California Proposes $300 Million Fine for PG&E Pipe Blast

California Public Utilities Commission staff recommended PG&E Corp. (PCG) pay a minimum $300 million fine as part of a proposed $2.25 billion penalty for the 2010 natural gas pipeline explosion that killed eight people in San Bruno.

The fine would be the largest ever ordered by the California regulator, the commission’s Consumer Protection and Safety Division said in a filing today. “The tragedy in San Bruno, which was directly caused by PG&E’s unreasonable conduct and neglect for decades, was the worst disaster in the history of California electric and/or gas utilities.”

The proposal, subject to review by administrative law judges and a vote by the full commission, amends a prior staff recommendation under which the company would’ve been forced to spend the entire $2.25 billion to improve its pipeline system. The new plan would require the San Francisco-based utility owner to pay $300 million into the state’s general fund.

San Bruno has previously called for the state regulator to impose a $3.85 billion penalty. The original proposal “let PG&E off the hook” by allowing the company to claim credit for prior pipeline work, the city said on July 2. PG&E Chairman and Chief Executive Officer Anthony Earley called the original $2.25 billion penalty proposal “excessive” on May 6.

‘Unorthodox Events’

PG&E didn’t immediately respond to e-mails and a phone message seeking comment on the revised staff recommendation.

The commission said some of the attorneys working on the case asked to be reassigned last month after the division initially proposed the $2.25 billion penalty. In asking to amend its original proposal, the division cited the “unorthodox events” surrounding staffing changes.

The blast in San Bruno has cost PG&E’s shareholders $1.4 billion in mandated safety work and other expenses, the company said on May 2. It precipitated the retirement of former PG&E Chairman and CEO Peter Darbee and forced the state’s largest utility owner to freeze its dividend. PG&E has set aside at least $200 million for fines, according to a May 2 regulatory filing.

Administrative law judges at the commission still must rule on the recommended penalties. The five-member commission will then vote on the final penalty amount.

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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