PG&E President Christopher Johns seemed resigned today to paying $2 billion-plus in fines as partial penance for the 2010 San Bruno natural gas explosion, but said the $3.8 billion sought by the city of San Bruno is over the top.
The California Public Utilities Commission is contemplating imposing a $2.25 billion fine, a sum that covers the cost of safety improvements that PG&E has performed since the blast, which leveled a neighborhood and killed eight people.
"It shouldn't be any higher than the money we have spent and we've committed to spend," Johns said, placing that number at $2.2 billion, during a visit to The Bee's editorial board today. "We certainly would like it to be less than that."
Johns' visit came two weeks after a delegation led by San Bruno Mayor Jim Ruane and Sen. Jerry Hill, D-San Mateo, told The Bee's editorial board that the penalty ought to be closer to $4 million, and structured in such a way that PG&E could not write off any portion of the payment.
Johns said the biggest penalty over in the United States over a gas pipe issue to date is $101.5 million. A $2.25 billion fine would represent 10 percent of the company's market capitalization.
We asked whether a penalty of $3.8 billion would force PG&E to enter bankruptcy. "I don't know whether it would," he replied. "It would definitely put us into a difficult financial situation."
Johns defended the tax write-off of roughly $900 million that PG&E could take if the CPUC imposes the $2.25 billion.
"When you make investments into the system, yes, that has tax ramifications," he said. "People portray it as a windfall for us--$2.25 billion after taxes is still, what, $1.5 billion or more. That is still a huge number."
Johns said the utility already has paid $400 million to victims of the blast, including families of the individuals who died, plus another $120 million to the city of San Bruno.
He added that the company no longer is talking with city of San Bruno officials. For now, the focus is on the regulatory proceeding before the California Public Utilities Commission.
Johns called the blast a "tragic accident," and said he is insisting on a change in corporate culture in which every employee is responsible for safety.
"We're not going to let it be something we forget," Johns said of the Sept. 10, 2010 blast.
Johns became president of PG&E in August of 2009, 13 months before the San Bruno explosion. In 2011, he earned a total compensation of $5.1 million, including $3.3 million in restricted stock rewards, according to Forbes. Unlike some businesses responsible for high-profile industrial disasters, PG&E has not seen its stock price suffer appreciably since 2010. The company's stock price had been above $48 before the blast, and dipped to $44.21 in the days after the blast. It was $44.87 today.
-- Dan Morain and Stuart Leavenworth
Photo of Christopher Johns courtesy of PG&E