Pacific Gas & Electric Co. v. Public Utilities Commission

Filed 6/16/15
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

PACIFIC GAS AND ELECTRIC
COMPANY,
Petitioner,
v. A142127
PUBLIC UTILITIES COMMISSION,
(Cal. PUC Decision Nos. 13-12-053 &
Respondent; 14-05-034)
CITY OF SAN BRUNO et al.,
Real Parties in Interest.

Pursuant to its statutory authority to adopt ―rules of practice and procedure‖ (Pub.
Util. Code, § 1701, subd. (a)1), the Public Utilities Commission (PUC or Commission)
promulgated Rule 1.1, which provides in pertinent part: ―Any person who . . . transacts
business with the Commission . . . agrees . . . never to mislead the Commission or its staff
by an artifice or false statement of fact or law.‖ (Cal. Code Regs., tit. 20, § 1.1 (Rule
1.1).)
In the aftermath of a massive 2010 explosion of an underground gas pipeline
owned and operated by Pacific Gas and Electric Company (PG&E), the PUC imposed a
series of reforms to be instituted by PG&E. One of those reforms was that PG&E
improve its recordkeeping and information technology capabilities. PG&E was directed
to keep the PUC informed of any reported pipeline leaks and any discovered information
regarding the safety of continuing pipeline operations. Thereafter, following discovery of

1
Statutory references are to the Public Utilities Code unless otherwise indicated.

1
a pipeline leak, PG&E also discovered that some information it had provided to the PUC
concerning the internal pressure at which certain pipelines could be safely operated might
not be correct. Approximately seven months after discovery of this mistake was
internally verified by PG&E, it was communicated to the PUC via a written ―Errata‖ to a
previous filing. Following extensive hearings, the PUC deemed this filing both a
substantive and a procedural violation of Rule 1.1, which the Commission determined
had the effect of misleading the Commission. For this dual violation of Rule 1.1, the
Commission imposed civil penalties totaling $14,350,000.
We granted PG&E‘s petition for a writ of review to consider: (1) whether the
penalties were validly imposed in the belief that Rule 1.1 does not invariably demand a
scienter requirement; (2) whether the Commission correctly treated PG&E‘s act and
omission as ―continuing‖ violations; (3) whether the PUC‘s order to show cause provided
sufficient notice of the grounds for which PG&E might be penalized; and (4) whether the
penalties authorized by sections 2107 and 2108 are constitutionally excessive. With
appropriate consideration for the unique powers of the PUC, we conclude that none of
PG&E‘s contentions has merit. We therefore affirm the decisions of the PUC imposing
the penalties and denying PG&E‘s request for rehearing.
BACKGROUND
The Nature, Duties, and Powers of the PUC
Our Supreme Court has described the PUC as ―a state agency of constitutional
origin with far-reaching duties, functions and powers. (Cal. Const., art. XII, §§ 1–6.)
The Constitution confers broad authority on the commission to regulate utilities,
including the power to fix rates, establish rules, hold various types of hearings, award
reparation, and establish its own procedures. (Id., §§ 2, 4, 6.) The commission‘s powers,
however, are not restricted to those expressly mentioned in the Constitution: ‗The
Legislature has plenary power, unlimited by the other provisions of this constitution but
consistent with this article, to confer additional authority and jurisdiction upon the
commission . . . .‘ (Cal. Const., art. XII, § 5.)

2
 ―Pursuant to this grant of power the Legislature enacted Public Utilities Code
section 701, conferring on the commission expansive authority to ‗Do all things, whether
specifically designated in [the Public Utilities Act] or addition thereto, which are
necessary and convenient‘ in the supervision and regulation of every public utility in
California. (Italics added.) The commission‘s authority has been liberally construed.‖
(Consumers Lobby Against Monopolies v. Public Utilities Com. (1979) 25 Cal.3d 891,
905.) That authority amounts to ―comprehensive jurisdiction over questions of public
health and safety arising from utility operations,‖ and ―includes not only administrative
but also legislative and judicial powers.‖ (San Diego Gas & Electric Co. v. Superior
Court (1996) 13 Cal.4th 893, 915, 924.)
The Legislature has also provided the PUC with extensive enforcement powers,
including the imposition of monetary civil penalties: ―Any public utility that violates or
fails to comply with any provision of the Constitution of this state or of this part, or that
fails or neglects to comply with any part or provision of any order, decision, decree, rule,
direction, demand, or requirement of the commission, in a case in which a penalty has not
otherwise been provided, is subject to a penalty of not less than five hundred dollars
($500), nor more than fifty thousand dollars ($50,000) for each offense.‖ (§ 2107.) ―In
determining the amount of such penalty, . . . the appropriateness of such penalty to the
size of the business charged, the gravity of the violation, and the good faith of the person
charged . . . shall be considered.‖ (§ 2104.5.) ―Every violation . . . is a separate and
distinct offense, and in case of a continuing violation each day‘s continuance thereof shall
be a separate and distinct offense.‖ (§ 2108.)
Among the Commission‘s duties is administering the regulatory authority over the
intrastate ―production, generation, transmission, delivery, underground storage, or
furnishing of gas, natural or manufactured, except propane, for light, heat, or power.‖
(§ 221; see also §§ 216, 222, 328.2, 2771–2775.6.) It is also authorized to exercise a
measure of federal interstate power under the Pipeline Safety Act. (49 U.S.C.
§§ 60104(c), 60105(b)(2), 60106(b); Olympic Pipe Line Co. v. City of Seattle (9th Cir.
2006) 437 F.3d 872, 878 [―a state authority may enter into a pipeline safety agreement

3
with the DOT [Department of Transportation], through which the DOT authorizes the
state authority to participate in the oversight of interstate pipeline facilities‖].) ―The
Commission in this capacity applies the federal pipeline safety regulations contained in
49 Code of Federal Regulations (CFR) Part 192, et seq. The Commission adopted
General Order (GO) 112-C in 1971, which adopted in their entirety the federal pipeline
safety rules in 49 C.F.R Part 192, also adopted in 1971.‖ (Cal.P.U.C. Order 12-01-007
(Jan. 12, 2012) [Slip Opn., p. 7].)
The San Bruno Pipeline Explosion
This proceeding traces back to what is commonly known as the San Bruno
pipeline explosion, the salient details of which were described in a PUC report as
follows:
―On September 9, 2010, at approximately 6:11 pm, a 30-inch diameter natural gas
transmission pipeline owned and operated by PG&E ruptured in San Bruno, California.
Gas escaping from the rupture ignited resulting in the loss of eight lives, injuries to 58
people, destruction of 38 homes, moderate to severe damage to 17 homes and minor
damage to 53 homes.
―The section of pipeline involved was Segment 180, . . . located at the intersection
of Earl Avenue and Glenview Drive . . . [¶] . . . [¶] Energy released from the rupture
created a crater about 72 feet long by 26 feet wide. A 28-foot long section of pipe
weighing approximately 3,000 pounds was ejected from the crater and landed
approximately 100 feet from the crater in the middle of Glenview Drive.‖
―During the 50 hours following the incident, about 600 firefighting (including
emergency medical service) personnel and 325 law enforcement personnel responded.
Fire crews and police officers conducted evacuations and door-to-door searches of houses
throughout the response. In total, about 300 homes were evacuated.‖ (Incident
Investigation Report September 9, 2010 PG&E Pipeline Rupture in San Bruno, California
(Cal.P.U.C., Jan. 12, 2012) (Investigation Report) [Slip Opn., pp. 7–8, 13].) ―The rupture
released about 47.6 million standard cubic feet of natural gas.‖ (Cal.P.U.C. Decision 11-
02-016 (Feb. 24, 2011) [Slip Opn., p. 3].)

4
 At the time of the explosion, the pipeline had been authorized to maintain a
maximum allowable operating pressure (MAOP) of 400 psig, but it had an effective
MAOP of 375 psig.2 (Investigation Report, supra [Slip Opn., pp. 7, 22].) Four days after
the explosion, the Commission‘s Executive Director directed PG&E to reduce the
operating pressure of the affected pipeline by 20 percent ―until such time as the
Commission allows PG&E to return to . . . normal operating pressure,‖ and also to
―Conduct an accelerated leak survey of all transmission lines in PG&E‘s service
territory . . . and take corrective action as required and report the results . . . on or before
October 12, 2010.‖ (Cal.P.U.C. Res. No. L-403 (Sept. 23, 2010) [Slip Opn., p. 3].) And
the PUC issued a press release that it would direct PG&E to ―Report immediately . . . and
provide specific data on all leak reports.‖ (Cal. Pub. Util. Com., Press Release, CPUC
Orders PG&E to Take Specific Action Related to San Bruno Explosion, Including
Inspection of Natural Gas System (Sept. 12, 2010)
[as of June 14,
2015].)
The PUC Begins to Investigate
Two weeks after the explosion, on September 23, 2010, the Commission ordered
an investigation into the causes of ―the San Bruno explosion,‖ which ―may be the largest
transmission pipeline explosion in an urban/suburban setting in U.S. history, certainly the
most catastrophic in California history.‖3 (Cal.P.U.C. Res. No. L-403, supra [Slip Opn.,
p. 2].) The Commission adopted certain ―mandates‖ to PG&E ordered by the
Commission‘s Executive Director, thus ratifying the 20 percent reduction of pipeline
operating pressure, and reiterating that PG&E had to, among other things: ―7) Preserve
all records related to the incident, including work at the Milpitas Terminal during the
2
PG&E advises that the second abbreviation stands for ―pounds per square inch
gauge, indicating pressure relative to atmospheric pressure.‖ The methods for calculating
the MAOP for natural gas pipeline transmission can be found at 49 C.F.R. §§ 192.619–
192.620 (2008).
3
A federal investigation had already been commenced by the National
Transportation Safety Board (NTSB).

5
month of September 2010; [¶] 8) Preserve all records related to the maintenance or
modification of Line 132 by PG&E and/or its contractors performed within the City of
San Bruno over the past ten (10) years; [and] [¶] 9) Review the classification of natural
gas transmission lines and determine if the classification has changed since the initial
designation and report the results to the Executive Director.‖ (Id. [Slip Opn., pp. 3–4].)
After conducting an extensive investigation into the pipeline explosion, the
Commission‘s Consumer Protection and Safety Division concluded: ―[T]he San Bruno
incident was caused by a combination of multiple contributing factors: [¶] 1. PG&E‘s
failure to follow accepted industry practices when it constructed Segment 180 in 1956;
[¶] 2. PG&E‘s failure to comply with the integrity management requirements; [¶] 3.
PG&E‘s inadequate record keeping practices; [¶] 4. Deficiencies in PG&E‘s SCADA
system and inadequate procedures related to the work at the Milpitas Terminal[4] and
PG&E‘s failure to comply with its own procedures; [¶] 5. PG&E‘s deficient emergency
response after the incident; and [¶] 6. PG&E‘s corporate culture emphasizing profits over
safety.‖ (Investigation Report, supra [Slip Opn., p. 3].) Some of the supporting details
were as follows:

4
―SCADA‖ is an acronym for Supervisory Control And Data Acquisition. It is
described in the PUC investigation report as ―the use of computers and communications
networks to gather field data from numerous remote locations, perform numerical
analysis, and generate trends and summary reports. . . . SCADA systems make it possible
to control a process that is distributed over a large area with a small group of people
located in a single room.‖ PG&E‘s SCDA system was called ―one of the largest in the
U.S., providing remote control of 6,438 miles of transmission pipeline.‖ (Investigation
Report, supra [Slip Opn., pp. 70–71].)
The Milpitas Terminal appears to be something like a district center responsible
for, among other things, administration, maintenance, and emergency response for its
vicinity. It was the nearest such center and the epicenter of PG&E activity before and
during the explosion. It was also a terminus for intrastate gas transmission pipelines, and
the junction for routing gas north to San Francisco. (Incident Investigation, supra [Slip.
Opn., pp. 7, 72, 74–76, 86, 95–97]; Cal.P.U.C. Order 12-01-007, supra [Slip Opn., p. 2.)
According to the Commission: ―Gas coming into Milpitas Terminal supplies the vast
majority of customers along the San Francisco peninsula.‖ (Cal.P.U.C. Decision 11-09-
006 (Sept. 8, 2011) p. 1.)

6
 ―In 1956, when PG&E constructed the section of pipe that failed in San Bruno, it
did not follow accepted good industry practice existing at the time. PG&E‘s failure to
identify deficiencies in pipe manufacturing through inspection and testing at the time of
construction resulted in the installation of defective pipe in the ground.‖ ―PG&E was
unable to produce records demonstrating that a strength test was performed on segment
180 at the conclusion of its construction, and before the segment was placed in
operation.‖ (Incident Investigation Report, supra [Slip Opn., pp. 15, 22].)
―The investigation found that PG&E did not comply with certain integrity
management requirements in the federal pipeline safety regulations. Significant
deficiencies were found in data gathering and integration, threat identification, risk
assessment, and assessment.‖ (Incident Investigation Report, supra, [Slip Opn., p. 25].)
―The investigation found that, at the time of the incident, PG&E transmission
pipeline records were not accurate, complete, or verifiable. PG&E‘s records showed
inaccurate information of Segment 180 . . . and PG&E could not identify the
manufacturer of Segment 180 or locate its as-built drawings, alignment sheets,
specifications and other design, material, construction, inspection, and testing records. . . .
[¶] PG&E failed to follow the record keeping standards . . . which were applicable at the
time Segment 180 was constructed and, in turn, violated the Public Utilities Code,
Section 451 by operating its system unsafely by lacking accurate and locatable records
essential for safe pipeline operation.‖ ―PG&E‘s transfer of data from hard copies to
electronic format was not performed adequately. Some data was not transferred
accurately or was completely missed due to human error or varying software versions and
file format incompatibilities.‖ (Incident Investigation Report, supra [Slip Opn., pp. 62,
64].)
In February 2011, the PUC, noting that the NTSB had already publicly expressed
―concern about the safety implications of the PG&E record-keeping deficiencies the
NTSB [had] uncovered in the San Bruno investigation,‖ decided to commence an
expansive investigation of PG&E‘s recordkeeping practices, not limited to the immediate

7
time before the explosion—indeed, not limited to the San Bruno pipeline.5 (Cal.P.U.C,
Order 11-02-016 (Feb. 24, 2011) [Slip Opn. p. 7].) PG&E was warned that ―The
Commission is prepared to impose very significant fines [and ‗statutory penalties
pursuant to Section 2107‘] if the evidence adduced at the hearing establishes that
PG&E‘s recordkeeping policies and practices contributed to the loss of life and injuries
that occurred at San Bruno.‖ (Id. [Slip Opn., pp. 11–12].) ―PG&E is therefore directed
to . . . provide a report . . . to identify all reasons of law and fact currently known to
PG&E to establish that the company has committed no violation of law with respect to its
recordkeeping of data needed and appropriate for safety engineering.‖ (Id., [Slip Opn.,
pp. 16, 20].)

5
The investigation was described as follows: ―The Commission will investigate
and decide whether PG&E‘s recordkeeping pertaining to the gas transmission lines,
including San Bruno, has violated good and accepted engineering standards and
practices, and thus whether PG&E violated Section 451of the Public Utilities Code or
other laws and regulations. [¶] . . . [¶] In this investigation, the Commission intends to
ascertain the adequacy of PG&E‘s recordkeeping for the entire life of the San Bruno
pipeline that ruptured on September 9, 2010, under both state and federal standards and
law that the Commission is specifically empowered to enforce. We also intend to
ascertain recordkeeping adequacy for all PG&E gas transmission pipelines. [¶] . . . [¶]
We consider this quite a broad subject . . . because we will review evidence to determine
whether deficient recordkeeping may adversely affect and reduce safety in design,
construction, operations, testing, maintenance, inspection, risk assessment, and pipe
replacement.‖ (Cal.P.U.C, Decision 11-02-016 (Feb. 24, 2011) [Slip Opn., pp. 8–10],
italics added.)
The explosion also produced a flurry of responsive activity from the Legislature.
(See Stats. 2011, chs. 519 [adding §§ 956.5, 957, 958.5, 959. 969, requiring every gas
corporation to meet annually with local fire departments, install automatic shutoff valves,
to ―prepare and submit to the commission a proposed comprehensive pressure testing
implementation program for all intrastate transmission lines,‖ to file biannual ―a gas
transmission and storage safety report,‖ and directing that ―[a] gas corporation shall not
recover any fine or penalty in any rate approved by the commission‖]; 522 [adding
§§ 961, 963, requiring every gas corporation to ―develop a plan for the safe and reliable
operation of its commission-regulated gas pipeline,‖ get it approved by the PUC, and
implement it]; 523 [adding § 969 directing the PUC to require an account ―for the
maintenance and repair of transmission pipelines‖; and amending § 2107 to increase the
maximum penalty from $20,000 to $50,000].)

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 In September 2011, the PUC denied PG&E‘s ―motion . . . to delegate authority to
the Executive Director to approve requests to lift operating pressure limitations,‖ but
―instead adopt[ed] an expedited hearing process for Commission consideration of such
requests.‖ (Cal.P.U.C. Decision 11-09-006 (Sept. 8, 2011) [Slip Opn., p. 1].) The
Commission reasoned that ―the process proposed by PG&E is inadequate to discharge
our Constitutional and statutory duties. The public interest in PG&E‘s natural gas
operations is intense. Restoring MAOP in PG&E‘s transmission pipelines has significant
implications for public safety. The public deserves to be informed about PG&E‘s
proposed MAOP restoration and to have an opportunity to assess PG&E‘s evidence in
support of the request. Moreover, PG&E‘s proposed delegation, particularly in light of
the unspecified supporting analysis, goes well beyond the scope of ministerial matters for
which the Commission may properly delegate its authority. The Commission ordered the
operating pressure reductions . . . and the Commission should consider whether these
ordered reductions should be lifted.‖ (Id. at p. 7].) And, PG&E was cautioned, it ―must
be fully accountable for the pressure test and the assertion that the line can be safely
operated at the restored MAOP.‖ (Id. at p. 11.)
In December 2011, after PG&E had conducted the pressure test, the PUC
authorized PG&E ―to operate Lines 101, 132A, and 147 at a pressure no higher than 365
pounds per square inch gauge.‖6 (Cal.P.U.C. Decision 11-12-048 (Dec. 15, 2011) [Slip
Opn., pp. 1, 7, 10].) Doing so, the Commission made two findings of fact that are
significant:

6
The decision describes Line 101 as follows: ―Located along the San Francisco
Peninsula, Line 101 runs 34 miles from Milpitas Terminal in Santa Clara County to the
San Francisco Gas Load Center in San Francisco . . . Line 101 approximately follows the
alignment of Highways 237 and 101. At the Lomita Park Meter Station, located across
the freeway from the San Francisco Airport, the pressure on Line 101 is reduced as the
gas supply moves toward San Francisco.‖ Lines 132A and 147 are ―cross-ties‖ to Line
101, measuring 1.5 and 3.8 miles in length, respectively. (Cal.P.U.C. Decision 11-12-
048 (Dec. 15, 2011) [Slip Opn., pp. 1–2].)

9
 ―PG&E‘s Vice President of Gas Transmission, Maintenance, and Construction,
verified that PG&E has validated the engineering and construction of, and performed
pressure tests in accordance with 49 CFR 192 Subpart J or the pressure test requirements
then in effect, on all segments of Lines 101, 132A, and 147 that will be operating at or
above 20% of specified minimum yield strength [see fn. 2, ante], and concluded that
these pipelines could be safely operated at the increased maximum operating pressure of
365 psig.
―CPSD [the Commission‘s Consumer Protection and Safety Division] reviewed
PG&E‘s supporting information and concluded that the information presented was
adequate to support the conclusion that pressure on the lines could be safely increased to
365 psig.‖ (Cal.P.U.C. Decision 11-12-048, supra [Slip Opn., pp. 9–10].)
Again, PG&E was cautioned that it ―must be fully accountable for . . . the
assertion that the line can be safely operated at the restored [MAOP].‖ (Cal.P.U.C.
Decision 11-12-048 , supra [Slip Opn., p. 6].)
Meanwhile, the previous month, November 2011, the PUC—noting that ―PG&E
appears to have failed to comply with federal regulations concerning the protection of
persons and property in areas with higher concentrations of human occupancy and
activity‖—formally opened an investigation into the San Bruno explosion. (Cal.P.U.C.
Investigation Order 11-11-009 (Nov. 10, 2011) [Slip. Opn., pp. 1, 5, 13.) It began on
January 12, 2012, when the PUC commenced a new, separate, and wide-ranging
investigation: ―This investigation will not be solely limited to the events that took place
on September 9, 2010, but shall include all past operations, practices, and other events or
courses of conduct that could have led to or contributed to the San Bruno explosion and
fire. We will specifically consider what monetary fines and other remedies are
appropriate to ensure that a catastrophe of this type does not occur again.‖ (Cal.P.U.C.
Order 12-01-007 (Jan. 12, 2012) [Slip Opn., pp. 2–3].)
In its petition, PG&E provides its explanation of what happened next:

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 ―On October 18, 2012, a PG&E employee discovered that a portion of the pipe on
Line 147 appeared to be of a different specification than that described in PG&E reports.7
Whereas the records indicated that the particular portion of the pipeline was of a type
known as a ‗Double Submerged Arc Weld,‘ the employee believed based on his visual
field inspection that the pipe was instead of a type known as ‗A.O. Smith.‘ The
employee shared the apparent discrepancy with others at PG&E for further investigation
and confirmation. Over the next several months, PG&E employees confirmed the Line
147 included ‗A.O. Smith‘ pipe.
―PG&E employees determined, based on the newly-discovered specification
information, that the proper MAOP of Line 147 should be 330 psig rather than 365 psig.
However, . . . Line 147 was already operating at a reduced pressure of 330 psig or less,
no further reduction in operating pressure was necessary . . . .
―Over the next several months, PG&E investigated how some of the Line 147 pipe
had been incorrectly identified in the records, reviewed all other specifications, re-
reviewed the information obtained from construction activities on the entire Line 147,
performed field examinations on the pipe, performed what is known as ‗destructive
testing‘ on a portion of the pipe, and reviewed the records pertaining to the other
pipelines affected by the Commission‘s [Decision] 11-02-048.
―Over the same period, PG&E employees found that certain federal pipeline
regulations had been incorrectly applied to a portion of Line 101, another pipeline whose
pressure had been restored by D.11-02-048. Whereas PG&E had previously relied on
tests conducted in 1989 to determine the MAOP for that pipeline, employees concluded
that under the regulations an earlier test conducted prior to 1974 should have been used
for this purpose.
‖PG&E employees determined, based on the change in regulatory classification,
that the proper MAOP of that portion of Line 101 should be 330 psig rather than 365

7
One detail PG&E does not include in this narrative is that it discovered the
―specification‖ discrepancy only because Line 147 was being examined to halt a gas leak.

11
psig. However, . . . [as] Line 101 was already operating at a reduced pressure of 330 psig
or less, no further reduction in operating pressure was necessary . . . .
―On February 22, 2013, PG&E contacted the Commission‘s staff to arrange a
meeting or teleconference to repeat these findings. A teleconference was held on March
20, 2013, during which PG&E employees discussed with the Commission‘s staff the
corrected information relating to Lines 101 and 147. In response to requests by
Commission staff during that teleconference, on May 2 and May 8, 2013, PG&E
provided the staff with validation reports and other materials concerning Lines 101 and
147, and further advised that PG&E was continuing its review of records relating to these
and other lines.‖8
PG&E Files the Errata and the PUC Response
On July 3, 2013, PG&E submitted for filing a document entitled ―Errata to Pacific
Gas and Electric Company‘s Supporting Information for Lifting Operating Pressure
Restrictions on Lines 101 and 147.‖ The document represented to the Commission that
―After receiving Decision 11-02-048, PG&E identified errors in some of the supporting
information for Lines 147 and 101. [¶] The errors do not raise a safety issue, as each
affected segment has been successfully hydro tested to a pressure that supports the
MAOP. However, after correcting these errors the affected segments will have a lower
MAOP than approved in Decision11-02-048. Both segments are currently operating
below the new, lower MAOP.‖ The ―Errata‖ concluded with this: ―[T]he operating
pressure of Line 101 has been limited to 300 psig since April 2013 and PG&E is revising
the MAOP of this segment of Line 101 from 365 psig to 330 psig . . . . In addition to
revising the MAOP of this segment, PG&E has accelerated plans to replace it. PG&E is
currently planning to replace the affected portion of Line 101 in 2014–2015.‖
PUC staff refused to accept this document for filing. On August 19, the PUC
issued an order for PG&E to show cause (OSC) why it should not be sanctioned for
violating Rule 1.1. The OSC recited that the Errata was ―rejected . . . as untimely to the

8
Actually, PG&E spoke with only a single staff member of the PUC.

12
extent that it sought to make a substantive change to issues‖ previously resolved by the
Commission. And under the heading ―Issues Revealed in PG&E‘s July Document,‖ the
OSC read as follows:
―PG&E‘s July document raises procedural and substantive issues. Procedurally,
parties are not allowed to file pleadings for the purpose of correcting minor typographical
or computational errors in previously filed applications. Parties are allowed to file
pleadings for the purpose of making substantive changes to a previously filed application,
and such filing triggers the opportunity for other parties to file a responsive pleading
(unless limited or prohibited . . . ). Here, PG&E appears to be revealing a substantial
error in an application upon which the Commission has relied in issuing a decision.
Attempting to correct an application eighteen months after the Commission issued a
decision appears to be an unreasonable procedural choice and could be interpreted as
attempting to create an inaccurate impression of a routine correction. The timing of the
attempted filing, the day before a summer holiday weekend, also raise questions.
―Substantively, as the record shown in this proceeding and others, the accuracy of
PG&E‘s natural gas transmission pipeline records has been and remains an
extraordinarily controversial issue in which the public has an intense interest. The facts
stated in PG&E‘s July filing appear to directly implicate this issue, particularly the
continuing inaccuracy of PG&E‘s records and the happenstance means by which this
most recent instance of erroneous records was discovered. Submitting this provocative
information in a routine-appearing document could be seen as an attempt to mislead the
Commission and the public on the significance of this new information.‖
On August 30, 2013, PG&E filed a ―Verified Statement‖ by M. Kirk Johnson, its
Vice-President for Gas Transmission, Maintenance and Construction, explaining how the
―discrepancies‖ in Lines 101 and 147 were discovered and how PG&E responded.
The OSC Hearing
The OSC was the subject of a hearing held on September 6, 2013 before three
PUC Commissioners (Ferron, Florio, and Sandoval) and two administrative law judges

13
(ALJ), including the chief judge.9 The sole witness was Joseph M. Malkin, PG&E‘s lead
counsel, who had practiced before the Commission for 28 years, the last three years of
which was devoted exclusively to representing PG&E before the Commission.10 In
addition to questioning by the Commissioners and ALJs, Lead Counsel was questioned
by counsel for the City of San Bruno, the Commission‘s Safety and Enforcement

9
The practice of the PUC is to ―assign one or more commissioners to oversee the
case and an administrative law judge where appropriate.‖ (§ 1701.1, subd. (b); see Cal.
Const., art. XII, § 2 [―Any commissioner as designated by the commission may hold a
hearing or investigation or issue an order subject to commission approval‖].) If a hearing
is required, the issues to be examined and procedures to be followed are spelled out in a
―scoping memo.‖ (§ 1701.2, subd. (a); Cal. Code Regs., tit. 20, §§ 1.3(f), 13.2(a).) A
decision must be made within 60 days of the hearing, and can be appealed to the full
commission within 30 days. (§ 1701.2, subd. (a).) These procedures govern regardless
of whether the hearing concerns a quasi-legislative, an adjudicatory, or a ratesetting
hearing. (§§ 1701.1, subd. (a), 1701.2, subd. (a), 1701.3, subd. (a), 1701.4, subd. (a).) A
case where the Commission considers imposing monetary penalties is an adjudicatory
matter. (See § 1701.2, subd, (e); Pacific Bell Wireless, LLC v. Public Utilities Com.
(2006) 140 Cal.App.4th 718, 739–740; 53 Cal.Jur.3d (2012) Public Utilities, § 96, pp.
130–132.)
The presence of two ALJs was explained in the OSC: ―Ensuring that parties
understand the importance of complying with the letter and spirit of the Commission‘s
Rules of Practice and Procedure is a duty of the Chief Administrative Law Judge. The
facts of this matter appear to implicate the core principles upon which the Rules are
based. For that reason, the undersigned Chief Administrative Law Judge is taking the
unusual step of co-presiding with the assigned Administrative Law Judge at this
important hearing.‖
10
Because it appears at many points in the Commission‘s decisions under review,
we adopt the Commission‘s usage of referring to Mr. Malkin as ―Lead Counsel.‖
Section 2109 provides: ―In construing and enforcing the provisions of this part
relating to penalties, the act, omission, or failure of any officer, agent, or employee of any
public utility, acting within the scope of his official duties or employment, shall in every
case be the act, omission, or failure of such public utility.‖ In other words, by signing the
Errata and representing PG&E at the hearing, Lead Counsel was PG&E, and everything
he did and said is fully attributable to PG&E. We do not understand PG&E to argue
otherwise.

14
Division (SED)11, and The Utility Reform Network (TURN). The gist of Lead Counsel‘s
testimony was that the Errata was filed on his responsibility, with no intent to mislead,
but only to correct erroneous information previously provided to the PUC in good faith,
in ―a completely unique situation‖ that unquestionably had to be brought to the
Commission‘s attention. As for the matter of the timing of submission of the Errata for
filing, Lead Counsel explained that the submission before the start of a long Fourth of
July weekend was not done to escape attention, but was motivated by nothing other than
his belief ―we should file as quickly as we could once we had everything nailed down.‖
Directly asked by another attorney for PG&E ―did you at any time in connection with the
preparation, the titling, or the filing of the errata intend to mislead the Commission, the
parties, or the public?‖, Lead Counsel replied, ―Absolutely not.‖
Counsel for TURN asked ―Can you tell us why this pleading [i.e., the Errata] does
not include the fact that this discovery was made eight to nine months prior to the date of
the pleading?‖ Lead Counsel answered, ―For purposes of this pleading, which was to
provide notice to the Commission and the parties that there were errors and how they
were corrected, that seems to me like way too much information.‖ And responding to a
question from a commissioner, Lead Counsel testified that PG&E was not ―trying . . . to
sneak something below the radar.‖
Thereafter the Commission received written submissions. PG&E filed
―comments,‖ which for the first time raised the issue of whether a violation of Rule 1.1
required a mental state related to misleading the Commission, and arguing that PG&E
had not ―acted with any intent to mislead in connection with the submission of [the
Errata],‖ nor with recklessness or gross negligence. PG&E further argued that ―[n]o
evidence supports a Rule 1.1 violation based on the July 3rd service date.‖
The City of San Bruno argued that the Errata ―was submitted to the Commission
as [a] mere artifice to mislead all parties in order to minimize PG&E‘s responsibility for

11
At some point in 2013 not shown in the record, the Commission‘s Consumer
Protection and Safety Division had been renamed the Safety and Enforcement Division.

15
past and ongoing deficiencies in its records.‖ In its words: ―PG&E obscured the
significance of its Line 101 and 147 errors via the artifice of an ‗errata‘ filing precisely
because the circumstances surrounding the faulty records for and operation of Lines 101
and 147 are identical to those that precipitated the disaster in San Bruno. After spending
hundreds of millions of dollars . . . PG&E‘s records are still dead wrong. Those
inaccuracies, along with the fact that PG&E tried to camouflage its ongoing problems
with an obscure regulatory filing rather than be forthcoming ought to scare this
Commission, Commission staff, and every customer in PG&E territory because PG&E‘s
behavior is still dangerous. [¶] . . . [¶] Not only does bad data for Lines 147 and 101
demonstrate that the Commission cannot trust PG&E‘s records system, it also
demonstrates that the Commission . . . cannot trust PG&E to uphold its Rule 1.1
obligations to be forthcoming, truthful and complete with its regulators.‖
SED‘s opening brief was uncompromising: PG&E misled the Commission.
Specifically:
―PG&E‘s misleading information permitted PG&E to unsafely raise its MAOP
throughout the system, in violation of the Commission‘s directives and standards. PG&E
failed to timely and accurately inform the Commission of errors and incompleteness in its
MAOP validation process violating Decision . . . 11-12-048. The decision lifted MAOP
restrictions based on PG&E‘s assurances that the MAOP validation process was subject
to careful quality assurance procedures and had been completed.
―PG&E first learned of possible errors in its MAOP validation process on October
18, 2012 but failed to inform the Commission until July 3, 2013, more than eight months
after PG&E . . . learned of these errors. When PG&E finally disclosed this information to
the Commission, the utility further misled the Commission by attempting to de-
emphasize and in effect hide errors in the validation process through an ‗Errata‘ rather
than a petition for modification of . . . [Decision] 11-02-016 for information concerning
possible errors in PG&E‘s MAOP validation process.

16
 ―SED contends that PG&E‘s conduct in this proceeding regarding critical
maximum pressure on segments in its transmission system warrants penalties for
violations of Rule 1.1 because:
―PG&E knew as early as October 18, 2012, that errors and records insufficiencies
existed in its Pipeline Features List used to validate maximum segment pressures;
―Rather than advising the Commission as a regulatory body in writing of these
errors, PG&E first chose to communicate with a Commission staffer, who acted in an
advisory capacity only. SED advocacy staff did not learn of PG&E‘s contact with this
individual until after the initiation of this Order to Show Cause;
―PG&E failed to provide this staffer with requested documents and information
concerning the errors until the end of May 2013, and further misrepresented to the
Commission in this OSC proceeding the contact‘s reaction to the information provided by
PG&E (no staff personnel has ratified or approved PG&E‘s submissions);
―PG&E delayed notifying the Commission and parties of the potential errors in its
MAOP validation process until July 3, 2013, some eight months after PG&E first
recognized the potential error in its validation process;
―PG&E was aware of SED‘s continuing data request concerning potential errors in
PG&E‘s MAOP Validation process but failed to notify SED; and
―Using an Errata to notify the Commission of errors in the pipeline features list
used in PG&E‘s critical MAOP Validation process—effectively disguising rather than
clearly identifying the serious errors in its MAOP calculations.‖ (Footnote omitted.)
SED also scoffed at PG&E‘s defense: ―PG&E contends that using the term
‗errata‘ is nothing more than ‗[lead] counsel‘s good faith selection of a word that
conveyed that the pleading was reporting errors . . . such as ―an error in printing or
writing.‖ ‘ . . . SED strongly disagrees. The errors in PG&E‘s PFL [pipeline features
list], and the questions such errors pose for PG&E‘s MAOP validation process of the
2,088 segments that were reviewed, raise serious concerns regarding the safety of
segments hydro tested blindly without sufficient knowledge . . . .‖ ―Hydro tests
performed at too high a pressure can result in failure or worse, a pinhole leak or crack

17
that may expand in time causing a rupture. PG&E‘s discovery of MAOP validation
errors in its PFL should have been reported shortly after discovery . . . . [¶] . . . PG&E
failed to provide the Commission with notice of errors in its PFL in a reasonable period
of time after discovery. As a result, the Commission was led to believe that hydro tests
on PG&E‘s . . . [gas] lines had been performed in a safe manner, using accurate . . . data,
when, in fact, the data was inaccurate leading to the possible over pressuring of lines
during hydro tests.‖
A crucial point of SED‘s brief was that it treated each day of the eight months
between October 18, 2012 and July 2, 2013 as part of a continuing violation. TURN
made the same point in its brief: ―PG&E should be required to pay the maximum
$50,000 fine for each day of its Rule 1.1 violation. A continuing violation from
October 24, 2012 to July 3, 2013, a total of 253 days, multiplied by the maximum
$50,000 per violation yields a fine of $12,650,000.‖
The assigned ALJ‘s proposed decision concluded that PG&E ―violated Rule 1.1 of
the Commission‘s Rules of Practice and Procedure by not correcting promptly a material
misstatement of fact in a pleading filed with the Commission and by mischaracterizing
the correction when filed as a routine and non-substantive correction. PG&E is fined
$6,750,000 for these violations.‖ The fine, which treated both violations as continuing
and deserving of the maximum $50,000 per day, was calculated as follows: ―We begin
the tabulation at the day PG&E first became obligated to inform the parties of the error in
its representations to the Commissions, March 20, 2013 [the date PG&E ―informed
Commission staff of its error and . . . correction of the pipeline features calculation‖], a
delay of 105 days. We assess the maximum statutory fine of $50,000 per day for this
continuing violation . . . . The resulting fine is $5,250,000. [¶] For submitting a
misleadingly entitled document, $50,000 per day for 30 days it remained pending at the
Commission, when PG&E could have retrieved and corrected it=$1,500.000.‖
Commissioner Ferron submitted an alternate proposed decision. He disagreed
with the assigned ALJ only in the manner he believed PG&E should be sanctioned.
Commissioner Ferron would run the $50,000 per day penalty for not revealing the

18
discovered information from November 16, 2012 (the date on which ―senior management
of PG&E‖ became aware of the situation) to August 30, 2013 (the date on which PG&E
filed the Verified Statement of its Vice-President of Gas Transmission, Maintenance and
Construction). This was a total of 287 days, making the penalty for this violation
$14,350,000. He would add a penalty for ―submitting a misleadingly titled and factually
incomplete document, $50,000 per day for the 58 days it remained uncorrected at the
Commission=$2,900,000.‖
The Full Commission Hearing
The matter was then considered by the full Commission (Commissioners Ferron,
Florio, Peevey, Peterman, and Sandoval), which heard arguments at a public hearing on
December 2, 2013. PG&E‘s initial argument was given by Tony Earley, its Chairman
and CEO, to ―underscore[] how seriously we take the issues at hand today.‖ According
to him, ―looking back from a safety standpoint, I think that our staff did all the right
things. I found no action that constituted an intentional effort to mislead the
Commission.‖ Earley was followed by Nick Stavropoulos, PG&E‘s Executive Vice
President of Gas Transmission, Maintenance and Construction, who, like Earley, had
joined PG&E two years before, and who emphasized the ―safety culture we are nurturing
at PG&E.‖ The Commission then heard from representatives of San Bruno and the SED,
and final arguments by Earley and Stavropoulos.
On December 19, 2013, the Commission filed Decision 13-12-053, concluding
that PG&E ―violated Rule 1.1 of the Commission‘s Rules of Practice and Procedure by
not correcting promptly a material misstatement of fact in a pleading filed with the
Commission and by mischaracterizing the correction submitted for filing on July 3, 2013
as a routine and non-substantive correction. PG&E is fined $14,350,000 for these
violations.‖
Concerning what it called ―Delay in Correcting Record,‖ the Commission stated:
―[T]he admissions by PG&E‘s Vice President [of Gas Transmission, Maintenance and
Construction], coupled with the serious nature of the discrepancies, the widespread
knowledge throughout the gas division of this discovery, and the additional steps taken to

19
address this problem, lead us to conclude that senior management either knew or should
have known about the serious records discrepancies and pipeline flaws shortly after they
were discovered and that this was a significant safety matter in the public‘s interest.‖
Adopting a phrase that appeared in the proposed decision of both the assigned ALJ and
Commissioner Ferron, the Commission found: ―It is not credible that PG&E‘s engineers
and executives did not recognize the provocative nature of these facts in light of the
intense public interest in natural gas pipeline safety. This is particularly true where, as
here, Line 147 had been the subject of a pressure increase proceeding at the Commission
the previous year.‖
The Commission continued:
―The date when PG&E‘s top management became aware of the true nature of the
pipeline is not determinative of whether PG&E should be accountable for its failure to
inform the Commission promptly of the erroneous information underlying [Decision] 11-
12-048. Given the importance of ensuring the integrity and safety of the transmission
system, PG&E should have had internal procedures in place to ensure that incidents such
as the discovery of record discrepancies for Line 147 would be relayed promptly to top
management and reported to the Commission. [¶] . . . [¶]
―When the Commission has issued a decision in a formal proceeding where a key
Ordering Paragraph sets a safety standard that relies on material information later found
to be erroneous, the proper method for a party to bring this to the Commission‘s attention
would be through a prompt filing in the proceeding, which could be a motion to reopen
the record or a petition for modification of the decision, depending on the circumstances.
Since PG&E became aware of record discrepancies beginning on October 18, 2012, we
find that PG&E should have prepared and submitted a filing to inform the Commission of
this significant and material discovery no later than November 16, 2012. [¶] . . . [¶] . . .
Once PG&E had knowledge of material errors in its filed Supporting Information that the
Commission relied upon to set a safety standard in [Decision] 11-12-048, PG&E should
have brought the record discrepancies to the Commission‘s attention through an
appropriate filing while it investigated . . . . By omission, PG&E‘s failure to promptly

20
make such a filing misled the Commission by allowing a ‗false statement of fact‘ within
the meaning of Rule 1.1 to remain uncorrected after PG&E had the knowledge to correct
it. [¶] . . .
―Instead of informing the Commission promptly, PG&E waited over seven months
to correct information that it knew to be incorrect and that it knew the Commission had
relied upon in issuing [Decision] 11-12-048. PG&E did not attempt to correct the record
. . . or inform the parties until July 3, 2013, when it submitted the Errata document for
filing and served the parties.‖
―To summarize, we find that PG&E‘s obligation to inform the Commission of the
errors in its 2011 Supporting Information that was relied on in Ordering Paragraph 1
setting a safety standard in [Decision] 11-12-048 began no later than November 16, 2012.
PG&E did not attempt to inform the Commission of the errors until July 3, 2013, a delay
of 229 days. This unreasonable delay misled the Commission by allowing a ‗false
statement of fact‘ to persist uncorrected and was a violation of Rule 1.1. We find that
this constitutes a continuing violation within § 2108. Thus, we conclude that this Rule
1.1 violation persisted for 229 days.‖
The Commission then turned to a discussion of the ―Errata‖:
Concerning the ―Title, Content, and Submission Date of the ‗Errata‘ Document,‖
the Commission first noted that such a document was prohibited by Rule 1.12(c). It then
reasoned: ―The record on Line 147 had been closed and the Commission decision issued.
At a minimum, in light of the circumstances here, the record needed to be re-opened and
corrected, and for a more complete resolution. [Decision] 11-12-048 should have been
modified to reflect the correct maximum allowing operating pressure.‖ Lead Counsel‘s
testimony why ―he rejected using an Amendment . . . [¶] . . . is not credible because it is
not logical. The Lead Counsel, with decades of experience, admits that notice of the
corrections was ‗absolutely required.‘ Then, he dismissed use of an amendment because
the record was closed; but the record was equally closed for the errata. No explanation
was offered for this flawed logic.‖

21
 ―Further, the ‗Errata‘ submitted for filing is a short document with only one page
devoted to a brief description of the errors in the MAOP validation records submitted
previously for Line 147 and the resulting need to reduce the MAOP from the 365 psig
authorized by [Decision] 11-12-048 to 330 psig. The ‗Errata‘ did not disclose, for
example, when or how PG&E became aware of the errors, the reasons for the errors, or
corrective actions that were being taken following discovery of the errors.‖
―In sum, the Lead Counsel chose to submit for filing a document which, while not
provided for in the Rules of Practice and Procedure, is typically used to inform parties of
minor changes and corrections in documents, most commonly prior to the original
document being offered for the record, but in any event before the Commission issues its
decision. This submission had the effect of concealing from the Commission and the
parties the actual nature of the document. [¶] . . . In addition to not being timely, . . . we
find that PG&E‘s attempted July 3rd filing of the ‗Errata‘ was not forthright, both
because of the title and the incomplete content.‖
―Because the document presented by PG&E for filing with the Commission on
July 3, 2013 did not clearly convey the nature or significance of the facts set forth within,
we find that it was an artifice, as that term is used in Rule 1.1, and misled the
Commission. The misleading nature was exacerbated by the submission date of July 3,
before a holiday weekend. [¶] We conclude that PG&E‘s submission of the ‗Errata‘
document was a separate violation of Rule 1.1.[12] This shortcoming remained
uncorrected until PG&E filed and served the Verified Statement of its Vice President of

12
At this point the Commission dropped a footnote which reads: ―In its brief,
PG&E argues that we must find specific intent to violate Rule 1.1. The Commission
addressed that issue in [Decision] 01-08-019 and found that intent should be considered
as an aggravating factor in determining the range of the fine. However, the unique
factual history of this matter—the worst tragedy in Commission history, a specific
directive for forthright and timely information, and an admitted need for notice—leads us
to put the fine at the highest levels. Thus, while the Lead Counsel has admitted that the
choice of title was intentional, that is, he intended to and did title the document errata, we
need not and do not consider whether specific intent was an aggravating factor in this
instance.‖

22
Gas Transmission Maintenance and Construction on August 30, 2013. We find that this
constitutes a continuing violation within § 2108. Thus, we conclude that this Rule 1.1
violation persisted for 58 days.‖
This is how the Commission fixed the penalty:
―[T]he facts of this proceeding require that we impose the maximum fine. Natural
gas transmission system safety by this operator has been one of the Commission‘s
highest priorities for three years. The management and legal decision-making regarding
the treatment of the discovery of errors in the Line 147 Supporting Information, as
reflected in this record, is profoundly disheartening in that it reflects a lack of candor and
appreciation of the public interest and the regulatory process.
―Therefore we calculate the fine as follows: For delay in submitting a filing to
disclose information regarding errors in pipeline specifications for Line 147, we impose
the maximum amount of $50,000 per day as a continuing violation aggravated by the
severity of this safety-related offense and the conduct of the utility. We begin the
calculation on November 16, 2012, the date by which we find that PG&E should have
prepared and submitted a filing to inform the Commission of the significant and material
discovery of the records discrepancy and end the calculation on the date that PG&E
submitted its Errata document for filing, July 3, 2013, a delay of 229 days. We assess the
maximum statutory value [sic] of $50,000 per day for this continuing violation based on
the history of this proceeding as set forth above. The resulting fine is $11,450,000.
―For submitting a misleadingly titled and factually incomplete document on
July 3, 2013, $50,000 per day for the 58 days while this shortcoming remained
uncorrected = $2,900.000. Total fine = $14,350,000.‖ (Italics added.)
The Commission then made some ―Comments on [the] Alternate Decision‖ of
Commissioner Ferron, one of which is especially germane: ―PG&E . . . argues that the
Commission must show that PG&E intentionally misled the Commission. However,
there is no ‗intent‘ element to a Rule 1.1 violation, either implicitly or explicitly. We
have previously held that Rule 1.1 violations have occurred where there has been a lack

23
of candor, withholding of information, or failure to correct information or respond fully
to data requests. [Fn. to four PUC decisions.]‖
In Decision 14-05-034, the Commission denied PG&E‘s request for rehearing,
rejecting PG&E‘s arguments that: (1) ―The Commission erred in finding violations of
Rule 1.1 without proof that PG&E intended to misled the Commission‖; (2) ―The
Commission erred in finding ‗continuing violations‘ of Rule 1.1 without proof that any
misconduct was continuing‖; and (3) the penalty imposed violated the prohibitions
against excessive fines in the United States and California constitutions, and also violated
the due process clauses of those documents. These are the issues PG&E brings for
review.
ANALYSIS
The Scope of Our Review
―Within 30 days after the commission issues its decision denying the application
for a rehearing, . . . any aggrieved party may petition for a writ of review in the court of
appeal . . . for the purpose of having the lawfulness of the original order or decision or of
the order or decision on rehearing inquired into and determined.‖ (§ 1756.)
―[T]he review by the court shall not extend further than to determine, on the basis
of the entire record . . . , whether any of the following occurred: [¶] (1) The commission
acted without, or in excess of, its powers or jurisdiction. [¶] (2) The commission has not
proceeded in the manner required by law. [¶] (3) The decision of the commission is not
supported by the findings. [¶] (4) The findings in the decision of the commission are not
supported by substantial evidence in light of the whole record. [¶] . . . [¶] (6) The order
or decision of the commission violates any right of the petitioner under the Constitution
of the United States or the California Constitution.‖ (§ 1757, subd. (a).)
―Notwithstanding Section . . . 1757 . . . , in any proceeding wherein the validity of
any order or decision is challenged on the ground that it violates any right of petitioner
under the United States Constitution or the California Constitution, the Supreme Court or
court of appeal shall exercise independent judgment on the law and the facts, and the

24
findings or conclusions of the commission material to the determination of the
constitutional question shall not be final.‖ (§ 1760.)
Thus, when no constitutional issue is presented, a PUC decision has the same
standing as a judgment of the superior court: it is presumed correct, and any party
challenging the decision has the burden of proving that it suffers from prejudicial error.
(City and County of San Francisco v. Public Utilities Com. (1985) 39 Cal.3d 523, 530;
Toward Utility Rate Normalization v. Public Utilities Com. (1978) 22 Cal.3d 529, 537;
Southern California Edison Co. v. Public Utilities Com. (2014) 227 Cal.App.4th 172,
185.) Indeed, our Supreme Court has repeatedly called the presumption in favor of the
Commission‘s decision a ―strong‖ one. (Greyhound Lines, Inc. v. Public Utilities Com.
(1968) 68 Cal.2d 406, 410 [―There is a strong presumption in favor of the validity of the
commission‘s decisions‖]; Pacific Tel. & Tel. Co. v. Public Util. Com. (1965) 62 Cal.2d
634, 647 [―strong presumption of the correctness of the findings . . . of the commission,
which may choose its own criteria or method of arriving at its decision‖].)
But even the presence of a constitutional dispute does not require the reviewing
court to adopt de novo or independent review. Even there, ―the question of the weight of
the evidence in determining issues of fact lies with the commission acting within its
statutory authority; the ‗judicial duty to exercise an independent judgment does not
justify disregard of the weight which may properly attach to findings upon hearing and
evidence.‘ ‖ (Pacific Tel. & Tel. Co. v. Public Util. Com., supra, 62 Cal.2d 634, 646.) In
other words, judicial reweighing of evidence and testimony is ordinarily not permitted.
(See, e.g., Toward Utility Rate Normalization v. Public Utilities Com., supra, 22 Cal.3d
529, 538 [― ‗When conflicting evidence is presented from which conflicting inferences
can be drawn, the commission‘s findings are final‘ ‖]; Pacific Tel. & Tel. Co. v. Public
Util. Com., supra, at p. 647 [findings which are final include those involving ―conflicting
evidence [or] undisputed evidence from which conflicting inferences may reasonably be
drawn‖]; Cal. Portland Cement Co. v. Public Util. Com. (1957) 49 Cal.2d 171, 175 [―The
weighing of whatever factors may have tended [to support an implied finding by the
PUC] . . . was a matter within the exclusive jurisdiction of the commission]; The Utility

25
Reform Network v. Public Utilities Com. (2014) 223 Cal.App.4th 945, 959; In re
Groundwater Cases (2007) 154 Cal.App.4th 659, 681; cf. SN Sands Corp. v. City and
County of San Francisco (2008) 167 Cal.App.4th 185, 191 [same approach taken to
review of county public utilities commission].) The only exception is those findings or
conclusions ―drawn from undisputed evidence . . . from which conflicting inferences may
not reasonably be drawn [and therefore] present questions of law.‖ (Pacific Tel. & Tel.
Co. v. Public Util. Com., supra, at p. 647.)
To accomplish the overturning of a Commission finding for lacking the support of
substantial evidence, the challenging party must demonstrate that based on the evidence
before the Commission, a reasonable person could not reach the same conclusion. (Clean
Energy Fuels Corp. v. Public Utilities Com. (2014) 227 Cal.App.4th 641, 649; The Utility
Reform Network v. Public Utilities Com., supra, 223 Cal.App.4th 945, 959.) It is for this
reason that the Commission‘s factual findings are almost always treated as
― ‗conclusive‘ ‖ (American Toll Bridge Co. v. Railroad Com. (1938) 12 Cal.2d 184, 192),
―final and not subject to review.‖ (City and County of San Francisco v. Public Utilities
Com., supra, 39 Cal.3d 523, 530.)
The special respect accorded the PUC as a constitutional entity also appears in the
considerable deference extended to what might otherwise appear purely judicial
functions. Courts have long accepted the principle that ―the commission‘s interpretation
of the Public Utilities Code should not be disturbed unless it fails to bear a reasonable
relation to statutory purposes and language . . . .‖ (Greyhound Lines, Inc. v. Public
Utilities Com., supra, 68 Cal.2d 406, 410–411;13 accord, Southern California Edison Co.

13
One of the sources for this conclusion was Netterville, Administrative
“Questions of Law” and the Scope of Judicial Review in California (1956) 29 So.Cal. L.
Rev. 434, 451–453. The relevant discussion on page 453 ends with the following:
―[T]he agency‘s choice of a set of legal inferences and legal conclusions from among a
number of possible choices can rarely be said to be an abuse of discretion. It is, on the
contrary, an exercise of the most useful kind of discretion which any agency could
exercise. As long as the agency‘s choice has evidentiary support in the record and the
legal inferences and conclusions drawn therefrom show a reasonable relation to its task of
effectuating the broad statutory purposes, the court will not interfere. The commission, in

26
v. Peevey (2003) 31 Cal.4th 781, 796; PG&E Corp. v. Public Utilities Com. (2004) 118
Cal.App.4th 1174, 1194.) This judicial deference acknowledges a role for the
Commission‘s administrative expertise: ―[W]e give presumptive value to a public
agency‘s interpretation of a statute within its administrative jurisdiction because the
agency may have ‗special familiarity with satellite legal and regulatory issues,‘ leading to
expertise expressed in its interpretation of the statute.‖ (Pacific Bell Wireless, LLC v.
Public Utilities Com. (2006) 140 Cal.App.4th 718, 729; accord, Southern California
Edison. Co. v. Public Utilities Com., supra, 227 Cal.App.4th 172, 185; SFFP, L.P. v.
Public Utilities Com. (2013) 217 Cal.App.4th 784, 794.)
The deference may, if anything, be even greater with regulations promulgated by
the agency. ―[T]he PUC‘s interpretation of its own regulations and decisions ‗is entitled
to consideration and respect by the courts. [Citation.] . . . ― ‗A court is more likely to
defer to an agency‘s interpretation of its own regulation than to its interpretation of a
statute, since the agency is likely to be intimately familiar with regulations it authored,
and sensitive to the practical implications of one interpretation over another.‘ ‖
[Citation.]‘ ‖ (Clean Energy Fuels Corp. v. Public Utilities Com., supra, 227
Cal.App.4th 641, 649; see The Utility Reform Network v. Public Utilities Com., supra,
223 Cal.App.4th 945, 958 [―The Commission‘s interpretation of its own rules and
regulations ‗is entitled to consideration by the courts.‘ ‖].)
All that being said, with either statute or regulation, the ultimate decision is with
the courts. (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1,
11–12; Carmona v. Division of Industrial Safety (1975) 13 Cal.3d 303, 310; PG&E Corp.
v. Public Utilities Com., supra, 118 Cal.App.4th 1174, 1194–1195.)

such a case is in as good, if not better position than the court, to make the choice from
among the possible and reasonable choices available.‖

27
 The Issues Presented
As shown by the captions in its petition, this is how PG&E frames the issues for
decision: (1) ―The Commission Erred in Holding That a Violation of Commission Rule
1.1 Does Not Require Proof of an Intent to Mislead the Commission‖; (2) ―The
Commission Erred in Holding That Continuing Violations of Rule 1.1 May Be Found
Without Proof of Continuing Misconduct‖; and (3) ―The Commission‘s Decision
Violates PG&E‘s Rights Under the California and United States Constitution,‖
specifically: ―The Commission found PG&E guilty of Rule 1.1 violations that the
Commission failed to identify in advance of the hearing, in contravention of the Due
Process Clause, and imposed fines of millions of dollars for unintentional reporting and
filing errors that caused no harm and were not accompanied by any improper intent, in
violation of the Excessive Fines Clause.‖
The Commission Can Find a Rule 1.1 Violation Without Requiring
a Mental State to Mislead

PG&E‘s opening contention attacks the PUC‘s conclusion that ―there is no ‗intent‘
element to . . . Rule 1.1.‖ PG&E asserts that this conclusion suffers from numerous
defects, in connection with which PG&E advances five supporting arguments, which will
hereafter be referred to as ―subarguments.‖ The subarguments are these: One, the
Commission neglected to recognize ―[t]hat Rule 1.1 incorporate[d] an intent element is
. . . mandated by the language of the Rule itself,‖ because ―[a]ll of the key terms in its
provision—‗to mislead,‘ ‗artifice,‘ and ‗false statement‘—denote purposefully deceptive
conduct.‖ Two, PUC‘s conclusion ―breaks from the Commission‘s own prior decisions.‖
Three, ―The Commission‘s interpretation . . . also conflicts directly with decisions
interpreting identical language in provisions of the California Rules of Professional
Conduct and [the] Business and Professions Code.‖ Four, ―Interpreting Rule 1.1 to
include an intent element is further supported by the presumption against strict liability,‖
which ―holds that a statute or regulation defining an offense is generally presumed to
require proof of intent, even when no mens rea element is specifically stated.‖ And five,
PUC‘s construction of Rule 1.1 ―opens the door to new and significant risks of liability

28
for all parties appearing before the Commission, given the ever-present possibility that a
particular filing may be deemed to be procedurally improper or to have somehow
‗misled‘ the Commission or its staff, potentially allowing for the imposition of fines in
the millions of dollars for representations made by a party in complete good faith.‖
It is clear from some of the language used by PG&E (―offense,‖ ―strict liability,‖
―mens rea‖), its copious citation of criminal authorities, and its invocation of
constitutional provisions linking excessive fines to cruel and/or unusual punishment,14
that PG&E is trying to insinuate that Rule 1.1 be treated as a species of penal statute.15
From this premise PG&E hopes to have a mental state element implied to avoid having a
Rule 1.1 violation treated as a strict liability offense. These efforts must be disappointed.
It is true that, according to repeated pronouncements from our Supreme Court,
―[t]he prevailing trend in the law is against imposing criminal liability without proof of
some mental state where the statute does not evidence the Legislature‘s intent to impose
strict liability.‖ (In re Jennings (2004) 34 Cal.4th 254, 267; accord, Stark v. Superior
Court (2011) 52 Cal.4th 368, 393; People v. Simon (1995) 9 Cal.4th 493, 521.) But this
trend does not apply to statutes imposing civil penalties for noncompliance with measures
intended to protect the public health and safety. These penalties are not penal offenses,
as is also shown by decisions by our Supreme Court.

14
―Excessive bail shall not be required, nor excessive fines imposed, nor cruel and
unusual punishment inflicted.‖ (U.S. Const., 8th Amend.) ―Cruel or unusual punishment
may not be inflicted or excessive fines imposed.‖ (Cal. Const., art. I, § 17.)
15
Of course, Rule 1.1 is not a statute, but a regulation promulgated by the PUC.
But Rule 1.1 cannot be divorced from section 2107, for the statute—together with the
very broad enabling power to ―do all things . . . which are necessary and convenient‖
granted by section 701—is the source of the authority to impose monetary sanctions for
violation of the rule. The rule is an organic extension of the statute, and the validity of
the rule cannot be considered while ignoring the statute. Section 2107 and Rule 1.1 are
clearly in pari materia and are to be construed together, along with section 701. (See
Hoitt v. Department of Rehabilitation (2012) 207 Cal.App.4th 513, 523–524; Mittelman
v. Seifert (1971) 17 Cal.App.3d 51, 77–78.) This conjunction is implicit in our analysis,
and references to Rule 1.1 are to be understood as also referencing sections 2107 and
701.

29
 ― ‗While . . . civil penalties may have a punitive or deterrent aspect, their primary
purpose is to secure obedience to statutes and regulations imposed to assure important
public policy objectives.‘ ‖ (California Assn. of Health Facilities v. Department of
Health Services (1997) 16 Cal.4th 284, 294–295, quoting Kizer v. County of San Mateo
(1991) 53 Cal.3d 139, 147–148, italics added.) ―It is . . . well accepted that a state may
impose reasonable penalties as a means of securing obedience to statutes validly enacted
under the police power . . . . Imposition of civil penalties has, increasingly in modern
times, become a means by which legislatures implement statutory policy.‖ (Hale v.
Morgan (1978) 22 Cal.3d 388, 398.) ―[T]he legislature may constitutionally impose
reasonable penalties to secure obedience to statutes enacted under the police power, so
long as those enactments are procedurally fair and reasonably related to a proper
legislative goal.‖ (Kinney v. Vaccari (1980) 27 Cal.3d 348, 352.)
Without question, the PUC operates pursuant to the state‘s police power. (E.g.,
Gt. Northern Ry. v. Washington (1937) 300 U.S. 154, 159; Sutter Butte Canal Co. v. R. R.
Comm’n. (1929) 279 U.S. 125, 139; Pacific Tel. & Tel. Co. v. Superior Court (1963) 60
Cal.2d 426, 428.) And PG&E does not dispute that the Commission has the authority to
impose monetary sanctions for disobedience of its orders made pursuant to the state‘s
police power.
When the Legislature meant to criminalize a violation of the Commission‘s
authority, it knew how to do so in unmistakable language.16 When the Legislature meant

16
―Every public utility and every officer, agent, or employee of any public utility,
who violates or fails to comply with, or who procures, aids, or abets any violation by any
public utility of any provision of the California Constitution or of this part, or who fails to
comply with any part of any order, decision, rule, direction, demand, or requirement of
the commission, or who procures, aids, or abets any public utility in the violation or
noncompliance in a case in which a penalty has not otherwise been provided, is guilty of
a misdemeanor and is punishable by a fine not exceeding five thousand dollars ($5,000),
or by imprisonment in a county jail not exceeding one year, or by both fine and
imprisonment.‖ (§ 2110.)
―Every person who, either individually, or acting as an officer, agent, or employee
of a corporation other than a public utility, violates any provision of this part, or fails to

30
to require a mental state for an act committed before the Commission, it knew how to do
so in plain language.17 And when the Legislature meant a party‘s good faith to be

comply with any part of any order, decision, rule, direction, demand, or requirement of
the commission, or who procures, aids, or abets any public utility in such violation or
noncompliance, in a case in which a penalty has not otherwise been provided for such
person, is guilty of a misdemeanor, and is punishable by a fine not exceeding one
thousand dollars ($1,000), or by imprisonment in a county jail not exceeding one year, or
by both such fine and imprisonment.‖ (§ 2112.)
―Any public utility on whose behalf any agent or officer thereof who, having taken
an oath that he will testify, declare, depose or certify truly before the commission,
willfully and contrary to such oath states or submits as true any material matter which he
knows to be false, or who testifies, declares, deposes, or certifies under penalty of perjury
and willfully states as true any material matter which he knows to be false, is guilty of a
felony and shall be punished by a fine not to exceed five hundred thousand dollars
($500,000).‖ (§ 2114.)
17
―Every corporation or person, other than a public utility and its officers, agents,
or employees, which or who knowingly violates or fails to comply with, or procures, aids
or abets any violation of any provision of the California Constitution relating to public
utilities or of this part, or fails to comply with any part of any order, decision, rule,
direction, demand, or requirement of the commission, or who procures, aids, or abets any
public utility in the violation or noncompliance, in a case in which a penalty has not
otherwise been provided for the corporation or person, is subject to a penalty of not less
than five hundred dollars ($500), nor more than fifty thousand dollars ($50,000) for each
offense.‖ (§ 2111, italics added.)
―Any public utility on whose behalf any agent or officer thereof who, having taken
an oath that he will testify, declare, depose or certify truly before the commission,
willfully and contrary to such oath states or submits as true any material matter which he
knows to be false, or who testifies, declares, deposes, or certifies under penalty of perjury
and willfully states as true any material matter which he knows to be false, is guilty of a
felony and shall be punished by a fine not to exceed five hundred thousand dollars
($500,000).‖ (§ 2114, italics added.)
―Any public utility which does, causes to be done, or permits any act, matter, or
thing prohibited or declared unlawful, or which omits to do any act, matter, or thing
required to be done, either by the Constitution, any law of this State, or any order or
decision of the commission, shall be liable to the persons or corporations affected thereby
for all loss, damages, or injury caused thereby or resulting therefrom. If the court finds
that the act or omission was wilful, it may, in addition to the actual damages, award
exemplary damages. . . .‖ (§ 2106, italics added.)

31
considered, it knew how to say so without ambiguity.18 The Legislature‘s decision not to
include such qualifying words as ―willfully‖ or ―knowingly‖ when enacting section 2107
indicates that it did not mean to impose a scienter requirement for a violation of ―any part
or any provision of any order, decision, decree, rule, direction, demand, or requirement of
the commission.‖ We are not authorized to insert such a requirement ― ‗to conform to an
assumed intention which does not appear from its language.‘ ‖ (Napa Valley Wine Train,
Inc. v. Public Utilities Com. (1990) 50 Cal.3d 370, 381.)19
The absence of such language in section 2107 compels the conclusion that a civil
penalty imposed under that statute is not a penal offense—and the rule of strictly
construing penal statutes intimated by PG&E has no application. Indeed, the opposite is
true: ― ‗[S]tatutes which prescribe only civil monetary penalties‘ . . . ‗for the protection

18
―Any penalty for violation of any provision of this act, or of any rule, regulation,
general order, or order of the commission, involving safety standards for pipeline
facilities or the transportation of gas in the State of California may be compromised by
the commission. In determining the amount of such penalty, or the amount agreed upon
in compromise, the appropriateness of such penalty to the size of the business of the
person charged, the gravity of the violation, and the good faith of the person charged in
attempting to achieve compliance, after notification of a violation, shall be
considered. . . .‖ (§ 2104.5, italics added.)
19
We would reach the same result if we examined Rule 1.1 without reference to
section 2107. As stated at the start of this opinion, Rule 1.1 was promulgated by the
Commission pursuant to its power under section 1701 to adopt ―rules of practice and
procedure.‖ When the PUC intends to require that an act or omission be done with a
specified mental state, it knows how to frame regulations expressing that intent. (See, for
example, Cal. Code Regs., tit. 20, §§ 1672(m) [entities performing home energy ratings
or audits ―shall not knowingly provide untrue, inaccurate, or incomplete rating
information or report rating results‖]; 1674 [entity that applies to be certified as a home
energy rating provider must furnish ―A statement that the [entity] . . . will not knowingly
fail to comply with the requirements of these regulations‖]; and 2841(c)(1) [PUC ―may
rescind approval of a Registry Service Provider‖ if the provider ―is guilty of . . . gross
negligence‖].) The Commission did not do so when it promulgated Rule 1.1. In that the
same rules of construction govern both statutes and regulations promulgated by an
administrative agency (Guzman v. County of Monterey (2009) 46 Cal.4th 887, 898; Cal.
Drive-In Restaurant Assn. v. Clark (1943) 22 Cal.2d 287, 292), we are no less precluded
from reading such a requirement into Rule 1.1 as we are from inserting it into section
2107.

32
of the public are . . . broadly construed in favor of that protective purpose.‘ ‖ (Smith v.
Superior Court (2006) 39 Cal.4th 77, 92, quoting People ex rel. Lungren v. Superior
Court (1996) 14 Cal.4th 294, 312–313.)
PG&E characterizes the Errata as an innocent mistake ―made . . . in complete good
faith,‖ which ―did not cause any harm and did not pose any risk to the Commission, its
staff, any party, or the public.‖ This completely misperceives what the PUC believed
was at issue.20 Statutes such as section 2107 would have virtually no deterrent impact if
the utility were penalized only upon the actual occurrence of the substantive harm the
Commission was trying to avoid. (See State of California v. City and County of San
Francisco (1979) 94 Cal.App.3d 522, 531.) And the idea that the Commission could not
employ that authority to prevent a recurrence of the September 9, 2010 explosion is too
preposterous to be entertained. The Commission was not powerless until another
explosion launched another segment of underground pipe into Glenview Drive. To
validate such an extreme consequence is something we must avoid if at all possible.
(See, e.g., Eel River Disposal & Resources Recovery, Inc. v. County of Humboldt (2013)
221 Cal.App.4th 209, 227; Reliable Tree Experts v. Baker (2011) 200 Cal.App.4th 785,
796–797; Friends of Bay Meadows v. City of San Mateo (2007) 157 Cal.App.4th 1175,
1191.)
As we have noted in refusing to accept an argument such as PG&E makes here:
―[T]he legitimate police power device of ‗securing obedience‘ . . . requires more than

20
That said, we cannot indulge the factual predicate of PG&E‘s argument—that
the contents of the Errata and the timing of its submission to the Commission—was
―innocent.‖ That predicate is, in turn, founded upon a positive interpretation of Lead
Counsel‘s testimony. But the Commission was clearly of the opinion that Lead Counsel
and his testimony were not credible. The Commission went to the trouble of stating this
determination explicitly in its analysis quoted above, then restating it as a conclusion of
law, and implicitly adopting it as a ―finding of fact‖ (―The explanation . . . by Lead
Counsel . . . is logically flawed‖). Such a fact-specific issue as an individual credibility
determination—and the corollary issues of deducible inferences—could not be examined
here without a wholesale violation of the standards governing our limited scope of
review.

33
compensation of [actual] losses, a penalty that might achieve little or no compliance.‖21
(City and County of San Francisco v. Sainez (2000) 77 Cal.App.4th 1302, 1315.) Our
Supreme Court is equally unreceptive to challenges to the Commission‘s powers to
impose deterrent penalties: ―Civil penalties under [section 2107] . . . require no showing
of actual harm,‖ ―are imposed . . . irrespective of actual damage suffered,‖ ―without
regard to motive,‖ and ―require no showing of malfeasance or intent to injure.‖ (Kizer v.
County of San Mateo, supra, 53 Cal.3d 139, 147.)
This mirrors the position of the Commission. In language especially pertinent to
our inquiry, since at least 1998 the Commission has taken the position that ―The purpose
of a fine is to go beyond restitution to the victim and to effectively deter further violations
. . . . [¶] Effective deterrence . . . is particularly important against violations which could
result in public harm, and particularly against those where severe consequences could
result.‖ (Enforcement Rules, supra, 84 Cal.P.U.C.2d 167, 188.) Nor is ―harm‖ narrowly
restricted to ―the victim‖—or even the general ―public‖: ―Many potential penalty cases
before the Commission do not involve any harm to consumers but are instead violations
of reporting or compliance requirements. In these cases, the harm may not be to
consumers but rather to the integrity of the regulatory processes. . . . [¶] . . . [¶] Such
compliance is absolutely necessary to the proper functioning of the regulatory process.‖
(Ibid.)
Based on the above, we must reject PG&E‘s subarguments one and four. We
reject subargument one because it is not so much the plain language of Rule 1.1 that

21
PG&E argues that ―it is difficult to see how the fines here will have any real
additional deterrent effect, since by the Commission‘s own holding they could be
imposed for violations that are ‗inadvertent or unintentional.‘ ‖ The answer is obvious:
if a utility pays closer attention to PUC directives, and how it responds to those
directives, the utility will avoid paying a multi-million dollar penalty, and also escape the
public embarrassment of trying to explain why it was penalized. (See Final Opinion
Adopting Enforcement Rules (1998) 84 Cal.P.U.C.2d 167, 188 (Enforcement Rules)
[―Effective deterrence creates an incentive for public utilities to avoid violations.
Deterrence is particularly important against violations which could result in public harm,
and particularly against those where severe consequences could result.‖ Italics added.].)

34
governs, but the language of section 2107 which, together with sections 701 and 1701, is
the head source authority for Rule 1.1. (See fn. 15, ante.) The language of section 2107,
by itself and when examined with other statutes, establishes that no intent element is
―mandated‖ by that language. And contrary to PG&E‘s subargument four, section 2107
is not a penal provision requiring strict construction, but is instead a provision that allows
for the PUC, in the exercise of its unquestionably legitimate regulatory jurisdiction, to
impose civil penalties.
The same reasoning dooms PG&E‘s subargument three, with its reference to the
California Rules of Court and the Business and Professions Code. (See fn. 22, post.) The
Commission‘s power to impose monetary deterrent sanctions to ensure compliance with
such an unquestionably valid jurisdictional power cannot be overcome by PG&E‘s
reliance upon arguments based on supposedly analogous statutes. PG&E is correct that
the statutory tort of deceit does have a scienter requirement. (Civ. Code, § 1710; Lazar v.
Superior Court (1996) 12 Cal.4th 631, 638; 5 Witkin, Summary of Cal. Law (10th ed.
2005) Torts, §§ 800–807, pp. 1157–1163.) But that requirement is not invariable, and
does not exclude the existence of actionable fraud that does not require a mental element.
Our State‘s Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) is one example
that comes to mind. (See Cortez v. Purolator Air Filtration Products Co. (2000) 23
Cal.4th 163, 181 [―the plaintiff need not show that a UCL defendant intended to injure
anyone through its unfair or unlawful conduct. The UCL imposes strict liability when
property or monetary losses are occasioned by conduct that constitutes an unfair business
practice‖]; Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 520 [same].)
―Moreover, tort law recognizes a claim for negligent misrepresentation, which allows
recovery in the absence of scienter or intent to defraud (Civ. Code, § 1710, subd. 2; Small
v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173–174) and attaches liability to ‗[t]he
suppression of a fact, by one who is bound to disclose it, or who gives information of
other facts which are likely to mislead for want of communication of that fact.‘ (Civ.
Code, § 1710, subd. 3.) And tort law also recognizes that a party having exclusive
knowledge of information materially affecting the value of a transaction may have a duty

35
to disclose that information to the other party even in the absence of a fiduciary
relationship. (5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 796, pp. 1151–
1152.)‖ (Los Angeles Unified School Dist. v. Great American Ins. Co. (2010) 49 Cal.4th
739, 750, fn. 5.)
This approach has found wide acceptance when construing statutes intended to
protect the public, even when noncompliance is treated as a misdemeanor. (E.g., In re
Marley (1946) 29 Cal.2d 525, 528–530; Hypertouch, Inc. v. ValueClick, Inc. (2011) 192
Cal.App.4th 805, 821–822; Khan v. Medical Board (1993) 12 Cal.App.4th 1834, 1844–
1845; People ex rel. Van de Kamp v. Cappuccio, Inc. (1988) 204 Cal.App.3d 750, 761;
Brodsky v. California State Board of Pharmacy (1959) 173 Cal.App.2d 680, 688.) It is
only when the violation elevates to felony, and is accompanied by harsher consequences,
that an intent element is implied. (See In re Jorge M. (2000) 23 Cal.4th 866, 879–880;
People v. Coria (1999) 21 Cal.4th 868, 876–878.)
As no misdemeanor or felony prosecution confronts PG&E, we conclude the
public protection approach furnishes a more useful and reliable analogue than one aspect
of statutory tort law. The Commission is not concerned with redressing a private wrong
to an individual, but with protecting the safety of the general public—not to mention the
integrity of the state-wide regulatory authority exercised by the Commission.22
The matter of PG&E‘s subargument two, which is based on the PUC‘s own prior

22
PG&E‘s citation of one California statute and a rule of professional conduct,
neither of which address public safety, and a handful of irrelevant cases from other
jurisdictions, are hardly contrary.
PG&E cites Business and Professions Code section 6068, subdivision (d)—―It is
the duty of an attorney to . . . [¶] . . .[¶] . . . never to seek to mislead the judge or any
judicial officer by an artifice or false statement or fact of law‖—and rule 5-200(B) of the
Rules of Professional Conduct—―In presenting a matter to a tribunal, a member:
[¶] . . . [¶] . . . Shall not seek to mislead the judge, judicial officer, or jury by an artifice or
false statement of fact or law.‖ PG&E also cites a selective survey of decisions from
other states, i.e., the attorney discipline cases of In re Discipline of Eicher (S.D. 2003)
661 N.W.2d 354, In re Leonhardt (Ore. 1997) 930 P.2d 844, and In re Norton (Utah
1944) 146 P.2d 899, and one criminal decision. (Turner v. State (Mo.Ct.App. 1998) 979
S.W.2d 222.) None of it is pertinent.

36
decisions, is more problematic. PG&E tells us: ―[T]he Commission itself has in prior
decisions, contrary to its holding in this case, refused to find a violation of Rule 1.1 or
impose sanctions when the alleged misstatement ‗was an oversight rather than a
deliberate attempt to mislead us,‘ [citation] or when the record did not ‗demonstrate an
intent to mislead the Commission.‘ ‖
The Commission responds that its prior applications of Rule 1.1 (and its
predecessor version, Rule 1) furnish additional support for concluding that scienter is not
a sine qua non.23 The Commission views its past adjudicatory decisions as illustrating the
principle that intent has never been deemed essential to finding a violation of the rule
against misleading the Commission. In the Commission‘s words, it ―has never held that
intent is an absolute prerequisite to finding a Rule 1 violation. A violation may also be
established where the utility demonstrates lack of candor, withholds information, or fails
to correctly inform or correct mistaken information. [Citations.] [¶] The Commission
has also explained that Rule 1 inquiries look to the reasonableness of a utility‘s conduct,
including its compliance with relevant statutes and decisions. [Citation.] In some
instances, even inadvertent or unintentional conduct may result in a violation if the effect
is to mislead the Commission. . . . [¶] That is not to say intent is not considered at all.
However, it goes to the weight to be assigned to a violation. [Citation.] That is, it may
be weighed as an aggravating or mitigating factor.‖
Although the Commission maintains that the line of its decisions is unbroken and

23
The complete text of Rule 1.1 reads: ―Any person who signs a pleading or brief,
enters an appearance, offers testimony at a hearing, or transacts business with the
Commission, by such act represents that he or she is authorized to do so and agrees to
comply with the laws of this State; to maintain the respect due to the Commission,
members of the Commission and its Administrative Law Judges; and never to mislead the
Commission or its staff by an artifice or false statement of fact or law.‖
Rule 1.1 derives from the former Rule 1, which was adopted by the PUC in 1950.
(Public Utilities Commission Rules of Practice and Procedure (1950) 49 Cal.P.U.C. 536,
541.) When renumbered Rule 1.1 in 2006, the only difference was addition of the words
―or she.‖ (Cal.P.U.C. Decision 06-07-006 (July 20, 2006), Appen., p. 7.) We appreciate
amici providing us with this information.

37
true, and therefore entitled to deference, we cannot agree. The nonsystematic
examination we have made, based on the decisions cited by the parties and amici, leaves
us with the impression that the Commission‘s applications of Rule 1.1 are hardly linear.
One illustration from the matter before us will illustrate the point.
When the Commission denied PG&E‘s application for rehearing, it made the
categorical statement that ―we have never held that a purposeful intent is a prerequisite to
impose Rule 1.1 sanctions.‖ Amici responds with a 2002 decision where the
Commission made the equally categorical pronouncement that ―Rule 1 violations require
purposeful intent, recklessness, or gross negligence in regard to communications with the
Commission.‖ (Cal.P.U.C. Decision 02-08-063 (Aug. 22, 2002) [Slip Opn., p. 20].)24
Yet, in that very same 2002 decision the Commission also cited a 1994 decision in which
the Commission had referred to ―a line of Commission decisions which holds that
situations involving a failure to correctly cite a proposition of law, a lack of candor or
withholding of information, and a failure to correctly inform and to correct the mistaken
information,‖ which the Commission viewed as ―support[ing] the proposition that a
violation of Rule 1 can result from a reckless or grossly negligent act.‖ (Id., citing
Cal.P.U.C. Decision 94-11-018 (Nov. 9, 1994 [57 CPUC2d 204], italics added.)
All of this was reiterated in a 2004 decision: ―The Commission has recently held
that Rule 1 violations require purposeful intent, recklessness, or gross negligence in
regard to communications with the Commission. (See D.02-08-063 . . . .) In D.94-11-
018, 57 CPUC2d 176, the Commission recognized that a line of prior decisions held that
situations involving a failure to correctly cite a proposition of law, a lack of candor, or

24
But at an earlier point in the 2002 decision the Commission made a statement
that can hardly bring comfort to PG&E: ―This decision should not be interpreted to
suggest that parties that transact business with the Commission may rely on oral
discussions with Commission employees as a basis for providing in their written
submissions and pleadings anything less than the complete and candid disclosure of
information that is required by Rule 1.‖ (Cal.P.U.C. Decision 02-08-063, supra [Slip
Opn., p. 19].) This appears to be the basis for disregarding the discussion between PG&E
employees and the PUC staffer following the October 2012 discovery of the misidentified
pipe in Line 147. (See fn. 8, ante.)

38
withholding information, and a failure to correctly inform and to correct mistaken
information are potential Rule 1 violations, and clarified that a Rule 1 violation can result
from such conduct if it is reckless or grossly negligent.‖ (Cal.P.U.C. Decision 04-04-065
(April 22, 2004) [Slip Opn., pp. 35–36].)
Although it may be literally correct that the Commission has never expressly held
that Rule 1.1 cannot be violated unless there is intent, recklessness, or gross negligence,
one could conclude that it had. That conclusion would only be fortified by considering
decisions where the Commission had—most recently during the period while PG&E‘s
application for rehearing was pending—declined to impose Rule 1.1 sanctions because a
utility‘s misstatement was treated as ―an oversight rather than a deliberate attempt to
mislead.‖ (Cal.P.U.C. Decision 14-02-041 (Feb. 27, 2014) [Slip Opn., p. 9, fn. 18]; see
Cal.P.U.C. Decision 03-11-023 (Nov. 13, 2003) [Slip Opn., p. 28] [common carrier not
sanctioned because evidence did not establish that carrier ―knowingly and willfully filed
false quarterly reports that understated revenue‖]; Cal.P.U.C. Decision 84-08-031(Aug. 1,
1984) [16 CPUC2d 29]), or an ―honest mistake.‖ (Cal.P.U.C. Decision 09-01-017 (Jan.
29, 2009) [Slip Opn., p. 6].) But against these comments is the 2009 decision in which
the Commission determined that a utility ―is subject to a penalty for its violation of Rule
1.1, even if the violation was inadvertent.‖ (Cal.P.U.C. Decision 09-04-009 (April 16,
2009) [Slip Opn, p. 15].)
Then there are decisions from 1990, 1992, and 2001 that hardly clarify things. In
the 1990 decision, attorneys for a utility sent to the Commission a number of letters
containing false information. What the utility tried to dismiss as a simple mistake, the
PUC denounced as ―sharp dealing,‖ sanctionable under Rule 1: ―U.S. West, by its
attorney‘s letters . . . , misled the Commission and its staff, leading to the approval of
Resolution T-13052, approving Advice Letter 8-A. U.S. West took full advantage of the
‗mistake‘ it had implanted, and by failing within a reasonable time . . . to bring this
‗mistake‘ and the resulting language ambiguity to the attention of the Commission,
persisted in further sharp dealing.‖ (Cal.P.U.C. Decision 90-01-013 (Dec. 6, 1990) [38
CPUC2d 420–421].)

39
 In the 1992 decision, the Commission determined that a gas pipeline utility had
improperly assigned certain gas pipeline capacity rights to an affiliate, further
determining that the utility had violated Rule 1 by misrepresenting the status of the
affiliate‘s ―transportation rights ‖in a report filed with the Commission. (Cal.P.U.C.
Decision 92-03-042 (March 11, 1992) [43 CPUC2d 501–502].) The Commission denied
the utility‘s application for rehearing on the issue of whether it had violated Rule 1. The
language used in doing so merits quotation at length:
―There is sufficient evidence and legal basis to support our determination that
SoCalGas violated Rule 1 by misleading the Commission as to the status of the PITCO
transportation arrangements in the report it filed with the Commission on December 31,
1991. SoCalGas executed the capacity assignment on December 26, 1991, but did not
make this fact known to the Commission in the report it filed on December 31, 1991.
Rather, SoCalGas incorrectly informed the Commission that it was ‗contemplating‘ such
an assignment. . . . Even after the assignment became effective on January 1, 1992,
SoCalGas failed on its own to advise the Commission of the assignment, despite the
claims that ‗[a]s a business matter, [SoCalGas] always communicate[s] closely with the
pertinent staff on these matters whether or not there is a formal requirement that
[SoCalGas] . . . submit a filing.‘ . . . Apparently, . . . the assignment was discovered by
accident during the course of the implementation proceedings . . . .
―Thus, from the record, a strong evidentiary inference can be drawn that SoCalGas
did not intend to inform the Commission about the assignment of interstate capacity to an
affiliate . . . . [¶] Interestingly, SoCalGas also did not address the assignment in its
testimony [before the PUC] . . . Absent the Commission‘s accidental discovery of this
illegal assignment, the inaccurate language in the . . . report constituted a continuing
misrepresentation of the true facts . . . and would have misled the Commission that the
assignment was only being contemplated. [¶] Therefore, by failing to provide the correct
information in its report, and in not informing the Commission of the actual assignment,
SoCalGas misrepresented and misled the Commission . . . .

40
 ―Such a conclusion is supported by [the 1990 decision]. In this decision, the
Commission found a Rule 1 violation against a cellular telephone company for taking
advantage of a ‗mistake‘ it had introduced and for failing to bring this ‗mistake‘ to the
attention of the Commission within a reasonable time.‖ (Cal.P.U.C. Decision 92-07-084
(July 22, 1992) [45 CPUC2d 242], citations omitted.)
The 2001 decision involved the failure to disclose relevant information to the
Commission. The PUC refused to accept the utility‘s claim that this was an innocent
oversight:
―There is no dispute that Sprint PCS failed to disclose the information sought by
the staff . . . . Sprint PCS‘ major argument is that the omission was purely unintentional
and as such, does not qualify as a Rule 1 violation. . . . [¶] Even to the extent we were to
presume that Sprint PCS did not intentionally set out to deceive the staff, the results of its
actions did have the effect of misleading the staff.‖ (Cal.P.U.C. Decision 01-08-019
(Aug. 2, 2001) [Slip Opn., pp. 7–8].)
―Merely because a party initially withholds information . . . and then later
discloses the information . . . does not necessarily mean that the initial nondisclosure was
purely unintentional. The timing or manner in which information is disclosed could
potentially have a material effect on the outcome . . . . If a party is able to simply claim
ignorance of the initial omission, the party would . . . escape any sanctions or penalties.
[¶] In any event, the question of intent to deceive merely goes to the question of how
much weight to assign to any penalty that may be assessed. The lack of direct intent to
deceive does not necessarily, however, avoid a Rule 1 violation.‖ (Cal.P.U.C. Decision
01-08-019, supra [Slip Opn., pp. 7–9].)
In sum, that both the Commission and PG&E can point to seemingly contradictory
expressions on the predicate for Rule 1.1 liability is enough to establish that the
Commission‘s expressions on this issue have not been uniform. Put conversely, if the
Commission has a fixed position on Rule 1.1 liability, its inconsistent expressions make it
difficult to discern. We have said that judicial deference is not given to an administrative
interpretation that is inconsistent, transitory, or ― ‗ ―vacillating.‖ ‘ ‖ (State Building &

41
Construction Trades Council of California v. Duncan (2008) 162 Cal.App.4th 289, 303.)
But we went on to state: ―Nevertheless, the opinion of an administrative agency as to a
statute‘s meaning may be helpful even if it is ‗not binding or necessarily even
authoritative.‘ [Citations.] ‗Courts must, in short, independently judge the text of the
statute, taking into account and respecting an agency‘s interpretation of its meaning, of
course, whether embodied in a formal rule or less formal representation. Where the
meaning and legal effect of a statute is the issue, an agency‘s interpretation is one among
several tools available to the court. Depending on the context, it may be helpful,
enlightening, even convincing. It may sometimes be of little worth.‘ ‖ (Id. at p. 304,
quoting Yamaha Corp. of America v. State Bd. of Equalization, supra, 19 Cal.4th 1, 7–8.)
And in the 1998 decision we were quoting, our Supreme Court stated: ―Whether judicial
deference to an agency‘s interpretation is appropriate and, if so, its extent—the ‗weight‘
it should be given— is thus fundamentally situational. A court assessing the value of an
interpretation must consider a complex of factors material to the substantive legal issue
before it, the particular agency offering the interpretation, and the comparative weight the
factors ought in reason to command.‖ (Yamaha Corp. of America v. State Bd. of
Equalization, supra, at p. 12.)
Based on the above, the quantum of deference owed to the PUC‘s interpretation of
Rule 1.1 might be described as minimal. (See Yamaha Corp. of America v. State Bd. of
Equalization, supra, 19 Cal.4th 1, 12–13 [―A court is more likely to defer to an agency‘s
interpretation of its own regulation . . . [if] the agency ‗has consistently maintained the
interpretation in question, especially if [it] is long-standing‘ ‖].) But even so, this does
not mean that the Commission‘s interpretation is be ignored. It still rates consideration
and respect. (Id. at pp. 7–8; Clean Energy Fuels Corp. v. Public Utilities Com., supra,
227 Cal.App.4th 641, 649.) As we have taken pains to establish, we cannot look just to
Rule 1.1, we must also account for its statutory ancestry (see fn. 15, ante), statutes that
are part of the extensive regulatory scheme entrusted to the Commission‘s administration.
And that responsibility requires us to give some weight to the PUC‘s interpretation of
those statutes, if that interpretation bears a reasonable relation to the statutes‘ language

42
and purposes. (Southern California Edison Co. v. Peevey, supra, 31 Cal.4th 781, 796;
Greyhound Lines, Inc. v. Public Utilities Com., supra, 68 Cal.2d 406, 411; Pacific Bell
Wireless, LLC v. Public Utilities Com., supra, 140 Cal.App.4th 718, 729 [―we give
presumptive value to a public agency‘s interpretation of a statute within its administrative
jurisdiction‖].)
So, even if the interpretation of sections 1701 and 2107, together with Rule 1.1, is
not a subject to which the PUC brings a technical expertise derived from its regulatory
functions, the Commission is nevertheless entitled to its opinion concerning the practical
realities. Certainly no court can hope to equal the PUC‘s knowledge of what will
―mislead‖ it. No court can have an institutional memory of what constitutes ―an artifice‖
gained from familiarity with the practices and procedures before the PUC. This case
furnishes a perfect illustration: How can this court presume to think it knows better than
the Commission when use of an ―Errata‖ is, or is not, justified and in compliance with the
Commission‘s Rule 1.12(c)? This is a ―situational‖ factor working in favor of the
Commission‘s interpretation of the rule. (See Yamaha Corp. of America v. State Bd. of
Equalization, supra, 19 Cal.4th 1, 12; Clean Energy Fuels Corp. v. Public Utilities Com.,
supra, 227 Cal.App.4th 641, 649.) And the means chosen by the Commission to fulfill
its constitutional and statutory authority are to receive a liberal construction (San Diego
Gas & Electric Co. v. Superior Court, supra, 13 Cal.4th 893, 915), which, we believe,
reasonably translates as a measure of judicial deference to what the PUC deems
appropriate to police its jurisdiction.
True, the PUC‘s interpretation of Rule 1.1 may have been shrouded in a haze of
divergent and even differing formulations. Yet the subject addressed by the rule—
ensuring the transmission of truthful information to the Commission—is obviously
central to the proper discharge of the PUC‘s responsibilities. The Commission‘s history
of inexactitude or infelicitously expressing what will be deemed a violation of Rule 1.1
cannot be used to vitiate a vital deterrent. And thus we reject PG&E‘s subargument two.
That leaves PG&E‘s speculative subargument five, which rests upon the
assumption that the PUC has used Rule 1.1 to penalize ―representations made by a party

43
in complete good faith.‖ As previously shown, the factual predicate of that assumption
cannot be indulged ―without a whole violation of the standards governing our limited
scope of review.‖ (See fn. 20, ante.) Another erroneous underlying assumption is the
unduly narrow view of the Commission‘s legitimate deterrence powers. The remainder
of subargument five will be addressed while analyzing PG&E‘s contentions that the
Commission used an improper concept of what constitutes a continuing violation, and
that the aggregate amount of the penalties imposed violates the excessive fine
prohibitions of the United States and California constitutions.
We restate our conclusions:
The operative statutory language is the plain language of section 2107. The
Legislature knows how to specify how a mental state shall be required for an act or
omission to warrant a financial consequence, and its decision not to include such
qualifying words as ―willfully,‖ or ―knowingly‖ when that statute was enacted indicates
that it did not mean to impose a scienter requirement for a violation of ―any part or
provision of any order, decision, decree, rule, direction, demand, or requirement of the
commission.‖ This court must respect that omission, ―not rewrite the statute to conform
to an assumed intention which does not appear from its language.‖ (Stop Youth
Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 573.)
Section 2107 is not a penal statute that is to receive strict construction. It is
instead a statute authorizing a monetary civil penalty in the exercise of the state‘s
unquestioned police power that it has constitutionally delegated to the PUC. Just as
firmly established is that the regulatory police power encompasses the imposition of
deterrent civil penalties to protect the public interest that do not depend upon actual loss.
By itself, the diffuse and meandering construction the Commission has given to
Rule 1.1 might deserve only the merest modicum of deference. Yet that construction
exists within the context of the Commission operating under the broad license of section
701, and exercising its ―comprehensive jurisdiction over questions of public health and
safety arising from utility operations.‖ (San Diego Gas & Electric Co. v. Superior Court,
supra, 13 Cal.4th 893, 924.) The means chosen by the Commission to police that

44
expansive domain, and enforce control of proceedings before it, is unquestionably a
matter that bears a reasonable relation to the purposes and language of the statutes under
which the PUC operates, and should receive a measure of judicial recognition and
consideration, founded upon appreciation of the practical realities of the Commission
administering its vast and variegated jurisdiction.
In any event, our purely independent review would bring us to the same
conclusion. Without any input from the Commission, and looking solely at the relevant
statutory language, we cannot discern an unmistakable legislative desire for a scienter
requirement.
For each and all of these reasons, we conclude the Commission did not exceed its
jurisdiction or fail to proceed according to law (§ 1757, subd. (a)) when it invoked Rule
1.1 in its present form as the justification and basis for the imposition of civil penalties on
PG&E.
A “Continuing” Violation Does Not
Require “Proof Of Continuing Misconduct”

PG&E‘s second contention, under the heading ―The Commission Erred in Holding
that Continuing Violations of Rule 1.1 May be Found Without Proof of Continuing
Misconduct,‖ proceeds as follows:
―Having found that PG&E‘s reporting and filing errors constituted a violation of
Rule 1.1 despite the lack of any direct proof of intent to mislead, the Commission then
held that those violations should be deemed ‗continuing‘ under . . . § 2108, warranting a
cumulative penalty of $50,000 per day. . . . In particular, it determined that PG&E‘s
failure to disclose the corrected pipeline information represented a ‗continuing violation‘
from November 16, 2012 (a month after PG&E first discovered the apparent
inconsistency in the specifications for Line 147), through July 3, 2013 (when PG&E filed
the Errata); and that the filing of the Errata gave rise to another continuing violation from
July 2, 2013 through August 30, 2013 (when PG&E filed a verified statement describing
the timeline of events in detail). . . . Those holdings reflect a fundamental misconception
of the meaning of ‗continuing violation.‘

45
 ―A ‗continuing violation‘ occurs, by definition, only when a party has engaged in
‗a continuing course of unlawful conduct‘ over a period of time. Richards v. CH2M Hill,
Inc., 26 Cal.4th 798, 823 (2001). This principle, affirmed in scores of cases from the
California Supreme Court and others, requires that the party be shown to have engaged in
a course of repeated or ongoing misconduct, such that the provision in question is
continually violated over a certain period of time. Id.; see also Flowers v. Carville, 310
F.3d 1118, 1126 (9th Cir. 2002); Ward v. Caulk, 650 F.2d 1144, 1147 (9th Cir. 1981);
Birschtein v. New United Motor Mfg., Inc., 92 Cal.App.4th 994, 1005 (2001). In other
words, for a ‗continuing violation‘ to be found, the party must have ‗continually‘ violated
the provision at issue, from an identifiable start date through an identifiable end date.
―The Commission misunderstood, and as a result misapplied, this basic concept.
It held that a ‗continuing violation‘ may exist over any period of time that a party, once
adjudged to have violated a rule, fails to fully and completely correct the breach. . . . On
that basis, it determined that in this case PG&E‘s failure to correct the inaccurate pipeline
information was ‗continuing‘ throughout the period that PG&E might have but did not
remedy the error through a formal notification to the Commission. [Citation.]
―That conclusion cannot be reconciled with the cases discussed above, which
recognize that a ‗continuing violation‘ is characterized by ‗a continuing course of
unlawful conduct,‘ Richards, 26 Cal.4th at 823, not ‗by continual ill effects from the
original violation,‘ Ward, 650 F2.d at 1147. Thus, neither ‗the lingering effect of an
unlawful act‘ nor ‗the mere failure to right a wrong‘ constitutes a continuing violation.
Earle v. D.C., 707 F.3d 299, 306 (D.C. Cir. 2012); see also Garcia v. Brockway, 526 F.3d
456, 462 (9th Cir. 2008) (en banc); Cowell v. Palmer Twp., 263 F.3d 286, 293 (3d Cir.
2001). Here, even assuming that the Commission was ‗misled‘ by the inaccurate
information concerning the pipeline specification, the violation occurred and was
completed at the time the inaccuracy was discovered. While the effect of the violation
might arguably have ‗linger[ed]‘in some sense until PG&E communicated with
Commission staff in early 2013 or even until it filed the Errata, PG&E‘s failure to
communicate with the Commission sooner did not ‗mislead‘ the Commission any further

46
than what had already occurred, and could not be deemed a continuing or repeated series
of unlawful acts. See Garcia, 526 F3d at 462. At most, this course of conduct
represented a ‗failure to right a wrong‘—which, as the cases above state, does not
constitute a ‗continuing violation.‘ Earle, 707 F.3d at 306; accord Alston v. Hormel
Foods Corp., 730 N.W.2d 376, 381 (Neb. 2007).‖
PG&E‘s reasoning was quoted at length to demonstrate why it must be rejected.
The decisions cited by PG&E deal with the idea of a ―continuing violation‖ as a
judicially created doctrine that will toll the statute of limitations, specifically in
anti-discrimination actions. This is shown by the full quotation from the decision of our
Supreme Court instanced by PG&E as the definitional exemplar of what constitutes a
―continuing violation‖: ―Thus, when an employer engages in a continuing course of
unlawful conduct under the FEHA by refusing reasonable accommodation of a disabled
employee or engaging in disability harassment, and this course of conduct does not
constitute a constructive discharge, the statute of limitations begins to run, not necessarily
when the employee first believes that his or her rights may have been violated, but rather,
either when the course of conduct is brought to an end, as by the employer‘s cessation of
such conduct or by the employee‘s resignation, or when the employee is on notice that
further efforts to end the unlawful conduct will be in vain.‖ (Richards v. CH2M Hill,
Inc., supra, 26 Cal.4th 798, 823.)
PG&E again fails to recognize that we are dealing with a statute. And that
statute—namely, section 2108, enacted in 1951 with the Public Utilities Code
(Stats. 1951, ch. 764, § 2108, p. 2098)— expressly codifies the concept of a continuing
violation of ―any order, decision, decree, rule, direction, demand, or requirement‖ of the
Commission. Not only that, it specifies that such a violation may continue on a daily
basis. Instead of tackling this statutory language, PG&E relies on a common law doctrine
that has no connection to administrative law—or the authority of a regulatory agency to
impose monetary penalties for persistent noncompliance with its orders.
Section 2108 is no outlier. ―[M]any statutes expressly authorize penalties for
continuing violations.‖ (Boorstein v. CBS Interactive, Inc. (2013) 222 Cal.App.4th 456,

47
470, fn. 3.) Numerous codes have such provisions, specifying that a continuing violation
may occur on a daily basis. (See, e.g., Bus. & Prof. Code, § 13610; Corp. Code, § 28900;
Fin. Code, §§ 2151.1, 5310, subd. (b)(2), 18349.5, subd. (i)(3), 31900; Gov. Code,
§ 8670.66, subd. (b), 8670.67, subd. (b); Health & Saf. Code, §§ 17061, subd. (c),
17061.5, subds. (a), (b), (c)(1), (d); Ins. Code, §§ 728, subd. (h)(2), (h)(3), 1748.5,
subd. (h)(3); Pub. Resources Code, §§ 14591.1, subds. (b), (c), 42850, subd. (a); Veh.
Code, §§ 32053, subd. (a), 34660, subd. (b); Wat. Code, § 6425.) Indeed, section 2108 is
not unique in the field of public utilities, being one of four such statutes governing
continuing violations in various aspects of the PUC‘s extensive jurisdiction. (See
§§ 1013, subd. (j) [applicable to telephone and telegraph corporations], 5315 [household
goods carriers], and 5415 [charter-party passenger carriers].)
Moreover, it is clear from section 2108 and the other penalty-related statutes that
the Legislature left it to the Commission to decide what amounts to a violation of ―any
order, decision, decree, rule, direction, demand, or requirement of the commission.‖ (See
§ 2101 [―The Commission shall see that . . . statutes . . . affecting public utilities . . . are
enforced and obeyed, and that violations thereof are promptly prosecuted and penalties
due . . . recovered and collected‖].) The statutory scheme clearly accepts that the PUC
will be able to identify when a violation amounts to a continuing one. How the
Commission does so would clearly be another matter. (See Southern California Edison
Co. v. Peevey, supra, 31 Cal.4th 781, 796; Greyhound Lines, Inc. v. Public Utilities
Com., supra, 68 Cal.2d 406, 410–411.) As such, it is entitled to considerable deference
by a reviewing court.
PG&E‘s proffered definition of a continuing violation would apply only to
instances of positive acts, and not cover a persistent failure to act, such as the
Commission found here. If accepted, PG&E‘s ―failure to correct a wrong‖ approach
would eviscerate the Commission‘s power to require continual self-reporting by virtually
destroying the Commission‘s power to sanction noncompliance. It amounts to another
attempt to gut the PUC‘s vital deterrent power of enforcing compliance with its orders.
Instead of treating a violation as occurring daily, as expressly authorized by section 2108,

48
PG&E would truncate that power by rewriting the statute to make the maximum penalty
$50,000 (or in this case, $100,000 for the two violations found by the Commission).
Indeed, PG&E‘s definition would constitute such a severe restriction on the PUC‘s power
to enforce compliance with its orders that it would produce another result by rewarding
parties who succeed in misleading the Commission by their continued noncompliance but
who, as PG&E would have it, ―[do] not ‗mislead‘ the Commission any further than [has]
already occurred.‖ This is another outlandish outcome we must reject. (Eel River
Disposal & Resource Recovery, Inc. v. County of Humboldt, supra, 221 Cal.App.4th 209,
227; Reliable Tree Experts v. Baker, supra, 200 Cal.App.4th 785, 796–797; Friends of
Bay Meadows v. City of San Mateo, supra, 157 Cal.App.4th 1175, 1191.) Were all this
not enough, we note that had the Legislature intended such a result, it knew how to have
employed language to accomplish it. (See Pub. Resources Code, § 4601.1, subds. (a)(1),
(b) [―damage that occurs over multiple days that results from a single action shall not be
considered a continuing violation‖].) Again, it is not our function to remedy that
omission. (Napa Valley Wine Train, Inc. v. Public Utilities Com., supra, 50 Cal.3d 370,
381.)
Once it is established that PG&E was under a continuing duty to advise the
Commission of the information concerning Lines 101 and 147, the Commission could
treat PG&E‘s violation as a continuing one for each of the 229 days that duty remained
unsatisfied. And once it is established that PG&E was under a duty to correct the
―misleadingly titled and factually incomplete‖ Errata, the Commission could treat
PG&E‘s violation as a continuing one for each of the 58 days until PG&E finally
satisfied that duty.25 The Commission was obviously following the reasoning noted by

25
We certainly do not agree with PG&E‘s characterization as ―arbitrary‖ of the
dates selected by the Commission to start and end each of the violations. If anything, the
Commission may have been generous in fixing November 16, 2012, almost a month after
the October 18 discovery of the Line 147 problem, as ―the date by which . . . PG&E
should have prepared and submitted a filing to inform the Commission of the significant
and material discovery of the records discrepancy‖ with Line 147. If, as PG&E asserts,
―this date was apparently plucked from thin air,‖ it nevertheless amounted to giving

49
this court in 2000, that PG&E ―had it within [its] control first to prevent and then to stop
the accumulation of penalties‖ (City and County of San Francisco v. Sainez, supra, 77
Cal.App.4th 1302, 1316), an approach well-established in the context of a continuing
nuisance. (See, e.g., Baker v. Burbank-Glendale-Pasadena Airport Authority (1985) 39
Cal.3d 862, 869 [―if a nuisance is a use which may be discontinued at any time, it is
considered continuing‖]; Phillips v. City of Pasadena (1945) 27 Cal.2d 104, 107 [―if the
nuisance may be discontinued at any time it is considered continuing‖].) Last, but by no
means incidentally, we note that our Supreme Court has on two occasions pointed to
section 2107 as allowing penalties to accumulate on a daily basis. (Hale v. Morgan,
supra, 22 Cal.3d 388, 401; People v. Western Air Lines, Inc. (1954) 42 Cal.2d 621, 642.)

PG&E a month‘s grace period, something we would not normally think would elicit
complaint from the party benefitted. And as to the end date, the penalty stopped with the
filing of a ―verified statement‖ by PG&E‘s Vice-President of Gas Transmission,
Maintenance and Construction explaining how the ―discrepancies‖ in Lines 101 and 147
were discovered and how PG&E responded. There is nothing arbitrary about this
reasoning.
PG&E maintains the penalty should have halted when ―PG&E actually disclosed
the corrected information to Commission staff in March 2013,‖ and thus, ―at least as of
that time, PG&E was neither withholding the information nor ‗misleading‘ the
Commission.‖ However, as previously noted, PG&E failed to provide staff with
requested documents and information concerning the errors until the end of May 2013.
Thus, at best, there was only a partial, or attempted, disclosure. More significantly, as the
Commission stated in its decision denying rehearing and rejecting this very argument:
―The Commission has consistently rejected utility efforts to rely on communications with
staff [in] satisfying their obligation to formally inform the Commission and parties in the
applicable proceeding. [Footnote.] For that reason, the [initial] Decision reminded
PG&E that conversations with staff do not substitute for such notification.‖ (Italics
added.) In its initial decision the PUC stated: ―Rule 1.1 does not treat the Commission
and its staff as synonymous.‖ It should be obvious why the Commission would not wish
to encourage parties to believe that an informal discussion, in this case a conference call
with a single staff member, would substitute for the formal written amendment the
Commission took such pains to identify as the proper means to inform the Commission,
and the dozens of interested parties who would also be notified of the amendment.

50
 PG&E Received Constitutionally Adequate
Notice of the Potential Fines

The first of PG&E‘s two constitutional claims proceeds as follows: ―Due process
requires, at its most basic, that a party be given fair notice of allegations of misconduct
prior to any adjudicatory hearing. . . . [¶] That essential requirement was flouted here.
The Show Cause Order in this matter gave notice of two specific alleged violations of
Rule 1.1: (i) whether PG&E attempted to mislead the Commission by titling its
disclosure filing as an ‗Errata‘ and (ii) whether PG&E attempted to mislead the
Commission by filing on July 3, 2013, ‗the day before a summer holiday weekend.‘
[Citation.] Nothing in the Order indicated that the Commission would also consider
whether PG&E had separately violated Rule 1.1 by failing to disclose the corrected
pipeline specification information a month after the first preliminary information was
discovered, or that PG&E might face continuing violation sanctions based on any breach
of disclosure or filing obligations.‖ This portrayal of PG&E as the victim of bureaucratic
bushwhacking is unsound.
In conducting an adjudicatory hearing, the PUC is not governed by the
Administrative Procedure Act (Gov. Code, § 11340 et seq.), but is allowed to establish its
own procedures (§§ 1701, 1701.2), subject, of course, to the constitutional obligation to
satisfy due process, as to which Justice Robert Jackson stated the classic formulation:
―An elementary and fundamental requirement of due process in any proceeding which is
to be accorded finality is notice reasonably calculated, under all the circumstances, to
apprise interested parties of the pendency of the action and afford them an opportunity to
present their objections.‖ (Mullane v. Central Hanover Tr. Co. (1950) 339 U.S. 306,
314.) Four years later, our Supreme Court ruled on the application of this principle to the
PUC: ―Due process as to the commission‘s . . . action is provided by the requirement of
adequate notice to a party affected and an opportunity to be heard before a valid order can
be made.‖ (People v. Western Air Lines, Inc., supra, 42 Cal.2d 621, 632.)
The centrality of notice is indisputable. ―Engrained in our concept of due process
is the requirement of notice. Notice is sometimes essential so that the citizen has the

51
chance to defend charges. Notice is required before property interests are disturbed,
before assessments are made, before penalties are assessed.‖ (Lambert v. California
(1957) 355 U.S. 225, 228.) But satisfying the obligation of due process does not have to
be onerous.
To begin with, due process does not require any particular form of notice.
(Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 990; Drummey v. State Bd. of
Funeral Directors (1939) 13 Cal.2d 75, 80; see Litchfield v. County of Marin (1955) 130
Cal.App.2d 806, 813 [―there is no constitutional mandate . . . which makes specific how
. . . notice is to be given or which form it must take‖].) The details can be flexible,
―depend[ing] on the circumstances . . . var[ying] with the subject matter and the
necessities of the situation.‖ (Sokol v. Public Utilities Commission (1966) 65 Cal.2d 247,
254; see Haas v. County of San Bernardino (2002) 27 Cal.4th 1017, 1037 [―The
requirements of due process are flexible, especially where administrative procedure is
concerned‖].) All that is required is that the notice be reasonable. (Jonathan Neil &
Assoc., Inc. v. Jones (2004) 33 Cal.4th 917, 936, fn. 7; Drummey v. State Bd. of Funeral
Directors, supra, at pp. 80–81.)
As PG&E sees it, the Commission‘s OSC alerted PG&E only to the distinctly
minor offenses of choosing the wrong title for the document it submitted, and making
that submission on the eve of a major summer holiday. This characterization is
inaccurate. The OSC told PG&E that its attempted filing of the Errata ―raises procedural
and substantive issues,‖ which the Commission called ―serious issues.‖ The OSC
notified PG&E that the Errata was procedurally improper because it went beyond
―correcting minor typographical or computational errors‖ and ―could be interpreted as
attempting to create an inaccurate impression of a routine correction.‖ The OSC also
notified PG&E that the Errata was perceived by the Commission as ―making substantive
changes to a previously filed application‖ by ―revealing a substantial error in an
application upon which the Commission has relied in issuing a decision.‖ In sum, a fair
reading of the OSC discloses that the PUC was not merely concerned with how the filing
was titled.

52
 What did attract the Commission‘s attention was the substance of the document.
The Commission‘s language—referring to ―substantive issues,‖ ―substantive changes to a
previously filed application,‖ and ―revealing a substantial error in an application upon
which the Commission has relied in issuing a decision‖—goes far beyond the single word
chosen for a caption. The Commission was obviously paying close attention to the
contents of PG&E‘s document. And the wording of the OSC leaves no room for doubt
on this point: ―Attempting to correct an application eighteen months after the
Commission issued a decision appears to be an unreasonable procedural choice and could
be interpreted as attempting to create an inaccurate impression of a routine correction.
The timing of the attempted filing, the day before a summer holiday weekend, also raises
questions. [¶] Substantively, as the record shows in this proceeding and others, the
accuracy of PG&E‘s natural gas transmission pipeline records has been and remains an
extraordinarily controversial issue in which the public has an intense interest. The facts
stated in PG&E‘s July filing appear to directly implicate this issue, particularly the
continuing inaccuracy of PG&E‘s records and the happenstance means by which this
most recent instance of erroneous records was discovered. Submitting this provocative
information in a routine-appearing document could be seen as an attempt to mislead the
Commission and the public on the significance of this new information.‖ As for the
timing of the Errata, that merited only the single sentence just quoted.
The OSC advised PG&E that it may have violated Rule 1.1, thus exposing it to the
financial consequences specified in section 2107. It is true that the OSC did not cite
section 2108, or tell PG&E that ―each offense, if found to be supported by evidence at the
hearing,‖ might be treated as a continuing offense.26 But section 2108 does not define a
substantive offense, but merely states how such an offense may be ―a separate and
distinct offense, and . . . a continuing violation.‖ PG&E cites to no authority that due

26
We cannot claim to have made a systematic study, but it is our impression that
the PUC does not makes it a practice to cite section 2108 in OSC‘s for matters that are
subsequently penalized as continuing violations. Given the minimal effort this would
entail, the PUC might wish to revise this practice.

53
process demands that the full and complete possible adverse consequences be spelled out
in the notice. The OSC did advise PG&E that it was accused of violating Rule 1.l, and
that appears to be the most consequential detail.27 (Cf. Margarito v. State Athletic Com.
(2010) 189 Cal.App.4th 159, 171 [―the Commission‘s letter informed Margarito of the
specific violation of which he was accused—hand wraps that violated rule 323‖].) And
the Commission makes a cogent point in its answer to PG&E‘s petition: ―[I]t is neither
surprising nor improper that the OSC could not identify the ultimate timing issue . . . .
The Errata that triggered the OSC did not disclose that PG&E had discovered new
information months before it notified the Commission. That fact was not revealed until
PG&E was told to provide a complete explanation of the events‖—which did not occur
until PG&E filed the ―Verified Statement‖ 11 days after the OSC issued.
Moreover, our inquiry does not have to end with the OSC. As already recounted,
the briefs filed by SED and TURN prior to the Commission‘s initial decision show that
those entities construed the OSC as putting PG&E on notice as to whether it had failed to
comply with a standing order that the Commission be promptly notified of matters
relating to pipeline safety, and whether PG&E‘s delay in complying with that directive
constituted a continuing violation within the plain scope of section 2108. So did each of
the proposed decisions submitted by Commissioner Ferron and the ALJ. Following the
Commission‘s initial decision, PG&E identified the supposed lack of notice as one of the
grounds for which it sought a rehearing. The point was contested by TURN, the SED,
and the cities of San Bruno and San Carlos in the written opposition to PG&E‘s request.
The Commission held a hearing on PG&E‘s request, at which it heard PG&E‘s Chairman

27
When it denied PG&E‘s request for rehearing, the PUC took the position that
―penalties are considered in the context of the entire statutory scheme governing
‗Violations‘ under the Public Utilities Code [‗specifically Pub. Util. Code, §§ 2100–
2119‘]. Section 2108, involving continuing violations, is part of that statutory scheme.‖
Given that PG&E was being advised by experienced counsel (see text accompanying fn.
10, ante), it is difficult to credit that the concept of a continuing violation was unknown
or could not reasonably be anticipated at being at issue. Put another way, we think it
exceedingly unlikely that PG&E believed it was facing a penalty of no more than
$100,000.

54
and Chief Executive Officer and its Vice-President of Gas Transmission, Maintenance
and Construction earnestly assert PG&E‘s good faith and complete lack of intent to
mislead the commission.
Administrative proceedings ― ‗are not bound by strict rules of pleading . . . . So
long as the respondent is informed of the substance of the charge and afforded the basic,
appropriate elements of procedural due process, he cannot complain of a variance
between administrative pleadings and proof.‘ ‖ (Smith v. State Bd. of Pharmacy (1995)
37 Cal.App.4th 229, 241, quoting Stearns v. Fair Employment Practice Com. (1971) 6
Cal.3d 205, 213.) In other words, ― ‗[a] variance between the allegations of a pleading
and the proof will not be deemed material unless it has actually misled the adverse party
to his prejudice in maintaining his action or defense on the merits, and a variance may be
disregarded when the action has been as fully and fairly tried on the merits as though the
variance had not existed.‘ [Citations.]‖ (Cooper v. Board of Medical Examiners (1975)
49 Cal.App.3d 931, 942, italics added.)
The situation here is not a true variance situation because there is no real
divergence between pleading and proof, but at most a divergence between how the OSC
can be read. No one was obliged to take PG&E‘s word that the notice provided by the
OSC was inadequate. Certainly the PUC did not, nor did the real parties in interest. And
when PG&E sought rehearing, it did not claim that its ability to present a defense had
been compromised. It made nothing akin to an offer of proof, identifying no testimony or
other evidence it would have presented had it realized the full scope of what the OSC
entailed. Nor does PG&E attempt to do so in its petition. With due regard for the totality
of these circumstances, we conclude that any imprecision in the OSC did not prejudice
PG&E in presenting its defense. (Stearns v. Fair Employment Practice Com., supra, 6
Cal.3d 205, 213; Cooper v. Board of Medical Examiners, supra, 49 Cal.App.3d 931, 942;
Yanke v. State Dep’t of Public Health (1958) 162 Cal.App.2d 600, 603.)28

28
Citing FCC v. Fox TV Stations, Inc. (2012) ---U.S. --- [132 S.Ct. 2307], PG&E
argues that the OSC was ―so broad and so vaguely worded that it did not . . . in any
meaningful way limit the scope of allegations against which PG&E must defend, or

55
 The Fines Are Not Constitutionally Excessive

PG&E‘s final contention is based on the application of the excessive fine
prohibitions of the United States and California constitutions (quoted at fn. 14, ante) to
civil penalties imposed by an administrative agency. (See People ex rel. Lockyer v. R.J.
Reynolds Tobacco Co. (2005) 37 Cal.4th 707, 727–729; Ojavan Investors, Inc. v.
California Coastal Com. (1997) 54 Cal.App.4th 373, 396–397.)
In December 1998, the PUC promulgated detailed guidelines for the process of
calculating fines. (See Enforcement Rules, supra, 84 Cal.P.U.C.2d 167, 188–190.)
―[T]he two general factors used by the Commission in setting fines are: (1) severity of
the offense and (2) conduct of the utility.‖ (Id. at p. 188.) The ―conduct of the utility‖
includes its actions to ―Prevent a Violation,‖ ―Detect a Violation,‖ and ―Disclose and
Rectify a Violation.‖ (Id. at p. 189.) The Commission will also consider the ―Financial
Resources of the Utility‖ and the ―Totality of the Circumstances in Furtherance of the
Public Interest.‖ (Ibid.) ―In all cases, the harm will be evaluated from the perspective of
the public interest.‖ (Ibid.)

restrict the Commission‘s ability to sua sponte expand the investigation to address new
issues . . . without any prior notice to PG&E.‖ Also citing FCC v. Fox, amici appear to
invoke the void-for-vagueness doctrine and apply it to Rule 1.1 in light of the
Commission‘s ―inconsistency‖ regarding whether scienter is required. We doubt whether
either PG&E or amici genuinely mean to assert that Rule 1.1 is truly void on its face, and
thus incapable of any constitutionally valid application in its current form. (See FCC v.
Fox TV Stations, Inc. (2012) ---U.S. --- [132 S.Ct. 2307, 2316 [notice component of due
process ―requires the invalidation of laws that are impermissibly vague‖]; People ex rel.
Gallo v. Acuna (1997) 14 Cal.4th 1090, 1116 [―a claim that a law is unconstitutionally
vague can succeed only where the litigant demonstrates . . . that the law is . . .
‗impermissibly vague in all of its applications.‖].) Regardless, the issue is not properly
before us. In reviewing a PUC decision on a writ of review, ―the petitioner may not raise
in court a matter not included in its application for rehearing‖ to the PUC of its decision.
(Utility Consumers’ Action Network v. Public Utilities Com. (2010) 187 Cal.App.4th 688,
696.) The word ‗vagueness‖ was not mentioned in PG&E‘s application for rehearing.
And we will not let amici argue what PG&E cannot. (California Assn. for Safety
Education v. Brown (1994) 30 Cal.App.4th 1264, 1275.)

56
 In the only decision by our Supreme Court on this point, it appears to have
adopted the approach of the United States Supreme Court that ― ‗[t]he touchstone of the
constitutional inquiry under the Excessive Fines Clause is the principle of
proportionality,‘ ‖ including these factors: ―(1) the defendant‘s culpability; (2) the
relationship between the harm and the penalty; (3) the penalties imposed in similar
statutes; and (4) the defendant‘s ability to pay.‖ (People ex rel. Lockyer v. R.J. Reynolds
Tobacco Co., supra, 37 Cal.4th 707, 728 [citing and quoting United States v. Bajakajian
(1998) 524 U.S. 321, 334, 337–338], 720–721.)
We have encountered a number of decisions where the PUC systematically
discussed various of these factors in calculating fines. (E.g., Cal.P.U.C. Decision 13-09-
028 (Sept. 19, 2009); Cal.P.U.C. Decision 08-09-038 (Sept. 18, 2008); Cal.P.U.C.
Decision 04-04-065 (April 22, 2004); Cal.P.U.C. Decision 01-08-019, supra; Cal.P.U.C.
Decision 95-04-43, supra.) The Commission did not follow that process here, but PG&E
does not contend that this omission makes the fine order invalid.29
Adverting generally to these considerations, PG&E‘s argument runs as follows:
―[The Excessive Fines] Clauses prohibit fines that are ‗grossly disportiona[te]‘ to the
underlying violation. United States v. Bajakajian, [(1998)] 524 U.S. 321, 324 . . . .
Whether a fine is ‗grossly disproportional‘ is determined by (i) the extent of the harm
caused, (ii) the gravity of the offense relative to the fine, (iii) the relationship of the
violation to other illegal activity, and (iv) the availability of other penalties and the
maximum penalties that could have been imposed. [Citation]; People v. R.J. Reynolds
Tobacco Co., 37 Cal.4th 707, 728 (2005) . . . . Of perhaps greater importance, however,
is the disparity between the fine and any actual damages resulting from the underlying
offense: where the amount of the fine is many multiples greater than actual damages, the
penalty is more likely unconstitutional. [¶] The fines imposed by the Commission in this
case . . . are the largest ever imposed by the Commission for such a violation of Rule 1.1,

29
We mention this because such an explication of the Commission‘s reasoning
would considerably assist subsequent judicial review.

57
and yet none of the factors relevant to the ‗grossly disproportionate‘ analysis supports
such a massive penalty.
―First, the adjudicated violations did not cause any harm and did not pose any risk
to the Commission, its staff, any party, or the public. [Citation.] The Commission can
point only to a generalized ‗potential for harm,‘ that cannot by itself support such an
excessive fine, especially where, as here, the potential risk never materialized . . . .
―Second, although ‗misleading‘ a regulatory body is certainly a serious matter in
general, in this case PG&E did not act with any intent to deceive, or indeed with any
culpable intent whatsoever. . . .
―Third, the violations here did not contribute to or result from any other illegal
activity. To the contrary, the pipeline information was discovered while PG&E was
performing safety-related inspections—conduct undeniably intended to advance public
safety. [Citation.]
―Finally, the fines in this case represented not merely the maximum allowed under
state law, but in fact were greater than that permitted by statute because of the
Commission‘s erroneous interpretation of what constitutes a ‗continuing violation.‘
[Citation.] Particularly given the vast disparity between the damages caused by the
violations (at most, the costs associated with additional Commission proceedings) and the
nearly $15 million fines, those fines cannot be reconciled as consonant with the
Excessive Fines Clauses of either the California or Federal Constitution[s].‖
Much of this is familiar. PG&E‘s argument that ―the adjudicated violations did
not cause any harm and did not pose any risk to the Commission, its staff, any party, or
the public‖ is literally true, but it completely misperceives what was at issue. ―No harm
no foul‖ may work in the schoolyard, but it is no principle for the maintenance of public
safety. Given the context here, PG&E‘s emphasis on ―actual damages‖ is dismaying,
antithetical to the entire concept of deterrence. The Commission takes a very dim view
of denying it information, treating it as a factor in aggravation when its comes to fixing
penalty. (See Cal.P.U.C. Decision 13-09-028, supra [Slip Opn., p. 36] [―The withholding
of relevant information causes substantial harm to the regulatory process, which cannot

58
function effectively unless participants act with integrity at all times. . . . [T]his criterion
weighs in favor of a significant fine.‖].)
We have already determined that virtually denuding the Commission‘s jurisdiction
would be a consequence of the way PG&E wants to have Rule 1.1, as well as sections
2107 and 2108, interpreted. The notion that a civil penalty cannot be imposed if ―the
potential risk never materialized‖ would encourage utilities not to self-report, and, by
stripping the Commission‘s sanction power, would make a Commission order to self-
report essentially meaningless—indeed, reward defiance of the Commission. PG&E will
not prevail in its attempt to repackage in constitutional wrapping the same intent-based
arguments we have already rejected.
PG&E‘s last argument (the ―Third‖ one quoted above) is phrased in a manner the
PUC could regard as a masterpiece of tendentious wording. The ―safety-related
inspection‖ PG&E casts in such a favorable light was exactly the type of event, i.e., a gas
leak, that the Commission could view as covered by PG&E‘s self-reporting obligation.
Moreover, the fact that PG&E neglected that obligation for nine months—and then only
imperfectly attempted to correct—was one the Commission viewed as ―profoundly
disheartening,‖ precisely because ―[n]atural gas transmission system safety by this
operator has been one of the Commission‘s highest priorities for three years.‖ (Italics
added.) The Commission was understandably dismayed at learning that Line 147 could
have been operated in an unsafe manner, and yet within the authorized MAOP, because
the Commission made that authorization on the basis of inaccurate information furnished
by PG&E. That dismay was only aggravated by being advised of ―this provocative
information in a routine-appearing document.‖
According to the Commission‘s Enforcement Rules—which, not incidentally, are
never mentioned by PG&E—PG&E was on notice that a violation of Rule 1.1 that did
not cause actual physical harm to people or property would be treated almost as severely
as one that did. (See Enforcement Rules, supra, 84 Cal.P.U.C.2d 167, 188.) The PUC
here was confronting a violation of its order—a violation that, beyond disputing the
mental state issue, PG&E makes no real attempt to deny—concerning the safe operating

59
pressure of a pipeline transmitting gas through heavily inhabited urban areas. PG&E
argued that the violation was inadvertent. The Commission found that explanation,
delivered through Lead Counsel, lacked credibility. That determination, together with its
decision to impose penalties, evidence the Commission‘s conclusion that PG&E had not
acted in good faith.
At the end of this proceeding, PG&E‘s Chief Executive Earley told the
Commission: ―The fact that I‘m here today means that we failed to meet your
expectations in how we communicated with you.‖ In the exercise of its ―comprehensive
jurisdiction over questions of public health and safety arising from utility operations‖
(San Diego Gas & Electric Co. v. Superior Court, supra, 13 Cal.4th 893, 915, 924), the
Commission determined that that failure was sufficiently egregious to warrant a sanction
of $14,350,000. That determination comes to us with a strong presumption of
correctness, a presumption that extends to all factual determinations, and to the
Commission‘s construction of sections 2107 and 2108, and Rule 1.1, all of which deal
with the conduct of regulatory practices and practicalities concerning which the
Commission is more familiar and more expert.30 Although the amount is large, so is the
real and potential harm caused by PG&E‘s inaction. And PG&E does not argue that it
lacks the ability to pay the fine. (Id.; § 2104.5; see Cal.P.U.C. Decision 11-11-001 (Nov.
1, 2011) [Slip. Opn. p. 40] [―PG&E reported 2010 operating revenues of $13.841
billion.‖].)
Exercising our independent judgment as specified by section 1760, the penalties
imposed do not strike us as ―grossly disproportional to the gravity‖ of PG&E‘s tardiness

30
―Effective deterrence also requires that the Commission recognize the financial
resources of the public utility in setting a fine which balances the need for deterrence
with the constitutional limitations on excessive fines. . . . The Commission intends to
adjust fine levels to achieve the objective of deterrence, without becoming excessive,
based on each utility‘s financial resources.‖ (Enforcement Rules, supra, 84 Cal.P.U.C.2d
167, 189.) ―[T]he two general factors used by the Commission in setting fines are: (1)
severity of the offense and (2) conduct of the utility. These help guide the Commission
in setting fines which are proportionate to the violation.‖ (Id. at p. 188.)

60
in self-reporting information that the Commission and the public were entitled to know.
(United States v. Bajakajian, supra, 524 U.S. 321, 324, italics added.) ―We cannot
conclude that the unconstitutionality of the penalty [imposed by the PUC] clearly,
positively and unmistakably appears.‖ (City and County of San Francisco v. Sainez,
supra, 77 Cal.App.4th 1302, 1321.) PG&E has failed to demonstrate a violation of the
Excessive Fine provisions of either the United States or the California Constitutions.
DISPOSITION
Decisions 13-12-053 and 14-05-034 are affirmed.

61
 _________________________
Richman, J.

We concur:

_________________________
Kline, P.J.

_________________________
Miller, J.

A142127, Pacific Gas and Electric v. Public Utilities Commission

62
Pacific Gas and Electric Company v. Public Utilities Commission of California
(A142127P)

Attorneys:

Sidley Austin LLP: Marie L. Fiala, Carter Phillips, and Quin M. Sorenson
Attorneys for Petitioner

Karen Valentia Clopton and Pamela Nataloni
Attorneys for Respondent

Meyers, Nave, Riback, Silver & Wilson: Steven Robert Meyers and Harry W.
Chamberlain II
Attorneys for Real Party in Interest, City of San Bruno

Thomas John Long
Attorney for Real Party in Interest, The Utility Reform Network

Jones Day: Charles Churchill Read and Haley Melisse McIntosh
Attorneys for Real Parties in Interest, American Gas Association et al.

63