PG&E: Shareholders to Pay Slightly More for Improvements

The controversy over is continuing this week after the company insisted Tuesday that customers should foot most of the bill for the pipeline safety upgrades.

Tom Bottorff, a senior vice president of the company, told reporters on a call that the company wanted to respond to the criticism the company has been receiving about the costs of its Pipeline Safety Enhancement Plan, which was proposed after the San Bruno pipeline explosion to improve pipeline safety.

Bottorff said PG&E believes the proposal is far-reaching plan that will build a next-generation natural gas system that will be in compliance with regulations set by the California Public Utilities Commission.

He also conceded to the fact that, when factoring in financing, the cost of the plan would eventually be close to $5 billion over 50 years—a figure Assemblyman Jerry Hill, D-San Mateo, quoted earlier this month when he the "true costs" of PG&E's plan.

Here is what media outlets are saying about Tuesday's announcement.

From the San Francisco Chronicle:

Although PG&E is undertaking some projects in reaction to deficiencies revealed by the September 2010 pipeline explosion in San Bruno that killed eight people, it is doing other work to meet newly imposed state and federal rules, Bottorff said. Customers should pay for those improvements, he said.

Advocates for PG&E customers argue that shareholders need to pay much more of the costs because the company mismanaged its gas system for years.

The $5 billion price tag is "outrageous," said Assemblyman Jerry Hill, D-San Mateo, whose district includes San Bruno.

"Because of the problems in the past, they are going to make a profit in the future. That's not right," Hill said. "But we expected PG&E to try everything to avoid taking full financial responsibility for their negligence."

The San Jose Mercury News noted that Bottorff said PG&E is now proposing that shareholders pay for more of the costs, but customers would still be on the hook for most of the costs:

Before Tuesday, the utility said shareholders would pay only $320 million toward the $2.2 billion tab.

Bottorff said Tuesday that shareholders will pay slightly more, up to $360 million, which still leaves customers on the hook for the rest.

Further explaining the costs, PG&E issued a news release on its PG&E Currents site that gave an analogy for how the costs for the pipeline safety improvements would work:

The simplest explanation is familiar to many people: It’s just like how you buy a house.

When you buy a new home, you borrow the money and then you pay your mortgage every month. You say you bought a $300,000 home, which is the selling price, but you’re actually paying that $300,000 plus interest and some other expenses. It’s actually a much higher dollar figure than $300,000, but nobody describes it that way.

“It’s the same situation with the investment in our pipeline business,” said Tom Bottorff, PG&E’s senior vice president of regulatory relations.

How does this latest development sit with you?