NEW YORK (TheStreet) -- PG&E Corporation (PCG) said on Monday it would fight a dozen criminal charges filed against the California-based utility as a result of a September 2010 explosion of one of the company's pipelines in San Bruno, Calif. that killed eight people and injured 66.
The federal charges allege that PG&E willfully violated the Pipeline Safety Act in areas such as record keeping, pipeline integrity management and identification of pipeline threats. PG&E will fight the criminal charges; however, it has conceded negligence in civil litigation that paid out nearly $500 million to blast victims and their families.
PG&E paid $70 million to the city of San Bruno and said on Monday it has invested $2.7 billion in shareholder money toward safety improvements. The utility disclosed the prospect of an imminent criminal charge in a March filing with the Securities and Exchange.
Monday's criminal charges allege that PG&E violated the Pipeline Safety Act in its poor surveillance of pipelines. Specifically, the charges highlighted weak record keeping, pipeline integrity management and identification of pipeline threats, and allege that PG&E knowingly failed to fix safety shortfalls.
"As alleged in the indictment, PG&E knowingly and willfully failed to identify and evaluate threats to its transmission pipelines," California attorney general Kamala Harris said in a statement.
"Today's indictment is an important step in providing justice for the individuals, families and community devastated by the 2010 pipeline explosion and fire in San Bruno," Harris added.
"One of the worst natural gas disasters in American history was caused by PG&E's gross misconduct," San Bruno Mayor James Ruane said in a statement. "Its executives should get the harshest penalty to prevent this from ever happening again."
PG&E, on Monday, apologized once more for the pipeline explosion and attempted to emphasize its remedial efforts since 2010.
"We've taken accountability and are deeply sorry. We have worked hard to do the right thing for victims, their families and the community, and we will continue to do so," PG&E CEO Tony Earley said in a statement.
Earley was brought to PG&E after the blast and characterized it as an "accident" repeatedly on Monday. "San Bruno was a tragic accident," Earley said. PG&E said it believes that employees did not intentionally violate the federal Pipeline Safety Act and that, even if mistakes were made, the company's employees always acted in good faith.
In addition to billions in safety-related investment, PG&E said on Monday it had completed nine of 12 recommendations made by the National Transportation Safety Board, with acceptable progress on remaining initiatives. PG&E's safety investment includes the replacement of 127 miles of pipeline, and retrofitted 268 miles of pipelines.
A Monday criminal indictment of PG&E raises the prospect of further monetary penalties. Each criminal indictment carries a $500,000 maximum penalty. Meanwhile, the company continues to face an inquiry by the California Public Utilities Commission that could lead to billions more in fines.
In February, PG&E said it would stop providing guidance on its earnings per share forecasts for 2014, pending the settlement of major rate cases, in addition to San Bruno-related legal proceedings like the CPUC's probe.
Bank of America Merrill Lynch analyst Peter D. Quinn in a March 31 client note said rating agency downgrades would weigh heavily on PG&E. Were Standard & Poor's to downgrade PG&E in the event of a costly CPUC or criminal settlement, it would put the company's ratings at below investment grade.
PG&E shares were trading slightly higher in Tuesday morning trading at $42.60. Shares tumbled over 4%, wiping out $800 million in market cap when PG&E disclosed the imminent criminal charges in late March.
-- Written by Antoine Gara in New York