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CPUC Slams PG&E with $14M Fine, OKs Higher Pipe Pressure

California regulators on Thursday applied both the carrot and the stick to Pacific Gas and Electric Co.'s (PG&E) natural gas pipeline operations.

In separate, unanimous actions, the California Public Utilities Commission (CPUC) granted the utility's request to restore high-pressure transmission operations to a key eight-mile lateral (Line 147) interconnecting with the three major, north-south transmission lines on the peninsula south of San Francisco. But commissioners then slapped PG&E with a $14.35 million penalty for allegedly covering up record-keeping errors related to the same lateral (see Daily GPI, Sept. 6).

With sharp words for PG&E senior management, Commissioner Mark Ferron won support from all of his colleagues on the regulatory panel for the multi-million-dollar penalty as part of an alternate proposal to an administrative law judge's more modest rebuke (see Daily GPI, Nov. 5).

Ferron cited the combination utility's "failure to promptly notify" the CPUC of incorrect records it discovered for Line 147, which runs through a suburb of San Carlos. In the earlier proposed decision and in Ferron's, PG&E is said to have delayed and downplayed disclosure of critical information regarding Line 147's safety.

PG&E has admitted to bad record-keeping, but contends that it was not doing anything dishonest or trying to cover up the situation. In November, CEO Tony Earley asked the utility's board of directors audit committee to review the CPUC assertions, particularly allegations that he and other senior executives had been "dishonest" and "attempted to conceal" information from the CPUC (see Daily GPI, Nov. 7).

Ferron said the penalty was "designed to serve as a deterrent to similar behavior in the future," and that there "should be no question that the CPUC expects nothing less than forthright and timely disclosure in all matters of public safety."

A PG&E spokesperson said the San Francisco-based utility was pleased to get the higher operating pressure for Line 147 but was disappointed in the fine, calling it "excessive."

"We acknowledge that our communication efforts fell short of expectations in this instance, and we are committed to improving the way that we communicate with the CPUC to meet the commission's expectations for the timely flow of information in every instance."

The CPUC's lead member on natural gas matters, Mike Florio, said the decision to raise the operating pressure to 330 psi on Line 147 was a balancing of risks and was something that was "absolutely necessary" to be able to serve customers throughout the peninsula and San Francisco.

The latest action by the CPUC comes after months of turmoil involving PG&E getting into a court battle with the city of San Carlos regarding the pipeline lateral, during which the utility faced a hostile show-cause hearing before the state regulators, raised and then lowered Line 147's pressure and eventually operated the pipe at distribution pressure (125 psi), which if left in place would compromise reliability during the winter heating season.

"If we could run the overall pipeline system safely without Line 147, certainly we would do so," Florio said. "Given the need to have that line open to deal with all contingencies, the only option is to have it operate at 330 psi in conjunction with the adjacent lines. I am comfortable that the evidence and the science support restoring the higher pressure."

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