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PG&E ordered to pay $1.6 billion penalty for 2010 California pipeline explosion

10 April 2015

Pacific Gas & Electric Co. (PG&E) has been ordered to pay a $1.6 billion penalty – the largest ever levied against a US public utility – for a 2010 explosion in a gas pipeline it operated that killed eight people, injured 58 and destroyed dozens of homes in the San Francisco suburb of San Bruno.

The California Public Utilities Commission voted 4-0 on April 9 to impose the penalty, with the commission president, Michael Picker, abstaining. Picker, however, called for a larger review of problems at PG&E. He intimated that the utility might be too big to deal with its problems, including the rising number state safety citations made against it.

The commission will study the culture of safety and organisational structure of the utility.
The CPUC action requires PG&E to pay $850 million for improvements to its natural gas pipeline system. Another $300 million will go to the state's general treasury, $400 million will be refunded to PG&E gas customers as a one-time credit and $50 million will pay for a variety of safety activities by PUC staff and contractors. The entire $1.6 billion fine would be paid for by the company and shareholders — not by ratepayers.

The Contra Costa Times said the hearing and the contentious process that led up to it brought almost as much scrutiny and criticism of the PUC as it did of PG&E. Federal regulators sharply criticized how the PUC monitored the utility before the blast, and thousands of emails released after the explosion painted a picture of a regulatory agency disturbingly close to a utility that it was supposed to oversee.

The $1.6 billion fine -- which exceeds the $1.45 billion the utility reported in profit in 2014 -- is not the last of PG&E's legal and regulatory troubles. Other fines and penalties have been awarded against it, and there is still a 28-count criminal indictment on federal charges and an investigation by state prosecutors who are probing the email controversy. 

Search warrants served by the state attorney general at the residences of PG&E executives show that criminal investigators were seeking evidence of improper communications, judge shopping, bribery and obstruction of justice involving the utility and the state agency.

Investigators believe that a combination of PG&E's flawed record keeping and shoddy maintenance, coupled with the PUC's lax oversight, were the key factors that caused the explosion.


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