PG&E Penalized $1.6 Billion for Deadly San Bruno Blast, but Does It Matter?

Friday, April 10, 2015
San Bruno fire after a gas line exploded (photo: Brant Ward, San Francisco Chronicle)

The careful calculus that goes into Pacific Gas & Electric’s (PG&E) balancing of community safety and the long-term efficiency of its natural gas pipeline system against the bottom-line needs of investors may have been recalibrated on Thursday when state regulators penalized the utility $1.6 billion for the 2010 San Bruno explosion that leveled a neighborhood and killed eight people.

But not everyone is convinced.

Shortly after the Public Utilities Commission (PUC) announced its decision, President Michael Picker said that he questions whether even a record penalty can influence the highly-profitable utility to change its evil ways. “If PG&E is failing to establish a safety culture, and we continue to see more accidents and violations, what are our tools?” Picker reportedly told those attending the commission meeting.

He cited problems since the San Bruno blast at San Jose’s Metcalf electricity substation and incidents in Kern County, Carmel, Morgan Hill, Castro Valley, Cupertino and Milpitas

Picker then openly mused about what sounded like the breakup of the utility: “Is the organization simply too large—spread across a sizable portion of a large state, and encompassing diverse functions such as both gas transmission and gas distribution, as well as electric service—to succeed at safety?”

San Bruno Mayor Jim Ruane kind of wonders the same thing and was hoping the commission would openly call for the state Legislature to create an independent panel to monitor PG&E’s safety program. It didn’t.

The unanimous vote of the five-person PUC did not include Commissioner Mike Florio, who recused himself after being implicated in a scandal revolving around revealing e-mails and charges of cronyism between PG&E and its regulator. Former Commission President Michael Peevey, who left at the end of 2014, is under investigation.

The final penalty is different than early proposals that shielded investors and put the burden on ratepayers. Instead of PG&E paying $950 million to the state general fund and zero dollars for pipeline improvements they only put $300 million in the general fund and spend $850 million to do the work they should have already done.

The total amount is $200 million more than recommended by two administrative law judges. The plan directs $400 million to customers in the form of lower rates and designates $50 million for specific pipeline safety improvements. That brings to more than $2.2 billion the total penalties levied against PG&E for San Bruno, according to the Los Angeles Times.     

The shift in sentiment at the PUC followed the release last year of e-mails revealing an overly cozy relationship between utility executives and regulators, and improper, if not illegal, backroom strategizing. The U.S. Department of Justice (DOJ) and the state Attorney General’s office started investigations of the more egregious improprieties in an unfolding scandal that includes alleged judge shopping in the San Bruno case. 

A federal criminal trial will begin in a year over 27 charges that PG&E violated the pipeline safety act and one allegation that it obstructed a federal investigation into the blast.

The faulty pipeline weld that gave way in San Bruno had not been inspected in 54 years, partially because inadequate records failed to indicate certain characteristics that would have flagged it for attention. PG&E has already been compelled to reassess the entire system and put in place a real inspection and repair system.

PG&E said it probably won’t appeal the PUC penalty decision.

–Ken Broder


To Learn More:

PUC Fines PG&E $1.6 Billion for San Bruno Explosion (by Chris Rauber, San Francisco Business Times)

San Bruno: PG&E Slapped with Record Penalty of $1.6 Billion for Fatal Explosion (by George Avalos, Oakland Tribune)

California Regulators Fine PG&E a Record $1.6 Billion for San Bruno Blast (by Marc Lifsher, Los Angeles Times)

State Regulator Says PG&E May Be Too Big to Operate Safely (by Jaxon Van Derbeken, San Francisco Chronicle)

New PUC Chief Wants to Up the PG&E Penalty for San Bruno and Add Some Pipeline Repair (by Ken Broder, AllGov California)

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