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LOS ANGELES (AP) — The biggest beneficiary of the record $1.4 billion fine levied against Pacific Gas & Electric Co. for a gas line explosion that killed eight people and destroyed dozens of homes in suburban San Francisco is the state of California, which stands to gain $950 million to spend any way it wants.

That reality has set up a tussle over how the state punishes corporate wrongdoing and who should benefit from fines like the one Public Utilities Commission judges imposed on PG&E earlier this week for the 2010 blast. The judges wrote that “a fine of this magnitude is necessary to deter future violations” and said they were following established policy by earmarking the large fine for the state treasury.

 The proposed judgment is the largest safety-related penalty ever imposed against a public utility in California. PG&E, which plans to appeal, has argued that the penalty should be “reasonable” and directed to benefit public safety.

The concern with pipeline safety was echoed by city officials in San Bruno, where the blast occurred, and consumer groups that want to see miles of aging gas lines tested, replaced or repaired.

“The Legislature can always find a need for an extra $950 million,” said state Sen. Jerry Hill, a Democrat whose district includes San Bruno. He introduced a bill several years ago in the Assembly to steer such penalties to pipeline fixes, which failed to pass.

“We are the one that should benefit from that, either in reduced rates or upgrading the safety of our pipeline system,” Hill said. “It should go to the people who were affected by it.”

Industry consultant Brigham McCown, a former acting administrator for the federal Pipeline and Hazardous Materials Safety Administration, said it seems incongruous that the ruling faults the company for failing to spend enough on pipeline improvements and safety yet diverts most of the money to state coffers, with no strings attached.

“The money needs to go back into the system, versus the black hole of Sacramento,” he said.

It’s routine for the state treasury to collect PUC fines. Agency records from 1999 until early 2012 show the state was designated to receive $228 million from violations in dozens of cases. In some cases the agency orders a fine for the state, sometimes restitution for customers or other steps, and sometimes a combination of those penalties, the records showed.

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