The $1 million civil penalty agreed to in a settlement between UGI-Penn Natural Gas and the state Public Utility Commission would be the largest on record if the commission approves the deal.
The settlement, which became public Tuesday when it was filed on the PUC’s website, details a series of incidents that the state alleges UGI-PNG knew about and covered up regarding a leaking gas main along a stretch of Business Route 309 near the Sheetz gas station in Wilkes-Barre Township in the spring of 2012.
The 47-page settlement calls for the gas utility to adhere to a series of record-keeping, inspection, pipeline improvement and reporting requirements, all costs the company could seek to recover in its next base-rate proceeding, PUC spokeswoman Jennifer R. Kocher said.
She said parties could argue against the utility to get back those costs through rate hikes, and the commission would take the matter under consideration.
As for the fine, Kocher noted, “It says specifically on page 11 of the settlement that the company may not recover the cost of the fine from ratepayers.”
Act 11 of 2012 changed the ceiling on natural gas-related penalties from $500,000 to $2 million. This is the first settlement that would go into effect in excess of the previous maximum fine threshold and if approved, it would be “the largest civil penalty in recent history and the largest natural gas fine,” Kocher said.
The most recent fine anywhere near the $1 million mark was $990,000 in 1999 against HSS Vending for payphone overcharges.
A history of violations was taken into consideration when determining the penalty, the findings of a PUC investigation shows, noting that in the past five years UGI-PNG or its subsidiaries have been involved in at least nine cases arising from alleged gas safety violations.
Earlier this year, the company was fined $500,000 for a 2011 explosion that killed five in Allentown. At the time, the $500,000 was the highest allowable penalty under the law.
According to the settlement, the investigation in the local incident was launched thanks to a UGI-Penn Natural Gas whistle-blower who reported that improper clamps were used to repair a leak on a high-pressure gas distribution line along Business Route 309 in the vicinity of the Sheetz gas station last year. The report found the clamps, which are pressure rated at 100 pounds per square inch are not considered suitable for a permanent repair on a pipe operating at 320 pounds per square inch.
“Although no serious consequences resulted from this incident, the potential for serious consequences to occur was significant,” according to the 47-page report dated Aug. 16 and filed on the PUC’s website Tuesday. “Therefore, (the Bureau of Investigations and Enforcement) submits that UGI-PNG’ s alleged conduct is of a serious nature and was considered in arriving at the substantial civil penalty in this settlement.”
UGI: Settlement fair
For its part, UGI-PNG has cooperated with the investigation, according to the settlement.
“UGI-PNG believes the joint settlement is fair and in the best interests of the company, its customers, and the communities it serves,” company spokesman Keith Dorman said in an emailed statement. “UGI-PNG is committed to its ongoing efforts to further enhance the safety and reliability of the company’s facilities and practices.”
In its chance to make a statement filed as part of the report, UGI staff attorney Kent D. Murphy said the company will take necessary actions to ensure future compliance. As part of that, the company writes in the report that it plans to hire a “substantial” number of employees.
“High on the list of priorities are increased numbers of construction inspectors, regulatory compliance specialists, training personnel, and additional workers trained in corrosion prevention and other distribution integrity management functions,” UGI-PNG includes in the report.
Dorman declined to answer a question regarding how many, if any, new hires have been made to address the PUC’s concerns.