Safety staff at the California Public Utilities Commission (CPUC) last week reiterated its rationale for a proposed $2.25 billion penalty against Pacific Gas and Electric Co. (PG&E) arising from the natural gas pipeline explosion two years ago in San Bruno (see NGI, May 13).

In a brief for three consolidated cases, the CPUC Safety and Enforcement Division (SED) said “it’s time to throw the book at PG&E,” and said the San Francisco-based combination utility showed “no remorse” for the explosion, based on PG&E’s characterization of the penalty proposal as “excessive” (see NGI, June 3).

SED said PG&E could absorb a penalty of $2.25 billion “without jeopardizing the safety of its operations and its financial viability.” SED Director Jack Hagan said PG&E has made a “strong and commendable effort” since San Bruno to make its system safer, under CPUC direction. But he cited “decades of violations of fundamental safety rules and principles,” and despite a management overhaul, there is still much to be done at the utility.

“Based on my own evaluation, I estimate that PG&E will need to spend as much as $3-4 billion, in total, to bring this massive gas system into a state where we can say it is safe,” Hagan said. Hagan proposes that PG&E absorb up to $2.25 billion of the costs of its future gas system upgrades as payment of the proposed penalty. San Bruno officials and others don’t necessarily agree with this approach and would like a portion of the penalty going to the state’s general revenue fund.

As a result, Hagan on Thursday clarified, but did not change, his position. Some CPUC employees don’t agree with his penalty recommendation, he noted. The proposal would require PG&E to spend $2.25 billion of shareholder funds to fix the gas system. “The criticism I am hearing is that some of this money should go to the state’s general fund as a fine. I have not recommended that approach because of the importance I place on safety. The CPUC’s commissioners ultimately will decide this, but I stand by my proposal.”

For the past two years, the utility has been proposing to spend nearly $2 billion of ratepayer-supported programs in its pipeline enhancement plan. In the penalty proceeding, SED and four other parties support multi-billion-dollar penalty assessments, plus little or no ratepayer support for the pipeline enhancement plan. Hagan emphasized in that he thinks PG&E “continues to manifest a conspicuous and disturbing lack of remorse” for what he called the utility’s “many failures leading up to the tragedy at San Bruno.”

The CPUC last week sent a progress report to the National Transportation Safety Board (NTSB), responding to four goals for regulators to pursue (see NGI, Oct. 3, 2011). One of the recommendations was to require PG&E to correct all deficiencies found after the San Bruno explosion. CPUC Executive Director Paul Clanon said a final decision on penalties is expected late this summer.

San Bruno and PG&E settled their legal differences last year, but elected officials have continued to question the CPUC. San Bruno Mayor Jim Ruane has called for the California Attorney General’s Office to investigate, and he claimed that CPUC’s entire legal team has resigned from the case. CPUC disputes this and said “no CPUC lawyer was fired or resigned. Some of the lawyers working on the penalty consideration cases have asked to be reassigned to other matters, and their requests have been granted.”

“The concerted action by these dedicated public servants, who spent the last two-and-a-half years of their careers investigating PG&E and documenting its safety failures, raises serious questions about the propriety of these proceedings and leadership of the CPUC,” Ruane said. He said the CPUC is poised to “credit” PG&E with $1 billion that the utility claims it has already spent. Further, the mayor alleged that PG&E will get about $900 million in state and federal tax dedications out of the penalty assessment.

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