Light penalties for utilities in natural gas accidents are a norm in Pennsylvania and other states, according to a recent article by The Morning Call, a newspaper that covers Pennsylvania’s Lehigh Valley.
The newspaper investigated the Pennsylvania Public Utility Commission’s (PUC) handling of safety violations after the Commission negotiated a $500,000 penalty for the natural gas utility UGI following an explosion in Allentown on February 9, 2011, that killed five people and destroyed eight homes.
The explosion was attributed to a corroded natural gas distribution line belonging to UGI, but the utility got off easily compared to Pacific Gas & Electric, a California utility that was penalized $2 billion for a 2010 explosion in San Bruno, Calif., that killed eight people.
“Unlike in the San Bruno case, in Pennsylvania, the PUC negotiated its settlement with UGI behind closed doors, without public presentation of evidence or witness testimony,” the Morning Call wrote. The PUC hasn’t fully litigated a case involving an alleged safety violation by a gas or electric utility in recent memory, according to the article. Instead, the PUC disposes of safety violations through negotiated settlements.
“After the Allentown explosion, for example, the PUC’s Bureau of Investigation and Enforcement met with UGI’s lawyers in private. There, the two sides reached the following agreement: UGI, a division of Valley Forge-based UGI Corp., a Fortune 500 company with $6.5 billion in revenue that year, would pay a fine of $386,000 — a figure later increased to $500,000. The company would also expedite its pipeline replacement schedule and forgo reimbursement for $25 million in replacement costs over the next two years, though it could later recoup that money from customers through a rate hike,” the article states.
“It raises a question,” said Scott Hempling, former executive director of the National Regulatory Research Institute, told The Morning Call. “The process by which potential wrongdoers are being held accountable — does that process have enough rigor, transparency and weight to produce a result in the public interest?”
The California Public Utilities Commission (CPUC) is different from other state utility commissions in that it litigates some of its utility cases. Jason Zeller, a recently retired CPUC lawyer, told The Morning Call that litigation motivates investigators to dig deeper and look harder for evidence — “to go out there and open file cabinets.”
“Only after the CPUC began preparing for litigation did investigators discover through an audit that PG&E had diverted to shareholders $50 million that was supposed to have gone toward natural gas pipeline safety improvements,” the article states. “We need to find out what happened,” Zeller said. “The only way to do that is to litigate a case.”
Gerry Norlander, executive director of the Public Utility Law Project, told The Morning Call, “If you never play the card,” referring to litigation, “if your opponent knows you are bluffing, they can say this is their last offer [and] … they’re more likely to get an agreement friendlier to them.” He also said regulators cannot know what constitutes a good settlement if they have no record of litigation for a basis of comparison. “You’re settling cases in the dark,” he told the newspaper.
The lack of transparency in utility enforcement cases is a point of concern for Hempling as well. “[If] there’s not a public accounting, I don’t know how you ensure that the public is being protected,” he told the newspaper.
Mark McDonald, a gas explosion investigator for Boston-based NatGas Consulting, says the penalties that come out of negotiated settlements are too small. “In the industry, it’s called ‘the cost of doing business,’” he told The Morning Call. Explosions will continue “until someone starts truly paying — other than the victims,” he said.
To read the Morning Call article, click here.