Aftermath of San Bruno pipeline explosion
  • Aftermath of San Bruno pipeline explosion
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Two California Public Utilities Commission (CPUC) administrative law judges ruled today (September 2) that Pacific Gas & Electric (PG&E) must pay $1.4 billion in fines and penalties for safety violations that led to the 2010 San Bruno pipeline explosion that resulted in eight deaths and 38 destroyed homes. It is the largest fine ever assessed by the regulator, but it is less than the $2.25 billion recommended by the CPUC staff.

The decision has to go to the five-member CPUC later. Previous fines bring the total to $2 billion. The utility was fined for almost 3800 violations of state and federal rules, standards, and regulations. The fines and penalties must come from shareholders, not ratepayers.

The decision came two hours and 35 minutes before the closing of the market, and PG&E stock rose sharply when the word got out, ending the day up 1.74 percent.

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Comments

Visduh Sept. 2, 2014 @ 8:03 p.m.

To clarify, these are fines that will flow into the state coffers, and have no connection to liabilities connected with the disaster? The claims from those who lost homes, had loved ones killed, had property damaged, etc. etc. are going to be adjudicated, and will add to the cost. But the damage claims involve insurance that PG&E carried for such things. Those we can assume will be in the $ billions, but it is the insurers who are on the hook for the largest share, not PG&E.

The fact that the stock price jumped up today is evidence that the investor community had assumed the hit would be much greater, and had factored that into the market price of the stock. So, the announcement that the fine would be $1.4 billion when/if the commission so approves, is good news. The stock pundits thought it would be worse. Uh huh, the market sees a $ 1.4 billion fine as "good news."

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danfogel Sept. 2, 2014 @ 8:47 p.m.

Visduh, I thought the same when I heard the news. Then I had this thought. Look at some of the fines recently levied against the financial industry. Wasn't BofA fined about $16 billion for its faulty mortgage practices that contributed to the credit crisis? I mean yes, these guys may have caused many people problems, but nothing to mach the death and destruction that PG&E caused. So yeah, I think the market saw the fines as good news.

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Don Bauder Sept. 2, 2014 @ 9:32 p.m.

danfogel: Good point: $1.4 billion looks puny next to the fines Wall Street is getting. However, I would add that Wall Street isn't getting the punishment it deserves. Best, Don Bauder

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danfogel Sept. 2, 2014 @ 9:44 p.m.

don bauder, Nevertheless, that wall street isn't getting the punishment it deserves is irrelevant except as a comparison to PG&E. Personally, I think that the destruction of property and loss of life in San Bruno due to PG&E's willful negligence warrants a punishment much more severe than anything served up to Wall Street

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Don Bauder Sept. 2, 2014 @ 9:50 p.m.

danfogel: Wall Street's greed and recklessness may not have killed anybody, but the financial community ruined more lives than did the PG&E explosion. Best, Don Bauder

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danfogel Sept. 2, 2014 @ 9:59 p.m.

don bauder, well Wall Street's greed and recklessness actually did kill a few people, but I'm not going to debate over who committed the worse evils. I'll just say that if someone was ruined financially, they might have the chance to come back. But, at least the last time I checked, with one exception, when you are dead, you are dead, at least in this life.

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Don Bauder Sept. 3, 2014 @ 7:05 a.m.

danfogel: The fact that the Obama administration did not file criminal complaints against many banking executives in the 2008 meltdown is a failure and a guarantee that the practices will continue. Best, Don Bauder

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Don Bauder Sept. 2, 2014 @ 9:30 p.m.

Visduh: Of the sum, $950 million goes into the state's general fund, $400 million into pipeline improvements, and another $50 million to implement remedies to pipelines. The CPUC previously ordered PG&E to pay $635 million for pipeline modernization.

Yes, Wall Street certainly appeared to be expecting something closer to the $2.25 billion recommended by staff. The stock went up sharply after the decision was announced. Best, Don Bauder

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Visduh Sept. 3, 2014 @ 9:18 a.m.

The related matter is how much PG&E set aside already to cover the costs of litigation, fines, and related costs of the disaster. Oddly enough, the accounting fraternity is very big on "conservatism" in matters of putting reserves on the balance sheet in such cases. So, in the aftermath of the explosion, it is likely that PG&E took a whopping charge (several $ billion) that is now history. Wall Street has a pattern of allowing such charges to be taken repeatedly without having much adverse impact on the stock price. That is one reason that these periodic restructuring charges are taken by corporate America--the investment community looks upon them favorably and ignores that they are real profit dollars that are being spent (or squandered.)

So, now it is likely that PG&E can begin to plan to put some of that reserve back through the P&L, and jack up its earnings.

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Don Bauder Sept. 4, 2014 @ 6:04 a.m.

Visduh: And both PG&E and the CPUC have only one interest: earnings. Public service and safety are not on the radar screen. Best, Don Bauder

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CaptainObvious Sept. 2, 2014 @ 8:41 p.m.

I have a friend who was an arborist for PG&E until he found a batter job recently. One job after this disaster was to implement a zero-vegetation policy over underground gas lines, much to the dismay of property owners, and I understand they even removed some building that were over the lines.

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Don Bauder Sept. 2, 2014 @ 9:33 p.m.

CaptainObvious: Zero vegetation? Buildings removed? I didn't know about either. Best, Don Bauder

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danfogel Sept. 2, 2014 @ 9:54 p.m.

Don Bauder I read about their plan to remove vegetation and structures that block access to its network of natural gas pipelines, but what I read was only regarding the East Bay at the time. They call it their Pipeline Pathways Project: http://www.pge.com/includes/docs/pdfs/myhome/customerservice/other/treetrimming/pipelinerightofway/StepByStepImprovngPipelineAccess.pdf

Not exactly a zero-vegetation policy as described. It actually seems pretty reasonable to me.

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Don Bauder Sept. 3, 2014 @ 7:12 a.m.

danfogel: There hasn't been much controversy about the issue, I believe -- although there may have been in Northern California. Best, Don Bauder

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Don Bauder Sept. 3, 2014 @ 7:34 a.m.

William Bibb: Yes, many if not most companies place profit over safety. They also place profit over employee, community, vendor, and environmental relationships. Our primary problem is that companies now consider the shareholders the only constituency. Fifty years ago, this was not true. Companies did consider it good business to have good community relations.

I am sure your client was up against a battery of well-paid lawyers...and perhaps against a judge biased in favor of the corporation. Best, Don Bauder

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MURPHYJUNK Sept. 3, 2014 @ 8:52 a.m.

another rate hike in the works to cover this ?

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Don Bauder Sept. 3, 2014 @ 11:02 a.m.

Murphyjunk: The administrative law judges ruled that the shareholders, not ratepayers, must pay for the San Bruno fees and penalties. That decision will be reviewed by the full commission. The most disgusting aspect about this decision is that the damage was considerably lowered from what the CPUC staff recommended. Best, Don Bauder

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Visduh Sept. 3, 2014 @ 11:35 a.m.

At least it cannot be claimed that the staff is running the show there. There are such bodies where the board routinely rubber stamps anything/everything recommended by the staff.

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Don Bauder Sept. 3, 2014 @ 3:18 p.m.

Visduh: The staff is hardly running the show when the administrative law judges can reduce the suggested penalty by so much. It was the same way with the Coastal Commission's view of the proposed convention center expansion. The staff recommended a no vote; the commission voted yes. Best, Don Bauder

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monaghan Sept. 3, 2014 @ 3:19 p.m.

Staff is where the knowledge is, always. Too bad the judgement is only half of what was recommended, but in today's climate, this is a win and I am glad to hear it. When is CPUC chairman Peevey going to leave? I agree with Dan Fogel: the death and destruction wrought in San Bruno was in a class by itself.

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Don Bauder Sept. 4, 2014 @ 6:06 a.m.

monaghan: PG&E was negligent in thousands of areas, according to researchers. The penalty should have been at least as high as the one recommended by staff, and perhaps even higher. Best, Don Bauder

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CaptD Sept. 4, 2014 @ 7:28 a.m.

Another major BILION DOLLAR gift to a "Public Utility" called PG&E.

No wonder CA has the highest rates in the USA.

Now notice how our bought MSM will focus on the Big Fine and not the BIG Discount given to PG&E.

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