In a ruling that San Bruno's mayor and other critics complained lets PG&E off the hook for the deadly 2010 pipeline blast that killed eight people, state regulators Thursday approved a planned upgrade of the utility's pipeline system that leaves ratepayers facing higher monthly bills.

The Public Utilities Commission's ruling allows PG&E to raise rates by about $299 million between now and the end of 2014 to cover the utility's efforts to upgrade its vast network of gas pipelines.

That will raise the typical bill of a residential customer by 88 cents a month next year, and by an additional 48 cents the following year -- for a total increase of $1.36 by the end of 2014, according to PG&E spokeswoman Brittany Chord.

The rate increases are slightly more than what was proposed by a PUC administrative law judge, but only 39 percent of the $768 million that PG&E had proposed through the end of 2014.

PUC Commissioner Mike Florio, before it was announced, defended the ruling as "a well-balanced, well-thought-out decision." PG&E, while getting much less than it had requested, said the decision "affirms PG&E's blueprint for continued progress on behalf of our customers."

But the PUC's 5-0 vote infuriated San Bruno Mayor Jim Ruane.

"PG&E blew up our town and killed eight people," Ruane said. "PG&E is making a profit on those lives. It is disgusting and unfair."


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State Sen. Jerry Hill, D-San Bruno, also lambasted the PUC's decision, calling it "a Christmas gift to PG&E."

"It is shameful," Hill said. "About 100 years ago, California was owned by Southern Pacific Railroad. Today, PG&E owns the state of California and the PUC."

Representatives of The Utility Reform Network complained that the ruling will allow PG&E to profit from the upgrades. Tom Long, TURN's legal director, said ratepayers over the long term "will end up paying 55 percent of the costs of the improvements."

PG&E was prompted to upgrade its natural gas system following public outrage over the Sept. 9, 2010, blast, which killed eight people, injured dozens of others and destroyed or damaged 108 homes.

An investigation by the National Transportation Safety Board found that the blast was caused by a rupture in a pipe with a deficient seam weld that had gone undetected because PG&E had failed to conduct proper inspections. It also blamed the utility for taking more than 90 minutes to close manual valves that the safety board said would have choked off the flow of gas to the blaze.

The work PG&E has proposed through 2014 includes pressure testing 783 miles of gas lines, replacing 186 miles of pipe, installing 228 automated valves and upgrading 199 miles of pipe so inspection devices can run inside them.

Before announcing their ruling, PUC officials said they believed it would help the utility and its customers turn the corner and restore confidence in the safety of PG&E's natural gas system.

"This will be the best gas system in the country," PUC Commissioner Timothy Simon said before the vote.

But PUC officials said the agency and PG&E both will have to keep a stronger focus on safety if the program of upgrades is to be successful.

"Safety is, and has to be, the top priority of this commission and of every utility," said Commissioner Mark Ferron.

While critics complained that PG&E got off easy, PG&E officials said they were disappointed by the PUC's ruling because it forces the company's shareholders to bear too much of the cost of the upgrades.

PG&E argued that the ratepayers should finance much of the improvements because the upgrades are required by new rules from state and federal regulators.

"Today's decision confirms that PG&E's plan is the right path forward to build the next-generation gas transmission system that Californians need and deserve," said Chris Johns, president of Pacific Gas & Electric Co., the utility subsidiary of PG&E.

Contact George Avalos at 408-373-3556 or 925-977-8477. Follow him at Twitter.com/george_avalos.