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PG&E Working Through Legal Aftershocks of San Bruno Blast

Pacific Gas and Electric Co. (PG&E) executives said Thursday there is no early resolution in sight for the regulatory and criminal legal proceedings facing the utility for the 2010 explosion of one of its natural gas pipelines, which killed eight and devastated a San Bruno, CA, neighborhood (see Daily GPI, Sept. 27, 2010).

CEO Tony Earley said quarterly earnings results "have been challenged by the impact of unrecovered costs in our natural gas business," but PG&E intends to continue pouring hundreds of millions of dollars into upgrading its pipeline maintenance and safety program. "It remains vital to our pipeline safety and reliability enhancement program that state regulators resolve pending gas proceedings in a timely and balanced manner," Earley said.

During an earnings conference call Earley and other PG&E executives indicated that a proposed decision is still not forthcoming in the $2.25 billion penalty proceedings at the California Public Utilities Commission (CPUC) (see Daily GPI, May 7, 2013). More recent federal criminal court charges (see Daily GPI, April 2) could take two years or more to resolve if the case goes to trial in a San Francisco federal district court.

While noting that the utility "continues to make strong progress," Earley said there should be a proposed decision in the CPUC penalty cases by mid-year, and in the meantime, the combination utility is "focused on moving ahead and getting work done; the more we close out all of our gas issues the better off we are."

Earley said there has been "considerable confusion" in the pending federal criminal case over the issue of possible "alternative fines" that could come out of that case. In fact, he said there is no request at this point from the prosecutors for alternative fines. "To do that, we strongly believe that the law would require the prosecutors to go back to the grand jury and seek alternate fines," Earley said.

PG&E General Counsel Hyun Park said prosecutors face "high hurdles" in seeking more fines against the utility. They would have to file a whole new summary indictment and get the grand jury to go along, and if that happened, a trial jury would have to find that beyond a reasonable doubt criminal activity occurred, and further that the criminal activity caused economic harm.

"They also have to convince the court that an alternative fine would not unduly complicate and prolong the sentencing process," Park said. "So they have to jump through a lot of hoops for that."

In response to another question, Earley said PG&E is always willing to settle the case and will "continue to look for opportunities" in that regard in the future, but given the current stage of the still very new indictments, the timing isn't right yet for settlement talks. "As we get through the initial phases of the proceeding we will look for those opportunities," he said.

PG&E reported net income of $227 million (49 cents/share) for the quarter, compared with $239 million (55 cents/share) for the same period last year.

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