PG&E 2010 Annual Report Download - page 38

The CPUC also has appointed an independent review
panel to gather and review facts, make a technical
assessment of the San Bruno accident and its root cause,
and make recommendations for action by the CPUC to
ensure such an accident is not repeated. The report of the
independent review panel is expected in the second quarter
of 2011. The recommendations arising from the CPUC’s
own investigation or the investigation of the independent
review panel may include changes to design, construction,
operation and maintenance of natural gas facilities;
management practices at the Utility in the areas of pipeline
integrity and public safety; regulatory and statutory
changes; and other recommendations deemed appropriate,
including whether there are systemic management
problems at the Utility and whether greater resources are
needed to achieve fundamental infrastructure
improvement.
Several parties have requested that the CPUC institute a
formal public investigation of the San Bruno accident. The
CPUC may consider this request at its meeting to be held
on February 24, 2011. The Utility has filed a response
stating that it welcomes the CPUC’s investigation. If the
CPUC institutes a formal investigation, the CPUC may
impose penalties on the Utility if it determines that the
Utility violated any laws, rules, regulations, or orders
pertaining to the operations and maintenance of its natural
gas system. PG&E Corporation and the Utility anticipate
that the CPUC will institute one or more formal
investigations regarding these matters.
In addition, the Boards of Directors of PG&E
Corporation and the Utility appointed a special review
committee, composed solely of independent directors, to
review the Utility’s natural gas transmission and
distribution operations. This review will include an
assessment of current and emerging industry practices
relating to gas transmission and distribution inspection,
accident prevention, maintenance, capital and expense
planning, engineering, and the Utility’s safety practices and
culture. The committee has retained an engineering
consultant to assist in this review. The review, which
commenced in late 2010, is expected to be completed by
the third quarter of 2011.
CPUC INVESTIGATION OF THE RANCHO
CORDOVA ACCIDENT
On November 19, 2010, the CPUC began a formal
investigation of the Rancho Cordova accident. The
explosion in a house resulted in one death, injuries to
several people, and property damage. The NTSB and the
CPUC’s Consumer Protection and Safety Division
(“CPSD”) investigated the accident. The NTSB issued its
investigative report in May 2010, and the CPSD submitted
its report to the CPUC in November 2010. The NTSB
determined that the probable cause of the release, ignition,
and explosion of natural gas was the use of a section of
unmarked and out-of-specification polyethylene pipe with
inadequate wall thickness that allowed gas to leak from the
mechanical coupling that had been installed on
September 21, 2006. The NTSB stated that the delayed
response by the Utility’s employees was a contributing
factor. Based on the CPSD’s and the NTSB’s investigative
findings, the CPSD requested the CPUC to open a formal
investigation of the Rancho Cordova accident and
recommended that the CPUC impose unspecified fines
and penalties on the Utility. In its order instituting the
investigation, the CPUC stated that it will determine
whether the Utility violated any law, regulation, CPUC
general orders or decisions, or other rules or requirements
applicable to its natural gas service and facilities, and/or
engaged in unreasonable and/or imprudent practices in
connection with the Rancho Cordova accident. The CPUC
stated that it intends to ascertain whether any management
policies and practices contributed to violations of law and
the Rancho Cordova accident. Finally, the CPUC noted
that it may order the Utility to implement operational and
policy measures designed to prevent future gas safety
hazards.
The CPUC ordered the Utility to provide extensive
information, from as far back as January 1, 2000, about the
Utility’s practices and procedures at issue. The Utility’s
report, due on February 17, 2011, agrees with the NTSB’s
conclusions about the probable cause of the accident and
explains what process improvements the Utility has made
to prevent a similar accident in the future. The CPUC has
scheduled a pre-hearing conference on March 1, 2011 to
establish a schedule for the proceeding, including the date
of an evidentiary hearing.
The Utility believes that any remaining third-party
liability associated with the Rancho Cordova accident is
immaterial. However, PG&E Corporation and the Utility
believe that the CPUC is likely to impose penalties on the
Utility in connection with the Rancho Cordova accident
and that such penalties could be material.
If the CPUC determines that the Utility violated any
law, regulation, CPUC general orders or decisions, or other
rules or requirements applicable to the Utility’s natural gas
service and facilities in connection with the San Bruno or
Rancho Cordova accidents, the CPUC is authorized to
impose penalties of up to $20,000 per day, per violation. In
addition, law enforcement authorities could begin
proceedings that could result in the imposition of civil or
criminal fines or penalties on the Utility. PG&E
Corporation and the Utility are unable to predict the
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