The Fine Print: How Big Companies Use "Plain English" to Rob You Blind (20 page)

Under the 2002 law, only 44 percent of liquid fuel pipelines and just 7 percent of natural gas pipelines are subject to safety inspections. “We thought it was a good start, but that it was just a start, and the safety regulations would be expanded and increased over time. We are still trying to achieve that goal,” said Weimer, executive director of Pipeline Safety Trust.

The 2002 law requires that residents be told if they live near a transmission pipeline, but the notices I inspected were nothing more than inserts in utility bills, which most people toss out unread. Aside from boilerplate copy advising anyone with a backhoe to call 811 to locate pipelines before digging, the supposed warning notices read more like promotional brochures for pipeline safety.

The actual purpose of the pamphlets—to alert people who live near a high-pressure pipeline of its presence—typically gets a single paragraph deep in the pamphlet using that ill-defined term mentioned earlier, “high consequence area.” Words like
death
,
blast
and
burn
do not appear, nor does any advice on what to do in case of explosion. None of the brochures I reviewed mentioned the size, age, condition or location of any pipeline.

Even when schoolchildren are at risk, the pipeline industry and the government put obfuscation ahead of safety warnings. One colorful six-page pamphlet sent to schools by the pipeline industry states on its fifth page that “you are receiving this information because pipeline infrastructure is located near schools or facilities in your district.” There is no useful information in the brochure about where pipelines are located, what precautions or plans are appropriate, or anything else that might help school officials or parents. This utterly useless document comes from the Pipeline Association for Public Awareness, an industry group, with official approval from the federal Office of Pipeline Safety and its Pipeline and Hazardous Materials Safety Administration.

The federal government has done no studies or surveys or convened any focus groups to see if these pamphlets are effective. But the proof that they do not work is this: Mayor Ruane said San Bruno fire and police officials did not even know of the existence of the pipeline that exploded in 2010. The mayor said a second pipeline came to the city’s attention only because of plans to build a structure—a tot lot, a park for small children—directly atop that pipeline.

When the next pipeline disaster occurs, how well prepared will pipeline companies be? Paul Blackburn ran Plains Justice, a public interest law firm that was in Vermillion, South Dakota, on the border with Nebraska. Earlier in his career Blackburn worked as an energy regulatory lawyer in Washington. Because he is engaged in several public interest actions aimed at dealing with damage from pipeline ruptures and efforts to make a proposed new pipeline from Canada into the United States safer, he filed Freedom of Information Act requests for pipeline company safety planning.

“I expected detailed emergency response and evacuation plans, including emergency contact numbers and an assessment of firefighting resources,” Blackburn said. Instead, “I found there was almost nothing in the file. It was pathetic.” Blackburn said the files show that “the government basically rubber stamps industry documents” with little to no evidence that it questioned, much less challenged, anything the companies proposed.

Utility workers across the country have told me that customers are being put at risk by cost-cutting that they say began with the deregulation of gas distribution. “All the gas utility companies are basically playing the odds,” said Charlie D. Rittenhouse, president of the Utility Workers Union of America, Local 98 in West Virginia. “They’ve cut the workforces and cut the workforces and cut the workforces while at the same time keeping the CEOs’ and top executives’ wages going up and up and up. A major concern for our group and many other groups we deal with is that there’s not enough people there to do the work.”

Rittenhouse and others say their greatest concern is with the rebuilding of compressor stations serving pipelines laid three or more decades ago. “The compressor stations have been refitted to handle higher pressure and higher volumes of gas,” Rittenhouse said, “so you would think that means more and more careful supervision, but just the opposite…has happened. Now in compressor stations, fewer people are utilized and more reliance is put on computers. Fortunately we have not had a major disaster at a large compressor station for some time, but when we do, I believe it will make the pipeline explosions look like small fireworks.

“Fact is, pipeline safety and regulation for compressor-station manning has not kept up with the times; the companies are pretty well allowed to handle the manning any way they see fit,” he said.

Rittenhouse recalled what a federal Occupational Safety and Health Administration official once told a gathering of union members concerned about the risk of a compressor blowing up. “Once there is a major
disaster,” the OSHA official said, “then there will be all kinds of regulations regarding compressor stations. Until then, as the companies tell us, we should not worry because it hasn’t happened yet.”

Prior to protests from parents and the prosecutor that followed the Bellingham disaster, the federal Office of Pipeline Safety was so badly run that it did not even have maps locating pipelines. In 2006, four years after the very limited safety inspection bill became law, the
Houston Chronicle
showed that some pipelines did not even appear on official maps for East Texas and Louisiana. Other pipelines noted on the map were far from their actual locations.

The bottom line is this: America’s 2.4-million-mile network of pipelines is aging and corroding. About 300,000 of these pipeline miles are high-pressure natural-gas transmission lines like the ones that blew up in New Mexico and California. Another 200,000 miles of pipelines move diesel, jet fuel and gasoline, like the one that ruptured in Bellingham. While experience so far has been that pipeline explosions killing more than one or two people are rare, past performance is no indicator of future outcomes.

There’s a final irony. The pipeline monopolies whose prices are regulated by the government get to include in their rates the cost of insurance to pay for losses from pipeline disasters. As pipelines age and as more people live near pipelines, the risk of disaster increases—and so does the cost of insurance. But because pipelines are monopolies, they get to add the higher insurance costs to the rates they charge. So you get to pay more even as you are put in greater danger.

11.
Connie Barr figured
three dozen people might come to the Fel- ton firehouse in 2002 to learn about the stealthy takeover of their water supply by a giant German corporation. When a hard rain started falling, Barr expected half the seats to go empty.

Instead, the room quickly overflowed with people. So many came that the fire trucks had to be moved into the street, allowing an audience of 120 people to crowd into the empty bays. Several dozen latecomers stood outside, intent on hearing even as the cold night rain pelted them.

The story of that night, and what happened over the next four years in Felton, may well be repeated in your town. Water companies are doing their best to win ownership or control of reliable, low-cost municipal and community water systems. They know that, over time, they can make big profits by jacking up water rates.

We tend to take water for granted. It flows from the tap instantly, pure enough to drink and cheap enough to water our lawns. About 275 million Americans get their water from piped systems; some 240 million of those are served by nonprofit operations. Water provided by cities and other nonprofit systems typically costs less than half a penny per gallon. Even in Atlanta, which has perhaps the costliest municipal water in America, the price runs only about a penny a gallon.

Corporate water costs more. A 2006 study for the American Water Works Association (AWWA) found that, in New York State, the six
largest water companies charge 25 percent higher rates than nearby municipal systems. The association represents mostly municipal water systems and the companies that sell them equipment and services.

In Wisconsin, corporate water costs on average 49 percent more than municipal water, according to Wisconsin Public Utility Commission data.

In California, where about 140 corporate water suppliers serve 6 million people (a sixth of the state population), corporate water, according to a 2007 study by the national consulting firm Black and Veatch, cost on average 20 percent more than public water. Three years later, American Water filed to raise rates in seven California systems it operates by 31 percent, at a time when wages were flat to falling and inflation the lowest in living memory.

How high can it go? In the lettuce-growing town of Chualar, an hour’s drive from Felton in neighboring Monterey County, some people saw their water bills jump 500 percent after American Water bought their system in 2002.

GOING PRIVATE

Monopolists protect their exclusive franchises with targeted campaign contributions, seeking to acquire the allegiance of elected officials, who then put in place rules that mean ever higher prices for water. But that is not all. These monopolists can get laws changed to make it harder to buy them out (that would let people get water at lower prices).

Typically, these monopolists don’t talk about the profits they plan to make when they seek to acquire publicly owned water systems. They talk about easing tax burdens, staying mum about rate hikes. Sometimes they appeal to the beleaguered taxpayer, proffering a big cash payment. To local governments facing a budget squeeze, that big cash payment looks like a great deal. But compared to the stream of costs that will follow, it is probably a mirage. The corporation will recover that upfront payment through higher rates; it’s no gift to the community, but an advance that must be paid back—along with what studies show is typically an 11 percent profit.

Corporate owners employ more expensive executives than municipal water systems, adding to the pressure to hike water rates. The corporation pays dividends to its shareholders, unlike municipal systems that can return any surplus to the community through lower rates or by reducing
local tax burdens. If a holding company sits atop the water utility, which is the case with all of the big operators, the corporate income taxes embedded in water rates may never make their way to government. And the holding company may borrow most of its capital, making its real rate of return to shareholders double or triple the officially authorized rate of return.

Increasing the cost of all the piped water Americans use by just a penny a gallon taps an extra $96 billion from consumer pockets per year. That penny would increase the total price that households would pay for piped water from about a billion dollars a week to nearly three billion.

In Felton, California, people fought to avoid having their pockets drained by a distant water corporation and to regain control of a water system that, more than a century earlier, the town fathers built as a perpetual benefit for the community.

The Feltonians succeeded, despite a 1992 law the state legislature passed at the behest of corporate utilities to insulate the companies from municipal takeovers. Before 1992, California law assumed that public takeovers of water utilities were in the public interest; but the new law, sponsored by an association of corporate water providers, required that communities trying to buy out a corporate utility prove the action was a necessity.

That 1992 law was just one brick in a nationwide wall that monopoly corporations are building with their campaign contributions. What the people of Felton and some other California towns did to fight back provides a template for stopping price-gouging monopolists and their allies in government.

In addition to their corporate opponents, the people of Felton faced open hostility from the California Public Utilities Commission. In the sixties and seventies, corporate utilities regarded CPUC as the toughest regulator of its kind in the nation, a guardian of public interests that wrought many reforms, including addressing phantom taxes related to water billing. By the dawn of the new millennium, however, the good reputation of the commission had deteriorated.

After passage of the 1978 property tax limit known as Proposition 13, political power in California concentrated in Sacramento as taxing power and responsibility shifted to the state from elected county and municipal officials. By the time the Felton fight began, two of the five utility commissioners came from utilities, and staff members of a third commissioner openly mocked consumers for challenging what utility companies
wanted. Hardly anyone knew this, however, because only one major newspaper, the
San Francisco Chronicle
, retained a journalist who frequently covered utility issues.

Yet the prospect of costly water in Felton ignited unexpected interest. Felton is an idyllic hamlet, with a covered wooden bridge and a small-gauge steam railroad attracting tourists and picnickers. The business district parallels the San Lorenzo River, which flows beneath steeply raked mountainsides studded with giant redwood trees that drink from the morning fog. Nestled among the redwoods are a few hundred cottages and some sprawling modern homes that overlook a two-lane road that wends through the coastal mountains until the asphalt, along with the river, flows into the seaside resort of Santa Cruz, six miles away.

Felton is home to some five thousand people, an amalgam of Silicon Valley commuters, entrepreneurs, artists and small-business owners like Connie Barr. She arrived as a widow escaping crowded Southern California and kept busy for a decade running a children’s clothing shop. I know Felton well. For a year, starting in 1967, as a teenager I earned the minimum wage reporting for the weekly
Valley Press
. Later six of my children attended school there.