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PG&E faces $1.4 billion fine for San Bruno blast

03 September 2014

The California Public Utilities Commission (CPUC) has ruled that Pacific Gas & Electric should face a $1.4 billion fine over the pipeline explosion that devastated the town of San Bruno in the suburbs of San Francisco. The explosion killed eight people and destroyed 38 homes on September 19, 2010.

Stock image
Stock image

The penalty is the largest ever levied by the regulatory agency, CPUC officials said on September 2, and must come from shareholders, not ratepayers. Along with previous fines, the total cost will exceed $2 billion, the agency said.

In a series of rulings by two administrative law judges, San Francisco-based PG&E was fined for nearly 3,800 violations of state and federal law, rules, standards and regulations in connection with operation of its gas transmission system, including pipelines. Many of those violations went on for years, adding up to nearly 18.5 million days in violation, the CPUC said.
The fines included $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 other pipeline safety remedies, including $30 million to hire independent auditors to monitor PG&E's Pressure Validation project and other efforts.

The utility said in a statement that it fully accepted that a penalty was appropriate, but did not say if it would accept or appeal the fine. PG&E can appeal the decision within 30 days, or one of CPUC's commissioners can request a review.

Earlier, PG&E was fined $635 million to help pay for its pipeline modernisation program, which also targeted shareholders, not customers. The utility must submit a report within 60 days on progress in implementing the improvements and remedies.

In its Sept. 2 statement, PG&E noted that since the San Bruno tragedy it has made a number of safety improvements, including testing 566 miles of pipeline, replacing 108 miles, installing or upgrading 157 automated valves, and taken other steps to improve safety, such as digitizing 3.8 million paper documents going back more than half a century.

A 2011 investigation by the National Transportation Safety Board concluded that the rupture occurred in a weak weld in a pipeline that PG&E records had shown as being smooth and unwelded. PG&E neglected to shut off natural gas feeding the fire until 95 minutes after the blast, the federal investigators said.

The investigation found PG&E's safety management of its pipelines overall deficient and ineffective. The federal board also faulted what it called the ineffectiveness of California's Public Utilities Commission in regulating the power utility, whose service area covers all but the southern one-third of California.

This year, federal prosecutors separately indicted PG&E on 27 counts alleging the utility violated pipeline-safety requirements. Another federal count alleges that PG&E lied to the National Transportation Safety Board in that agency's investigation.

The company could face additional fines of more than $1 billion if convicted of the federal charges, which are separate from the financial penalties that the state administrative judges weighed. PG&E pleaded not-guilty to the federal counts in August.

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