The California Public Utilities Commission in San Francisco today imposed a record $1.6 billion penalty on PG&E Co. for a fatal pipeline explosion in San Bruno in 2010.
Commission President Michael Picker said, “PG&E failed to uphold the public’s trust” and the penalty is intended to send “a painful signal” to PG&E of the imperative of making safety a priority.
Picker also said the PUC itself “failed to keep vigilant” and called on the agency to strengthen its safety enforcement.
“In San Bruno, we were not vigilant enough. People died. Homes were destroyed. We just can’t let that happen again,” he said.
Eight people died, 66 others were injured and 38 houses were destroyed in an explosion and fire when a high-pressure PG&E natural gas transmission pipeline segment ruptured in San Bruno on Sept. 9, 2010.
The pipeline segment, installed in approximately 1956, had a defective seam weld and was incorrectly listed in PG&E records as being seamless.
The penalty, proposed by Picker, is to be paid by shareholders and not customers. Combined with a previous $635 million penalty for improvements, the total levy on the utility is more than $2.2 billion.
Picker said it is the largest penalty ever levied on a California utility and one of the largest in the United States.
It includes $850 million for pipeline safety improvements, a $300 million fine to be paid to the state’s general fund, a $400 million one-time bill credit to customers and $50 million for previously identified improvements.
The sanction was approved unanimously by the four commissioners participating in the meeting at the PUC’s headquarters.
Commissioner Catherine Sandoval said, “Let this decision herald a new era of integrity and safety.”
The commission’s fifth member, Mike Florio, recused himself from the case last fall after email messages came to light that showed private communications between Florio and PG&E executives.
Former commission President Michael Peevey and his former chief of staff were also alleged to have engaged in improper communications with PG&E executives on regulatory matters. In September, Peevey recused himself from the San Bruno case and PG&E fired three executives. In December, Peevey retired.
Gov. Brown then appointed Picker, who was already a commission member, as president.
At the start of today’s hearing, San Bruno Mayor Jim Ruane told the commissioners, “This explosion was a preventable disaster that resulted from faulty record keeping, negligent CPUC oversight and a broken CPUC regulatory culture that looked the other way as PG&E prioritized profits over public safety.”
PG&E chairman Tony Earley said in a statement after the hearing, “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.”
Earley said a final decision on whether to appeal has not been made, but, “We do not expect to appeal today’s decision.”
“Our focus is on moving forward to complete the important safety work we set out to do,” Earley said.
The commissioners imposed the penalty in a coordinated case that combined three PUC investigations into the San Bruno explosion, PG&E record-keeping practices and its pipeline operations in locations with high population density.
Before imposing the penalty, the commissioners concluded that PG&E committed 2,425 violations of regulations in the three areas. Some violations lasted for years and the total number of days of violations was more than 18 million, the commission said in a written decision.
In comments after the penalty vote, Picker said PG&E has made many improvements, but said it was too soon to tell whether the utility has “developed a company-wide effective safety culture.”
He questioned whether the company may be “simply too large…to succeed at safety.” San Francisco-based PG&E provides natural gas and electricity to 16 million people in northern and central California.
A leader of a union that represents thousands of PG&E workers disputed Picker’s suggestion that the utility may be too big to promote safety effectively.
International Brotherhood of Electrical Workers Local 1245 Business Manager Tom Dalzell said, “Since the San Bruno explosion, PG&E has improved the safety of its system and is working towards the goal of making it one of the world’s safest.
“We know this is the case because our members are the ones who are putting on their gloves and hardhats every day working to make the system safer,” Dalzell said.
Outside the PUC headquarters after the meeting, former San Bruno resident Sue Bullis, who lost her teenaged son, husband and mother-in-law in the explosion, said, “I’m going to be remembering this (tragedy) my whole life.”
But Bullis, who now lives in Burlingame, said, “I’m encouraged by what Picker said they need to do in PG&E and the commission itself. The problem was caused by both PG&E management procedures and the PUC.”
Mark Toney, the executive director of the consumer group The Utility Reform Network, or TURN, said, “These penalties send a strong message to PG&E’s stockholders and executives that the neglect and mismanagement that led to the San Bruno explosion must never happen again.
“Customers are looking to the CPUC to rein in PG&E and be a watchdog, rather than a lapdog,” Toney said.
Congresswoman Jackie Speier (D-San Francisco/San Mateo counties) said in a statement, “No amount of money will ever bring back the lives of the eight people who perished in the San Bruno tragedy.
“But the CPUC took a significant step towards repairing its tarnished record as a lax watchdog and moving towards a culture of accountability and safety,” Speier said.
Julia Cheever, Bay City News
