A March 12, 2014 natural gas explosion at latest count has taken seven lives and injured scores of other persons. The blast also demolished several structures.
In exchange for being allowed to use the public streets and exercise eminent domain over private property, a utility has the common law duty to provide safe and adequate service to all. A breach of the safe service duty of the utility may have been the cause or contributing factor to this tragic event.
The Public Service Commission is given the power and duty by the legislature to oversee the utilities in performance of their public service duties. Under PSC regulations Con Edison will be required to make prompt reports, and the incident will be investigated by the Public Service Commission, and it will eventually issue a report. This may take time. For example, last month, the PSC issued a report involving a fatal gas explosion that occurred three years earlier in NYSEG’s service territory, and issued new directives to NYSEG and the other gas companies intended to reduce the likelihood of similar events, through better education regarding gas leak reporting, requiring recording of gas leak calls, and other measures.
In some situations involving fatalities and alleged breach of the safe and adequate service requirements, the PSC conducts a public investigation in a public proceeding, which is open to intervenors who will contribute to development of the record and recommendations for future action. Such cases have led to improvement of regulatory standards and practices, such as the requirements for stray voltage testing in the Jodie Lane case. In that case, the Commission stated:
“Over the past 10 to 15 years, we and other regulatory commissions across the nation have moved from traditional one-year litigated rate cases to multi-year performance-based rate plans. The purpose of these plans is to allow for rate stability while allowing the utilities greater flexibility in managing their operations. Staff’s investigation into this matter suggests that the utilities may not have been placing enough attention and emphasis on safety matters. For example, we were surprised and disappointed to learn that three of the major electric utilities have conducted no stray voltage testing and have no plans to do so. **** The utilities are responsible for ensuring that they are maximizing the safety of their electric systems. The fact that some utilities have done nothing regarding stray voltage suggests that the focus of utility management may need realignment.”
In the not too distant past, issues have been raised about the adequacy of the PSC’s gas leak repair rules and oversight of gas safety. Officials Say Proposed Rules For Gas Leaks Are Too Lax.
Also, several years ago, the Inspector General raised questions as to the sufficiency and integrity of utility and PSC investigations. It would be the best practice for the PSC to conduct an open investigation of this event to determine the root cause and contributing factors, and to reexamine rules, practices and oversight to reduce the chance of future catastrophes.
The PSC style of regulation has been to set rate caps and guarantee revenues for utilities for multiyear periods to avoid more frequent review of rates and practices, and to let utilities keep savings achieved through cost-cutting. These multi year rate plans thus give utilities strong incentives to cut maintenance and other costs. To address the risk that safety and customer service might be sacrificed for savings that redound to the utility’s benefit, performance metrics are established in the rate plans, typically established in settlements, to measure certain limited aspects of customer service and safety, with adverse financial consequences if standards are not met. For example, there are standards for reducing the number of leaks, stray voltage detection, and gradual replacement of leak prone gas pipe. The performance standards and amount of financial sanctions are agreed upon by the companies and the regulator. The possibility that the performance standards are not sufficient and easily met, or that the sanctions are too weak when standards are not met, is discussed in 2013 comments of the Utility Project and AARP to the Moreland Commission on utilities. See CONSUMER GROUPS ASK NY LEADERS FOR BETTER UTILITY OVERSIGHT, STRONGER CONSUMER PROTECTIONS, AND MORE RESOURCES FOR INDEPENDENT UTILITY CONSUMER ADVOCACY.
Nikita Stewart, Michael Winerip and N. R. Kleinfield, In 2 East Harlem Buildings Leveled by Explosion, Lives Entwined as in Bygone Era, N.Y. Times March 13, 2014.
Jim Polson and Mark Chediak, NTSB Finds Gas Pipe Leak Near Fatal New York Building Blast, Bloomberg News, March 19, 2014.