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PG&E Fined $1.6B For San Bruno Pipeline Explosion

California regulators on Thursday ordered record-setting $1.6 billion in penalties for Pacific Gas and Electric Co.’s in the Sept. 9, 2010 failure of its 30-inch diameter natural gas transmission pipeline that caused death and destruction in San Bruno, CA (see Daily GPI, Sept. 13, 2010).

The penalty was one of four actions taken by the California Public Utilities Commission (CPUC), all of which found that PG&E violated various federal and state safety standards before and after the explosion. The five-member CPUC agreed unanimously (4-0) on all of the items, with Commissioner Mike Florio recusing himself from the discussion and votes.

The penalties were imposed not only for the large combination utility's failures regarding the San Bruno pipeline rupture and explosion, but also for shortcomings in its transmission pipeline recordkeeping and failure to maintain proper class designation of pipelines in high-population density areas.

PG&E CEO Tony Earley defended the company's response to San Bruno, contending that the utility is focused on "becoming the safest and most reliable energy provider in America." Earley added that the "lessons of this tragic event will not be forgotten," and the large San Francisco-based utility was not likely to appeal the CPUC decision.

"Our focus is on moving forward to complete the important safety work we set out to do," Earley said. "We've made tremendous progress but we have more to do, and we are committed to doing it right."

Broken into four areas, the $1.6 billion includes $850 million that PG&E will pay for future gas infrastructure improvements tied to transmission pipeline safety, $300 million paid to the state's general fund as a fine, $400 million to be given to PG&E gas customers as a one-time bill credit, and approximately $50 million for PG&E to implement safety remedies identified by the CPUC Safety and Enforcement Division. The settlement was proposed last month by CPUC President Michael Picker (see Daily GPI, March 16).

This action closes a period of turmoil at both PG&E and the CPUC, but there are still ongoing federal and state criminal investigations and state lawmakers are considering action this year to rein in the state regulatory commission following an email scandal that revealed too close a relationship between CPUC officials and the utilities they regulate (see Daily GPI, Sept. 16, 2014).

Florio's role in some of the questionable communications with PG&E in various regulatory matters last year caused him to recuse himself from the vote on Thursday. In a court filing last fall, Florio removed himself from the ongoing San Bruno deliberations joining then CPUC President Michael Peevey, who earlier did the same since PG&E divulged a series of email communications between the two regulators and now fired utility executives (see Daily GPI, Oct. 17, 2014).

Picker said that "PG&E failed to uphold the public's trust, and the CPUC failed to keep vigilant. Our decision commits a significant portion of the shareholder-funded penalty -- one of the biggest utility sanctions in U.S. history -- to making PG&E's gas transmission system as safe as possible."

San Bruno Mayor Jim Ruane, a critic of both PG&E and the CPUC, spoke before the CPUC took its action, supporting the $1.6 billion penalty, but noting the city will push for continued safety reforms. Ruane indicated he would not be satisfied before there are "sweeping and lasting changes" at both the regulatory commission and the utility.

The Utility Reform Network (TURN), another critic of the handling of the aftermath of the pipeline failure, praised the CPUC's action, particularly the provision for directing most of the penalty funds toward "overdue pipeline maintenance and improvements."

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