California agency says PG&E should pay $2.25B for blast

California agency says PG&E should pay $2.25B for blast

May 06, 2013, 05:00 AM The Associated Press
 The California agency investigating the deadly 2010 gas pipeline explosion in a San Francisco Bay Area neighborhood recommended Monday that Pacific Gas & Electric Co. pay a $2.25 billion fine for its negligence leading up to the blast.

The penalty would be the largest ever assessed by a state regulator, officials said.

The California Public Utilities Commission recommended the fine and said the company’s shareholders should shoulder it, not the utility’s customers.

The blast in San Bruno sparked a fireball that killed eight people, injured dozens more and destroyed 38 homes in the quiet bedroom community.

Commission investigators and consumer advocates filed a range of proposals for fines Monday.

The city of San Bruno, which is still struggling to rebuild the neighborhood devastated in the blast, said earlier Monday that the utility’s shareholders should pay no less than $1.25 billion in fines, plus at least $1 billion toward pipeline inspection and upgrade costs.

PG&E will file its proposal later this month, and a judge from the utilities commission is expected to make a final decision about how much to fine PG&E later this year.

Consumer advocates said the fine the commission proposed was appropriate, given the company’s myriad violations before the blast. The proposal calls for all the money to be directly invested in safety testing, replacing and upgrading hundreds of miles of PG&E’s gas transmission lines, rather than being sent to the state’s general fund.

“It’s absolutely the amount PG&E should pay for their all their past violations,” said Marcel Hawiger, an attorney with the nonprofit Utility Reform Network. “This is a very big penalty, but it’s not quite as big as it seems when you account for the tax benefits PG&E would accrue.”

The National Transportation Safety Board unanimously agreed in 2011 that the accident was caused by what board chairman Deborah Hersman called a “litany of failures” by PG&E, as well as weak oversight by regulators.

Separate from the NTSB investigation, state investigators at the California Public Utilities Commission have blamed PG&E for the explosion, which occurred when an underground pipeline ruptured at the site of a decades-old faulty weld, sparking a gas-fueled fire.

4 comments for “California agency says PG&E should pay $2.25B for blast

  1. Cynthia Marcopulos
    May 7, 2013 at 12:44 am

    Finally, an agency doing its job. But, as always, PG&E will appeal, and then the fine will be reduced and we’ll be shouldering it, not the stockholders or corporation execs who should be behind bars…

  2. Editor
    May 7, 2013 at 3:10 am

    A reader emailed us this response to this information put out by the Associated Press:

    First thought that comes to my mind is that the lawyer in this case is paid according to how much she will get them to settle for, main reason for this huge asking amount.
    I think San Bruno residents and others have already been paid off.
    Second thing is the settlement cannot bankrupt the company.
    Third thing is that the ones ending up paying this fine, the stock holders, and most might be older retired folks.
    I think that no matter what they say a good part of it will end up in CA General Fund.
    Even part of that amount is a lot of money and the lawyer should come out doing very well in any case. She earned it

  3. Editor
    May 8, 2013 at 9:13 pm

    This Editorial by San Mateo Daily Journal seems to capture what most are thinking and we are sharing it here. The original editorial can be found at
    http://www.smdailyjournal.com/article_preview.php?id=1768019.

    Editorial: PG&E fine should go for safety improvements
    May 08, 2013, 05:00 AM Editorial

    The staff of the California Public Utilities Commission recommended a hefty fine for Pacific Gas and Electric Monday for its negligence leading up to the 2010 San Bruno pipeline explosion and fire in San Bruno that killed eight, injured dozens and destroyed 38 homes.

    The recommended fine, $2.25 billion, is weighty for sure and it is good the commission also said it should come from shareholders and not rate payers. That makes an abundance of sense since ratepayers should not pay twice for a safe utility. However, if that money finds its way into the state’s general fund, rather than specifically earmarked for safety testing and replacing and upgrading gas transmission lines, it is a total waste.

    Sure, the state could use the money, but this amount should be used specifically for pipeline safety. The CPUC staff has recommended that the money be used solely to improve the utility’s infrastructure. It would include costs of safety work already done since 2010. So, in a sense, the fine is meant as a punishment but should be earmarked for safety work the company has already been forced to do.

    The fine, while eye-popping, will not undo the damage done on that fateful night in 2010 which forever changed the Glenview neighborhood of San Bruno and all of its residents. Having PG&E pay such a fine may seem like a way to assist the city’s healing, and in fact, it is the exact amount the city asked for. So it seems like a victory for the city while civil liability moves forward in court.

    One thing should be made clear, however. What should not be included in the fine is the $100 million PG&E offered for immediate relief, emergency assistance, property damage and assistance with rebuilding; the $70 million trust to cover the costs of recovery and the $70 million payment for a community benefit nonprofit. These are separate, and should remain so.

    The utility has taken the blame for the explosion and this fine is meant to deter the actions that caused it. The National Transportation Safety Board has stated that the blast was the result of a “litany of failures” by the utility leading up to the blast. The NTSB also took the CPUC to task for its weak oversight of the utility and this fine is likely the result of the commission’s desire to be seen as a serious enforcer of safety and defender of the public interest. So, this fine not only penalizes PG&E but it also makes the CPUC seem like it is doing its job after its “cozy” relationship with the utility has been called into question.

    If the fine is used specifically for safety measures, the amount will be tax deductible. That may seem unfair since the utility can write it off. PG&E officials also claim the fine will undermine its safety efforts but, if the money is directed to be used specifically for safety measures, it will go toward making our gas delivery safer and move us in the direction of preventing another disaster on the scale of what happened in San Bruno. And isn’t that the goal?

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