The California Public Utilities Commission said it would impose $1.6 billion in fines on
On September 9, 2010, a 30-inch natural gas transmission pipeline rupture beneath a residential neighborhood in San Bruno about 12 miles south of San Francisco.
The rupture triggered an explosion that registered 1.1 on the Richter scale and ignited “a wall of fire more than 1,000 feet high.” The blast and subsequent blaze killed eight people, seriously injured dozens more people and burned 38 homes to the ground.
The penalties include $850 million for gas transmission pipeline safety infrastructure improvements, $300 million to the state's General Fund; $400 million in a one-time bill credit spread across PG&E's gas customers and $50 million for other remedies to enhance pipeline safety.
PG&E said it would not appeal the penalty, which is the largest imposed on a utility in California’s history.
Despite the multi-billion dollar fines and penalties involved, PG&E has been cited for safety violations on multiple occasions since the tragedy.
The chronic safety problems at PG&E have not escaped the notice of California’s utility regulators. In particular, utility regulators are recognizing that shareholders are not holding the utility’s management accountable.
The CPUC has tried to deter safety violations at PG&E with fines and monetary penalties. but those measures are beginning to reach the limits of their efficacy.
“Here’s our bind,” said President Picker. “We are now reaching the upper end of the range of fines and cash penalties that the CPUC’s economic studies, cited in these just-adopted decisions, argue that we can make the utility pay without raising the cost to borrow capital, and thus raise costs to ratepayers. 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?
This candid observation is the most encouraging sign I have seen to date that the CPUC understands the gravity of the risks exposed by the San Bruno tragedy.
The utility has been largely immune to conventional forms of market discipline.
“Shareholders simply may be abdicating their responsibility to hold their Board of Directors accountable to state laws and rules, knowing that we have an interest in limiting our sanctions to levels that they, as owners, can live with, so as to avoid impacts on ratepayers, as well,” said CPUC President Picker.
Picker said that he would ask the commission staff to evaluate whether more fundamental institutional and regulatory changes are necessary to resolve safety problems at PG&E.
In particular, one possible change Picker said would be considered is whether PG&E’s gas and electric businesses should be broken up into separate companies?
In my view, the answer is a no-brainer and it is “yes.”
A holding company should not be allowed to own natural gas and electric utilities that serve the same geographic region.
