By CASSANDRA SWEET
SAN FRANCISCO -- PG&E should pay $2.25 billion in
penalties for a 2010 natural gas pipeline explosion in San
Bruno, California, that killed eight people and damaged more
than 100 homes, state investigators and San Bruno officials
In their recommendations to California's utility regulator,
the state and the city differed on the details, but both argued
that PG&E violated federal and state safety rules.
PG&E, based in San Francisco, has admitted liability for
the blast but said proposed penalties were out of line.
Both the state and the San Bruno proposals to the California
Public Utilities Commission (CPUC) include $1 billion that the
commission already has ordered PG&E to spend on overhauling
State investigators recommended that on top of that,
PG&E pay $1.25 billion in penalties to cover much of the
cost of safety improvements to its pipelines ordered by the
utility regulator in December, that otherwise would be covered
mainly by PG&E customers through fees.
A fine of that size would "send a message that safety is a
top priority and that gross negligence and recklessness will
not be tolerated," San Bruno Mayor Jim Ruane said at a news
conference. "We believe if there's any case for punishing a
utility for unprecedented bad behavior, it is this one."
San Bruno officials argued the fine is commensurate with the
scale of the disaster and alleged missteps by PG&E that led
to the explosion. Federal and state investigators have blamed
PG&E for the blast, saying the company mismanaged its aging
pipeline system for decades.
"I understand the desire to punish PG&E," CEO Anthony
Earley said in a news release. "However, the penalties
proposed, far exceed anything that I have seen in my 30 years
in the industry and fail to appropriately account for the
actions taken by the company."
PG&E has admitted liability for the blast in public
statements and in radio and TV ads. But in legal documents
filed with the state utilities commission, it denied most of
the state's allegations that it violated safety rules.
The utilities commission isn't required to act on
recommendations and can make its own decision about what, if
any, fines it will impose on PG&E. The company has set
aside $200 million to pay for potential penalties.
Mr. Earley, speaking at a news conference after PG&E's
annual shareholder meeting, said the company has spent more
than $1.5 billion on pipeline related costs since the blast. He
added he hopes the state commission takes that into account
when it decides penalties. "The company has already paid a very
heavy price," Mr. Earley said, adding that the fine sought by
San Bruno was "unrealistic."
Mr. Earley, who was hired after the blast, has said in
interviews and in an ad campaign that PG&E had "lost its
way" before the accident and now was focused on beefing up
But company attorneys and representatives sounded a
different note in testimony and documents filed with the state
utilities commission in January, arguing that the PG&E did
nearly everything it was supposed to and followed most safety
"PG&E deeply regrets the accident of September 9, 2010,
and acknowledges practices could have been better but, at the
time, its gas operations were in line with common practice and
regulatory requirements," the utility said in January.
Some blast victims say they are still struggling to lead
normal lives. On the day of the explosion, Bill Magoolaghan's
wife, Betty, and the couple's three children ran for their
lives as a fire sparked by the blast raced toward their San
Mr. Magoolaghan said in an interview that the children, now
8, 6 and 4 years old, still have daily nightmares and are
easily frightened by images of fire. He agreed with San Bruno
officials that PG&E should pay a large fine, hoping it
would serve to prevent future disasters.
"It's critical to have harsh penalties when you've killed
eight people and destroyed a neighborhood," he said.
Dow Jones Newswires