Report 99117.1 Summary - May 1999

Public Utilities Commission:

Did Not Effectively Manage Its Contract for Investigating San Francisco's December 1998 Power Failure

In contracting with a consultant to investigate the massive power failure that struck the San Francisco Bay Area on December 8, 1998, the California Public Utilities Commission (commission) inadequately monitored its consultant's contract and failed to ensure that the consultant's expenditures were reasonable and remained within budgeted amounts. The electrical power outage, caused by a system disturbance at a Pacific Gas and Electric Company (PG & E) substation, left more than one million people in the San Francisco Bay Area without electricity for up to 7.5 hours. Because it did not have adequate technical expertise to explore the causes of the outage and to recommend methods for preventing a recurrence, the commission awarded a $400,000 contract to an outside consulting firm (consultant) that would conduct the investigation. The contract required the consultant to draw expert conclusions and prepare a report suitable for litigation purposes related to the power failure.

Even though contracting with the consultant is reasonable, the commission is unable to demonstrate that it evaluated the qualifications of the consultant's subcontractors. The commission also did not make certain that the consultant's report contained sufficient detail and analysis to support all of the report's conclusions. For example, the report has invited criticism because it concludes that "PG & E has an error prone work culture that tends to bypass procedures and work practice requirements." However, the report does not specify the methodology or detailed analysis that the consultant used to arrive at this conclusion. The commission has agreed to pay an additional amount so that the consultant, which should have submitted a complete analysis, can provide further support for the report's conclusions. Additionally, the commission based the contract amount on broad estimates that it cannot substantiate, and it has not required the consultant to submit invoices so that the commission can ensure that expenditures for the investigation have been appropriate and within the contract's budgeted amounts.