SAN BRUNO -- PG&E said Thursday it expects federal prosecutors to charge it with criminal violations as a result of the fatal 2010 natural gas explosion in San Bruno and disclosed that the government could seek to place the company's natural gas operations under independent control.
The U.S. attorney's office did not respond to a request for comment from this newspaper, and the full implications of a criminal indictment of the utility remained unclear. But San Francisco-based PG&E warned in a filing with the U.S. Securities and Exchange Commission that the criminal case could force wide-ranging changes in how the company operates some of its gas units, and could seriously damage its finances and reputation. The company's shares plunged more than 5 percent in after-hours trading.
"Given the most recent discussions with the U.S. attorney's office, the utility expects that it will be charged with criminal violations of the federal Pipeline Safety Act," PG&E said.
The utility said any criminal charges would be without merit and that its employees have not intentionally violated pipeline safety laws. "The company believes that, even where mistakes were made, employees were acting in good faith," it wrote in the filing.
But state Sen. Jerry Hill, a Democrat whose district includes San Bruno, said criminal charges are warranted. "The evidence has been clear for years that PG&E's action to divert hundreds of millions of dollars from safety, maintenance and operations to profits, salaries and bonuses, was criminal," he said Thursday.
San Bruno City Manage Connie Jackson also welcomed the news that a criminal indictment against PG&E may be in the works.
"It has long been San Bruno's position that gross negligence on the part of PG&E was a very important factor that contributed to the tragic explosion here and the devastation that resulted," she said.
State and federal investigators have determined that PG&E's shoddy maintenance efforts contributed to a system of flawed record keeping that was a prime culprit in the explosion. PG&E, in its filing Thursday, said it expects that the U.S. Attorney "will charge that PG&E's past operating practices violated the federal Pipeline Safety Act in areas such as record keeping, pipeline integrity management and identification of pipeline threats."
Robert Weisberg, a professor with expertise in criminal law and white-collar crime at the Stanford University law school, said federal prosecutors apparently have concluded that a criminal indictment would be more effective than a lawsuit to force the reforms that would prevent another gas pipeline disaster.
"Criminal charges give the prosecutors more leverage to demand changes with the company and how it operates," he said. "The prosecutor could even put PG&E into temporary receivership. It's a way to send a strong statement. The criminal prosecution serves as a deterrent."
PG&E also faces the prospect of a record-setting fine of up to $4 billion from the state Public Utilities Commission in connection with the lethal blast. The state regulatory agency is expected to announce its penalty before the end of the year.
PG&E CEO Tony Earley said in a statement Thursday that the San Bruno blast, which killed eight people and destroyed 38 homes, "was a tragic accident that caused a great deal of pain for many people. We're accountable for that and make no excuses. Most of all, we are deeply sorry."
PG&E pointed out in its filing that it has committed $2.7 billion of shareholders money to undertake a wide-ranging array of repairs and upgrades to the company's century-old natural gas system.
"We've learned the tragic lesson of San Bruno that safety must always come first," Earley said.
Contact George Avalos at 408-859-5167. Follow at Twitter.com/georgeavalos