Legal & Regulatory

PG&E Slapped with $1.4 Billion Fine for San Bruno Blast

Nearly four years to the day after eight people were killed in a natural gas pipeline explosion in San Bruno, two judges of the California Public Utilities Commission (CPUC) ruled on Sept. 2 that Pacific Gas & Electric (PG&E) must pay a record $1.4 billion in fines and penalties for its role in the disaster.

The explosion took place in the evening of Sept. 9, 2010, when gas leaking from a 30-inch pipeline under a residential neighborhood ignited, causing a massive explosion and fire that led to eight deaths and destroyed dozens of homes. The blast was so large that authorities initially believed it had been caused by a plane crashing from the nearby San Francisco airport.

Later investigations determined that the pipeline had likely been leaking for some time as the result of defective welds. PG&E was ultimately cited by the CPUC for more than 3,700 violations of pipeline safety regulations, shoddy record keeping, and failing to perform required pipeline testing and maintenance. The final report from the commission appointed to investigate the disaster found that PG&E’s failure to properly test the faulty pipeline led to the blast. The failure was largely the result of poor record-keeping in that PG&E was unaware that the specific welds that failed even existed.

The $1.4 billion penalty—by far the largest ever against a U.S. utility for a gas explosion—includes a $400 million refund to its ratepayers for pipeline improvements included in the ratebase that were never performed.

The fine comes on top of an earlier order to spend more than $600 million on pipeline upgrades and improvements throughout the system, funds that must come from PG&E shareholders rather than ratepayers.

The proposed ruling must still be approved by the full CPUC, which could offer its own alternatives. PG&E has not said whether it will appeal the ruling. It has accepted responsibility for the accident and said that it will accept a penalty, but has disagreed with the CPUC on how the fines should be structured.

PG&E says that it has improved its maintenance and testing programs since the explosion.

The fine does not put the whole matter to rest. PG&E is still facing a federal indictment for violations of the Natural Gas Pipeline Safety Act as well as allegedly lying to the National Transportation Safety Board during the investigation. That case could lead to as much as $1.13 billion in additional penalties. A consolidated civil suit against the company by the victims of the blast and their families is also pending.

—Thomas W. Overton, JD is a POWER associate editor (@POWERmagazine, @thomas_overton).

Photo courtesy Mister Oh/Wikipedia.

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