California regulatory judges issued a $1.4 billion penalty on Tuesday against the state's largest utility for a lethal 2010 gas pipeline explosion that engulfed a suburban San Francisco neighborhood in flames, killing eight people and prompting national alerts about the oversight of aging pipelines.
The California Public Utilities Commission said the figure reached by two administrative law judges against Pacific Gas & Electric Co. (NYSE:PCG) in the San Bruno pipeline explosion represented the largest safety-related penalty it had ever imposed.
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The amount of the penalty is meant to "send a strong message to PG&E, and all other pipeline operators, that they must comply with mandated federal and state pipeline safety requirements, or face severe consequences," judge Timothy J. Sullivan wrote in his order.
The largest share — $950 million — of the penalty is a fine to be paid directly to the state. The amount drew objections from city officials in San Bruno and from the utility that the money should be spent on improving the security of the pipeline network.
Asked whether PG&E would appeal, utility spokesman Greg Snapper said, "We're reviewing the decision and believe that any penalty should go toward pipeline safety." PG&E separately said in a statement it fully accepts that a penalty is appropriate. The judges' recommended penalty becomes final in 30 days if no party involved lodges an appeal.
The commission previously ordered PG&E to pay $635 million for pipeline modernization in the wake of the Sept. 9, 2010, blast in the suburban San Francisco community of San Bruno. It destroyed more than three dozen homes and was California's deadliest utility disaster in decades.
The $1.4 billion penalty also includes $400 million for pipeline improvements, and about $50 million to enhance pipeline safety. PG&E cannot recover any of the money from customers, including the earlier $635 million penalty.
The administrative law judges found that PG&E committed nearly 3,800 violations of state and federal laws, rules, standards or regulations in the operation of its gas transmission system.
The blast occurred when a 30-inch natural-gas transmission line installed in 1956 ruptured. At the time, survivors described the heat of the blast burning the back of their necks like a blowtorch as they ran away.
San Bruno city officials were just beginning to study Tuesday's decision but on first read believed the penalty fell short of what was needed to ensure PG&E upgraded pipeline safety as much as necessary, city manager Connie Jackson said.
"Based on what we're seeing, it does not appear that this penalty amount goes far enough," Jackson said.
A 2011 investigation by the National Transportation Safety Board concluded that the rupture occurred in a weak weld in a pipeline that PG&E records had shown as being smooth and unwelded. PG&E neglected to shut off natural gas feeding the fire until 95 minutes after the blast, among other safety failings, the federal investigators said.
The 2011 probe found PG&E's safety management of its pipelines overall deficient and ineffective. At the same time, the federal board also faulted what it called the ineffectiveness of California's Public Utilities Commission in regulating the power utility, whose service area covers all but the southern one-third of California. The San Bruno blast prompted congressional hearings on pipeline safety and recommendations from the National Transportation Safety Board and others that utilities step up their monitoring of decades old natural gas lines.
This year, federal prosecutors separately indicted PG&E on 27 counts alleging the utility violated pipeline safety requirements. Another federal count alleges PG&E lied to the National Transportation Safety Board in that agency's investigation of the San Bruno blast.
PG&E faces additional fines of more than $1 billion if convicted of the federal charges, which are separate from the financial penalties that the California state administrative judges weighed.
PG&E pleaded not guilty to the federal counts earlier in August.
(AP writer Garance Burke contributed to this report.)