Commission Opens Penalty Phase in San Bruno Case

With an independent audit and a report from CPUC's Consumer Protection and Safety Division exposing Pacific Gas and Electric Company's repeated decisions to postpone maintenance, the penalty consideration case opened Jan. 12 could result in "very significant fines" against the utility.

The penalty consideration case opened Jan. 12 by the California Public Utilities Commission in the San Bruno gas pipeline explosion could be very expensive for Pacific Gas and Electric Company. Criminal charges may yet be brought, possibly supported by two documents released last week by the commission. They are an independent audit by Overland Consulting of Leawood, Kansas, and a report from CPUC's Consumer Protection and Safety Division.

The Sept. 9, 2010, explosion of a 30-inch natural gas transmission pipeline owned and operated by PG&E resulted in eight deaths, damage to 70 homes, and the destruction of 38 homes. The Consumer Protection and Safety Division report determined that PG&E violated the Public Utilities Code and several federal and state pipeline safety regulations and also did not follow accepted industry standards when it installed the section of pipe that failed in San Bruno, according to the commission. The audit showed the utility's Gas Transmission & Storage unit was under significant budgetary pressure from 2008 through 2010, and maintenance and integrity management budgets were set far below the requested amounts. Some integrity management projects were deferred to future years to save money. The audit says PG&E's corrective maintenance backlog experienced large increases in 2008, 2009, and 2010.

Opening the case concludes the CPUC staff's investigation into the pipeline rupture "and means a formal enforcement action, leading to possible penalties and other remedies, has now been launched by the CPUC," the agency announced. "The case will not be solely limited to the events that took place on September 9, 2010, but will include all past operations, practices, and other events or courses of conduct that could have led to or contributed to the pipeline rupture in San Bruno."

"The National Transportation Safety Board, the Independent Review Panel, and CPSD have presented us with sufficient information and good cause to move to this new phase and determine whether safety violations have occurred with respect to PG&E before, during, and after the San Bruno pipeline rupture, and if so, the proper remedies for such violations," said CPUC President Michael R. Peevey. "We are now essentially giving PG&E its day in court. If we determine PG&E has violated the law, we are prepared to impose very significant fines."

In fact, NTSB's report on the explosion said the pipe would not have met quality control or welding standards when it was installed in 1956. If the CPUC had not permitted grandfathering of older pipelines since 1961 and DOT had not permitted it since 1970, that pipeline "would have undergone a hydrostatic pressure test that would likely have exposed the defective pipe that led to this accident," the safety board concluded. It also said there is "no safety justification for the grandfather clause exempting pre-1970 pipelines from the requirement for post-construction hydrostatic pressure testing."

CPUC Commissioner Timothy Alan Simon, who is a member of the Pipeline Safety Task Force between the National Association of Regulatory Utility Commissioners and DOT's Pipeline and Hazardous Materials Safety Administration, said the timing of the penalty consideration case "is very appropriate as we have before us the complete investigation reports from the National Transportation Safety Board, the Independent Review Panel, and our Consumer Protection and Safety Division." He added, "I believe this proceeding is going to show utilities the need to re-examine their response protocols, risk assessment, and records management for pipeline safety."

Public hearings will be held as part of the case, and the commission will specifically consider what level of fines and other remedies to levy to ensure this type of catastrophe does not recur, commissioners said. For more information on the case, including the division's report, visit www.cpuc.ca.gov/PUC/SanBrunoReport.htm. For information on steps CPUC is taking to improve pipeline safety, visit www.cpuc.ca.gov/PUC/events/sanbruno.htm.The audit is available at ftp://ftp.cpuc.ca.gov/SanBrunoReports/Focused%20Audit.pdf and the NTSB report at http://www.ntsb.gov/doclib/reports/2011/par1101.pdf.

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