In what would be an historically high fine, the safety staff of the California Public Utilities Commission (CPUC) last week amended its $2.25 billion penalty recommendation against or Pacific Gas and Electric Co. (PG&E) concerning the San Bruno, CA, natural gas pipeline rupture, to include a minimum of $300 million paid to the state’s general fund.
However, the Consumer Protection and Safety Division (CPSD) didn’t change the overall scope of the proposed penalty (see NGI, June 10). Since amending its position, the CPSD has asked the CPUC administrative law judge for the three combined penalty proceedings to grant the utility a chance to reply with a 10-page filing.
“CPSD recommends that PG&E must pay a fine to the general fund, which is larger than any fine ordered by the CPUC in its history,” the regulatory safety staff attorneys said in a 15-page filing that called the pipeline explosion three years ago “the worst disaster in the history of California electric and/or natural gas utilities.” San Bruno was “directly caused” by “PG&E’s unreasonable conduct and neglect for decades.”
CPSD cited five reasons for the increased penalty: extent of people dying and property destroyed; the “reasonable and prudent steps” PG&E could have taken to prevent the disaster; three investigations that support the utility’s repeated past violations; investigations support a major degree of culpability by PG&E; and past penalties.
PG&E pushed back, saying the proposed move could set back its efforts to upgrade the safety of its gas system. Safety regulators have “lost sight of an important shared goal — making the PG&E gas system the safest in the country.” The proposal indicates a “zeal to punish PG&E,” said Tom Bottorff, senior vice president for regulatory affairs.
Bottorff said the proposed penalty payment ignores the fact that PG&E needs to be able to attract substantial new capital to maintain an “extraordinary investment in safety” that has been underway since the Sept. 9, 2010 tragedy that killed eight people and injured many more.
Earlier in the month, Moody’s Investors Service Inc. said the move by the CPSD to amend its penalty position, even without knowing the details, carried “negative credit implications” for the San Francisco-based combination utility.
“It is difficult to understand how the CPUC expects [us] to attract the capital necessary to maintain the extraordinary investment in safety currently underway, or raise billions of dollars more for safety improvements mandated by the CPUC,” Bottorff said. He urged the five-member commission to make note of the capital requirements.
California’s utility watchdog group, The Utility Reform Network (TURN), reversed its past criticism of the penalty recommendation and said the latest proposal is “a great improvement.” TURN earlier had proposed forcing PG&E to pay millions of dollars into the state coffers.
“The public is still waiting for PG&E to be held accountable,” said TURN legal director Tom Long. “PG&E should not be allowed to call the shots in the first place. It seems obvious that penalties should reduce PG&E’s profits, rather than cushion [its] shareholders.”
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