PG&E penalty unlawful, PUC lawyer says
A state lawyer who worked for more than two years building a case against Pacific Gas and Electric Co. over the San Bruno natural gas explosion said Thursday that the Public Utilities Commission’s suggested penalty for the utility—which would include no fines—is “unlawful.”
Robert Cagen was one of four members of the state legal team who refused to sign the commission’s final brief to a pair of administrative law judges considering potential penalties against PG&E. All the attorneys were reassigned to other legal duties.
The final brief, signed by the head of the utilities commission’s safety division, urged that PG&E be penalized $2.25 billion for the San Bruno explosion – but that the money that the company is spending to fix up its natural gas system constitute the penalty.
Levying a fine against PG&E that would go into the state’s general fund “makes no sense,” said safety division chief Jack Hagan. It would be better, he argued, to make sure PG&E spends the money fixing a natural gas system whose failings were exposed in September 2010 when a transmission pipe exploded in San Bruno, killing eight people and destroying 38 homes.
Hagan filed the commission’s brief this week to the administrative law judges, who in turn will make a recommendation to the five members of the Public Utilities Commission, who are appointed by the governor.
Cagen, a member of the State Bar since 1973, was brought out of retirement by the commission in 2010 to handle PG&E-related cases.
In an e-mail Thursday, he wrote, “I personally could not continue working on the San Bruno penalty briefs because I concluded that the (safety division’s) recommendations that were to be made in the briefs were unlawful and contrary to what our team had worked to accomplish in the last 2 1/2 years.”
Reached by phone, Cagen would not say what he believes to be unlawful about the recommendations. Legal experts said he is barred under state law from revealing specifics about his objections to Hagan’s legal filing.
Diane Karpman, a legal ethics lawyer in Beverly Hills, said any lawyer who divulges such specifics could run afoul of attorney-client confidentiality rules.
Hagan argued that forcing PG&E to spend $2.25 billion on gas safety improvements would amount to the largest penalty ever assessed against a utility. On Thursday, he said he is aware that some utilities commission staffers had criticized his plan, but insisted it is consistent with his position that gas safety is a top priority.
“I made the decision that all the money should go into safety. I still believe that,” said Hagan, who was an investigator with the state Department of Justice until last year. “I checked with the general counsel; he said this was not unlawful.”
‘They work for me’
He said the lawyers who disagreed had asked to be reassigned. “I can’t really discuss what went on, because there is client-attorney privilege,” he said. “I’m the client, and they work for me. You make your recommendation, the client makes the decision. That’s the way life is.”
Hagan added, “I don’t have any love lost for PG&E. What they did was reprehensible, and they are not showing any remorse. I want to improve the system so we would never have this kind of event again.”
The cities of San Bruno and San Francisco have filed recommendations for penalizing PG&E, as has a customer-advocacy group, The Utility Reform Network. All argued that PG&E should have to pay a fine in addition to other penalties.
Their attorneys said allowing PG&E to classify its gas-system improvements as a penalty would allow the company to write off the expenses, saving $900 million in taxes.
‘No penalty at all’
“It amounts to no penalty at all,” said Tom Long, an attorney with The Utility Reform Network. “It would let PG&E get off without any financial consequences, because they would get credit for what they were going to have to pay for anyway.”
In addition to Cagen, members of the utilities commission’s legal team who refused to go along with Hagan’s filing include Harvey Morris, the agency’s assistant general counsel. He declined to comment Thursday.
Morris was reassigned after challenging PG&E’s accounting of its gas-system testing and repair costs as totaling $2.25 billion – a sum in line with Hagan’s suggested penalty. The administrative law judges agreed with Morris that PG&E had insufficient evidence to back up the amount and threw it out.
PG&E has agreed that any penalty stemming from the San Bruno disaster should be borne by the company’s shareholders and not its customers. But the company has argued that a $2.25 billion total would be excessive.