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CPUC: PG&E, Not Customers, to Pay Majority of Costs to Upgrade Pipelines

In issuing the preliminary decision about PG&E's proposed gas pipeline safety plan, the CPUC said this is only the beginning of a permanent change that has to take place with PG&E and other pipeline operators throughout the state.

The CPUC issued a preliminary decision today to approve PG&E's new safety plan that would modernize its pipeline system, but PG&E will have to absorb two-thirds of the costs.

PG&E initially proposed that the upgrades to its natural gas transmission operations, which came in the wake of the 2010 San Bruno fire, would cost about $2.2 billion over several years. The utility wanted ratepayers to pick up 85 percent of the tab because the billions PG&E would be spending represents costs to meet new, industrywide standards set by the California Public Utilities Commission.

According to the plan, PG&E requested $768.7 million in rate increases through 2014 to cover initial costs. However, the CPUC only authroized $277.8 million, or 36 percent, of the amount PG&E requested because of the utility's previous mismanagement of pipeline safety.

The decision, authored by Administrative Law Judge Maribeth Bushey and which still has to be approved by the five-member commission, also stated:

  • PG&E shareholders will bear the costs of pressure testing pipeline for which pressure test records are missing.
  • PG&E must continue its gas pipeline record management improvement project; however, due to past deficiencies in document management, the costs of this project and the proposed new computer database may not be recovered from ratepayers.
  • PG&E’s shareholders must bear the risk of cost overruns because PG&E’s past management decisions led to the need to undertake the massive project on an expedited schedule.
  • Shareholder return on equity for all safety enhancement capital expenditures is reduced from 11.35 percent to 6.05 percent for five years.

PG&E called the decision "wholly inadequate" and said it hoped the commission would reconsider its proposal when making a final decision.

“The proposed decision by the (administrative law judge) is wholly inadequate and fails to recognize the magnitude of the work that’s required to create a modern gas transmission system that reaches new safety standards and serves the people of California,” Tom Bottorff, PG&E’s senior vice president of regulatory affairs said in a statement.

“When this comes before the entire commission, we’re hopeful that they will consider the ramifications of this work and its critical importance to California,” he added.

The commenting period is now open for members of the public to respond to the CPUC's proposal. Comments by parties involved in the proceeding are due by Nov. 13, and comments from the public are due by Nov. 26.

A copy of the preliminary decision can be found on the CPUC's website.

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Martin Ricard October 13, 2012 at 05:25 PM
Just added a quote from PG&E. What do folks think?
Jim C October 13, 2012 at 07:51 PM
I think they should find a way to go back 20 years and take ALL the money out of any executive bonuses and stockholder dividends...that's what I think.

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