CPUC Investigations into San Bruno Explosion and
Gas Pipeline Safety Violations: Fines and Remedies
On September 9, 2010, a 30-inch gas transmission pipeline owned and operated by PG&E ruptured and caused an enormous fire that killed eight people, injured 58 others, and destroyed or damaged over a hundred homes in a San Bruno, CA neighborhood. In the wake of the San Bruno explosion, the CPUC opened three separate investigations into PG&E’s failure to comply with pipeline safety requirements. The CPUC will determine whether fines and other forms of penalties are appropriate and the magnitude of those fines, relevant to the proceedings below.
- San Bruno Investigation: In January 2012, the CPUC opened an Investigation to determine whether PG&E violated state safety laws and whether its actions and practices contributed to the San Bruno pipeline explosion.
- Recordkeeping: In February 2011, the CPUC opened an Investigation to determine whether PG&E violated state law by failing to maintain pipeline records necessary for safe operation its transmission gas system. The CPUC defined gas safety recordkeeping to mean “PG&E’s acquisition, maintenance, organization, safekeeping, and efficient retrieval of data that the Commission finds is necessary and appropriate under the circumstances for PG&E to make good and safe gas engineering decisions, and thus to promote safety as required by Section 451 of the California Public Utilities Code.”
- Pipeline Safety in High Density Areas: In November 2011, the CPUC opened an Investigation to determine whether PG&E violated state and federal regulations by failing to survey population changes in its service territory and to meet safety requirements applicable to high density areas. More stringent safety requirements apply to densely populated areas. Federal and state laws require gas utilities to monitor changes in population density in their service territories and to reduce gas pressure or strengthen pipe to mitigate potential dangers in highly populated areas.
In May 2013, the CPUC’s Safety and Enforcement Division (SED), formerly the Consumer Protection and Safety Division (CPSD), filed its Opening Brief. On July 16, 2013, SED filed an Amendment to its Reply Brief. The Amendment recommends the CPUC impose a $2.25 billion “penalty” on PG&E for hundreds of safety violations shown in the CPUC’s three Investigations, broken down as follows:
- $300 million minimum fine, to be paid immediately to the California state general fund.
- $1.95 billion remaining should be used to pay the disallowed costs of shareholders, to decrease ratepayer burden in Phase 1 pipeline safety upgrades.
- The balance of penalty remaining should be used to relieve ratepayers from future costs of pipeline safety upgrades in Phase 2.
Total pipeline safety upgrades required could cost $10 billion, or even more. The CPUC had previously issued a Decision to divide the cost responsibility between ratepayers and shareholders.
The CPUC should impose on PG&E a fine large enough to have a deterrent effect, given the evidence of many serious pipeline safety violations going back decades. Other remedies are also needed to ensure public safety. DRA specifically recommends that the CPUC:
- Impose a pre-tax $ 2.5 billion penalty on PG&E (which SED’s financial analysis demonstrates PG&E can absorb), which would include:
- $550 million fine payable to the state’s General Fund
- $1.169 billion approved by the CPUC for the first phase of PG&E’s remedial Pipeline Safety Plan, which should now be paid by PG&E including any cost overruns
- Acknowledge tax benefits of the portion of the total penalty that is used to improve PG&E’s gas system, which significantly reduces the effective cost to the PG&E.
- Engage a qualified and independent Monitor to ensure that PG&E properly performs and completes Pipeline Safety work, and to provide periodic public reports at shareholder expense.
- Implement fully the NTSB’s recommendation to conduct a comprehensive audit on all of PG&E’s gas operations.
- Require PG&E shareholders to reimburse the costs of the CPUC’s three investigation.
See DRA’s May 6, 2013 Opening Brief.
A CPUC Proposed Decision is expected in summer 2013.
See the Proceeding docket on the San Bruno Investigation.
See the Proceeding docket on Recordkeeping Investigation.
See the Proceeding docket on Pipeline Safety in High Density Areas.
DRA PG&E Pipeline Safety Plan Webpage
CPUC Press Release on its Safety Enforcement Decision penalties, May 6, 2013.