State Penalizes PG&E $1.4 Billion for Deadly San Bruno Pipeline Explosion

Wednesday, September 03, 2014
San Bruno fire (photo: Paul Sakuma/Associated Press)

Two state administrative judges meted out $1.4 billion in penalties to Pacific Gas & Electric (PG&E) Tuesday for the 2010 San Bruno gas pipeline explosion that killed eight people and leveled a neighborhood, bringing the utility’s bill, so far, to $2 billion.

The judges, whose decision could be appealed to the five-member California Public Utilities Commission (CPUC), found that PG&E committed 3,708 violations of federal regulations, engineering standards and state rules, many of them over a number of years. When added up, PG&E was in violation 18,447,805 days. 

That works out to a $76-penalty-per-fine-per-day. The judges said that they wanted the size of the penalty to serve as deterrence for other utilities that might not be properly attending to safety matters. Consumer groups and the CPUC’s own Office of Ratepayer Advocates had recommended $2.25 billion in penalties.

Bay Area Democratic State Senator Jerry Hill told the Oakland Tribune the decision was “shocking and outrageous. . . . a windfall for PG&E. This is business as usual at the PUC.”

The San Bruno blast was caused by a failed pipeline weld that had not been inspected, as required, after gas-pressure surges. In the ensuing investigations and lawsuits, it became apparent that PG&E kept horrible records of its pipeline infrastructure and wasn’t performing necessary testing and upgrades.

The largest portion of the penalty, a $950-million fine, goes to the state’s General Fund. Another $400 million must be refunded to consumers for money that was not spent on promised safety upgrades and $50 million covers costs, such as audits.

PG&E has already paid $500 million to settle lawsuits with victims and relatives, and spent $650 million on pipeline upgrades it couldn’t pass on to customers. The utility still faces a potential fine in a federal criminal case that could top $1.1 billion. 

San Bruno Mayor Jim Ruane criticized the divvy, telling the San Francisco Chronicle that more of the total should have gone to increasing pipeline safety, rather than a “payday” for the state. City Manager Connie Jackson said it was “too soon” to say if the city would appeal.

The contours of the state’s penalty have been scrutinized throughout the process leading up to the decision by Judges Amy Yip-Kikugawa and Mark Wetzell. An early proposal would have shifted the penalty from fines to infrastructure upgrades, but was criticized for sticking consumers, not shareholders, with more of the cost and giving PG&E credit for work it should already have done.

Critics said the proposal was indicative of the cozy relationship between the utility and the commission that oversees and were none too pleased when e-mails were released a month ago documenting the two sharing strategies and commiserating with each other.  

PG&E’s stock rose 1.74% Tuesday, closing near its 2014 high, at $47.29.

–Ken Broder


To Learn More:

$1.4 Billion Penalty Urged for PG&E in San Bruno Blast (by Jaxon Van Derbeken, San Francisco Chronicle)

CPUC Zaps PG&E with Record $1.4 Billion Fine over San Bruno Explosion (by Chris Rauber, San Francisco Business Times)

PG&E to Be Fined $1.4 Billion for San Bruno Explosion (by George Avalos, Oakland Tribune)

PG&E Penalized $1.4B for Deadly Pipeline Blast (by Ellen Knickmeyer, Associated Press)

PUC Wants $1.4 Billion Fine for PG&E San Bruno Blast That Killed 8 (by Marc Lifsher, Los Angeles Times)

Feds Add Obstruction of Justice and a Real Penalty to PG&E Indictment for San Bruno (by Ken Broder, AllGov California)

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