Way, the occupants would not have entered the house without being seen.
4. PG&E's emergency response plans, practices, and procedures were inadequate to prevent the December 24, 2008 explosion, and to protect life and property from actual or potential hazards of gas leaks, and PG&E failed to coordinate with the fire department, law enforcement, or other agencies to effectively respond to the emergency.
5. PG&E failed to train the appropriate operating personnel to assure that they are knowledgeable of the emergency procedures and to verify that the training is effective.
6. PG&E did not administer drug and alcohol tests to its employees whose performance either contributed to the Rancho Cordova incident, or whose performance cannot be completely discounted as a contributing factor to the incident.
3.3.2. PG&E Position
PG&E's report acknowledges that the December 24, 2008 explosion and fire in Rancho Cordova "resulted from a series of failures by PG&E employees to follow prescribed procedures, failures for which PG&E takes full responsibility." (Ex. 2 at 1.)
PG&E's Introduction to its report (Exhibit 2) describes three errors that PG&E believes caused or contributed to the Rancho Cordova explosion:
First, in September 2006, a PG&E employee - contrary to PG&E's express work procedures - used a -inch piece of unapproved plastic pipe to complete a repair on the gas main in the front yard of the house. Had the correct pipe been properly installed in accordance with PG&E's procedures, the subsequent leak and explosion would not have occurred. Had the employee followed procedures, he would have recognized that the -inch piece of pipe was not authorized: (a) he would have noted that the pipe did not have the required line marking; and (b) even if he missed that, had he performed the required pressure test on the pipe itself, [the pipe] would have failed because the wall thickness was not sufficient to hold the 100 psig test pressure.
Second, a supervisor failed to properly review the documentation of the repair. Had these PG&E controls been followed, they would have exposed the use of the unapproved pipe and prevented the gas leak and explosion.
Third, on the day of the accident, two PG&E supervisors failed to act to ensure that PG&E's leak investigator and repair crew arrived timely, resulting in an unreasonable delay in PG&E's response to the hazardous leak identified by its representative on the scene. (Ex. 2 at 1-2.)
PG&E "disputes many of CPSD's other allegations, including that PG&E's Gas Emergency Plan was inadequate and did not comply with the applicable regulations." (Ex. 2 at 2.) Volume II of PG&E's report (Exhibit 3) contains testimony that PG&E's Gas Emergency Plan and procedures that were in effect on December 24, 2008 were reasonable, met industry standards, and complied with the applicable law.
PG&E also disputes CPSD's contention that further investigation of the October 2006 Elk Grove repair should have led to the discovery of the September 2006 defective repair at 10708 Paiute Way. PG&E's report contends that unlike the Rancho Cordova repair, the pipe used to repair the Elk Grove leak had markings on it and the pipe was manufactured for use in gas distribution. PG&E also contends that it followed its Gas Material Problem Report process, and correctly concluded that the materials problem was an isolated incident.
PG&E's report also acknowledges that it took the following actions after the Rancho Cordova explosion.
First, as a result of the facts which came to light following PG&E's investigation, PG&E states it terminated "the crew foreman who performed the faulty repair and two supervisors who failed to adhere to PG&E's system of controls by not properly overseeing the repair at Paiute Way and other locations as well as allowing the unreasonable delay in responding to the gas leak." (Ex. 2 at 2.)
Second, PG&E "strengthened its procedures around gas leak investigation and gas odor response." (Ex. 2 at 2.) As a result, the gas service representatives, who are PG&E's first responders to gas odor complaints, now use upgraded or new gas detection devices that display specific gas concentration readings. The gas service representatives have now been trained to investigate both inside and outdoor gas leaks. The revised procedures "include a more precise definition of what constitutes a potentially hazardous situation...," have "clarified [PG&E's] criteria for the evacuation of customers from potentially unsafe buildings and implemented the use of warning tape to prevent entrance to such buildings." 16 (Ex. 2 at 2.) According to PG&E's report, "these improvements give PG&E's employees better tools, training and guidance to protect the public in gas leak situations." (Ex. 2 at 35.)
Third, PG&E has "made improvements to processes to prevent the use of unapproved pipe in the field." (Ex. 2 at 3.) Among the changes are revisions to its material inspection processes for incoming pipe shipments, and issuing guidelines to its field employees to reinforce the requirement to use approved materials.
3.3.3. TURN Position
TURN submitted its testimony on June 17, 2011. TURN's testimony recommended that PG&E be ordered to exclude the claims related to the Rancho Cordova explosion that were paid by PG&E in 2009 and 2010 from the recorded costs in Account 925, which is used to set the test year forecast in PG&E's next rate case. TURN's reason for excluding such costs is because PG&E has admitted that its employees acted unreasonably and failed to follow proper procedures, and therefore ratepayers should not be responsible for such costs in the next test year forecast. TURN points out that: "PG&E does not dispute that its employees were negligent in the 1) faulty repair performed on the pipeline at 10708 Paiute Way in September 2006, and 2) lack of timeliness in responding to the odor complaints at 10708 Paiute Way on December 24, 2008;" that PG&E's testimony acknowledges its employees failed to follow company policies and procedures; and that three of its employees were terminated as a result. (Ex. 16 at 2-3.)
TURN's testimony contends that if the Rancho Cordova 2009 and 2010 claims that were paid are recorded to Account 925, and the 2009 and 2010 recorded costs are used to forecast the next test year revenue requirement, that ratepayers will end up paying higher rates as a result of the Rancho Cordova claims that were paid.
TURN's testimony also recommended that the Commission should address the treatment of expenses for third party claims and settlements to ensure that ratemaking treatment does not undermine the utility's attention to safety. TURN contends that if PG&E settles or directly pays a claim before there is any legal finding of negligence or culpability, those costs are usually included in Account 925 and ratepayers ultimately bear the expense in rates. But if a civil lawsuit is litigated, and there is an adverse judgment against PG&E due to its negligence or culpability, TURN contends that PG&E is less likely to seek future rate recovery based on the judgment amount.
TURN contends that this difference in result may reduce PG&E's attention to public safety because PG&E will be motivated to settle and pay claims, rather than to litigate and perhaps receive a judgment adverse to PG&E. That is, if settlement claims are included in future test year forecasts, PG&E may have less incentive to address underlying problems in its operations, practices, and behavior.
3.4. Summary of the Stipulations
3.4.1. PG&E and CPSD Stipulation
The PG&E and CPSD stipulation consists of "Recitals," a "Stipulation," and a "Stipulation of Facts."17
The Recitals describe six events related to the Rancho Cordova explosion. First, the recital summarizes the events that took place on December 24, 2008 which resulted in the Rancho Cordova explosion and fire. Second, it summarizes the NTSB investigation, the issuance of the NTSB's Pipeline Accident Brief, and the NTSB's conclusion regarding the probable cause of the explosion, and that the delay of 2 hours and 47 minutes to begin response activities was a contributing factor. Third, it summarizes CPSD's Incident Investigation Report, and the violations CPSD alleges that PG&E committed. Fourth, the document summarizes that this OII was issued on November 19, 2010. Fifth, it summarizes that PG&E submitted its testimony and exhibits in response to the OII on February 17, 2011. And sixth, it summarizes that PG&E and CPSD agree that the PG&E and CPSD stipulation "represents a just and reasonable resolution of all claims, allegations and issues in this investigation." (PG&E and CPSD stipulation at 2.)
The "Stipulation" portion of the PG&E and CPSD stipulation at pages 2 to 5 sets forth 12 agreements and admissions to which PG&E and CPSD have agreed.
o PG&E admits that the September 2006 pipe installation at 10708 Paiute Way was not authorized for gas service in violation of 49 CFR §§192.59(a)(1) and 192.13(c).
o PG&E admits that the pipe used at 10708 Paiute Way in September 2006 was not pressure tested in the manner required by law, prior to reinstating gas service, in violation of 49 CFR §192.503(a)(1).
o PG&E admits that the installation of gas pipe in Elk Grove in October 2006 had a wall thickness that was below specifications and in violation of 49 CFR §192.59(a)(1).
o PG&E admits that it failed to follow internal procedures with respect to its October 2006 discovery of the installation of gas pipe with wall thickness below specifications in Elk Grove, in violation of 49 CFR § 192.13(c).
o PG&E admits that its response to the December 24, 2008 telephone call of an outdoor gas leak odor on Paiute Way "was unreasonably delayed and not effective."
o PG&E "admits that not administering drug and alcohol tests after the Rancho Cordova explosion to all employees" on December 24, 2008, "under the circumstances presented, could not be completely discounted as a contributing factor to the accident," and "was in violation of 49 [CFR §§] 199.105(b) and 199.225(a)."
o PG&E's admissions are for this proceeding only, "and are not an admission with respect to any standard of conduct, state of mind, authorization or any other matter not expressly set forth above or related to any other proceeding or matter. "
o Except as set forth above, "PG&E and CPSD continue to contest all material issues."
o PG&E agrees to pay $26 million as a penalty to the State General Fund within 20 days "of the Commission's approval of this stipulation without modification."
o PG&E agrees to pay CPSD's investigation and proceeding costs within 20 days "of the Commission's approval of this stipulation without modification," or within 20 days "of CPSD providing PG&E with an accounting of such costs, whichever of these two events comes later."18
o PG&E agrees "that it will not seek to recover from customers in rates any portion of the penalty or any portion of the funds PG&E pays for CPSD costs."
o PG&E and CPSD agree that the Stipulation of Facts "contains stipulated facts which are sufficient to support the Commission's resolution of this proceeding," and that other than the Stipulation of Facts, "neither PG&E nor CPSD agrees to any other stipulation of fact."
The Stipulation of Facts sets forth a series of facts that PG&E and CPSD have agreed to, many of which have been incorporated into section 3.2 of this decision. The Stipulation of Facts concerns the events which occurred on December 24, 2008 regarding the smell of natural gas on Paiute Way in Rancho Cordova. The Stipulation of Facts also describes the events concerning the September 21, 2006 gas pipe installation at 10708 Paiute Way, and the October 2006 repair that was performed in Elk Grove.
3.4.2. PG&E and TURN Stipulation
After the PG&E and CPSD stipulation was filed, PG&E and TURN entered into a separate stipulation. The PG&E and TURN stipulation provides that any Commission decision adopting the PG&E and CPSD stipulation should contain the following additional ordering paragraph:
For purposes of its test year forecasts in PG&E's next general rate case, PG&E shall exclude from Account 925 any amounts paid for claims or settlements related to the December 24, 2008 natural gas explosion in Rancho Cordova, California.
The PG&E and TURN stipulation also provides that in PG&E's next general rate case, PG&E will provide to TURN (subject to a confidentiality agreement) the total amount of claims and settlements before removing the Rancho Cordova related claims and settlements, as well as the total amount of Rancho Cordova related claims and settlements. The PG&E and TURN stipulation further states that "TURN agrees that a resolution of the OII that adopts the Stipulation and includes the additional ordering paragraph described in Paragraph 1 of this stipulation represents a just and reasonable resolution of all claims, allegations and issues in this investigation."
4 Title 49 of the Code of Federal Regulations is hereafter cited as "49 CFR," and the Code of Federal Regulations is cited as "CFR."
5 Up until the time of the Rancho Cordova explosion, outdoor natural gas leaks were investigated by PG&E leak investigators using a flame ionization detection device to conduct a "leak survey" to locate the outdoor gas leak. Following the Rancho Cordova explosion, gas service representatives are now trained, and have the equipment, to conduct both inside and outside gas leak surveys.
6 According to the Sacramento County Sheriff Department's report, which is Appendix A to CPSD's report, the male occupant at 10712 Paiute Way asked the gas service representative and the leak investigator about evacuating the area.
7 According to PG&E's report, the foreman and fieldperson came from different locations and drove to Paiute Way in separate vehicles.
8 According to PG&E's report and the post-accident interviews, the homeowner of 10708 Paiute Way, along with his daughter and granddaughter, returned to the house at about noon. While waiting for the leak investigator, the gas service representative did not see them arrive, nor did the daughter or granddaughter notice the PG&E vehicle parked nearby when they returned to the residence.
9 At the July 29, 2011 hearing, the CPSD engineer testified that natural gas is explosive within a range of 45,000 to 145,000 parts per million of gas in air. (1 RT 40-41.)
10 There were five PG&E work orders for 10708 Paiute Way from August 17, 2006 to September 21, 2006. According to CPSD's chronology of the repairs at 10708 Paiute Way, PG&E performed two gas leak repairs. PG&E performed the first gas leak repair on September 5, 2006. PG&E discovered a second gas leak problem on or about September 15, 2006, and repaired it on September 21, 2006. (See Ex. 1 at 13.) NTSB concluded that the September 21, 2006 repair was the cause of the Rancho Cordova leak and subsequent explosion.
11 According to CPSD's report, "for a significant time period, the Sacramento Division had a practice of using scrap pieces of pile which were stored in Stub Marker Bins to mark the ends of gas service stubs." (Ex. 1 at 16.)
12 According to the NTSB Report No. 09-021, four pipe sections that had not been placed in service were examined by the NTSB. Two of the four samples were found in the stub marker bin at the Sacramento M&C field office. The other two samples came from the Fremont Materials Yard, and one of the Fremont samples was used to align or stack the rolls of pipe. (Ex. 1, App. 5.) According to the CPSD report, the pipe used to align or stabilize the coils of pipe is referred to in the CPSD report as "packing pipe" or "stack piping." This packing pipe "is made from the same resin and on the same equipment as the plastic pipe approved for gas usage;" is "produced during the start up process before the product achieves the required dimensions;" is produced with no markings in order to make the packaging pipe segments distinguishable from the finished specification pipe product so that they would not be mistakenly installed;" and "is not intended to be used to transport gas because its specifications do not match the ASTM D 2513 standards." (Ex. 1 at 17.) As described in Exhibit 2 at 43 to 46, after the 2008 Rancho Cordova explosion, PG&E took steps to preclude packing pipe from being used for any purpose.
13 A discrepancy appears in PG&E's report in Exhibit 2 at 25 to 26, and in Footnote 117, as to whether 664 or 644 locations were identified.
14 Three of the 75 Sacramento locations were not excavated because PG&E determined from the repair forms that 1-inch pipe had been used at those three locations.
15 Each of the provisions that CPSD alleges that PG&E violated are set forth at 21 to 24 of Exhibit 1, and the key facts that CPSD alleges support the violations are described at 24 to 29 of Exhibit 1.
16 Under PG&E's updated evacuation procedures, the evacuation criteria is as follows: (1) if the gas service representative obtains an initial continuous reading of 1% or greater gas in air, or greater upon entry into the building, the occupants should be immediately evacuated from the structure, and the gas service representative may continue the investigation without 911 assistance; (2) while in the immediate entry area, if the gas service representative obtains a continuous reading between 1% and 2% gas (readings between 1% and 2% are considered safe for qualified PG&E personnel), the gas service representative should shut off the gas supply, and at the gas representative's discretion, contact and wait for the fire department to assist with initiating ventilation before proceeding with an inside investigation; (3) if the gas service representative obtains any continuous readings between 1% and 2% gas in air in a particular room (probably resulting from an accumulation of gas in the room), the gas service representative should shut off the gas supply and call for 911 assistance and wait for the fire department to assist with initiating ventilation before continuing with the investigation; and (4) if the gas service representative obtains a continuous reading of 2% or greater gas in air inside a structure, or five feet or less from the structure, all employees and first responders must evacuate the structure and contact dispatch to request 911 assistance, and employees will wait for the fire department to assist with initiating ventilation. PG&E's customer service representatives, who are the first persons that customers talk to on the telephone when gas odor complaints are called in, have also been trained on advising customers when they should evacuate a building. (Ex. 2 at 38-41.)
17 The Stipulation of Facts is attached to the PG&E and CPSD stipulation as "Attachment A."
18 CPSD's investigation and proceeding costs are estimated by CPSD to be less than one million dollars.