Guilty Verdict Means Felon Image for PG&E, DA Says

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By Joyce E. Cutler

Aug. 10 — Pacific Gas & Electric Co., California’s largest public utility, now has a new identity— convicted felon ( United States v. PG&E Corp., N.D. Cal., No. 3:14-cr-00175, jury verdict 8/9/16 ).

The “stain” on the San Francisco utility’s name is what San Bruno, Calif., and San Mateo County wanted in the criminal trial against PG&E for a deadly pipeline explosion and is what the company fought so hard against, county and city representatives told reporters Aug. 10.

Jurors’ verdict told PG&E “you are a company that is properly described as felons, and that’s what occurred yesterday,” San Mateo County District Attorney Stephen Wagstaffe said.

A U.S. District Court for the Northern District of California jury Aug. 9 found PG&E guilty of five felony Natural Gas Pipeline Safety Act violations and one obstruction charge in the National Transportation Safety Board’s investigation. The April 2014 indictment alleged the pipeline running through a suburban neighborhood had defective welds that ruptured from over pressurization. The explosion and fire killed eight and destroyed 38 homes.

“It was entirely a man-made disaster, one that resulted from negligent decision making and actions by PG&E corporate executives over six decades” and from regulatory failures, said City Manager Connie Jackson.

PG&E in a statement after the verdict said the utility has “made unprecedented progress in the nearly six years since the tragic San Bruno accident and we are committed to maintaining our focus on safety.”

Small Fine, Big Mark

The utility could be fined $1.5 million at the as-yet-unscheduled sentencing at which San Bruno will ask the judge to install a monitor at PG&E “to provide the necessary independent oversight of the company’s policy and operational practices, to assure that the necessary changes are made and that PG&E adheres rigorously to the requirements of all safety regulations,” Jackson said.

“It’s never been about the money,” said Jackson. The convictions “provide a black mark on the corporate seal of PG&E. It is a strong reminder that criminal negligence will not be tolerated.”

Jurors after the nearly six-week trial cleared the utility of six recordkeeping counts. Prosecutors backed off a proposal to seek a penalty of as much as $562 million. Information was insufficient to charge any individuals with a crime, Wagstaffe said.

“The right message is there is that stain on your name. And that is just from our perspective,” he said.

Judge Thelton Henderson scheduled an Oct. 11 post-trial motion hearing.

$2.7 Billion Spent

The California Public Utilities Commission in April 2015 fined PG&E $1.6 billion, the largest fine ever levied against a U.S. public utility.

PG&E spent $2.7 billion on natural gas system improvements, money spent because it was forced to, Mindy Spatt, spokeswoman for the Utility Reform Network, told Bloomberg BNA.

Any safety improvements is “because of regulation, not because of better PG&E. Remember, PG&E wanted to charge customers $2 billion to fix its neglected pipeline. And thanks to TURN and the city of San Bruno, the CPUC penalized PG&E,” Spatt said Aug. 10. “PG&E resisted fixing the problems it created.”

PG&E in securities filings said the conviction “could harm its relationships with regulators, legislators, communities, business partners, or other constituencies and make it more difficult to recruit qualified personnel and senior management.”

The conviction could affect future ratemaking and regulatory proceedings and “could result in increased regulatory or legislative scrutiny with respect to various aspects of how the Utility’s business is conducted or organized.”

Legislative Scrutiny

CPUC is the subject of dozens of bills since the NTSB criticized the agency for its cozy relationship and faulty oversight.

The California Assembly Appropriations Committee advanced Aug. 10 reform bills aimed at restoring confidence in the agency, increasing public access to meetings and records and make ethics requirements applicable to administrative law judges.

The committee postponed to Aug. 11 voting on Senate Bill 215, which would permit the California Attorney General to sue a decision maker or CPUC employee who violates ex parte communication requirements, requiring lobbyists to register and funneling supervision to other agencies.

To contact the reporter on this story: Joyce Cutler in San Francisco, jcutler@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

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