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Utility Fined $1.4B in CA Disaster

Friday, September 5, 2014

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The California Public Utilities Commission has proposed a $1.4 billion fine—its largest ever—against Pacific Gas & Electric for thousands of state and federal pipeline violations and a catastrophic explosion.

In four decisions issued Tuesday (Sept. 2) by two Administrative Law Judges, the commission totaled the number of violations by PG&E across its vast network and unloaded the 10-figure fine.

The judges "found that in total, PG&E committed 3,798 violations of state and federal laws, rules, standards, or regulations in connection with the operations and practices of its gas transmission system pipeline," the commission announced.

San Bruno
Photos: NTSB

More than 100 homes and businesses were damaged or destroyed in the 2010 San Bruno, CA, explosion and blaze that followed.

"Many of these violations continued for several years, resulting in a total of 18,447,803 days in violation."

The violations include those that led to the massive September 2010 explosion and fire that killed eight people and leveled a neighborhood in San Bruno, CA.

PG&E is California's largest utility and one of the largest in the United States.

$3B+ Tab

PG&E now owes over $2 billion in penalties just to CPUC, including $635 million that the commission previously ruled must come from shareholders for expenditures to improve the safe operation of natural gas pipelines.

In addition, a federal grand jury indicted the utility in July on charges of "knowingly and willfully" obstructing the National Transportation Safety Board's investigation of the San Bruno disaster and additional violations of the Natural Gas Pipeline Safety Act. The criminal indictment carries a potential fine of more than $1.1 billion.

The Safety Board's investigation eventually resulted in a 153-page report that detailed system-wide problems in PG&E's pipeline design, installation, inspection, monitoring and emergency response. Investigators called the utility's pipeline integrity management program "deficient and ineffective."

San Bruno

Firefighting operations featuring hundreds of personnel lasted for two days after the explosion.

PG&E has apologized for the disaster but denied deliberate wrongdoing.

New Penalty

The CPUC's fine has been the subject of intense speculation; numerous public officials had accused the commission of being too cozy to the utility it was charged with overseeing.

However, the commission emphasized that the rulings did not reflect "input or comment" by any of the CPUC commissioners, "nor did they have an opportunity to review the decisions before their release today."

The new penalty comprises:

  • $950 million to be paid to California's General Fund;
  • $400 million in pipeline improvements that cannot be recovered from customers; and
  • $50 million to implement over 75 remedies to enhance pipeline safety.

The pipeline safety money includes $30 million for CPUC's Safety and Enforcement Division to hire independent auditors to audit PG&E's Pressure Validation project and Project Mariner implementation. The $30 million will also support:

  • Training for emergencies (City of San Bruno);
  • Establishing a central database to track location and use of salvaged pipe in PG&E's gas transmission pipeline system; and
  • "Reasonably incurred litigation expenses of intervenors."

Details and Deadlines

The penalties "must be paid by PG&E's shareholders and are not recoverable from PG&E's customers," the commission said.

San Bruno

Nearly a year after the disaster, the NTSB issued a 153-page report highly critical of PG&E.

PG&E will have 60 days to submit a report with a progress status and timeframe for completing each remedy ordered in the decisions.

The decisions become final in 30 calendar days, unless a party to the case or a commissioner requests a review.

The full decisions are available at the following links:

The second largest safety related penalty ever levied by CPUC was also to PG&E: $38 million resulting from a 2008 natural- gas explosion in Rancho Cordova, CA.

PG&E Responds

In a lengthy statement Tuesday, apparently issued before the fine was announced, PG&E detailed the upgrades and measures it had made since the San Bruno disaster. The statement appealed for a "reasonable and proportionate" penalty.

“We are accountable and fully accept that a penalty of some kind is appropriate," said
PG&E Corporation Chairman, CEO and President Tony Earley.

"However, we have respectfully asked that the Commission ensure that the penalty is reasonable and proportionate and takes into consideration the company's investments and actions to promote safety. Moreover, we believe any penalty should directly benefit public safety."

Since the explosion, Earley said, "We have made tremendous progress, but we’re not done.

"We have more work to do, and we won’t rest until it’s done and done right.”


Tagged categories: Explosions; Fatalities; Government; Health & Safety; Health and safety; Laws and litigation; North America; Oil and Gas; Pipelines; Regulations; Utilities

Comment from Bob Bellow, (9/5/2014, 7:31 AM)

So if I calculated right this PUC was in violation for 51,038.92 years???

Comment from william cash-robertson, (9/5/2014, 8:15 AM)

Those are "violation days". Under the law, each day is a separate violation. And each of the 3798 violations ran for various numbers of days, so the math works out to 18,447,803 "days".

Comment from Ron Cros, (9/8/2014, 11:29 AM)

All PG&E customers can look forward to a rate increase to cover the cost for this!!!

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