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CPUC Recommends $2.25 Billion Penalty Against PG&E

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Updated: 5/06/2013 2:12 pm
The Safety and Enforcement Division of the California Public Utilities Commission (CPUC) today recommended that the CPUC impose a total $2.25 billion penalty against Pacific Gas and Electric Company (PG&E) for three penalty cases arising from the Sept. 9, 2010, PG&E pipeline rupture in San Bruno, Calif. If the recommendation is adopted by the CPUC, it would be the largest penalty ever levied by a state regulator.

“I am recommending the highest penalty possible against PG&E, without compromising safety and I want every penny of it to go toward making PG&E’s system safer," said Brigadier General (CA) Jack Hagan, the Director of the CPUC’s Safety and Enforcement Division.

The Safety and Enforcement Division’s recommendation calls for the $2.25 billion penalty to be used solely for safety purposes. The Safety and Enforcement Division says that the death toll, physical injuries, and extensive damage to homes by the pipeline blast is unsurpassed in its severity and PG&E’s failures is long and reprehensible.

“There is no amount of money that will bring back the eight people who tragically lost their lives in the pipeline blast or heal the lasting wounds to the people of San Bruno," said Hagan. "All we can do is make sure such a tragedy does not happen again."

The recommended penalty payment would encompass monies PG&E already has been ordered to spend on safety enhancements, as well as future safety investments. Under the Safety and Enforcement Division’s recommendation, the $2.25 billion penalty would be directed toward Phase I and Phase II of PG&E’s Pipeline Safety Enhancement Plan. The money would come out of shareholder funds and would not be paid by ratepayers. Likewise, any capital investments by PG&E would be excluded from the utility’s rate base, for ratemaking purposes.

Since the September 2010 pipeline rupture, PG&E has said that it has invested upwards of $1 billion in safety activities such as pipeline test or replacement, installation of safety values, verification audits and inspections, and development of safety management systems. The recommended penalty amount would include these expenditures plus future safety expenses, up to a total of $2.25 billion.

Under the recommendation made today, PG&E also would be subject to audits to ensure the company does not under-spend in any other areas of their operations that effect safety to off-set any of these expenditures. The recommendation calls for an independent third-party to oversee the funds to ensure they are spent wholly and appropriately.

If today’s recommendation is adopted by the CPUC, it would be the largest penalty ever levied by a state regulatory body in the U.S. The largest CPUC safety related penalty imposed in the past was a $38 million penalty against PG&E as a result of a natural gas explosion on December 24, 2008, in Rancho Cordova, Calif. Nationally, the largest penalty under federal pipeline safety laws was $101.5 million for an explosion on the El Paso Natural Gas pipeline in New Mexico in August 2000.

PG&E will file its reply to the recommendations of the Safety and Enforcement Division and other intervenors on May 24, 2013; the Safety and Enforcement Division and intervenors will then file any replies to PG&E on June 5, 2013. A CPUC decision is expected in late summer.



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