Pac. Gas & Elec. Co. v. Pub. Utilities Comm'n, A142127

Decision Date16 June 2015
Docket NumberA142127
Citation188 Cal.Rptr.3d 374,237 Cal.App.4th 812
CourtCalifornia Court of Appeals Court of Appeals
PartiesPACIFIC GAS AND ELECTRIC COMPANY, Petitioner, v. PUBLIC UTILITIES COMMISSION, Respondent; City of San Bruno et al., Real Parties in Interest.

Sidley Austin LLP: Marie L. Fiala, San Francisco, Carter Phillips, and Quin M. Sorenson, Washington, Attorneys for Petitioner

Karen Valentia Clopton and Pamela Nataloni, Attorneys, for Respondent

Meyers, Nave, Riback, Silver & Wilson: Steven Robert Meyers, Oakland and Harry W. Chamberlain II, Attorneys for Real Party in Interest, City of San Bruno

Thomas John Long, San Francisco, Attorney for Real Party in Interest, The Utility Reform Network

Jones Day : Charles Churchill Read and Haley Melisse McIntosh, Los Angeles, Attorneys for Real Parties in Interest, American Gas Association et al.


Richman, J.

Pursuant to its statutory authority to adopt “rules of practice and procedure” (Pub. Util. Code, § 1701, subd. (a)1 ), the Public Utilities Commission (PUC or Commission) promulgated rule 1.1, which provides in pertinent part: “Any person who ... transacts business with the Commission ... agrees ... never to mislead the Commission or its staff by an artifice or false statement of fact or law.” (Cal. Code Regs., tit. 20, § 1.1 (Rule 1.1).)

In the aftermath of a massive 2010 explosion of an underground gas pipeline owned and operated by Pacific Gas and Electric Company (PG&E), the PUC imposed a series of reforms to be instituted by PG&E. One of those reforms was that PG&E improve its recordkeeping and information technology capabilities. PG&E was directed to keep the PUC informed of any reported pipeline leaks and any discovered information regarding the safety of continuing pipeline operations. Thereafter, following discovery of a pipeline leak, PG&E also discovered that some information it had provided to the PUC concerning the internal pressure at which certain pipelines could be safely operated might not be correct. Approximately seven months after discovery of this mistake was internally verified by PG&E, it was communicated to the PUC via a written “Errata” to a previous filing. Following extensive hearings, the PUC deemed this filing both a substantive and a procedural violation of Rule 1.1, which the Commission determined had the effect of misleading the Commission. For this dual violation of Rule 1.1, the Commission imposed civil penalties totaling $14.35 million.

We granted PG&E's petition for a writ of review to consider (1) whether the penalties were validly imposed in the belief that Rule 1.1 does not invariably demand a scienter requirement; (2) whether the Commission correctly treated PG&E's act and omission as “continuing” violations; (3) whether the PUC's order to show cause provided sufficient notice of the grounds for which PG&E might be penalized; and (4) whether the penalties authorized by sections 2107 and 2108 are constitutionally excessive. With appropriate consideration for the unique powers of the PUC, we conclude that none of PG&E's contentions has merit. We therefore affirm the decisions of the PUC imposing the penalties and denying PG&E's request for rehearing.

The Nature, Duties, and Powers of the PUC

Our Supreme Court has described the PUC as “a state agency of constitutional origin with far-reaching duties, functions and powers. (Cal. Const., art. XII, §§ 1 –6.) The Constitution confers broad authority on the commission to regulate utilities, including the power to fix rates, establish rules, hold various types of hearings, award reparation, and establish its own procedures. (Id., §§ 2, 4, 6.) The commission's powers, however, are not restricted to those expressly mentioned in the Constitution: ‘The Legislature has plenary power, unlimited by the other provisions of this constitution but consistent with this article, to confer additional authority and jurisdiction upon the commission....’ (Cal. Const., art. XII, § 5.)

“Pursuant to this grant of power the Legislature enacted Public Utilities Code section 701, conferring on the commission expansive authority to do all things, whether specifically designated in [the Public Utilities Act] or addition thereto, which are necessary and convenient’ in the supervision and regulation of every public utility in California. (Italics added.) The commission's authority has been liberally construed.” (Consumers Lobby Against Monopolies v. Public Utilities Com. (1979) 25 Cal.3d 891, 905, 160 Cal.Rptr. 124, 603 P.2d 41.) That authority amounts to “comprehensive jurisdiction over questions of public health and safety arising from utility operations,” and “includes not only administrative but also legislative and judicial powers.” (San Diego Gas & Electric Co. v. Superior Court (1996) 13 Cal.4th 893, 915, 924, 55 Cal.Rptr.2d 724, 920 P.2d 669.)

The Legislature has also provided the PUC with extensive enforcement powers, including the imposition of monetary civil penalties: “Any public utility that violates or fails to comply with any provision of the Constitution of this state or of this part, or that fails or neglects to comply with any part or provision of any order, decision, decree, rule, direction, demand, or requirement of the commission, in a case in which a penalty has not otherwise been provided, is subject to a penalty of not less than five hundred dollars ($500), nor more than fifty thousand dollars ($50,000) for each offense.” (§ 2107.) “In determining the amount of such penalty, ... the appropriateness of such penalty to the size of the business charged, the gravity of the violation, and the good faith of the person charged ... shall be considered.” (§ 2104.5.) “Every violation ... is a separate and distinct offense, and in case of a continuing violation each day's continuance thereof shall be a separate and distinct offense.” (§ 2108.)

Among the Commission's duties is administering the regulatory authority over the intrastate “production, generation, transmission, delivery, underground storage, or furnishing of gas, natural or manufactured, except propane, for light, heat, or power.” (§ 221; see §§ 216, 222, 328.2, 2771-2775.6.) It is also authorized to exercise a measure of federal interstate power under the Pipeline Safety Act. (49 U.S.C. §§ 60104(c), 60105(b)(2), 60106(b) ; Olympic Pipe Line Co. v. City of Seattle (9th Cir.2006) 437 F.3d 872, 878 [“a state authority may enter into a pipeline safety agreement with the DOT [Department of Transportation], through which the DOT authorizes the state authority to participate in the oversight of interstate pipeline facilities”].) “The Commission in this capacity applies the federal pipeline safety regulations contained in 49 Code of Federal Regulations (CFR) Part 192, et seq. The Commission adopted General Order (GO) 112-C in 1971, which adopted in their entirety the federal pipeline safety rules in 49 C.F.R Part 192, also adopted in 1971.” (Order Instituting Investigation on the Commission's own Motion into the Operations and Practices of Pacific Gas and Electric Company (Jan. 12, 2012) Cal.P.U.C. Dec. No. I.12-01-007 [2012 Cal.P.U.C. Lexis 39, p. *13] (Cal.P.U.C. Decision No. I.12-01-007).)

The San Bruno Pipeline Explosion

This proceeding traces back to what is commonly known as the San Bruno pipeline explosion, the salient details of which were described in a PUC report as follows:

“On September 9, 2010, at approximately 6:11 pm, a 30-inch diameter natural gas transmission pipeline owned and operated by PG&E ruptured in San Bruno, California. Gas escaping from the rupture ignited resulting in the loss of eight lives, injuries to 58 people, destruction of 38 homes, moderate to severe damage to 17 homes and minor damage to 53 homes.

“The section of pipeline involved was Segment 180, ... located at the intersection of Earl Avenue and Glenview Drive .... [¶] ... [¶] Energy released from the rupture created a crater about 72 feet long by 26 feet wide. A 28-foot long section of pipe weighing approximately 3,000 pounds was ejected from the crater and landed approximately 100 feet from the crater in the middle of Glenview Drive.” (Incident Investigation Rep.: September 9, 2010 PG&E Pipeline Rupture in San Bruno, Cal. (Cal.P.U.C., Jan. 12, 2012) pp. 7-8 (Investigation Report).)

“During the 50 hours following the incident, about 600 firefighting (including emergency medical service) personnel and 325 law enforcement personnel responded. Fire crews and police officers conducted evacuations and door-to-door searches of houses throughout the response. In total, about 300 homes were evacuated.” (Investigation Rep., supra , at p. 13.) “The rupture released about 47.6 million standard cubic feet of natural gas.” (Order Instituting Investigation on the Commission's Own Motion into the Operations and Practices of Pacific Gas and Electric Co. (Feb. 24, 2011) Cal.P.U.C. Dec. No. I.11–02–016 [2011 Cal.P.U.C. Lexis 69, p. *51] (Cal.P.U.C. Decision No. I.11-02-016).)

At the time of the explosion, the pipeline had been authorized to maintain a maximum allowable operating pressure (MAOP) of 400 psig, but it had an effective MAOP of 375 psig.2 (Investigation Rep., supra, at pp. 7, 22.) Four days after the explosion, the Commission's executive director directed PG&E to reduce the operating pressure of the affected pipeline by 20 percent “until such time as the Commission allows PG&E to return to ... normal operating pressure,” and also to “Conduct an accelerated leak survey of all transmission lines in PG&E's service territory ... and take corrective action as required and report the results ... on or before October 12, 2010.” (Cal.P.U.C. Res. No. L-403 (Sept. 23, 2010) p. 3.) And the PUC issued a press release that it would direct PG&E to “Report immediately ... and provide specific data on all leak reports.” (Cal. Pub. Util. Com., Press Release, CPUC Orders PG&E to Take Specific Action Related to San Bruno Explosion, Including Inspection of Natural Gas...

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