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Con Edison Agrees to $153M Settlement For Fatal East Harlem NatGas Explosion

In the largest natural gas safety-related settlement in New York history, Consolidated Edison agreed Thursday to pay $153 million for damages related to an explosion in 2014 that killed eight people and destroyed two buildings.

The agreement, approved Thursday by the New York State Public Service Commission (PSC), stems from an investigation into a gas leak in March 2014 that rocked an East Harlem area of New York City. In addition to the fatalities, 50 people were injured.

"The East Harlem explosion was devastating and entirely avoidable," Gov. Andrew M. Cuomo said. "This landmark action is a pointed reminder to the energy companies of their awesome responsibility to maintain safety first and foremost. This administration will continue to hold utilities accountable to the highest standards, and enforce the requirement that they place life and safety before any other consideration."

The New York Department of Public Service (DPS) last year said Con Edison had violated state safety regulations that led up to and followed the natural gas explosion by failing to properly qualify employees and contractors to perform plastic gas pipe fusions and supervise their work, inadequate recordkeeping, and failing to install valves capable of shutting down the gas system during emergencies.

The National Transportation Safety Board initially had foundunusually high concentrations of gas following the explosion. The follow-up DPS investigation, considered more extensive, also found that Con Edison had failed to adhere to nearly a dozen state gas safety requirements, many of which it said contributed to the explosion. The NTSB did not have authority to issue financial penalties against Con Edison.

The settlement includes a fund of more than $25 million designated to benefit Con Edison gas customers. The PSC will determine how the fund is used after Con Edison conducts outreach to gas customers to develop ideas for the best use of the funds. The rest of the settlement would cover costs related to leak response-related activities, gas safety public education programs, emergency payments to residents and businesses immediately following the incident, and expenses related to remediating leak-prone gas pipes.

As a result of the settlement, Con Edison's shareholders will pay for the inspection and repair of gas pipes improperly installed in the utility's natural gas distribution system. The company also agreed to implement measures to improve the safety of its distribution system by reducing the time needed to complete an emergency shut-down of parts of the system. The company also agreed to work with New York City to identify roadway depressions that could indicate problems below ground with infrastructure.

According to PSC, the utility already has undertaken additional customer gas leak surveys; an enhanced pipe-fusing process; improved worker qualifications and inspections; and leak-prone pipe replacements. In addition, Con Edison is working with city agencies on other measures and has launched a pilot program to evaluate residential methane detectors.

"The deaths and injuries caused by the East Harlem incident devastated families and the community," said PSC Chair Audrey Zibelman. "Our stringent gas safety regulations -- among the strictest in the nation -- ensure that the infrastructure, the underground pipes that transport and deliver gas to consumers, are properly maintained and secured. Utilities face stiff regulatory action if they fail to adhere to the safety regulations, and I strongly believe this unprecedented settlement amount represents an outstanding financial gain for Con Edison's gas customers."

Con Edison agreed not to seek reimbursement from its customers for the more than $125.5 million spent on gas leak response-related activities since the East Harlem explosion. The settlement does not resolve outstanding civil actions brought by individuals against the utility related to the explosion.

Reforms Cuomo signed into law in 2013 strengthened PSC's enforcement mechanisms to ensure that major electric and gas utility companies are held accountable to the safety of New Yorkers. The law also required that settlement costs be the responsibility of utility shareholders, ensuring the monies come from a corporation instead of utility customers.

In addition, a recent Con Edison rate agreement provides the PSC with the ability to potentially lower the company's gas revenues by $200 million over three years if key performance indicators are not met. As well, the rate agreement includes other financial consequences for each instance of noncompliance with PSC gas safety regulations.

Con Edison provides gas service to 1.1 million customers in Manhattan, the Bronx, parts of Queens and Westchester County, NY. It also provides electric service to 3.4 million customers in New York City and Westchester County, and it operates a steam distribution system that serves 1,700 customers in parts of Manhattan.

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