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UPDATE: CPUC Release Confirms $1.4B Penalty to PG&E Related to San Bruno Rupture

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The California Public
Utilities Commission (CPUC) today issued four decisions by two
Administrative Law Judges in connection with its investigations
of Pacific Gas and Electric Company's (PG&E) operations and
practices related to gas transmission, including the pipeline
rupture in San Bruno, Calif., in 2010, penalizing PG&E $1.4
billion, the largest safety related penalty ever levied by the
CPUC.

The Administrative Law Judges issued three decisions
establishing the number of violations in connection with each
investigation. In the fourth decision, the Administrative Law
Judges impose a penalty based on the total number of violations.
The Administrative Law Judges found that in total, PG&E
committed 3,798 violations of state and federal laws, rules,
standards, or regulations in connection with the operations and
practices of its gas transmission system pipeline. Many of
these violations continued for several years, resulting in a
total of 18,447,803 days in violation.

The $1.4 billion penalty, when combined with the amount that the
CPUC previously ruled must come from shareholders for
expenditures to improve the safe operation of natural gas
pipelines (R.11-02-019), exceeds $2 billion. The penalty
consists of $950 million to be paid to California's General
Fund, $400 million in pipeline improvements that cannot be
recovered from customers (called a disallowance), and
approximately $50 million to be used to implement more than 75
remedies to enhance pipeline safety, including $30 million for
the CPUC's Safety and Enforcement Division to hire independent
auditors to audit PG&E's Pressure Validation project and Project
Mariner implementation, training for emergencies (City of San
Bruno), establishing a centralized database to track location
and use of salvaged pipe in PG&E's gas transmission pipeline
system, and to pay reasonably incurred litigation expenses of
intervenors.

The penalty breakdown ordered in today's decisions is as
follows:

-Fine to the California General Fund: $950 million
-Shareholder amount toward PG&E's Pipeline Safety Implementation
Plan: $400 million
-Shareholder amount toward more than 75 remedies proposed by
parties: $50 million (est.)

Total penalty from these investigations: $1.4 billion

-Shareholder amount toward PG&E's Pipeline Modernization Program
(disallowance previously approved in Decision 12-12-030):
$635 million

Total from these investigations and D.12-12-030:
$2.035 billion

These penalties must be paid by PG&E's shareholders and are not
recoverable from PG&E's customers. Within 60 days PG&E must
submit a report to the CPUC providing the status of the progress
and the timeframe for completion of each remedy ordered in the
decisions.

The decisions of the two Administrative Law Judges are the
culmination of the CPUC's investigations into PG&E's pipeline
rupture in San Bruno (I.12-01-007), its pipeline recordkeeping
(I.11-02-016), and its pipeline classification (I.11-11-009).

The CPUC's Commissioners did not provide input or comment into
the decisions, nor did they have an opportunity to review the
decisions before their release today. This is standard process
in these types of investigations.

The decisions of the Administrative Law Judges will become the
decisions of the CPUC after 30 calendar days from today, unless
a party to the proceeding files an appeal or a Commissioner
requests a review. Should a party file an appeal of the
decisions or a Commissioner requests review, the Administrative
Law Judges will review the appeal and either make changes to
their decisions or keep them the same. The decisions would then
come before the Commissioners to consider at a Voting Meeting
(although the Commissioners may discuss the decisions of the
Administrative Law Judges in a publicly noticed closed session,
they can only vote on the decisions in open session).
Commissioners also have the option of writing Alternate
decisions for consideration.

The penalties announced today amount to the largest safety
related penalty ever levied by the CPUC. The next largest CPUC
safety related penalty imposed in the recent past was a $38
million penalty against PG&E as a result of a natural gas
explosion on December 24, 2008, in Rancho Cordova, Calif.

For more information on the CPUC, please visit www.cpuc.ca.gov.

Posted-In: News Commodities Legal Markets Press Releases

 

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