All posts by Carl Wood

Playing Russian Roulette With Our Neighborhoods

Remember this phrase – Condition-Based Maintenance.  CBM.   Crash and Burn Maintenance.  CBM.  

The San Bruno explosion should be a wake up call.  As the inevitable regulatory reviews, recriminations and revisions of history play out in the wake of San Bruno, it is important to keep CBM in mind because it is one of the most nefarious and dangerous lingering effects of the deregulation mania that swept over California and the nation in the last 15 years.  It must be eliminated from utility practice.  Let me explain.

Utility systems provide essential services whose loss even for a moment can be devastating in a very short time. – in the  case of manufacturing processes a matter of milliseconds.  For this reason operation and maintenance of these systems should be rigorously scrutinized and high standards enforced.  This is especially true of gas pipeline systems, because the substance they carry, methane gas under relatively high pressures, can be highly explosive and dangerous.

For decades standard practice in the utility industry was to perform Preventive Maintenance (PM) at relatively short intervals, with regular inspections between preventive maintenance applications.  This provided a high degree of assurance that equipment or material failures would not occur.

Deregulation placed a premium on cost cutting, job cutting and corner cutting, in the name of maximizing profits.  Preventive maintenance was one of the casualties.  It was replaced by CBM, Condition-Based Maintenance.   CBM is a concept that substitutes inspection intervals for maintenance intervals, with actual maintenance occurring only as needed based on the observed condition of the equipment or system.  If system or equipment is close to failure, maintenance or replacement is supposed to be performed “just in time.”  However, as San Bruno demonstrated, the inspections can miss something and place our communities literally at risk of blowing up.  There is no place for CBM in the utility infrastructure for delivering essential services and explosive substances.

The risk of catastrophe is enhanced in California because even though improved inspections can identify potentially hazardous conditions that warrant repair or replacement, the actual maintenance and capital spending by the utilities is set at a level that deliberately cuts safety margins to the edge of failure.  For example, gas utilities in California are currently operating pipes and equipment far beyond their designed life, with schedules for replacement as much as seven years into the future.

The PG&E San Bruno explosion has sparked a renewed sense of urgency in addressing infrastructure safety issues.  There are federal initiatives to improve pipeline safety that pre-dated San Bruno; there are state and federal investigations and there is sure to be a flurry of legislative proposals in the wake of the disaster that focus on improved inspections.  But until the philosophy of utility deregulation and the practice of CBM – push equipment and systems to the brink of failure in the name of cost-cutting – are eliminated, we have to ask: Whose neighborhood will blow up next?  Spin the chamber and pull the trigger.

Carl Wood is the Democratic candidate for the 65th State Assembly district (Riverside and San Bernardino Counties). Wood is a member of the Utility Workers Union of America and former Public Utilities Commissioner.  He has worked as a power plant maintenance electrician.

PG&E diverts ratepayer maintenance funds to profits

The “infamous case” cited by Robert Cruickshank is actually much worse than reported in Thursday’s Chronicle.  Under Pete Wilson’s PUC, PG&E under-spent (pocketed) multimillion dollar maintenance allowances included in rates, including its tree-trimming budget, not once but in three successive triennial rate case cycles.  The unspent ratepayer funds went right to the corporation’s bottom line.

When I was appointed to the PUC by Governor Gray Davis in 1999, the commission was about to vote on a new PG&E rate case.  The administrative law judge who heard the case, disgusted by the company’s performance, drafted a decision reducing the rate request by hundreds of millions of dollars.  The expectation of workers at the utility was that PG&E would respond with hundreds of layoffs rather than accept a reduction in profits.  

I offered an alternate decision that required the company to actually spend the money on tree-trimming (necessary to minimize service interruptions during storms and prevent wildfires), or return it to ratepayers.  My proposal passed 3-2, and over the next 3 years PG&E finally dealt with a decade’s accumulation of untrimmed trees.

The implementation of other reforms included in that decision, such as requiring the utility to track the condition of its electrical distribution system, meet its service appointment deadlines or pay penalties directly to the affected customers, and inspect homes for carbon monoxide was derailed by PG&E’s self-serving bankruptcy filing at the height of the 2000-2001 Energy Crisis.  After Gov. Davis caved in to corporate pressure and appointed anti-consumer commissioners (such as Susan Kennedy, currently Gov. Schwarzenegger’s Chief of Staff), any chance of serious regulatory oversight by the PUC disappeared.

This is another example of what is at stake in this year’s elections.  The new governor will be able immediately to appoint a majority to the PUC.  Whether this powerful commission will answer to consumers or to the industry it is supposed to regulate will turn on the outcome of the vote on November 2.

Utility Workers Union leader Carl Wood is the Democratic candidate in the 65th Assembly District (Riverside and San Bernardino Counties).

A former PUC Commissioner’s take on smart meters

As a former California Public Utilities Commissioner (1999-2004), I would like to offer a few thoughts about smart meters.

“Smart” meters are devices that can remotely report electricity and gas usage readings as often as hourly to utilities without the need for human meter readers.  The justifications offered by proponents are twofold.  First, it is claimed that utilities can control electricity usage by sharply raising rates during hours of high system demand, thus discouraging consumption and reducing the need for additional generation capacity.  Second, customers can supposedly benefit by moving their usage to hours when demand and prices are low.

While most residential customers are skeptical, this analysis has tremendous appeal to energy producers and market-oriented economists and regulators, the same folks who brought us the electrical deregulation catastrophe in 2000-2001.  What is almost never part of the public discussion is the real motivation of smart meter proponents.

Utilities make their money in two ways: they are reimbursed through rates for their reasonably-incurred costs of providing service, such as paying their workers; and they are fully repaid plus  a “reasonable” rate of return for long-term capital investments in their systems (“rate base”).  Only the second adds to corporate profit, the bottom line.  Replacing functioning existing meters, which have already been partially or fully amortized and have a low rate base, with expensive new ones provides a guaranteed stream of profits for decades to come.  

For example, Southern California Gas Company’s new meters, recently approved by the PUC, add over $1 billion to rate base and will bring the shareholders hundreds of millions of dollars in profits over the next 26 years, even if they don’t work as advertised or become technologically obsolete during that time.  As 1000 union jobs are eliminated in Southern California, customers will lose the safety-related services provided by human meter readers, even though there is no net cost savings from the new technology.

Most residential and small business consumers cannot afford the expensive systems that would enable them to automatically control their consumption in response to hourly price changes.  The winners here will be large industrial and commercial consumers and perhaps some very wealthy homeowners.  Even if non-time-of-use rates are maintained as an option for small consumers, they will go up as large consumers escape regulation that apportions utility system costs among classes of consumers.  In fact, this outcome has always been a central goal of deregulation.

Despite opposition from consumer advocates, Schwarzenegger’s PUC has enthusiastically rubber-stamped every smart meter project that has come before it.  Whoever is elected Governor in November will be able immediately to appoint a majority of this powerful commission.  Progressives need to make sure that the issue becomes part of the election debate.

[Full disclosure: I represent Utility Workers Union of America, Local 132 in its opposition to smart gas meters at the PUC; and I am President of the Board of The Utility Reform Network (TURN), which is leading the campaign to disclose the failings of PG&E’s smart meters.  I am also the Democratic candidate in the 65th Assembly District.]

Out of touch in the Inland Empire

In a dramatic illustration of my campaign theme that Republican incumbent assemblyman Paul Cook is out of touch with his district, he was quoted in Monday’s Riverside Press-Enterprise on his reason for voting against Sen. Mark Leno’s SB 1275, which would help homeowners by requiring banks and mortgage companies to better communicate with delinquent borrowers about modification options before beginning the foreclosure process.  Said Cook, “I needed a good reason to vote for it and I just didn’t see it.”

Well, Mr. Cook, let me suggest a few good reasons.  Our Assembly District 65, in the heart of the Inland Empire, has the highest unemployment rate of any large metropolitan area in California (15.1%, second nationally only to metro Detroit).  We are Ground Zero for the foreclosure crisis; when the New York Times did a series on foreclosures, they came to Moreno Valley for their interviews.  

Widespread foreclosures lead to failing neighborhoods, which in turn burden already underfunded schools.  Many schools in the 65th lag behind the rest of the state, mortgaging (no pun intended) the futures of our area’s youth.

Cook’s response to these multiple crises in his district?  Not a single bill that addresses the economic crisis or relief for its victims.  Although he proclaims his passion for recognizing the service of military veterans, his legislative record contains nothing that addresses the needs of the thousands of veterans in the 65th District facing unemployment, foreclosure and possible homelessness.

The 65th AD is poised to turn Democratic.  From a 23% Cook win in 2006, the Republican margin was cut to 6.5% when I ran against him in 2008.  If ever there was an area needing the solutions that only progressive Democrats can provide, it is the Inland Empire in 2010.

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