MEYERS/NAVE PROFESSIONAL LAW CORP. Attorneys for the City of Carmel-by-the-Sea Proposed Fines of $651,000,000; California Public Utilities Commission Orders Pacific Gas and Electric Company (PG&E) To Pay Fine of $25,626,000. City Requested Reimbursement from PG&E for Its Expenses, Recommended Linking Executive Compensation to Safety Performance & Appointment of an Independent Monitor: DENIED

ABSTRACT: Between October 2014 and June 2016 (as of the latest Check Register), City legal expenditures related to the natural gas explosion in Carmel-by-the-Sea, March, 2014, and, separately, a formal penalty consideration case against PG&E relating to recordkeeping associated with the utility’s gas distribution infrastructure (BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA, Investigation 14-11-008), amounted to a total of $440,396.45 to MEYERS/NAVE PROFESSIONAL LAW CORP., resulting in a $10,850,000 Citation assessed for the Carmel incident and total fines of $25,626,000 for the systemic violations and incidents, for a the total fine imposed on Pacific Gas and Electric Company for distribution system incidents of $36,476,000.

TIMELINE

MARCH 3, 2014 – AUGUST 18, 2016

MARCH 3, 2014: Carmel – March 3, 2014 A natural gas explosion destroyed a house located in the city of Carmel-by-the-Sea. Prior to the explosion, a PG&E welding crew was preparing to tie-in the gas distribution main along 3rd Avenue into the newly installed plastic main on Guadalupe Street. The crew welded a tapping tee onto a two-inch steel distribution main on 3rd Avenue, and did not know that the steel distribution main had an inserted and unmapped 1¼-inch plastic line, which was damaged by the welding and tapping process which caused the natural gas to escape the plastic main. Natural gas migrated into the residential structure and later resulted in an explosion.

OCTOBER 9, 2014 – NOVEMBER 18, 2014: CITY OF CARMEL-BY-THE-SEA LEGAL EXPENDITURES
Steven R. Myers Attorney MEYERS, NAVE, RIBACK, SILVER & WILSON 555 12TH STREET,

SUITE 1500 OAKLAND CA 94607
For: Carmel-by-the-Sea
Emilie E. De La Motte Attorney At Law MEYERS NAVE RIBACK SILVER & WILSON
Britt K. Strottman Attorney MEYERS, NAVE, RIBACK, SILVER & WILSON

129212 10/9/2014 MEYERS/NAVE PROFESSIONAL LAW CORP $918.75 PROFESSIONAL SERVICES-LEGAL

Vendor Total-> $918.75

129431 11/18/2014 MEYERS/NAVE PROFESSIONAL LAW CORP $10,212.70 PROFESSIONAL SERVICES-LEGAL

129431 11/18/2014 MEYERS/NAVE PROFESSIONAL LAW CORP $7,220.28 PROFESSIONAL SERVICES-LEGAL

129431 11/18/2.014 MEYERS/NAVE PROFESSIONAL LAW CORP $4,450.00 PROFESSIONAL SERVICES-LEGAL

129431 11/18/2014 MEYERS/NAVE PROFESSIONAL LAW CORP $1,870.00 PROFESSIONAL SERVICES-LEGAL

Vendor Total----> $23,752.98

TOTAL: Contract Spend $24,671.73

NOVEMBER 20, 2014: CPUC ISSUES $10.85 MILLION STAFF CITATION TO PG&E; COMMISSIONERS OPEN FORMAL CASE TO EVALUATE PG&E’S GAS DISTRIBUTION RECORDKEEPING
Docket #: I.14-11-008
SAN FRANCISCO, November 20, 2014 - The California Public Utilities Commission (CPUC) today issued a $10.85 million staff Citation to Pacific Gas and Electric Company (PG&E) for a natural gas explosion in Carmel-by-the-Sea in March, and, separately, opened a formal penalty consideration case against PG&E relating to recordkeeping associated with the utility’s gas distribution infrastructure.
Citation Date: November 20, 2014
Citation#: ALJ-274 2014-11-001
$10,850,000.00: State Treasury to the credit of the General Fund

JANUARY 22, 2015-JUNE 30, 2016: CITY OF CARMEL-BY-THE-SEA LEGAL EXPENDITURES
Steven R. Myers Attorney MEYERS, NAVE, RIBACK, SILVER & WILSON 555 12TH STREET, SUITE 1500 OAKLAND CA 94607
For: Carmel-by-the-Sea
Emilie E. De La Motte Attorney At Law MEYERS NAVE RIBACK SILVER & WILSON
Britt K. Strottman Attorney MEYERS, NAVE, RIBACK, SILVER & WILSON

129847 1/22/2015 MEY04 (MEYERS/NAVE PROFESSIONAL LAW CORP) $24,360.64 professional services- PG&E Incident $ 49,032.37

130324 3/19/2015 MEY04 (MEYERS/NAVE PROFESSIONAL LAW CORP) 1,188.44 Prof fees-PG&E $ 50,220.81

130554 5/1/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 8,643.50 PG&E GAS EXPLOSION LEGAL/PROF SERVICES

130554 5/1/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 11,115.00 PG&E GAS EXPLOSION LEGAL/PROF SERVICES

130554 5/1/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 16,683.19 PG&E GAS EXPLOSION LEGAL/PROF SERVICES

130554 5/1/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 499.25 PG&E GAS EXPLOSION LEGAL/PROF SERVICES

130679 5/29/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 16,259.38 PG&E GAS EXPLOSION LEGAL/PROF SERVICES $ 103,421.13

Vendor Total -----> 53,200.32

130853 6/26/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 12,706.75 PROF FEES:PG&E GAS EXPLOSION 116,127.88

Vendor Total -----> 12,706.75

131156 8/20/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 2,178.75 FY 15-16 PROF FEES RELATING TO PGE GAS EXPLOS 6/14

131213 8/27/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 33,768.43 FY 15-16 PROF FEES RELATING TO PGE EXPLOSION 3/14 152,075.06

Vendor Total -----> 35,947.18

131505 10/2/ 2015 MEYERS/NAVE PROFESSIONAL LAW CORP 17,654.65 PROF LEGAL SERVICES. PG&E MATTER 3/3/14 AUG BILL

Vendor Total-----> 17,654.65

131815 11/24/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 8,765.00 PG&E EXPLOSION PROF SERVICES
131815 11/24/ 2015 MEYERS/NAVE PROFESSIONAL LAW CORP 787.75 PG&E EXPLOSION 3/3/14 PROF SERVICES
131815 11/24/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 41,951.44 PG&E EXPLOSION PROF SERVICES 221.233.90
Vendor Total-> 51,504.19

132052 12/29/2015 MEYERS/NAVE PROFESSIONAL LAW CORP 15,643.95 PG&E EXPLOSION MARCH2014 NOVEMBER PROF SERVICES 236,877.85

Vendor Total--·> 15,643.95

132230 1/27/2016 MEYERS/NAVE PROFESSIONAL LAW CORP 22,612.40 PG&E GAS EXPLOSION PROF SERVICES FOR DEC2015 259.490.35

Vendor Total - - > 22,612.40

132915 5/11/2016 MEYERS/NAVE PROFESSIONAL LAW CORP 121,031.60 PG&E 2014 EXPLOSION-PROF SERVICES FOR JAN 2016

132!H5 5/11/2016 MEYERS/NAVE PROFESSIONAL LAW CORP 38,999.77 PG&E 2014 EXPLOSION-PROF SERVICES FOR FEB 2016

131915 5/11/1016 M£YERS/NAV£ PROFESSIONAL LAW CORP 15,918.00 PG&E 2014 EXPLOSION-PROF SERVICES FOR MARCH 2016

Vendor Total -> 177,949.37

JUNE 1, 2016: PRESIDING OFFICER’S DECISION

Total fines of $24,310,000 are assessed for the systemic violations and incidents found in today’s decision. With the Citation previously assessed for the Carmel incident, the total fine imposed on Pacific Gas and Electric Company for distribution system incidents is $35,160,000.

133222 6/30/2016 MEYERS/NAVE PROFESSIONAL LAW CORP 2,596.73 APRIL 2016 PROF SERVICES RE: PGE 2014 EXPLOSION

133222 6/30/2016 MEYERS/NAVE PROFESSIONAL LAW CORP 360.00 PROF SERVICES MAY 2016 RE: PGE 2014 EXPLOSION

Vendor Total----> 2,956.73

TOTAL: $415,724.72

AUGUST 18, 2016: MODIFIED PRESIDING OFFICER’S DECISION REGARDING INVESTIGATION OF PACIFIC GAS AND ELECTRIC COMPANY’S GAS DISTRIBUTION FACILITIES RECORDS
Total fines of $25,626,000 are assessed for the systemic violations and incidents found in today‘s decision. With the Citation previously assessed for the Carmel incident, the total fine imposed on Pacific Gas and Electric Company for distribution system incidents is $36,476,000.

EXCERPTS;

Appeal of the Presiding Officer’s Decision

SED and the City of Carmel-by-the-Sea filed appeals of the Presiding Officer‘s Decision on July 1, 2016. PG&E filed its response to both appeals on July 18, 2016. The grounds on which each party contended that the Presiding Officer Decision was unlawful or erroneous are analyzed below. Where noted in today‘s decision, the Presiding Officer‘s Decision has been revised in response to the appeals. In all other respects, the appeals are denied.

In today‘s decision, we add the omitted $50,000 Carmel fine to the total fine and revise the De Anza missing records per-day fine from $834.95 to $1,000 per day. The additional De Anza amount of $1,266,000 plus $50,000 brings the total fine to $25,626,000, as compared to the total fine of $24,310,000 in the Presiding Officer‘s decision.

5.1. Corrected Sum of Fine Assessed

SED47 contends and PG&E48 agrees that the sum of fines assessed on page 55 of the Presiding Officer‘s Decision incorrectly omits the $50,000 fine for PG&E‘s service failures to City of Carmel-by-the-Sea. This error has been corrected in today‘s decision.

5.2. Total Fine Amount and Carmel Incident

SED argued that the Presiding Officer Decision erred in setting the fine too low and that the fine for the Carmel incident should be increased by $20.73 million.  As set forth above, the Commission had previously upheld a citation of $10.85 million for that incident and SED did not dispute the Presiding Officer‘s Decision holding that an additional fine of $10.8 million should be assessed against PG&E for failing to prevent recurrences of leaks caused by unmapped plastic inserts (the cause of the Carmel explosion).

SED argued the Proposed Decision erred in adopting a fine of only $21.65 million and an additional fine of $20.73 million should be imposed. PG&E stated that a total fine of $42.38 million would be “disproportionate to the harm that resulted” and “unprecedented.”

SED cited to no Commission precedent with a fine of this magnitude for similar violations nor aggravating circumstances that would justify such a departure from Commission precedent. SED has shown no error or unlawful determination in the Presiding Officer‘s Decision.

5.5. Per Incident Fines and Additional Incidents

SED argued that the maximum fine for each incident should be imposed and that additional incidents should be included.  PG&E responded in opposition that the Commission has discretion to tailor the fines to specific facts of each violation and that additional incidents are not within the scope of this proceeding.

The City of Carmel-by-the-Sea also contended that the Commission was without discretion to decide, based on the specific facts of each violation, whether to apply Public Utilities Code § 2108 to uncorrected violations.

In its Appeal, SED acknowledged that the Commission has the discretion to decline to impose daily fines pursuant to § 2108.55 PG&E agreed with SED and cited to D.15-04-024.56

We find that the additional incidents were outside the scope of this proceeding and that the Commission has substantial discretion to tabulate and impose fines based on the specific facts of each violation. SED and the City of Carmel-by-the-Sea have demonstrated no error in the Presiding Officer‘s Decision.

5.6. City of Carmel-by-the-Sea’s Other Requests

The City requested reimbursement from PG&E for its expenses. The Commission‘s policy choice to decline to use its equitable powers to order PG&E to reimburse governmental entities for their litigation costs was set forth in D.15-04-024 at 168-170. The City has presented no reason to depart from that policy choice.

The City also recommended linking executive compensation to safety performance; a similar proposal was also examined and found duplicative or unsupported in D.15-04-024 at 167. Finally, the City of Carmel-by-the-Sea sought appointment of an independent monitor. That proposal was also considered in D.15-04-024 at 155– 60, where the Commission authorized another $30 million in reimbursement for experts for SED in addition to the $15 million awarded in Rulemaking 11-02-019, and otherwise denied the requested independent monitor.

Finally, the parties agree that the fines ordered in today‘s decision may not be included in regulated revenue requirement nor recovery sought from ratepayers in any manner.

The City of Carmel-by-the-Sea brought the unique perspectives of local government and first responders to this proceeding. The efforts of the City to bring forth these perspectives added greatly to the development of a complete evidentiary record and assisted the Commission in discharging its duties.

REFERENCE:
Decision on Fines and Remedies to Be Imposed 04-09-15

Date of Issuance April 9, 2015
DECISION ON FINES AND REMEDIES TO BE IMPOSED ON PACIFIC GAS AND ELECTRIC COMPANY FOR SPECIFIC VIOLATIONS IN CONNECTION WITH THE OPERATION AND PRACTICES OF ITS NATURAL GAS TRANSMISSION SYSTEM PIPELINES