California's PG&E Faces Record Fines Over Deadly 2010 San Bruno Pipeline Blast

By Rory Carroll

SAN FRANCISCO, Sept 2 (Reuters) - The California Public Utilities Commission on Tuesday levied penalties of a record $1.4 billion on Pacific Gas and Electric Co, stemming from the deadly 2010 San Bruno natural gas pipeline rupture and fire near San Francisco.

This is the largest safety-related penalty ever imposed by the commission, dwarfing a $38-million fine for PG&E over a 2008 natural gas explosion in Rancho Cordova, California, the agency said.

The fines cover 3,798 violations of state and federal laws and regulations that two administrative law judges for the agency found in connection with PG&E's pipeline network operation, including the 2010 explosion.

Many of those violations had run for years, the panel said.

The penalty takes effect in 30 days, unless a party to the proceedings, including PG&E, files an appeal or a panel member requests a review of the decision.

The utility was "still looking at a number of options" related to Tuesday's decision, said Keith Stephens, a spokesman for the company, a division of PG&E Corp.

The company had asked the commission to "ensure that the penalty is reasonable and proportionate," PG&E Corp Chairman and Chief Executive Tony Earley said in a statement.

The fine comprises $950 million to be paid to the state treasury, $400 million to a PG&E plan to boost pipeline safety and an estimated $50 million earmarked for more than 75 specific safety remedies ordered by the commission.

When combined with another $635 million the agency previously ordered the utility to pay to modernize pipelines, the overall penalties PG&E faces from the San Bruno disaster would exceed $2 billion, the commission said.

The agency previously ruled that all penalties must come from shareholders and may not be passed on to utility customers.

The company said its total shareholder impact could reach $4.75 billion, including $2.7 billion in estimated costs it said had already been incurred or are forecast to be incurred to improve the safety of its natural gas operations.

The pipeline explosion on Sept. 9, 2010, in San Bruno, a city just south of San Francisco, destroyed an entire neighborhood, killing eight people and injuring 58.

The National Transportation Safety Board later blamed the utility's lax approach to pipeline safety and weak oversight by regulators. A federal grand jury in April indicted the company on 12 felony counts of violating safety regulations. The company has pleaded not guilty. (Writing and additional reporting by Steve Gorman in Los Angeles; Editing by Clarence Fernandez)



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