Compliance

As we sharpen our focus on the basics of our business, we recognize the fundamental importance of maintaining compliance with all federal, state and local environmental laws and regulations. Doing so is essential to providing safe and reliable gas and electric service and to meeting our goal of environmental leadership.

In fact, our environmental policy begins with a commitment to “comply fully with the letter and spirit of all applicable environmental laws and regulations.”

Governance and Management Structure

PG&E’s operations are subject to extensive federal, state and local environmental laws and regulations. These requirements relate to a broad range of activities, including preventing the discharge of pollutants; properly transporting, handling, storing and disposing of hazardous wastes; protecting threatened and endangered species; and reporting and reducing carbon dioxide and other greenhouse gas emissions.

In 2011, Pacific Gas and Electric Company named a Vice President of Environmental to oversee our commitment to meet—and strive to exceed—these requirements. The new department consolidates the Utility’s environmental policy, environmental permitting and compliance, land management and remediation functions into one organization. PG&E also established an Environmental Officer Steering Committee to provide oversight on environmental issues across PG&E.

To maintain our focus on high-priority work, PG&E employs a variety of governance practices and processes. Operational controls are critical so that actions to meet the Utility’s environmental compliance obligations are performed on time, on purpose and are repeatable. We are also continuously learning from our experience and integrating these lessons back into our work processes and staff development.

Compliance performance updates are reviewed monthly by all PG&E officers. In addition, an annual environmental compliance summary is presented to the Public Policy Committee of the PG&E Corporation Board of Directors.

PG&E’s gas and electric operations and maintenance departments completed significant work last year to improve the reliability and capacity of our system, and a number of these projects required environmental permits. To support this important aspect of our business, we added personnel to oversee environmental compliance and strengthened our “release to construction” process to better ensure that environmental permits were in place and understood prior to construction.

We have also enhanced our measures of compliance performance—moving to new metrics that are more comprehensive and will help drive further improvements across our business. Starting in 2012, we will be tracking and reporting all written compliance sanctions issued by a regulatory agency, as well as the percentage of inspections performed without a citation.

Environmental Management System

The Utility has an Environmental Management System (EMS) that is modeled after the ISO 14001 environmental management standard. While the Utility has not obtained ISO 14001 certifications for its facilities, PG&E has performed an independent third-party gap analysis relative to the ISO 14001 standard to create an EMS enhancement plan.

This EMS enhancement plan incorporates a comprehensive review of our aspects and impacts by each line of business. In 2012, we will work with each operational line of business to develop specific environmental goals and objectives based on those results—ensuring that we have appropriate management plans in place for areas with the largest potential impacts to the environment. This process will be overseen by the Environmental Officer Steering Committee.

In 2011, we completed a series of process improvements for operating drinking water systems, continued implementation of our San Joaquin Valley Operations and Maintenance Habitat Conservation Plan (HCP) and maintained our focus on environmental permitting and compliance management for large operation, maintenance and construction projects. This included a focus on construction storm water permitting in light of new requirements that went into effect in mid-2010.

In 2011, PG&E hydrostatically tested 163 miles of pipeline running through densely populated areas and we plan to test hundreds of additional miles over the next several years. These tests, where pipe segments are taken out of service and isolated so that water can be inserted and pressurized for extended periods, are intended to verify the safety and reliability of the natural gas transmission system. PG&E’s environmental team is engaged throughout the process to ensure appropriate management of the water used in the testing and, more generally, to minimize or avoid environmental impacts.

We also continued to roll out an enterprise compliance tracking system (ECTS) to clarify roles and responsibilities for environmental tasks at the facility level. We have implemented the system at more than 80 service centers, with the remaining service centers to be completed in 2012, along with major electric transmission facilities.

To further improve performance and minimize risk, we began a new initiative to provide a “one-stop shop” for managing environmental permitting and compliance for construction projects. Currently in the pilot stage, this new project management system will allow all environmental permits to be tracked in one location, allowing for more streamlined permit processing. We are also continuing our efforts to develop programmatic and regionally based regulatory agreements such as HCPs and regional discharge permits for hydrostatic testing of our gas pipelines.

Training

Training continues to be a key element of the Utility’s compliance program. In 2011, we developed and delivered a range of general awareness, work activity and task-specific environmental compliance training to employees throughout our business. These training sessions were delivered through a combination of computer-based, instructor-led and short “tailboard” sessions and covered a range of topics—from cultural resources to hazardous materials management.

In 2011, the Utility provided more than 16,000 training sessions to employees to meet their environmental compliance obligations based on the business operations they perform. Some of this training fulfilled programmatic permit requirements, such as sessions for approximately 1,700 employees on the San Joaquin Valley Operations and Maintenance HCP last year. In addition to these recorded trainings, we provided activity- and resource-specific trainings to our crews at active construction projects.

We also developed numerous job aids on specific environmental requirements for front line supervisors to share with employees in the field.

Verifying and Auditing Our Performance

A robust environmental auditing program is key to ensuring that the Utility is effectively complying with the many environmental laws and regulations relating to our business. The Utility reviews and audits environmental performance in three different ways—self-assessments, comprehensive reviews and internal audits:

  • Self-Assessments: Environmental personnel perform self-assessments on facilities or projects under their responsibility. An assessment evaluates a facility or project on compliance with environmental regulations.
  • Comprehensive Reviews: These reviews are performed by personnel from the Environmental Department who are not responsible for compliance at the facility or project being inspected. A comprehensive review involves evaluating all environmental compliance obligations associated with a facility’s or project’s operations.
  • Internal Audits: The Internal Audit Department conducts systemic and programmatic controls-based audits to independently analyze the effectiveness of the Utility’s environmental compliance management systems. The results of these audits are reported annually to the PG&E Corporation and Utility Audit Committees of the Boards of Directors.

During 2011, we performed a combination of 809 self-assessments, comprehensive reviews and internal audits of various environmental processes, facilities and projects, compared to 716 in 2010.

We conducted 59 audits (system audits and comprehensive facility reviews) in 2011, up from 32 in 2010. This increase is due, in part, to an increase in comprehensive reviews conducted at our Shared Services facilities.

Corrective Actions

We continue to use Lean Six Sigma methodology to improve our programs—clearly defining, streamlining and documenting processes to improve compliance, consistency and effectiveness.

Whenever we receive an NOV, we conduct a root cause analysis, which results in a corrective action plan. We emphasize the importance of completing the root cause analyses and implementing the corrective action plans in a timely manner and track progress through department-specific metrics.

We also review all regulatory findings across our business to look for trends and opportunities for improvement. For example, one root cause analysis indicated a gap in roles and responsibilities for the maintenance of emergency generators, which we promptly resolved.

Operational Performance

PG&E tracks and reports annual environmental compliance performance indicators across a broad spectrum. This section details our performance results for 2011.

Importantly, starting in 2012, we have changed the way we track and report compliance findings from regulatory agencies. In prior years, we tracked the number of Notices of Violation (NOVs) issued by a regulatory agency. Now, we will track all written compliance sanctions issued by a regulatory agency, including NOVs. We will categorize all written sanctions as “Level 1” (those findings that resulted in an actual or potential impact to the environment) and “Level 2” (findings that did not result in an actual or potential impact to the environment).

Also starting in 2012, we have changed the way we track and report the rate of compliance issues. In prior years, we tracked the number of NOVs per 100 inspections by a regulatory agency. Now, we will track the percentage of inspections of our facilities and projects by a regulatory agency that do not result in a written sanction. In 2011, we achieved a rate of 85 percent inspections without a written sanction; our 2012 goal is 90 percent.

Reported Releases and Permit Exceedances

The Utility reported a total of 242 releases in 2011, a decrease from 246 reported in 2010. A release is defined as an unintentional discharge of a regulated substance that exceeds a reporting threshold. The Utility reports releases that both meet and fall below regulatory thresholds in an effort to ensure operational transparency to local agencies. A large percentage of these releases involved small amounts of mineral oil used in transformers or other petroleum-based substances. The Utility maintains emergency response procedures to provide employees and contractors with the tools needed to respond effectively.

PG&E reported one permit exceedance in 2011, the same number as 2010. An exceedance is defined as a discharge in excess of what is allowed by a permit. The exceedance occurred during a discharge to the City of San Jose's sewer system during a gas pipeline hydrotest and involved an exceedance of the permitted mercury limit. The exceedance was reported to the City of San Jose’s Environmental Services Division.

Agency Inspections

A total of 710 agency inspections occurred in 2011, including 542 facility and 168 field project inspections. The number of facility inspections decreased from 819 in 2010. The majority of these inspections were performed by certified Uniform Program Agencies, such as city and county environmental health departments and fire departments. The remainder of the inspections was performed by agencies such as air quality management districts, the California State Lands Commission and the CPUC.

Enforcement Actions—Notices of Violation

The number of NOVs received during 2011 was ten, an increase of two from 2010. Of the ten NOVs, two were self-reported by the Utility to the governing agency. The rate of NOVs per 100 agency inspections in 2011 increased to 1.41 from 0.98 in 2010.

Five NOVs involved air quality regulations, including a missed test on a pipeline liquids storage tank, two errors on equipment specifications listed in permits, equipment operating over its permitted hours and a nuisance allegation from a gas venting operation.

The remaining five citations involved nitrates in drinking water in Hinkley, a timber harvest plan violation, trees trimmed in a riparian area without a permit, an inadequate storm water pollution prevention plan implementation at our Humboldt Bay Generating Station and the previously-mentioned sewer discharge that exceeded permitted levels of mercury.

2011 Enforcement Penalties and Settlements

In 2011, the Utility paid settlements and penalties stemming from five environmental enforcement actions, resulting in monetary penalties totaling $32,378.

Compliance Data 2009 2010 2011
Notices of Violation (NOVs) 21 8 10
Rate of NOVs (per 100 inspections) 3.82 0.981 1.41
Releases/Exceedances 227 247 243
Penalties Paid $3,646 $39,882 $32,378
Agency Inspections 550 819 710
Audits Performed (System Audits and Comprehensive Facility Reviews) 75 32 59
Self-Assessments Performed 663 684 750

1 In 2010, the Utility began tracking government agency inspections that occur on gas and electric transmission capital projects in field locations. This figure is added to the number of agency inspections at facilities to produce a more comprehensive total number of agency inspections.