Fueling a Tragedy: Eight people were killed and 38 homes destroyed when a huge explosion ripped through a San Bruno, Calif., subdivision in September 2010. The explosion was caused when a weakened 1950s-era pipe under the neighborhood became flooded with gas from improperly opened valves.
Pacific Gas & Electric was unable to shut off fuel to the line, which eventually burst, releasing enough gas to power 12,000 homes for a year, according to the Los Angeles Times. A National Transportation Safety Board report released the following year cited deteriorating infrastructure, lax oversight, and non-existent emergency planning among a “litany of failures” that contributed to the explosion.
Pressing on the Gas (Company): The Consumer Safety and Protection Division of the California Public Utilities Commission last week recommended that PG&E be penalized a record $2.25 billion for its part in the explosion. The hefty penalty would be the largest ever levied by a state regulatory agency, according to the Los Angeles Times.
While the amount is staggering, it’s actually adjusted down from the fines regulators could have imposed. The CPSD investigation uncovered more than a hundred violations stretching back for multiple years.
“Imposing a fine for each violation for each ongoing day would result in tens of billions of dollars of fines, which is more than PG&E's net worth,” the investigation report states. “CPSD recognizes that there is a limit on how much PG&E can afford to pay, because PG&E needs… to be able to pay for its improvements in the safety of its facilities, as well as to procure natural gas and electric power.”
If approved, CPSD Director Jack Hagen stated that he would recommend “every penny” of the penalty be spent on making the PG&E system safer.
Running on Empty: PG&E has indicated that it thinks the potential sanctions are too onerous and will damage its ability to draw investors. The company has said that it will file a counterproposal with the Public Utilities Commission later this month, according to KGO-TV in San Francisco.
A statement released by company CEO Tony Earley also notes that the CPSD recommendation doesn’t reflect the $1.4 billion in shareholder-funded improvements already completed by the company since the explosion. PG&E also paid the City of San Bruno a $70 million settlement earlier this year.
“The company has already paid a very heavy price and I think numbers like you mentioned are just unrealistic,” Early told KGO-TV. “I don't have that money sitting in the bank. I've got to go out and raise that money from shareholders who're willing to invest in the company and future.”
The Public Utilities Commission will reply to recommendations by May 24 and make a decision in the matter by late summer, according to its statement.