California Public Utilities Commission Imposes Record $1.4 Billion Penalty Against Utility Following September 2010 Pipeline Explosion

Yesterday, the California Public Utilities Commission (CPUC) issued four decisions by two Administrative Law Judges in connection with CPUC investigations of a utility’s gas transmission operations and practices, including pipeline recordkeeping, pipeline classification, and the September 2010 pipeline explosion that killed 8 people, injured 58 others, and damaged or destroyed more than 100 homes.  Collectively, the decisions result in the largest safety-related penalty ever issued by the CPUC, dwarfing the previous high of $38 million following a natural gas explosion in 2008.  Collectively, the Administrative Law Judges found that the utility committed 3,798 violations of state and federal laws, rules, standards, or regulations, and because many of these violations continued for years, the utility was in violation for a total of 18,447,803 days.

The penalty, which the utility has vowed to challenge, is just the latest event in a long line of fallout from the September 2010 explosion.  In July, a federal grand jury returned a superseding indictment charging the utility with obstruction of the National Transportation Safety Board’s (NTSB) investigation of the explosion and 27 counts of knowingly and willfully violating the Pipeline Safety Act and its regulations between 2003 and 2010, including by failing to identify and evaluate threats to its transmission pipelines, violating pipeline “integrity management” practices and failing to address recordkeeping deficiencies with its natural gas pipelines despite knowledge that their records were inaccurate or incomplete.  The maximum statutory penalty for each count of violating the Pipeline Safety Act is $500,000 or a fine based on twice the gross gain the utility made as a result of the violations (alleged to be $281 million) or twice the losses suffered by the victims (alleged to be $565 million).