California regulators vote to penalize PG&E $1.6 billion for deadly gas pipeline blast

SAN FRANCISCO -- California Public Utilities Commission voted Thursday to penalize Pacific Gas & Electric Co. $1.6 billion for a 2010 gas pipeline explosion that killed eight people and destroyed more than three dozen homes in suburban San Francisco.

The penalty comes as the state's top regulator, Commission President Michael Picker, has called for a larger review that suggests the energy behemoth could be broken up.

Picker said state safety citations against PG&E were rising, but that the utility was so big, with $1.6 billion in earnings in 2014, that it was able to shrug off financial penalties.

"If, indeed, PG&E is failing to establish a safety culture, and we continue to see more accidents and violations of safety rules, what are our tools?" Picker asked.

The commission will study "the culture of safety" and organizational structure of Pacific Gas & Electric Co., which has its gas and electricity operations under a single corporate board and chief executive.

The board on Thursday, meanwhile, voted 4 to 0 in favor of the penalty Picker proposed last month. One of the five commissioners recused himself from the vote.

The $1.6 billion is the largest against a utility in California history, Picker said. It's $200 million higher than one recommended by administrative law judges last year for the state's largest power utility.

The fine requires PG&E shareholders to pay $850 million toward gas transmission safety improvements. It also orders PG&E to pay a $300 million fine that goes into the state's general fund.

It mandates the utility pay $400 million in bill credits, and it directs approximately $50 million toward other remedies.

Federal investigators faulted both PG&E and lax oversight by the utilities commission in the 2010 explosion in San Bruno.

The explosion has led to state and federal investigations into back channel dealings between PG&E executives and the utility commission's former head, Michael Peevey, whose term expired earlier this year. No results of the investigations have been announced.

PG&E has said it wanted a penalty that is "reasonable and proportionate" and that takes into account the utility's past spending to improve safety.

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PG&E Says Lessons of Tragic San Bruno Explosion Will Not Be Forgotten

"All of us at PG&E have committed ourselves to a goal of transforming this company into the safest and most reliable energy provider in America"

SAN FRANCISCO, Calif.- The chairman and CEO of PG&E Corporation today said the company is focused on becoming the safest and most reliable energy provider in America, motivated by the tragic lessons of the 2010 explosion of Pacific Gas and Electric Company's (PG&E) natural gas transmission pipeline in San Bruno.

The comments by PG&E Chairman and CEO Tony Earley followed today's decision by the California Public Utilities Commission (CPUC) regarding penalties associated with the explosion. He said:

"Since the 2010 explosion of our natural gas transmission pipeline in San Bruno, we have worked hard to do the right thing for the victims, their families and the community of San Bruno. We are deeply sorry for this tragic event and we have dedicated ourselves to re-earning the trust of our customers and the communities we serve. The lessons of this tragic event will not be forgotten.

"We want our customers and their families to know that all of us at PG&E have committed ourselves to a goal of transforming this company into the safest and most reliable energy provider in America. We've hired some of the best experts in the country to help guide this effort and we've supported it with billions of dollars in shareholder funded investments in gas safety.

"While we obviously need to review the orders in their entirety before making a final decision, we do not expect to appeal today's rulings. I want to be very clear -- our focus is on moving forward to complete the important safety work we set out to do. We've made tremendous progress but we have more to do and we are committed to doing it right."

As a result of the concrete actions the company has taken to make safety the cornerstone of its culture following the San Bruno explosion, PG&E became one of the first utilities ever to earn two of the highest internationally recognized safety certifications-the International Organization for Standardization (ISO) 55001 and Publicly Available Specification (PAS) 55-1.

• Change began at the top with Tony Earley joining the company as CEO in 2011. We restructured our gas operations business and hired the best natural gas experts in the country to run it.


• We put 3,500 leaders at all levels of PG&E through safety training and we review the lessons of San Bruno with every new employee.


• We have conducted advanced pipeline safety testing, replaced pipe where necessary and installed more than 200 new automated or remotely controlled emergency shut-off valves.


• We decommissioned more than 800 miles of remaining cast-iron pipe in our system, replacing with stronger, more efficient and seismically sound pipe.


• We built a new gas operations control center, employing the most advanced technology, from which we can monitor the entire system and respond more quickly and effectively to emergencies.


• We're using new gas leak detection technology that is 1,000 times more sensitive than before in order to help find and fix leaks before they become a problem. When a customer calls to report a gas odor, we are now among the fastest in the entire industry in responding.


• We have closed out nine of 12 recommendations from the National Transportation Safety Board and work on the remaining three is on track.

In addition, the company has settled claims amounting to more than $500 million with the victims and families of the San Bruno accident, established a $50 million trust for the City of San Bruno for costs related to recovery and contributed $70 million to support the city's and community's recovery efforts.