New York regulators ordered National Grid USA to explain why it should not face stiff penalties after inspectors determined the utility is potentially liable for at least 1,616 state safety rule violations, most of them tied to a natural gas pipeline project in Queens, N.Y.

The Public Service Commission of New York initiated enforcement proceedings against National Grid on July 11 after staff at the state's Department of Public Service, or DPS, uncovered the apparent violations over three years. The DPS' oversight stemmed in part from allegations that a National Grid contractor helped its workers cheat on qualification tests and put them to work on the Queens project with little or no training.

DPS staff overseeing the Queens gas reliability project and work on other gas infrastructure on Long Island found that the company failed to inspect the contractor's work, allowing hundreds of safety violations to go unnoticed. The violations included improper installations that led to gas leaks and plastic pipe fusings that failed inspections after being dug up.

"We will hold utilities strictly accountable when they do not comply with our gas safety rules, designed specifically to protect life and property," Public Service Commission Chair John Rhodes said in a statement.

The commission on July 11 ordered two National Grid utilities that serve the Queens and Long Island areas — Brooklyn Union Gas Co. and KeySpan Gas East Corp. — to explain why regulators should not impose penalties. It gave National Grid 45 days to review the alleged safety violations and offer rebuttals.

The commission also said it may initiate a prudence proceeding, which would ensure the cost of addressing the violations falls on the company's shareholders rather than on ratepayers. The cost of excavating infrastructure for inspection has already reached nearly $7 million, according to the commission.

National Grid said its shareholders have already taken on significant costs in addressing problems on the Queens project. The company said it self-disclosed information and regularly updated the DPS during the course of the re-digs. The utility said that because of this, it does not believe that a penalty proceeding is warranted but nevertheless takes the order very seriously and will respond accordingly.

"Regarding the issues cited in the NY PSC's show cause order, National Grid took immediate action when these items came to light in 2017, including terminating the offending contractor and conducting a comprehensive investigation, which has already led to improvements in our processes and quality control protocols related to training and inspection of work conducted by our contractors," the company said.

The commission's 24-page order laid out the scope of construction problems that plagued the Queens reliability project, which built more than 6 miles of pipeline to improve natural gas transmission through the borough in 2015 and 2016.

National Grid dug up portions of the Queens pipeline after the company received an anonymous tip in November 2016 that project contractor Network Infrastructure used unsafe and noncompliant practices during construction. The letter also provided evidence that Network workers had cheated on their operator qualification tests, a claim that was later substantiated by National Grid and Consolidated Edison Co. of New York Inc., which also employed Network contractors.

The tipster claimed Network's training program "is a joke and guys were sent to the field without any training," according to an excerpt included in the commission's July 11 order. Network employees allegedly received cheat sheets that were created from cell phone photos taken by high school students, who had sat for the operator qualification test administered by the Northeast Gas Association.

DPS staff recorded a raft of safety violations during the re-digs carried out by both National Grid and ConEd following the tip.

The commission initiated enforcement proceedings against ConEd on March 15. Shortly afterward, the company entered into talks about settling the case without litigation. The commission has twice granted deadline extensions to ConEd while settlement discussions continue. The next deadline is Aug. 15.

The number of alleged regulatory violations against National Grid is larger than the number involving ConEd, and National Grid's re-dig costs are substantially higher. The commission said ConEd and its contractors committed 644 violations and spent $1.9 million in excavation costs.

Some of the alleged National Grid violations in the July 11 order were found during another series of excavations on the Queens pipeline at the start of 2016, prior to the DPS receiving the anonymous letter.

The Queens pipeline first came under scrutiny just after it was scheduled to go into service at the end of 2015, when National Grid alerted the DPS that Network had potentially damaged the line by running a diagnostic device through it without fully opening the valves. Subsequent inspections revealed additional damage that resulted from portions of the line being situated close to or in contact with other infrastructure without adequate protection, according to DPS staff.

The DPS said National Grid also allowed plastic fusers and plastic fusion inspectors with lapsed qualification certifications to complete work on the line. Network and four other contractors on the line employed workers with lapsed qualifications, the DPS found.

The commission ordered local distribution companies to keep records on plastic fusions and inspections in 2015 after investigators discovered a contractor employee with lapsed qualifications had worked on the ConEd gas line that ruptured in Harlem in 2014, killing eight people and destroying two buildings. (New York Public Service Commission case 17-G-0317)

The regulatory proceedings against National Grid and ConEd came amid a standoff between the utilities and New York Gov. Andrew Cuomo's administration over pipeline projects that would deliver gas to the utilities in downstate areas. The administration has refused to grant permits for the gas transportation projects, leading National Grid and ConEd to declare moratoriums on new gas service in the New York City area.