EDITORIAL: PUC is wise to reverse course on PG&E penalty

Under intense public pressure, the California Public Utilities Commission has wisely changed course in deciding the proper penalty that Pacific Gas & Electric Co. should get for its failings leading to the deadly San Bruno gas pipeline explosion.

Last week, the commission's safety division said it will withdraw a $2.25 billion penalty that would have consisted entirely of money that the utility has already spent or plans to spend on pipeline system improvements.

The new direction comes from safety division lawyers who, in a rather remarkable reversal, are back on the case.

Depending on whom you believe, they either resigned voluntarily or were reassigned after refusing to sign off on the original plan. But on June 26, PUC President Michael Peevey announced that the legal team had been reinstated and that commission General Counsel Frank Lindh, a former PG&E attorney who clashed with those lawyers, had stepped aside from the case.

The lawyers plan to unveil the new proposed penalty to two administrative judges by the close of business today.

Assistant General Counsel Harvey Morris, who is leading the reinstated legal team, said in last week's filing that the revised plan "might make moot at least some of the issues" raised by San Bruno officials, who are pushing for a much steeper penalty.

The administrative judges will recommend a penalty to the full commission for a decision later this summer. It ought to follow these key principles:

* PG&E should not receive too much credit for safety measures ordered by federal or state regulators.

* The penalty should not be constructed in a way that would allow PG&E to deduct all or most of it from its taxes.

* Shareholders -- not ratepayers -- should pay for most of the safety upgrades.

Only a penalty along those lines will do adequate justice for what PG&E did wrong before the September 2010 conflagration that killed eight people, injured 58 others and destroyed 38 homes.

After the blast, state and federal investigations uncovered many troubling deficiencies in PG&E's maintenance and oversight of its sprawling network of gas transmission lines.

Investigators also concluded that PG&E completely failed to heed a clear warning from a December 2008 gas line leak and explosion in Rancho Cordova that killed one resident and injured five other people.

And the investigations uncovered that the utility had neglected to spend ratepayer money that had been set aside to test and replace pipelines that put the public at risk.

Certainly, PG&E deserves some credit, financial and otherwise, for the far-reaching safety improvements it has embarked upon since the San Bruno explosion.

But it also deserves ample punishment for the past failures that allowed it to happen.