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Settlement: $26M Fines for 2008 PG&E Pipeline Explosion

A regulatory judge will decide the next moves in a case in which the utility has admitted to safety violations..

The California Public Utilities Commission (CPUC) staff has hammered out a proposed settlement with Pacific Gas and Electric Co. (PG&E) that includes $26 million in fines for a 2008 Christmas Eve residential gas pipeline leak and explosion east of Sacramento that resulted in one death and five injuries.

If adopted by the five-member CPUC, this would constitute the largest safety-related fine ever assessed by the state regulatory body. It comes within weeks of an independent review panel's report that was highly critical of PG&E and the CPUC for operating and regulatory practices prior to last September's gas pipeline explosion in San Bruno, CA (see Daily GPI, June 10).

Separately on Monday PG&E turned over more 16,000 internal documents to state regulators dating back several decades. Critics contend the additional documents revealed that the utility's pipeline record keeping was flawed, prompting reports about a former employee's warning in the early 1990s that the lack of documentation could cause future problems for PG&E. For its part, the utility acknowledged that its past documentation was incomplete.

PG&E spokesperson Brian Swanson told NGI Tuesday that the utility continues to "put on a full-court press to gather records both to support our ongoing improvement efforts and to respond to the CPUC's requests." Swanson called Monday's filing "another step forward."

Regarding the 2008 distribution pipeline tragedy, Swanson said the utility was "deeply sorry" that the incident happened, and that during the subsequent investigation, PG&E "learned valuable lessons" about its operation, identifying "several areas where we could improve."

Last year the CPUC voted to open a formal penalty phase investigation of PG&E's Dec. 24, 2008 incident in Rancho Cordova, CA, during which an administrative law judge would hear testimony related to the explosion from the regulatory panel's safety investigators, PG&E and others. The CPUC Consumer Protection and Safety Division (CPSD) has come up with the proposed settlement, which it filed Monday as a stipulation to the regulatory panel.

Under the filing by the CPSD, the CPUC is to consider penalizing PG&E $26 million in shareholder funds for the gas leak and explosion, a CPUC spokesperson said. "In the stipulation, PG&E admits that it violated safety laws in several respects in connection with the Rancho Cordova explosion," the spokesperson said.

As part of the deal, PG&E will reimburse CPSD's investigation and proceeding costs, and the combination utility is specifically barred from seeking to recover any portion of the fine or CPSD costs in its retail utility rates.

Under a stipulated resolution agreed to by the regulatory staff division and PG&E, the fine is to be paid to the state general fund, and the San Francisco-based utility admits violations of pipeline safety regulations:

CPSD investigated the 2008 explosion along with the federal National Transportation Safety Board. The CPUC safety division concluded the incident was caused by gas leaking from a September 2006 pipe repair done by the utility. It also concluded that the repair work did not meet federal and state requirements for gas pipelines, and in this case the pipe separated from a metal coupling and leaked.

"I believe this is an effective and meaningful resolution of all the issues in this penalty case, but the commissioners will make the final decision," said Richard Clark, CPSD director.

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