Regulators penalize PG&E $1.6 billion for San Bruno pipeline blast

A law enforcement official runs towards a massive fire from a gas pipeline explosion in a residential neighborhood in this September 9, 2010 file photo taken in San Bruno, California. The California Public Utilities Commission is expected to vote Thursday, April 9, 2015, on a record $1.6 billion penalty against PG&E for the deadly explosion.
A law enforcement official runs towards a massive fire from a gas pipeline explosion in a residential neighborhood in this September 9, 2010 file photo taken in San Bruno, California. The California Public Utilities Commission is expected to vote Thursday, April 9, 2015, on a record $1.6 billion penalty against PG&E for the deadly explosion.
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10:53 a.m.: Regulators penalize PG&E $1.6 billion for pipeline blast

California Public Utilities Commission voted Thursday to penalize Pacific Gas & Electric Co. $1.6 billion for a deadly 2010 gas-pipeline.

The commission voted 4 to 0 on the penalty proposed last month by Commission President Michael Picker.

The fine is $200 million higher than one recommended by administrative law judges last year for PG&E, the state's largest power utility.

Picker's proposal would require PG&E shareholders to pay $850 million that would go toward gas transmission safety improvements. It also orders PG&E to pay a $300 million fine that would go into the state's general fund, and it mandates the utility pay $400 million in bill credit. 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, which killed eight people in the San Francisco suburb of San Bruno.

Picker's proposal also devotes more of the utility's penalty payments to pipeline safety upgrades. An earlier proposal considered by commissioners on Thursday would have sent most of the penalty payment into California's general fund.

The San Bruno 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 wants a penalty that is "reasonable and proportionate" and that takes into account the utility's past spending to improve safety, utility spokesman Greg Snapper said in a statement Tuesday.

10:41 a.m.: California regulator suggests utility PG&E is too big to be safe

Repeated natural-gas accidents — including a 2010 pipeline explosion that killed eight people — suggest that California's largest power utility could be too big to operate safely, the state's top utility regulator says.

California Public Utilities Commission President Michael Picker said he would ask the commission's staff to study "the culture of safety" and the structure of Pacific Gas & Electric Co., which has its gas and electricity operations under a single corporate board and chief executive.

He also wants staffers to review the possibility of the state claiming bonuses given to executives of PG&E, one of the country's largest power utilities with 9.7 million gas and electric customers.

The Associated Press obtained Picker's prepared statement ahead of a commission meeting Thursday, where the panel is expected to vote on a record $1.6 billion penalty against PG&E for a deadly gas pipeline explosion in a San Francisco suburb.

PG&E officials said Wednesday that the utility has redoubled safety training, changed top executives and carried out extensive safety improvements to its natural-gas system.

"We look forward to hearing any comments from President Picker and we welcome an ongoing discussion focused on safety," PG&Espokesman Keith Stephens said in an email. "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've made tremendous progress but we have more to do and we are committed to doing it right," he said.

Picker's statement cited what he said were rising numbers of state safety citations against PG&E's natural gas operations and said it appeared the utility, with $1.6 billion in earnings in 2014, 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.

"Is the organization simply too large — spread across a sizeable portion of a large state, and encompassing diverse functions such as both gas transmission and gas distribution, as well as electric service — to succeed at safety?" Picker said in his statement.

The commission planned to decide Thursday between the $1.6 billion penalty and another proposal with a lower penalty for the 2010 pipeline explosion in San Bruno.

The National Transportation Safety Board faulted repeated safety failures by PG&E, as well as lax regulation by the commission, in the blast. The fiery explosion from a broken pipeline engulfed a neighborhood on Sept. 9, 2010, killing eight people and destroying more than three dozen homes.

San Bruno officials have kept pressure on utility regulators and PG&E in the years since. Legal actions taken by city led to the release of 65,000 emails between the utility and regulators over the past two years. The emails included exchanges that showed commission staffers and members coordinating to find judges favorable to PG&E on rate cases.

Another email described Picker's predecessor, Michael Peevey, pressing a PG&E executive over dinner for $1 million in donations to a ballot initiative backed by Gov. Jerry Brown and for $100,000 to help pay for a commission gala.

The U.S. attorney's office and state attorney general have since informed PG&E that they are investigating possible corruption between the commission and the utility, PG&E says. The utility said the executives accused of improper dealings no longer work for PG&E.

The criminal investigations into the utility commission's backchannel dealings with PG&E led the governor to put Picker, his former energy adviser, in charge of the panel this year.

Since the blast, survivor John P. McGlothlin said PG&E television commercials and full-page newspaper ads describing the company's care for Californians make him skeptical the utility understands the gravity of safety problems.

"It looks like at some point they decided to spend the money on what I'll call propaganda, rather than action," said McGlothlin, who had been cooking dinner with his wife in 2010 when he heard what he thought was a plane coming apart overhead.

"I looked over my shoulder, and there was a fireball. Literally, the fireball looked like it was in our backyard," he said.