The settlement requires UGI to replace all its cast-iron pipelines within 14 years and its bare-steel mains over a 30-year period. Utilities now use plastic or coated-steel pipes for gas-distribution systems.
The February 2011 blast, which leveled two houses and set fire to a block of rowhouses, was traced to a crack in a cast-iron gas main. The PUC also said UGI's gas did not contain sufficient odorant to make the gas leak noticeable.
Powelson and Coleman blamed the utility's management for failing to pay adequate attention to safety, but they noted that the company appointed new management in late 2011.
"Absent sweeping changes, the commission will be forced to consider taking drastic steps if there is another catastrophic incident attributable to some failure on UGI's part," they said.
UGI Utilities, based in Reading, operates several gas and electric utilities. It is a subsidiary of UGI Corp., a Valley Forge energy company.
In a separate statement, Commissioner Wayne E. Gardner criticized UGI for not taking advantage of a new funding mechanism that would allow the utility to accelerate its upgrades with a surcharge on customers' bills.
UGI said it would review the PUC's action and respond formally to the commission.
The $500,000 fine is the maximum allowed, though the legislature recently increased the cap on civil penalties to $2 million.
The Allentown incident occurred a month after a gas main in Philadelphia's Tacony section exploded, killing a Philadelphia Gas Works employee.
PGW has agreed to pay $500,000 in penalties. That settlement awaits the commission's approval.
Contact Andrew Maykuth at 215-854-2947, @Maykuth on Twitter or firstname.lastname@example.org