PG&E could get stiffest fine ever for San Bruno blast negligence

Safety division recommends shareholders pick up tab, not ratepayers

The state agency investigating the 2010 horrific San Bruno blast recommended today (May 6) that Pacific Gas & Electric pay $2.25 billion for its negligence and spend $2.25 billion to make its gas transmission system safe. "This penalty will be the largest penalty ever assessed to a utility company," said the Consumer Protection and Safety Division of the California Public Utilities Commission (CPUC). The good news is that neither the fine nor the capital expenditures should be picked up by ratepayers, according to the recommendation; shareholder should bear the entire burden, said the division. A CPUC commission judge will make the decision on the penalty later this month.

The division spared few words: the accident was the worst of any electric or gas utility in the history of California, and "the serious failure by PG&E to detect and prevent this explosion, leading up to (and during) the incident, was morally and ethically reprehensible," said the division. "PG&E had literally no idea that the flawed pipe sections that ruptured were there." PG&E stock is down $1.59% to $46.50.

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Comments

Somehow I doubt the shareholders will be on the hook for what happened, but it wouldn't bother me if they were.

aardvark: Of course, this is one recommendation that the CPUC judge will take into account (hopefully). Under Mike Peevey, the CPUC has been pro-utility and its shareholders, and anti-ratepayers. So we will have to see. But at least this is a step in the right direction. Best, Don Bauder

The idea that ratepayers pick up the tab for events that occur in the normal course of business makes sense. But gross negligence and a catastrophic blast like that in San Bruno are not in the normal course of business. Hence, the stockholders are on the hook. Isn't that, more or less, the concept of a regulated public utility?

Visduh: You are absolutely right. Suppose a retailer gets caught using bait and switch tactics on its customers. Should those customers have to chip in and pay the retailer's legal fees and fines? Of course not. Ownership has to pay for negligence and/or fraud. Best, Don Bauder

Someone should be frog hopping in an orange jumpsuit. If blowing up a suburb isn't a crime, we need to pass a law. Strange how a couple of angry punks frighten a nation, when the greedy rich can set off a kiloton blast and it doesn't even bankrupt the company. Killing people to save a dollar should put a firm out of business, and everyone responsible in prison.

Psycholizard: Good points. As you can see, the Consumer Protection and Safety Division of the CPUC uses very strong language to denounce PG&E, not unlike your words. But I know of no criminal investigation going. Best, Don Bauder

yeh! strong language will make them think twice about their aging system. ( probably make the persons retire with a fat pension before they can be held accountable )

Murphyjunk: I get your point. You have fingered the modus operandi of the CPUC. The Division of Ratepayer Advocates or the Consumer Protection and Safety Division will issue a report denouncing a utility for its negligence and/or incompetence. But an administrative law judge and/or the full commission will issue a laughable wrist slap. Best, Don Bauder

WALL STREET LAUGHING OFF THE SCOLDING: Wall Street seems unconcerned about the recommended fine for PG&E. Indeed, Wall Street may consider the fine less than it expected. PG&E stock is up 1.8% this morning (May 7). Best, Don Bauder

The era of impunity from criminal prosecution for killing and threatening of lives of ratepayers due to criminal negligence by CPUC, SCE, PG&E and SDG&E executives must be ended and the executives prosecuted or it will just keep getting worse, as Fukushima proved. Shareholders, not ratepayers, must pay the costs of their criminal negligence or corporations will continue to get away with murder.

Anon92107: According to the basic premise of capitalism, shareholders should pay for mismanagement. But the modus operandi of California utilities is too close to crony capitalism, not capitalism. Best, Don Bauder

Don, my all time favorite Economics bible is Paul Samuelson's textbook, where I learned the same fact of life you just said about 50 years ago. I still keep it on my bookshelf for ready reference, but your column keeps updating me.

Unfortunately Greed always has and always shall rule, regardless of consequences against acceptable quality of life long-term future of humanity, as Washington proves 24/7.

Our generation trashed the legacy of the Greatest Generation so our grandchildren will be the first generation to pay the hideous price of our failure to prevent and fix the out of control mess we are in.

Anon92107: I agree that greed has always been dominant in our system, but beginning in the 1980s, the obsession with greed escalated tremendously. This has been quite harmful to our economy. Best, Don Bauder

NO doubt in my mind that the recent rate increases were inanticipation of this,

None of what is made public was not thought out with the help of all parties involved ( and not to the benefit of the public)

Murphyjunk: Absolutely. The CPUC operates behind closed doors -- and the utilities are in on those closed-door sessions. The public is not invited, because the conspirators are planning ways to screw the public. Best, Don Bauder

In their minds, they are not out screw the public, they just want to enrich themselves , screwing the public is just collateral damage,

Murphyjunk: The two phenomena are linked. Profits are maximized as ratepayers are screwed. But you are right on the motivation: it's self-gratification, self-aggrandizement, and insufferable greed. Best, Don Bauder

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