PG&E May Face $1.1 Billion U.S. Fine for Pipeline Blast

PG&E Corp. (PCG)’s utility was accused of obstructing a federal probe and faces a potential fine of as much as $1.13 billion on new charges over a 2010 natural gas pipeline explosion that killed eight people in a San Francisco suburb, prosecutors said.

In addition to obstruction, Pacific Gas & Electric Co. was charged with 27 counts of “knowingly and willfully” violating the Natural Gas Pipeline Safety Act in a revised indictment, according to a statement yesterday from the U.S. Attorney in San Francisco.

“These are serious allegations,” said Paul Patterson, a New York-based analyst for Glenrock Associates LLC. “I cannot think of a comparable situation in the 20 years that I have followed the utility industry.”

PG&E said yesterday in an e-mailed statement that it hadn’t seen the latest version of the indictment. The company said it doesn’t “believe that the charges are warranted and that, even where mistakes were made, employees were acting in good faith to provide customers with safe and reliable energy.”

PG&E fell 3 cents to $46.57 at 10:18 a.m. in New York trading. The shares gained 16 percent this year before today.

The additional charges come as state regulators separately consider a proposed $2.25 billion penalty after a gas fireball from a ruptured pipe engulfed a neighborhood in San Bruno, California. PG&E Chairman and Chief Executive Officer Tony Earley last year said a fine that large could force the San Francisco-based company to the brink of bankruptcy.

High Risk

Federal prosecutors said the utility tried to hide from the National Transportation Safety Board that it didn’t prioritize or properly assess many of its oldest natural gas pipelines as high-risk from 2009 to 2011, according to the statement.

The utility could face a fine based on twice the losses suffered by victims of the blast, totaling $1.13 billion, according to the statement. PG&E said last month that it expected federal prosecutors to file more charges over alleged violations.

“The new criminal charges demonstrate a pattern of deceit by PG&E,” San Bruno Mayor Jim Ruane said in an e-mailed statement. “The indictment shows federal prosecutors are taking the strongest steps to ensure PG&E is brought to justice based on the evidence of criminal actions and gross negligence.”

PG&E was initially charged in April with 12 pipeline safety violations by the U.S. government for the explosion.

The case is U.S. v. Pacific Gas and Electric Co., 14-cr-00175, U.S. District Court, Northern District of California (San Francisco).

To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net; Karen Gullo in federal court in San Francisco at kgullo@bloomberg.net

To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net; Michael Hytha at mhytha@bloomberg.net Andrew Dunn, David Glovin

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