Pipeline safety officials in California call for stiffer punishment of PG&E


Pipeline safety officials are calling for a stiffer punishment of PG&E Corp. for its role in a lethal pipeline explosion in San Bruno, Calif., in 2010.

A new proposal, issued Tuesday by staff lawyers for the California Public Utilities Commission, asks the agency's commissioners to levy a $300 million fine and additional penalties topping $1.9 billion.

The plan replaces an earlier proposal that ordered the utility to pay the same amount but included no fine, which analysts said lowered the company's costs on an after-tax basis. The new plan also limits the amount of money that PG&E has already spent on pipeline upgrades that it can count toward paying the penalties.

The company has already put aside $200 million to cover a fine; the commission still is months away from reaching a final decision.

The penalty case stems from the September 2010 explosion of a high-pressure natural-gas pipeline owned by Pacific Gas and Electric Co, which cut through a residential neighborhood in San Bruno.

The rupture caused a massive fireball that killed eight people, injured 58 others, and damaged or destroyed more than 100 homes. It was one of the largest pipeline disasters in US history, and reconstruction of the neighborhood is continuing.

Federal and state investigators determined that PG&E was to blame for the pipeline rupture, following separate investigations that revealed a pattern of neglect, including lost or incomplete pipeline records, shoddy welding of the pipeline that ruptured, and inadequate safety testing.

The call for harsher punishment shows that hard-liners at the regulatory agency prevailed in an internal dispute, among investigators and lawyers, concerning the appropriate punishment.

The initial penalty proposal favored by Jack Hagan, the head of the utility commission's investigative division, would have allowed the utility to get credit for some prior spending. That proposal did not include any outright fines.

A team of lawyers at the commission, led by 31-year veteran Harvey Morris, said the proposed punishment was far too lenient. As a result of the disagreement, the team of lawyers was temporarily removed from the case. City leaders from San Bruno sided with the ousted lawyers and said they, too, wanted harsher punishment and explicit fines.

The legal team was restored to the case in late June and soon notified a hearing judge that it would file a new penalty recommendation in the case.

San Bruno city officials still are calling for $3.85 billion in penalties, including a $900 million fine and increased spending on pipeline improvements, City Manager Connie Jackson said.

City officials also have asked the federal Pipeline and Hazardous Materials Safety Administration to strip California regulators of responsibility for enforcing federal pipeline safety laws. PHMSA, which in most states delegates those duties to utility regulators, told the city on Monday that it would audit California's inspection and enforcement program.

Dow Jones Newswires

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