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PG&E Fined $1.6 Billion for San Bruno Blast

SACRAMENTO (CN) - Pacific Gas & Electric was slammed with a record $1.6 billion fine for the fatal pipeline explosion in San Bruno that killed eight people and injured dozens in 2010.

It's the largest penalty ever assessed against a utility by the California Public Utilities Commission.

A 30-inch natural gas line with faulty welding work ruptured beneath a residential neighborhood 2 miles west in San Bruno on Sept. 9, 2010. Eight people died, 66 were injured and dozens of houses were destroyed.

"PG&E failed to uphold the public's trust," CPUC President Michael Picker said. "The CPUC failed to keep vigilant. Lives were lost. Numerous people were injured. Homes were destroyed. We must do everything we can to ensure that nothing like this happens again."

The four members of the California Public Utilities Commission voted unanimously on April 9 to fine PG&E for nearly 2,500 violations of federal and state safety rules.

"Our decision commits a significant portion of the shareholder-funded penalty - one of the biggest utility sanctions in U.S. history - to making PG&E's gas transmission system as safe as possible for the public, consumers, utility workers, and the environment," Picker said.

Of the $1.6 billion, PG&E will have to pay $850 million to improve gas pipeline safety, most of it for capital investments that the company will not add to its rate base and therefore will not earn any profit on.

A fine of $300 million will go to California's general fund, $400 million will go to a onetime bill credit spread across PG&E's gas customers, and approximately $50 million for other improvements to pipeline safety.

The total penalty is $200 million more than was proposed by administrative law judges.

"Californians should receive what the law says they have the right to expect: safe, reliable utility service through adequate facilities at just and reasonable rates," said Commissioner Catherine Sandoval. "This landmark decision provides redress for the systemic causes that led to the San Bruno tragedy and will improve gas pipeline safety for generations of Californians."

PG&E CEO and Chairman Tony Earley said the company is motivated by the tragic lessons of the explosion and is focused on becoming the safest and most reliable energy provider in America

"We are deeply sorry for this tragic event and we have dedicated ourselves to re-earning the trust of our customers and the communities we serve. The lessons of this tragic event will not be forgotten," said Earley, who joined the company as CEO in 2011.

While the company needs to review the CPUC orders, Earley said that PG&E does not expect to appeal the ruling.

"I want to be very clear - our focus is on moving forward to complete the important safety work we set out to do. We've made tremendous progress, but we have more to do and we are committed to doing it right," he said.

PG&E has already settled claims of more than $500 million with victims and families of the accident. It has established a $50 million trust for San Bruno for costs related to recovery and contributed $70 million to support the city's and community's recovery efforts.

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