PG&E Set to Appeal $1.4B Pipeline Safety Penalty

PG&E Co. announced in San Francisco today it will appeal a record $1.4 billion pipeline-safety penalty and fine to the California Public Utilities Commission.

The penalty and fine were levied Monday by two PUC administrative law judges in three proceedings stemming from a 2010 natural gas pipeline explosion in San Bruno that killed eight people, injured 66 others and destroyed dozens of homes.

The utility’s plan to appeal to the five-member commission, based in San Francisco, was disclosed in a PG&E filing with the U.S. Securities and Exchange Commission and confirmed by PG&E spokesman Donald Cutler today.

“We are planning to ask the Public Utilities Commission to review the penalty to ensure that it takes into account PG&E’s (existing) $2.7 billion safety investments and actions,” Cutler said.

In addition, the spokesman said, “We believe any penalty should directly benefit public safety.”

The $1.4 billion sanction proposed by PUC administrative law judges Mark Wetzell and Amy Yip-Kikugawa is for 3,708 violations of federal and state regulations governing gas transmission line record-keeping, classification and maintenance.

It includes a $950 million fine to be paid to the state’s general fund, $400 million for pipeline modernization and $50 million to carry out more than 75 specific safety measures.

It is the largest financial sanction is ever imposed by the commission in a safety-related case and must be paid with shareholder funds and not with customers’ gas and electric bill payments.

Including another $635 million in shareholder funding previously ordered by the PUC for the first phase of pipeline modernization, the total penalty and fine will be $2.035 billion, if upheld.

Cutler said the utility has already paid or agreed to pay $2.7 billion for improvements. That amount includes the previously allocated $635 million that the commission has said must come from shareholders rather than customers, according to the SEC filing.

Other parties in the case, which include the city of San Bruno and TURN, a consumer advocacy group, are also entitled to appeal to the commission within the next 30 days.

San Bruno and TURN have not yet announced whether they will appeal, but representatives of both said Monday they believed that more of the fine should go toward safety measures rather than the state’s general fund.

TURN executive director Mark Toney said the money should be used to alleviate costs to customers as well as to pay for improvement.

“We don’t want customers left holding the bag for PG&E’s neglect. The commission should be protecting consumers from these unfair costs, which are more appropriately borne by shareholders than ratepayers,” he said.

The cause of the Sept. 9, 2010, explosion in San Bruno was a rupture in a defective seam weld in a pipeline segment that was incorrectly listed in PG&E records as seamless, according to the National Transportation Safety Board.

The three PUC proceedings were investigations into the San Bruno explosion, PG&E’s pipeline record-keeping and its pipeline operations in locations with high population density.

PUC spokesman Christopher Chow said any appeals filed will first be submitted to the two administrative law judges for consideration of possible modification of their recommendation, and then referred to the commission.

If not appealed, the administrative judges’ ruling would have become the final decision in the case.

PG&E is also facing criminal charges in federal court in San Francisco. It is accused of one count of obstructing justice in the NTSB investigation of the San Bruno explosion and 27 counts of violating a federal pipeline safety law in connection with several pipelines.

If convicted, it could face a maximum penalty of $1.13 billion.

Julia Cheever, Bay City News

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