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California Regulators Approve PG&E Gas Storage/Pipeline Rate Case

California regulators on Thursday approved nearly $950 million in increased rates to support Pacific Gas and Electric Co.'s (PG&E) natural gas storage and transmission pipeline operations.

The approval on a 4-0 vote does not include the pending $850 million disallowance associated with the combination utility's identified shortcomings in handling the 2010 San Bruno transmission pipeline failure. (see Daily GPIApril 9, 2015).

A PG&E spokesperson said the San Francisco-based utility doesn't agree with parts of the California Public Utilities Commission (CPUC)decision, but "we want our customers to know that the dedication to our mission of becoming the safest, most reliable gas company in the country is as strong as ever."

Rather than an almost 80% increase in gas operations revenues requested by PG&E, the CPUC, with commissioner Mike Florio recusing himself, unanimously approved a 27.1% rate hike, or $192.9 million more than 2014 in an overall 2015 revenue requirement of $908 million. The utility tied most of the increase to efforts to enhance safety in its transmission pipeline and gas storage system since the San Bruno pipeline failure.

Separately, the five-member CPUC voted 5-0 to adopt a general rate case settlement for Sempra Energy's San Diego Gas and Electric Co. and Southern California Gas Co., totaling $1.8 billion and $2.2 billion, respectively. Each total represented about a $100 million decrease from the amounts each had as part of an earlier submitted settlement.

The lead CPUC commissioner for the PG&E case, Carla Peterman, called the utility's natural gas operations "a massive aging system" whose total transmission pipelines laid end-to-end would stretch from San Francisco to New York City and back, with pipe left over. "It carries high volumes of gas near population centers, and the tragic San Bruno explosion is a constant reminder of the need for safe operation of the system," Peterman said.

Peterman acknowledged that dozens of stakeholders and consumer advocates involved in the case argued that PG&E's request was too high. "But there was also a broad consensus that the work in this rate case needs to be completed to improve the overall safety of the PG&E system," said Peterman, adding that the decision is aimed at safety improvements while using rate mechanisms to improve affordability for consumers.

San Francisco utility watchdog group The Utility Reform Network (TURN) balked at this, alleging that regulators approved an 85% rate hike at the same time PG&E is involved in a federal court criminal trial regarding its alleged safety and other operating violations tied to the San Bruno incident (see Daily GPIJune 21). TURN Legal Director Tom Long alleged that the utility "let its pipes rust and now wants customers to pay again for maintenance that should have been done all along."

This rate decision includes requirements for the utility to complete hydrostatic testing of another 680 miles of transmission pipelines to detect defects and replace another 60 miles of aging pipes, according to Peterman.

"PG&E's rates are already among the highest in the United States," said TURN Executive Director Mark Toney. "These high rates have not guaranteed safety or reliability, but instead resulted in well more than a quarter of a million households being shut off in 2015."

Peterman said the decision also requires PG&E to provide additional information tied to the aftermath of the Aliso Canyon underground gas storage field's four-month storage well leak in Southern California that ended in February this year (see Daily GPIFeb. 18). Regulators are requiring information from the utility on safety orders, risk management, and emergency response plans for each of its storage facilities.

Also as part of Thursday's action, the CPUC is imposing a penalty on PG&E for the long delays in the proceeding based on ex-parte communications violations in the so-called e-mail scandal between the utility and some key decision-makers at the CPUC, Peterman said (see Daily GPISept. 16, 2014). The penalty is estimated at close to $140 million.

Because of these and other penalties paid for by shareholders, PG&E's actual investments in safer, more reliable gas infrastructure will be much greater than the nearly billion-dollar price tag put on the rate case, Peterman said.

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