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Hill, TURN Expose 'True Costs' of PG&E Plan

PG&E's pipeline safety upgrades would cost more than $5 billion, not the $2.2 billion the company has proposed, they said—and customers would be picking up most of the tab.

Updated 6:05 p.m.

Assemblyman Jerry Hill and Mark Toney, the executive director of The Utility Reform Network, called on the California Public Utilities Commission today to take a look at what they called the "true costs" of PG&E's proposed plan to modernize its pipeline system.

Through their own research, they said they found that the first phase of PG&E's upgrades would be more than $5 billion over 50 years and not the $2.2 billion that PG&E first proposed.

Under the utility's plan, they said, customers would pick up the tab not only for the upgrades but also for debt interest, shareholder profit and taxes on shareholder profit.

PG&E  to enhance electronic monitoring and install automatic shutoff valves, among other changes, on its pipelines shortly before the National Transportation Safety Board  on the 2010 San Bruno pipeline explosion, which left eight people dead and 38 homes destroyed.

The company has proposed that ratepayers pick up 90 percent of the tab, and it has defended that proposal because the costs would be used toward new, industrywide standards set by the CPUC.

Later in the day, the CPUC's Division of Ratepayer Advocates, an independent consumer advocacy division within the commission, released a statement recommending that PG&E—not the ratepayers—should fund the majority of costs associated with upgrading its pipeline system.

The Division of Ratepayer Advocates said PG&E should not be allowed to increase rates to recover the costs incurred during the three-year period its first phase of improvements are slated to take place and that PG&E should seek other funding sources, such as reducing management bonuses and reducing its shareholders’ earnings.

“PG&E’s own failure to maintain its gas pipeline and record-keeping systems over decades led to the extraordinary need for infrastructure upgrades the company is dealing with now,” said Joe Como, the advocacy division's acting director. “Asking customers to pay 90 percent of the bill for PG&E’s years of neglect is wrong.”

The advocacy unit made several other recommendations to the CPUC in its statement:

  • Through 2014, ratepayers should not be responsible for any additional costs—expenses or return on capital investment—associated with PG&E’s pipeline upgrades beyond what the CPUC has already approved for 2012-14.
  • PG&E shareholders should be entirely responsible for all expenses associated with all hydrostatic testing during 2012-14 and should foot the bill for the replacement of pipelines installed since 1955.
  • PG&E’s rate of return on equity on the replacement of pipelines installed between 1935 and 1955 should be set significantly lower than its currently authorized rate of return.  

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Bill Baker February 02, 2012 at 01:04 AM
Good to see Hill working with TURN.
Martin Ricard (Editor) February 02, 2012 at 02:13 AM
Just added a statement from the CPUC's Division of Ratepayer Advocates, which recommended that PG&E seek other funding sources to pay for its proposed pipeline safety upgrades. That funding could come from reducing management bonuses and reducing its shareholders’ earnings, the advocacy unit said.

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