California PUC fines PG&E record $1.4 billion for pipeline violations

The California Public Utilities Commission (CPUC) fined Pacific Gas & Electric Co. a record $1.4 billion for the unsafe operation of its natural gas pipeline system in 2010, including an explosion in San Bruno, Calif., that killed 8 people, injured 66 more, and destroyed 38 homes.

Commission members approved Pres. Michael Picker’s Sept. 2, 2014, penalty proposal in an Apr. 9 decision that will require shareholders of parent PG&E Corp. to bear the fine’s cost, which is $200 million more than what administrative law judges proposed.

It specifically ordered PG&E to spend:

∙ $850 million on gas transmission pipeline safety improvements, most of which will be capital investments that the utility will not add to its rate base and thus will not earn any profit on.

∙ $300 million in a fine to the state’s General Fund.

∙ $400 million in a one-time bill credit spread across PG&E’s gas customers.

∙ About $50 million toward other pipeline safety remedies.

When added to the disallowances already adopted in a prior CPUC decision, the penalties and remedies exceed $2.2 billion, the agency said.

“PG&E failed to uphold the public’s trust,” Picker said as the decision was announced. “The CPUC failed to keep vigilant. Lives were lost. Numerous people were injured. Homes were destroyed. We must do everything we can to ensure that nothing like this happens again.”

In response, PG&E Chief Executive Tony Earley said, “While we obviously need to review the orders in their entirety before making a final decision, we do not expect to appeal today's rulings. I want to be very clear: Our focus is on moving forward to complete the important safety work we set out to do. We’ve made tremendous progress, but we have more to do and we are committed to doing it right.”

US Rep. Jackie Speier (D-Calif.), whose district includes San Bruno, said that while she was glad the commission fined PG&E a record sum, no amount of money will bring back the lives of the 8 people who perished in the 2010 blast.

“But the CPUC took a significant step towards repairing its tarnished record as a lax watchdog and moving toward a culture of accountability and safety,” Speier said on Apr. 9. “PG&E will be forced to invest the majority of the penalty into pipeline safety at the expense of shareholders, not ratepayers.”

Contact Nick Snow at nicks@pennwell.com.

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