5. Assignment of Proceeding
Timothy Alan Simon is the assigned Commissioner and John S. Wong is the assigned ALJ in this proceeding. ALJ Wong was designated the presiding officer for this proceeding in the April 18, 2011 joint scoping memo and ruling.
1. This OII was opened as a result of the December 24, 2008 natural gas explosion and fire that occurred at 10708 Paiute Way in Rancho Cordova, which resulted in one death, several injuries, and property damage.
2. The NTSB and CPSD conducted investigations into the cause of the explosion, and the NTSB adopted its "Pipeline Accident Brief" on May 18, 2010, and CPSD released its "Incident Investigation Report on Rancho Cordova Explosion and Fire" on November 10, 2010.
3. The OII is based upon the investigations conducted by the NTSB and CPSD, and CPSD's allegations that PG&E violated Pub. Util. Code §451 and various provisions of 49 CFR, which are incorporated in GO 112-E.
4. On June 20, 2011, PG&E and CPSD filed their joint motion for approval of stipulation to order resolving investigation, and to adopt the PG&E and CPSD stipulation.
5. The PG&E and TURN stipulation was entered into following the filing of the PG&E and CPSD stipulation.
6. An evidentiary hearing on the two stipulations was held on July 29, 2011.
7. The PG&E and CPSD stipulation sets forth admissions by PG&E that it violated seven provisions of Part 192 of 49 CFR., and that its response on December 24, 2008 was unreasonably delayed and not effective.
8. As part of the PG&E and CPSD stipulation, PG&E agrees to pay a $26 million penalty, as well as CPSD's investigation and proceeding costs.
9. As part of the PG&E and TURN stipulation, PG&E agrees to exclude from its next general rate case, any amounts paid for claims or settlements related to the December 24, 2008 natural gas explosion in Rancho Cordova.
10. PG&E's report acknowledges that the Rancho Cordova explosion and fire resulted from a series of failures by PG&E's employees to follow prescribed procedures, failures for which PG&E takes full responsibility.
11. Safety and reliability of the natural gas system is of paramount importance to this Commission and to the public interest, i.e., the PG&E customers who rely on this system for gas service.
12. Safety and reliability of its gas system must also be PG&E's primary objective.
13. Based on the admissions and the events that took place, PG&E failed to provide safe and reliable service at Rancho Cordova.
14. Based on the admissions and the events that took place, there are shortcomings with PG&E's training, reinforcement of training, and a failure to emphasize to its employees that safety and reliability of its gas system must be of paramount importance.
15. The corrective action that PG&E took after the Rancho Cordova explosion reveals that the written procedures and processes that were in place, and which PG&E employees were supposed to follow to ensure safe and reliable service, were not adhered to.
16. Based on CPSD's allegations involving violations of Pub. Util. Code §451 and seven sections of 49 CFR that have been incorporated into GO 112-E, PG&E potentially faces $97 million or more in penalties.
17. Comparing the potential penalty that PG&E could face, and the PG&E and CPSD stipulation penalty amount of $26 million, provides the Commission with a range for deciding whether the stipulation penalty amount of $26 million is appropriate, reasonable, and in the public interest.
18. When one considers the gravity and severity of the alleged violations, the statutory obligation that PG&E is to provide safe and reliable gas service, PG&E's own acknowledgement of its employees' failures to follow procedures, the admissions made in the PG&E and CPSD stipulation, the untimely response by PG&E, the resulting death, other injuries and property damage, and this Commission's and the public interest in ensuring safe and reliable natural gas service, the PG&E and CPSD stipulation penalty amount of $26 million is too low.
19. Based on the circumstances, a penalty amount in the amount of $38 million, plus payment of CPSD's investigation and proceeding costs, is acceptable to this Commission for resolving and closing this OII.
1. The Commission will not approve settlements unless the settlement is reasonable in light of the whole record, consistent with the law, and in the public interest.
2. Although the resolution of certain issues in the PG&E and CPSD stipulation is reasonable in light of the record, the key in determining whether the stipulation is reasonable, consistent with the law, and in the public interest focuses on the penalty amount agreed to in the PG&E and CPSD stipulation.
3. Pub. Util. Code §2104.5 allows the Commission to adopt a penalty amount that is less than what the Commission could have imposed.
4. Pub. Util. Code §2104.5 and D.98-12-075 provide guidelines on determining what the size of the penalty amount should be.
5. A basic principle of public utility service is for the public utility to provide safe and reliable service, and PG&E is required to provide such service pursuant to Pub. Util. Code §451.
6. As a public utility, PG&E is ultimately responsible for the actions of its employees, and for any associated penalties.
7. The joint motion of PG&E and CPSD to adopt the PG&E and CPSD stipulation should be denied, and the PG&E and CPSD stipulation as written, and the PG&E and TURN stipulation, should not be adopted.
8. PG&E, CPSD, and TURN may accept the proposed penalty amount of $38 million by filing a motion accepting this penalty amount within 30 days from the date this presiding officer's decision is served, and a proposed decision or a modified presiding officer's decision will be issued if such a motion is filed.
9. If no motion accepting the proposed penalty amount of $38 million is filed, a ruling scheduling evidentiary hearings on the underlying issues will be issued.
IT IS ORDERED that:
1. The June 20, 2011 joint motion of Pacific Gas and Electric Company and the Consumer Protection and Safety Division for approval of stipulation to order resolving investigation is denied.
2. The "Stipulation to Order Resolving Investigation," which was filed by Pacific Gas and Electric Company and the Consumer Protection and Safety Division on June 20, 2011, is not adopted.
3. The "Stipulation to Order Resolving Investigation," dated July 20, 2011, and signed by Pacific Gas and Electric Company and The Utility Reform Network, is not adopted.
4. Pacific Gas and Electric Company, the Consumer Protection and Safety Division (CPSD), and The Utility Reform Network may accept the proposed penalty amount of $38 million, plus payment of CPSD's investigation and proceeding costs, by filing a motion accepting the $38 million penalty within 30 days from the date this presiding officer's decision is served.
a. If such a motion is filed, a proposed decision will be issued after the presiding officer's decision becomes final to address the $38 million penalty.
b. If an appeal of the presiding officer's decision or a request for review is filed, and a motion accepting the $38 million penalty is filed, a modified presiding officer's decision will be issued.
5. If no motion to accept the proposed penalty amount of $38 million is filed, the assigned Administrative Law Judge is directed to issue a ruling scheduling evidentiary hearings on the underlying issues in this Order Instituting Investigation 10-11-013.
6. Investigation 10-11-013 remains open.
This order is effective today.
Dated November 1, 2011, at San Francisco, California.
