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Criminal Probe Opened on PG&E Pipe Rupture

A joint criminal investigation has been launched regarding the Pacific Gas and Electric Co. (PG&E) pipeline rupture last September that resulted in an explosion and fire that killed eight people and wreaked havoc in a San Bruno residential neighborhood about 10 miles south of San Francisco, according to a brief disclosure by PG&E in its June 9 8-K filing to the Securities and Exchange Commission (SEC).

In the filing PG&E said it received notification from the U.S. Justice Department, California Attorney General's Office and the San Mateo County District Attorney's Office that the three prosecuting agencies have formed a task force to investigate the San Bruno incident.

The notification came on the same day that an independent review panel appointed by the California Public Utilities Commission (CPUC) issued a scathing report on the incident, criticizing both the combination utility's pipeline integrity management program and the CPUC's alleged lack of full safety oversight of gas pipelines in the state (see Daily GPI, June 10).

The panel's report was sought by the CPUC within weeks of the explosion last fall (see Daily GPI, Sept. 27, 2010). The five-member body said it believes third-party construction activity could have played a key role in transforming a fabrication flaw in the pipeline from a "stable" to an "unstable" threat, ultimately triggering the incident. The final report follows the panel's interim report last February (see Daily GPI, Feb. 11).

Now the criminal investigative card is being played, and PG&E told the SEC it intends "to cooperate fully with the members of the task force."

Both the holding company, PG&E Corp., and the utility acknowledged to the SEC that their financial condition could be adversely impacted if criminal fines and/or penalties are eventually imposed. It cited the possibility of operating results and cash flows being "materially and adversely affected" if the criminal probe results in punitive actions.

A PG&E spokesperson contacted late Friday would not speculate on that possibility and a spokesperson for the California Attorney General's Office contacted by NGI had nothing to say about the probe.

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