San Francisco-based Pacific Gas and Electric Co. (PG&E) has determined that its multi-billion-dollar, multi-year effort to upgrade its transmission pipeline system will now take longer and cost more than previously expected, PG&E senior executives said Tuesday.
Speaking during an earnings conference call, Chris Johns, president of PG&E utility operations, said the combination utility has taken a one-time $116 million charge against 4Q2014 earnings, reflecting the estimated added cost of the delays and added requirements in its pipeline safety enhancement program (PSEP).
"We've completed the majority of the planned work in PSEP, although a small amount of work continues into this year," Johns said. "But on the capital [replacement/expansion] side of the program, the last part has proven to be very challenging."
Johns said the utility determined late last year that the permitting and routing for a number of the pipeline replacement projects, including some in environmentally sensitive areas, will be "more difficult than previously expected." The work will now be more costly and will take a few more years to complete, he said.
"Since the PSEP program has a [limit] on the amount of capital we can recover, we took a charge of $160 million in the fourth quarter for these higher expected costs," Johns said.
CEO Tony Earley said the utility overall is well positioned "to continue to invest in our natural gas and electric systems. We plan to build on our progress of the last few years by continuing to upgrade our gas and electric infrastructure and leverage technology to enhance performance." Earley said PG&E's capital spending should average more than $5 billion/year during the next few years.
Earley said 2014 full-year profits were $1.4 billion ($3.06/share), compared to $814 million ($1.83) for 2013. Net income for 4Q2014 was $131 million (27 cents/share), compared to $86 million (19 cents) for the same period in 2013.
In regard to upgrading its gas utility system, Johns said the utility "knows it has more work to do. We'll continue to look for, find and fix areas that need improvement."
Both Earley and Johns acknowledged that last fall's email revelations of communications violations (see Daily GPI, Sept. 16, 2014) between the utility and the California Public Utilities Commission (CPUC), along with other factors related to the change in composition of the regulatory panel, leave uncertainty surrounding a series of pending cases related to PG&E's fatal gas transmission pipeline rupture in San Bruno, CA, in 2010 (see Daily GPI, Oct. 3, 2014).
In response to an analyst's question, Earley said a resolution on how much and when PG&E will be penalized for the San Bruno incident and its fallout has been delayed and there is no target date for when the CPUC will conclude proceedings. "It is clear some of the delay was caused by the issue surrounding the ex-parte communications, and then by the departure of [CPUC President Michael] Peevey and getting a new president and commissioner [see Daily GPI, Jan. 16).
"We now have all the pieces in place, so everything now is in the hands of the commission. They have a recommended decision [on San Bruno penalties] so it is up to the commissioners to make a decision," said Earley, adding that there is no target date for the CPUC to act at this point.