(09-02) 13:16 PDT SAN BRUNO --
Pacific Gas and Electric Co. must pay a record $1.4 billion in fines and improvements for violating pipeline safety laws in the deadly San Bruno natural-gas explosion, two administrative law judges said Tuesday.
The California Public Utilities Commission judges levied a $950 million fine against PG&E for the September 2010 blast that killed eight people and destroyed 38 homes. They also ordered the company to pay $400 million in improvements to its pipeline transmission system and $50 million in other costs, including an audit of changes it has already made to its gas lines since the disaster.
Combined with $635 million in pipeline upgrades that PG&E has already been ordered to absorb, the total cost of San Bruno fines and improvements to the company will top $2 billion, commission officials said in a statement.
The fines and ordered improvements would be paid for by PG&E's shareholders, not the company's customers.
The judges' ruling is final unless one of the parties in the San Bruno case or one of the utilities commission's five members challenges it within 30 days. If that happens, the matter would go before the full commission, whose members are appointed by the governor.
PG&E officials issued a statement that did not say whether they would challenge the ruling.
"We are accountable and fully accept that a penalty is appropriate," the company's statement said. "We have respectfully asked that the commission ensure that the penalty is reasonable and proportionate and takes into consideration the company's investments and actions to promote safety. Moreover, we believe any penalty should directly benefit public safety."
San Bruno City Manager Connie Jackson said it was "way too soon" for city officials to decide whether to appeal.
Mayor Jim Ruane said he was concerned that the judges hadn't ordered PG&E to spend more on safety improvements, and that the penalty may be disproportionately weighted toward fines.
"There is an extraordinary amount in the fine that does not go directly into safety of the pipelines in the ground," Ruane said, "and that's unfortunate."
Investigations by the National Transportation Safety Board and a blue-ribbon panel appointed by the utilities commission have said PG&E failed to adequately test and maintain its system of more than 1,100 miles of urban gas-transmission lines before the San Bruno explosion. The blast happened when a seam weld that PG&E didn't know existed ruptured on a 30-inch transmission line.
Since the disaster, company executives say, PG&E has beefed up its pipeline replacement and testing programs and improved its emergency response system.
The penalty announced Tuesday would far exceed the utilities commission's highest-ever against a utility for gas-related violations, a $38 million fine against PG&E for a December 2008 explosion that killed a homeowner in Rancho Cordova (Sacramento County). It would also exceed the biggest fine ever against a U.S. utility for a gas blast, topping the $101.5 million fine against El Paso Natural Gas for an August 2000 explosion that killed a dozen campers in Carlsbad, N.M.
The PG&E case was divided into two main areas. Administrative Judge Amy Yip-Kikugawa presided over hearings into PG&E's incomplete or missing pipeline records and its failure to track population growth in urban areas and lower pressures accordingly for safety reasons.
Yip-Kikugawa found that PG&E had routinely made flawed assumptions about its pipelines and had known its records were in disarray. She also found the utility had consistently failed to lower pipeline pressures around newly developed areas, as required by law.
Retired Administrative Law Judge Mark Wetzell oversaw the allegations stemming from the blast itself. He found PG&E had failed to properly test many of its at-risk pipelines, including the one that ruptured in San Bruno. The company relied on an inspection method for most pipelines that was incapable of detecting flawed welds, Wetzell found.
Working off incorrect records, PG&E had concluded that the pipeline installed in San Bruno's Crestmoor neighborhood in the 1950s had no seam welds. The line finally ruptured at a cobbled-together assortment of short pipes, many with flawed seam welds.
Jaxon Van Derbeken is a San Francisco Chronicle staff writer. E-mail:jvanderbeken@sfchronicle.com
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