3. Next Steps on the Safety Journey
In today's decision, we expand the scope of this Rulemaking to explicitly include issues addressed in Pub. Util. Code §§ 961 and 963. As set forth above, this Commission and our federal counterparts are already hard at work on many of these issues. We expect that the actions we have taken to date in this proceeding and will take in the future will be informed by the information we gain from the expanded scope of this proceeding. In short, the issues stated in §§ 961 and 963 join our safety improvement proceeding in progress.
3.1. Safety Plans
As set forth above, the overall safety plans of California's natural gas system operators flow from numerous Commission processes in addition to the PHMSA regulations. To provide a comprehensive articulation of these components, e.g., policies, procedures, standards, guidelines, which together form their respective safety plans, we will order all California natural gas system operators to file and serve no later than June 29, 2012, a natural gas system operator safety plan that shows how the operator addresses each element of Pub. Util. Code §§ 961 and 963 for its gas transmission and distribution facilities. The operators' safety plans may reference existing components or include Exhibits or Attachments that cross-reference to other existing utility documentation, but should include a substantive summary of the referenced policy, procedure, or standard that is a component of the safety plan.
In a hierarchy of gas utility documents that communicate its safety program, this gas safety plan is at the top. It conveys the Executive Officer's safety performance expectations, policy principles, and goals/objectives for the gas utility's safety performance. The rationale for developing a gas safety plan is to motivate a gas utility to reflect upon its existing methods and for it to change, to optimize, or to enhance the existing methods, using the elements promulgated by SB 705 and the lessons learned from the San Bruno incident, as appropriate, to ensure that the gas utility has a prudent plan in place to protect public safety and worker safety.
As set forth above, § 961(e) states that this Commission require each gas corporation to "provide opportunities for meaningful, substantial, and ongoing participation by the gas corporation workforce in the development and implementation of the plan, with the objective of developing an industry-wide culture of safety that will minimize accidents, explosions, fires, and dangerous conditions for the protection of the public and the gas corporation workforce." To comply with § 961(e), we will require that each gas corporation make its safety report available to its workforce, and provide for comments and suggestions from the workforce. Gas system operators shall retain a log of the comments and suggestions, including the disposition of the comment or suggestion, with a summary of the rationale for the disposition. The gas system operators shall also inform their employees that any employee who perceives a breach of safety requirements may inform the Commission of the breach, and that the Commission will keep the identity of the employee confidential. Each gas operator shall provide its workforce with the address of the Director of the Commission's Consumer Safety and Protection Division and the designation "Safety Breach Notification from Gas System Operator Employee-Confidentiality Requested" to seek confidential treatment. Other procedures and processes may be considered and implemented as part of the expanded Rulemaking.
3.2. Management Audits
Section 961(e) sets creating a "culture of safety" as an objective of the Commission's regulation of California natural gas systems operators. The history to date of our efforts to improve natural gas system safety lead us to conclude that attaining the objective of a culture of safety will require a review of California's natural gas system operators that goes beyond simple compliance with state and federal regulations. No rules can take the place of corporate leaders who are committed to safety as their first priority and who establish the priorities and values of a corporation, translate those priorities into a safety management system in its daily operations, and, in a routine and habitual basis, instill in the corporation's workers a commitment to safety through personal example and reward systems.
To evaluate whether California's natural gas system operators have established a "culture of safety," we must start with executive management. This Commission requires concrete assurance that the executive leaders of the gas corporations are fully meeting their safety responsibilities. We therefore order a management audit of the gas corporations and will begin with a management audit of PG&E, San Diego Gas & Electric Company (SDG&E), and Southern California Gas Company (SoCalGas). We will review the safety culture at each utility from the highest levels of management on down. We will consider how that culture is expressed in safety budgets, operational requirements, staffing, and priorities. The primary objective of the audit is to assess the effectiveness of the overall management system in achieving the goal of public and employee safety. The management audit will also review how safety is addressed in the gas corporations' executive compensation policies and employee incentive programs. Because we consider management values to be crucial to achieving our essential purpose of safe operations, we intend to be uncompromising in our review of management. We expect these highly compensated individuals to demonstrate with clarity how they go about fulfilling their duty of safe operations to all Californians.
In addition to the management audit, we also order audits of the gas corporations' implementation of revenue requirements authorized in their General Rate Cases. As set forth above, this Commission most directly exercises its oversight responsibilities through comprehensive review of investor-owned utilities budgets and operations in General Rate Cases. Again, we begin with audits of the major gas corporations operating in California. Therefore, we also order financial audits that will include, but not be limited to, the authorized and budgeted safety-related capital investments and operation and maintenance expenditures of PG&E, SDG&E, and SoCalGas for their last two authorized General Rate Case cycles. We are particularly interested in an audited delineation of the revenue requirements previously authorized by the Commission compared with actual expenditures by each utility, as well as each utility's earnings over the audited period. We will evaluate the overall utility revenues and expenses to the extent necessary to determine the categories of income that translate into earnings. We stress that our purpose with this review is to ensure that authorized safety projects have been implemented and, if not, whether procedural or accounting mechanisms need to be instituted.
Our ultimate goal is to review and, where necessary, improve existing systems for safe gas utility operations. Our purpose is not to invite or consider specific capital or expense projects, but rather to inspect the overall management system in place and the resulting management culture and the Commission's oversight role in achieving the obligation of safe operations. We need to be assured that the regulatory and management systems in place effectively prevent or detect and correct safety lapses. These systems have to work to identify and address threats to overall gas system operations. At the same time, we cannot consider these safety plans in a cost vacuum. As we noted in the order initiating this proceeding, California's families and businesses are confronting economic challenges and "we must be certain that each investment in safety that we order provides value to customers." (Order Instituting Rulemaking (OIR) at 12.)
We will begin with a management audit, including the overall management system and the safety culture promulgated at each major gas corporation.
Commission Staff, specifically its CPSD, will select the independent consultants and will manage these audits. The assigned Commissioner and Administrative Law Judge (ALJ) will establish the scope and timing of the management audits.
We note that PG&E has been subject to an audit for gas transmission-related expenditures, so this area will be excluded from the financial audits we order.10 Again, the assigned Commissioner and ALJ will establish the scope and timing of these audits.
3.3. Safety Certification
As described above, we have been requiring an enhanced level of safety certification from PG&E when considering a request to lift operating pressure restrictions. The scope of this OIR should be expanded to consider whether officers and employees of gas operators should be required to comply with a higher ethical standard in their professional representations to the Commission regarding gas system safety.
We may look to the ethical obligations for professional engineers for guidance or other sources11 where professional judgment forms a key component of public safety.
We are interested in considering enhanced obligations for written certifications as well as the oath administered in hearings when issues of public safety are before the Commission.
10 As appropriate, we will incorporate the record established regarding the audit of PG&E in I.12-01-007.
11 For example, the Nuclear Regulatory Commission published its Safety Culture Policy Statement in the Federal Register (76 FR 34773, June 14, 2011) and defined safety culture as core values and behaviors which foster nine definable traits.
