PG&E hit with staggering $1.6bn penalty stemming from pipeline explosion

The California Public Utilities Commission (CPUC) said April 9 that it has imposed the largest penalty it has ever assessed by ordering Pacific Gas and Electric (PG&E) (NYSE:PCG) shareholders to pay $1.6bn in connection with the disastrous San Bruno pipeline rupture in 2010.

In approving CPUC President Michael Picker’s penalty proposal, the Commissioners increased the penalty amount $200m over what was proposed by Administrative Law Judges.

The April 9 decision orders PG&E to pay $850m in gas transmission pipeline safety infrastructure improvements, most of which will be spent on capital investments that PG&E will not add to its rate base and thus will not earn any profit on; $300m in a fine to the state’s General Fund; $400m in a one-time bill credit spread across PG&E’s gas customers; and approximately $50m towards other remedies to enhance pipeline safety. When added to the disallowances already adopted in a prior CPUC Decision, the penalties and remedies exceed $2.2bn.

PG&E’s interests also include the Diablo Canyon nuclear station in California.

“PG&E failed to uphold the public’s trust. The CPUC failed to keep vigilant. Lives were lost. Numerous people were injured. Homes were destroyed. We must do everything we can to ensure that nothing like this happens again,” said President Picker. “Our decision commits a significant portion of the shareholder-funded penalty – one of the biggest utility sanctions in U.S. history – to making PG&E’s gas transmission system as safe as possible for the public, consumers, utility workers, and the environment.”

In September 2010 in San Bruno, Calif., a San Francisco suburb, was rocked when a PG&E gas pipeline exploded into flames in a residential neighborhood only a couple of miles from the San Francisco International Airport.

Several people were killed and nearby localities initially thought a small earthquake had occurred.

PG&E chief said lessons won’t be forgotten

PG&E Chairman and CEO Tony Earley said the company is focused on becoming the safest, most reliable energy company in the United States.

“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,” Earley said.

“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,” Earley said.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.