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PG&E Gas Pipeline, Storage Programs Get OK

Pacific Gas and Electric Co. (PG&E) received approval from California regulators Thursday to increase its rates annually over the next four years to support its natural gas transmission pipeline and storage system, which has been placed under a microscope since a pipeline rupture and explosion in San Bruno last year. Rate changes are effective May 1.

Action by the California Public Utilities Commission (CPUC) approved PG&E's Gas Accord V settlement, which was developed before the San Bruno incident. Final action was postponed in the wake of that tragedy, with some modifications being made, one of which was to require semi-annual pipeline and storage safety reports from the San Francisco-based combination utility.

The stepped-up CPUC oversight will allow regulatory safety staff to better "monitor PG&E's pipeline-related activities to assess whether high-risk projects are being built and to track whether [the utility] is spending its allocated funds on pipeline-related safety, reliability and integrity activities," a CPUC spokesperson said.

One of the criticisms that has emerged is that PG&E by its own admission has failed to spend allocated funds for specific pipeline maintenance and repair projects. Instead, critics contend the work was delayed and the funds deferred to projects the utility determined were of a more critical nature. CPUC staff apparently was not always aware of these changes by the utility.

The rate decision by the CPUC authorizes $514.2 million for PG&E transmission and storage operations this year, with an increase each year through 2014 at which time the authorized revenues for pipeline and storage operations will be $614.8 million. PG&E called the decision "an important step in preserving the long-term safety and reliability of natural gas service at reasonable rates."

PG&E said the decision will allow it to spend close to $200 million upgrading and replacing pipelines and regulating facilities on its transmission backbone system. The increased rates will result in less than a 1% increase for residential gas utility customers, a utility spokesperson said.

The decision is "not without its contestants or controversy," according to CPUC Commissioner Timothy Alan Simon, who was the lead regulator on the case. Unresolved is a dispute involving Sempra Energy's two utilities, Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co. (SDG&E), which contend that they have the right from a 1997 deal to firm shipping capacity on the PG&E intrastate transmission system to deliver gas to the PG&E citygate.

The two Sempra utilities also wanted to force PG&E to make its gas storage activities public, following federal guidelines that SoCalGas and SDG&E follow. "The issue of whether the CPUC should adopt the federal posting requirement for PG&E storage was beyond the scope of this proceeding," Simon said. "But I remain open to a comprehensive evaluation of whether an increased transparency and storage reporting requirement on a statewide basis will benefit the market."

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