PG&E Corporation's PCG primary subsidiary and California’s largest regulated electric and gas utility – Pacific Gas and Electric Company (Pacific Gas) – is charged with $1.6 billion in fines and penalties associated with the fatal 2010 San Bruno natural gas pipeline explosion.
This is $200 million more than the $1.4 billion penalty proposed last year by the San Francisco-based agency's administrative law judges. Members of the Public Utilities Commission (“PUC”) voted unanimously to fine PG&E for 2,425 violations of federal and state safety rules.
After nearly five years of the incident that killed eight people, injured dozens of others, and damaged over 100 houses, this penalty leveled by the California PUC is believed to be the largest safety-related fine in the history of the agency and one of the biggest to be paid by a U.S. utility.
The charges comprise a shareholder penalty worth $850 million for gas transmission pipeline safety infrastructure, a fine of $300 million for the state's general fund, a one-time bill credit of $400 million that would be distributed among the company’s gas customers and $50 million for measures related to the compliance of pipeline safety.
Including all San Bruno-related penalties levied against PG&E as well as other credits to be paid to customers, the total amount comes to a staggering $2.2 billion.
Not appeased with their harsh verdict, the members of the commission are now proposing a fresh investigation relating to “the culture of safety” at this San Francisco utility. The utility has been found guilty of neglecting its enormous network of gas pipelines for decades.
PG&E however reported encouraging fourth-quarter 2014 results with its operating earnings rising 26.2% year over year. On its fourth-quarter earnings call, the company stated that shareholder borne costs would amount to about $2.8 billion as a result of pipeline safety-related work since the San Bruno incident including the company’s commitment over the next few years.
Since the tragic explosion, the company has replaced 800 miles (1,300 km) of old cast-iron transmission lines with well-built and seismically sound pipes. Additionally, it installed 200 emergency shut-off valves and new leak-detection technology which is 1,000 times more sensitive than the earlier version.
PG&E currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector are DTE Energy Company DTE, Public Service Enterprise Group Inc. PEG and Alliant Energy Corporation LNT, each carrying a Zacks Rank #2 (Buy).
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