Bloomberg News

PG&E Should Pay $2.25 Billion for San Bruno Blast, City Says (1)

May 06, 2013

PG&E Corp. (PCG:US) should pay $2.25 billion for a 2010 natural gas pipeline explosion in California that killed eight people, the city of San Bruno said.

The city recommended to the California Public Utilities Commission that PG&E pay the state a $1.25 billion cash fine, San Bruno officials said in a statement today. PG&E and its shareholders also should have to pay another $1 billion in planned pipeline safety work and not be allowed to collect reimbursement for those costs from customers, the city said.

“We call on the CPUC to demonstrate that it is a tough regulator by imposing fines and penalties that will send a message that safety is a top priority and that gross negligence and recklessness will not be tolerated,” San Bruno Mayor Jim Ruane said today at a press conference ahead of PG&E’s annual shareholder meeting in San Francisco.

Parties today are submitting their recommendations for fines in a state regulatory probe into a PG&E gas line blast that destroyed 38 homes in San Bruno. The commission probably will assess a final penalty later this year, PG&E Chairman and Chief Executive Officer Anthony Earley said during an earnings conference call last week.

PG&E, based in San Francisco, fell $1.3 percent to $46.63 at 1:18 p.m. in New York.

Enhancing Safety

“PG&E has taken accountability and we fully expect a penalty from the CPUC,” Brittany Chord, a PG&E spokeswoman, said in a telephone interview. “The amount of that penalty is still an open question, but we believe every dollar of any penalty should be directed into work that enhances the safety of the system and benefits PG&E customers.”

Separately, the Utility Reform Network, a consumer advocacy group, is recommending that PG&E pay $1 billion to fix neglected pipelines and $720 million in fines and other penalties, according to an e-mailed statement. The CPUC’s Consumer Protection and Safety Division is expected to file its demand for fines and penalties later today.

The blast has cost PG&E’s shareholders $1.4 billion in mandated safety work and other expenses, the company said on May 2. It precipitated the retirement of former Chairman and CEO Peter Darbee and forced the state’s largest utility owner to freeze its dividend. PG&E has set aside at least $200 million for fines, according to a May 2 regulatory filing.

An administrative law judge still must rule on the fines and make a proposed decision for penalties. The five-member CPUC, which may amend that proposal, will then have to vote on the final penalty.

Analysts have estimated the fine will be $477 million, according to a January Wells Fargo & Co. report produced on behalf of PG&E.

To contact the reporter on this story: Mark Chediak in San Francisco at

To contact the editor responsible for this story: Susan Warren at

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