PG&E Challenges $1.4B Penalty for San Bruno

By Published On: September 4, 2014

Pacific Gas & Electric plans to appeal a $1.4 billion penalty for the San Bruno explosion in September 2010 that the California Public Utilities Commission proposed Sept. 2. The latest penalty on the table, based on nearly 4,000 alleged state and federal legal violations, is $850 million less than what the commission’s Safety & Enforcement Division recommended in July 2013. Tony Earley, PG&E Corp. chief executive officer, admitted a penalty was appropriate but he took issue with the current amount proposed. “[W]e 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,” he stated Sept. 3. San Bruno and consumer advocates welcomed the unprecedented penalty but objected to $950 million of it being diverted to the state’s general fund. “We commend the level of this record-setting penalty and fine—the biggest ever levied by the CPUC—but we remain disappointed that the CPUC chose to direct nearly $1 billion to the State General Fund instead of demanding that more dollars be reinvested back into a safer pipeline system,” said San Bruno Mayor Jim Ruane. Ruane added Sept. 2 that the city has not decided whether to appeal the proposed penalty. The utility estimates the financial pre-tax hit of the latest penalty plus safety upgrades it can’t recover from ratepayers at $4.75 billion, in a Sept. 3 filing to the Securities & Exchange Commission. That figure includes $.3.3 billion in estimated costs that utility shareholders incurred or are to incur for improving the safety of PG&E’s natural gas operations and $650 million that is not tax deductible, according to PG&E. The commission proposed four related decisions on Tuesday, specifying alleged state and federal legal and regulatory violations. Three of the proposals are the culmination of investigations into the pipeline blast, record keeping and pipe classification. The fourth one is the proposed penalty, which is far higher than the state’s previous record-breaking fine. That was a $38 million commission penalty against PG&E for a natural gas explosion on December 24, 2008, in Rancho Cordova. The pending commission decisions this week claim that PG&E committed 3,798 violations of laws and rules governing the gas transmission system over several decades. While the pending penalty directs $950 million of the money to the State’s general fund, the safety division’s proposal last year recommended sending $300 million to state coffers. The latest penalty also includes: -$400 million from utility shareholders, not ratepayers, for pipeline upgrades. -$50 million for remedial pipeline safety measures, including $30 million to the commission’s safety division for ongoing auditing of pipe pressure validation and emergency training for City of San Bruno as well as the “reasonable” legal costs of intervenors.

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