PG&E plans to appeal $1.4B penalty in deadly blast

SAN FRANCISCO (AP) — Pacific Gas & Electric Co. plans to appeal a $1.4 billion penalty recommended by California regulatory judges for a gas pipeline explosion in a San Francisco suburb that killed eight people, the utility said in a filing Wednesday with the U.S. Securities and Exchange Commission.

The utility said it plans to file an appeal with the California Public Utilities Commission within 30 days. The filing did not list a reason for the appeal, but PG&E spokesman Greg Snapper said the utility wants the commission to take into consideration the $2.7 billion PG&E has or will spend on gas pipeline safety improvements.

Snapper said any penalty should also directly go toward public safety.

"We're planning to ask the commission to review yesterday's recommendation to make sure that a final penalty counts all of the company's safety investments and actions to make the gas system the best in the country," Snapper said.

By far, the largest share of the $1.4 billion penalty recommended by two administrative law judges on Tuesday would go directly to the state with no strings attached.

The $950 million portion marked for the state's general fund also drew objections from a private advocacy group for ratepayers and the city of San Bruno, the San Francisco suburb where the fiery 2010 explosion destroyed more than three dozen homes and became the state's deadliest utility disaster in decades.

Those funds can be spent any way the governor and Legislature see fit, said H.D. Palmer, a spokesman for the state Department of Finance.

San Bruno city officials believed on first read that the overall judgment fell short of what was needed to ensure PG&E upgraded pipeline safety as much as necessary, City Manager Connie Jackson said.

The penalty — the largest safety-related levy ever against a public utility in the state — was historic in terms of financial charges levied against utilities on safety violations, said Britt Strottman, a lawyer for San Bruno. However, "a lot of the utilities do not cause the same amount of devastation and destruction that was a result of the PG&E explosion in San Bruno," Strottman said.

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, although a ratepayers' group called The Utility Reform Network maintained PG&E could raise rates in other rate cases to indirectly offset the penalty.

The California Public Utilities Commission said the figure reached by two administrative law judges over the San Bruno pipeline explosion reflected nearly 3,800 violations of state and federal law, regulations and standards by PG&E in the operation of its gas pipelines.

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," Timothy J. Sullivan, one of the two judges, wrote in the order.

The commission previously ordered PG&E to pay $635 million for pipeline modernization in the wake of the Sept. 9, 2010, blast in the suburb of San Francisco.

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.

A 2011 investigation by the National Transportation Safety Board concluded the rupture occurred in a weak weld in a pipeline that PG&E records had shown as being smooth and unwelded. Among other safety failings, PG&E let 95 minutes go by before shutting off the natural gas that was fueling the fire, the federal investigators said.

That same 2011 federal investigation also faulted what it called the California Public Utilities Commission's weak oversight of the utility, which serves customers in the northern two-thirds of California.

The San Bruno blast prompted congressional hearings on pipeline safety and recommendations from the National Transportation Safety Board and other government bodies that utilities intensify their oversight of decades-old natural gas lines.

This year, federal prosecutors separately indicted PG&E on 27 counts alleging the utility violated pipeline safety requirements.

PG&E faces additional fines of more than $1 billion if convicted of the federal charges, which are separate from the state financial penalties. PG&E has pleaded not guilty to the counts.

Separately, PG&E was hit with about 160 lawsuits from people who lost family members, suffered injuries or had property damage.

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AP writers Ellen Knickmeyer, Garance Burke and Donald Thompson contributed to this report.