Pending PG&E State Fine Bigger Concern than Federal One

By Published On: April 3, 2014

After being hit with criminal charges for alleged violations of federal pipeline safety laws, Pacific Gas & Electric warned April 1 of the harm it would incur if found guilty and hit with up to $10.8 million in federal penalties. Before the expected criminal charges were filed against PG&E, however, Standard & Poor’s reported it did not expect possible penalties by the federal court to significantly impact the utility and PG&E Corp., the utility’s parent corporation. The ratings agency added that it was more concerned about the impact from the California Public Utilities Commission’s proposed $2.25 billion penalty in response to PG&E’s gas pipe rupture in San Bruno. Standard & Poor’s 'BBB' corporate credit rating for PG&E and its parent remain “unchanged,” it stated March 28. “We maintain a negative outlook on PG&E that reflects the increased probability” of a huge penalty by state regulators, the ratings agency stated. San Bruno Mayor James Ruane said, “The eyes and souls of our city and the entire state are on the [commission] now.” After spending three years investigating the September 2010 explosion of PG&E’s gas line in San Bruno, the U.S. Attorney's Office and Federal Bureau of Investigation in San Francisco alleged in a court filing that PG&E “knowingly and willfully” violated the federal Pipeline Safety Act and regulations between 2003 and 2010. In an April 1 filing, PG&E Corp. and its utility were charged with a dozen felonies. Those allegations involve shoddy record keeping, inadequate pipeline integrity management, and threat identification shortcomings. Each charge could include a maximum $500,000 fine and additional $400,000 assessment, according to the complaint. No individuals were charged with criminal wrongdoing, just the corporate entities. PG&E denied criminal wrongdoing. In an April 2 Securities and Exchange Commission 8K filing, the company said it will plead not guilty during an April 9 arraignment in federal court. After the filing of the criminal complaint in the U.S. District Court for the Northern District of California, the company pointed out that it has made significant pipeline safety enhancements and replacements since the San Bruno pipeline explosion, which killed eight and destroyed more than three dozen homes. “We want all of our customers and their families to know that nothing will distract us from our mission of transforming this 100-plus-year-old system into the safest and most reliable natural gas system in the country," stated Tony Earley, PG&E chief executive officer.

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