PG&E Gets Hit by Regulators on Records Management

A horrific natural gas pipeline explosion in San Bruno, California on Sept. 9, 2010, which killed eight and destroyed 38 homes, set Pacific Gas & Electric on a mad scramble to locate records. While discovery of records is often associated with litigation, PG&E's struggles demonstrate the far-reaching authority of many regulators to compel discovery, and in PG&E's case, threaten many millions of dollars in fines and force many millions more in additional testing.

As a result of the explosion of PG&E's pipeline, the California Public Utilities Commission (CPUC) has expressed concerns about the integrity of PG&E's entire 1,805 mile natural gas pipeline network, and on January 3 of this year, the CPUC ordered PG&E to produce records verifying that these gas lines were constructed and have been maintained in a safe manner.

The San Bruno pipeline, like many segments of PG&E's pipelines, was constructed in the 1950s, and the task of locating all records for all its pipelines has set the utility scrambling. PG&E has admitted that many of these records have not been stored in a centralized location, but rather at facilities across the state. Furthermore, the company is not exactly sure what it does and does not have. PG&E has said that it has more than 300 people working 24/7 sifting through old records, and so far the teams have scanned, reviewed and analyzed more than 1.2 million records. Local media have reported that PG&E has even gone as far as renting the San Francisco Cow Palace, site of the 1956 and 1964 Republican National Conventions, to sort through records. Clearly, the "not reasonably accessible" doctrine does not apply to regulatory inquiry.

Even with this herculean effort, on its March 15 deadline, PG&E admitted that it lacked records for a third of its pipelines--or more than 500 miles. The company said that it was still searching. State regulators then accused PG&E of "willful noncompliance" and have threatened the company with fines of $1 million per day, although later these were lowered to $3 million. California State Attorney General Kamela Harris has blasted the CPUC for being too lenient. Even if PG&E can avoid the larger fines, lack of records may still prove extremely costly. The CPUC is considering requiring the utility to conduct a "water pressure test" on all gas lines for which it cannot locate records, at a cost of $150,000 to $500,000 per mile. PG&E claims this additional testing is unnecessary, but unless it can find records relating to the pipeline, it may be forced to test more than 500 miles of lines.

Unfortunately, I do not believe that PG&E's record keeping practices are the exception. Many companies could find themselves in a similar predicament. Records do matter.

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Mark Diamond

Mark Diamond, Founder & CEO of Contoural, Inc., is a regular contributor to Inside Counsel on Litigation Readiness and Records Information Management. You can e-mail...

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