All of Unitil's 28,500 Massachusetts customers lost power in the storm. One in five had no power a week later, and more than 1,000 had no electricity for 12 days or more.
"Unitil's lack of preparation for the storm and ineptitude during the restoration efforts caused great hardship, suffering and financial loss," Coakley said in a press release.
In a statement, Unitil called the proposed fine "unreasonable and unprecedented" and "severely disproportionate" to its role in the outages.
The New Hampshire-based company is the state's smallest utility, serving four communities.
The company said Coakley's decision not to fine any other utilities that had problems following the storm "has made it clear that this is an arbitrary proposal based more on public anger than the facts of the case."
Other utilities could later be fined. State utility regulators are investigating how three other companies responded to the storm. But those probes are in their early stages, and Coakley's office hasn't made any recommendations.
Coakley's office said it participated in public hearings and five days of evidentiary hearings before presenting the proposal to the Department of Public Utilities, which must approve a fine before it is imposed. The money would go into the state's general fund.
Coakley's office said it found numerous problems with Unitil's storm preparation, including an Emergency Response Plan that was insufficiently reviewed and tested and a failure to invest in any system to help restore power during an outage.
Most disturbingly, Coakley said, during the outage Unitil didn't try to contact 65 critical care customers whom it knew depended on electricity for survival.
Unitil has apologized for the lengthy outage. It released an internal report that was highly critical of its performance during the storm, saying managers lost track of work crews and felt overwhelmed. But the company also has said its employees worked as hard and efficiently as possible.
In its statement, Unitil said, "None of (the attorney general's) criticisms are new and most are shared among utilities across the region that responded to the worst natural disaster in decades."
The company said most of its Massachusetts customers had power restored at the same time as customers of other utilities even though its service area "was the epicenter of a natural disaster of unprecedented proportion for the region."
Unitil's serves the north central Massachusetts communities of Fitchburg, Townsend, Lunenburg and Ashby. It has 75,000 electric customers in New Hampshire.