A California state regulatory judge has rejected Pacific Gas and Electric Co.’s (PG&E) appeal of a safety staff-imposed $16.8 million fine levied in January against the combination utility company for its admitted failure to conduct natural gas pipeline leak surveys (see Daily GPI, Jan. 31).

Administrative Law Judge (ALJ) Burton Mattson recommended that the California Public Utilities Commission (CPUC) set aside PG&E’s contentions that the fine is excessive, the number of violations was miscalculated by the CPUC’s Consumer Protection and Safety Division (CPSD) and that the staff citation process for self-report violations should be suspended.

A PG&E spokesperson told NGI Monday that the utility plans to file by April 9 comments on the ALJ’s recommendation. PG&E is not commenting about whether it might appeal the fine in court if it is upheld by the CPUC.

The CPUC last year bolstered its natural gas safety efforts by creating a citation program under which gas pipeline operators could be fined by the CPSD for violating state and federal safety rules (see Daily GPI, Dec. 2, 2011). CPSD levied a fine of $20,000 per violation and calculated 838 violations by the utility dating back to 2004. PG&E argued the number of violations should be much smaller.

“A fine of $20,000 per violation reasonably recognizes all factors, particularly the size of the business, gravity of violations, need to send a strong message to gas corporations that safety must be their highest priority, and the goal of recent [state] legislation to mandate increased utility measures related to gas pipeline safety, importance of restoring the public’s confidence in the safety of all gas utilities’ facilities…and our duty to restore faith and confidence in the regulatory process,” Mattson wrote in recommending the CPUC deny the utility’s appeal.

Mattson also indicated that he did not agree with PG&E’s argument that the CPSD citations should not be applied to self-reported violations. The ALJ said CPSD did not agree with the utility, and he did not want to instruct staff to withhold issuing citations.

In response to the argument that the investment community may view a record fine as a “negative regulatory precedent,” Mattson again cast aside the utility’s concerns, noting that the investment community likely “will temper its concern, if any, over near-term [utility stock] valuation [issues] when it has time to consider how a good track record of safe operations and practices benefits the utility, the public and mitigates the size of — or eliminates entirely — future penalties.”

The CPSD-imposed fine was the second recent precedent-setting penalty levied against PG&E. California regulators in December handed out the biggest penalty ever for a gas utility, increasing an earlier penalty to $38 million for a fatal distribution pipeline failure and explosion in Rancho Cordova, CA, on Christmas Eve 2008.

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