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PG&E Hires Senior Gas Exec; Gets Partial General Rate OK

San Francisco-based Pacific Gas and Electric Co. (PG&E) said Thursday it has hired a seasoned senior executive to run a realigned natural gas organization following the announcement that it obtained a decision from state regulators on its settlement in a $1 billion general rate case.

Both developments follow by a day the announcement of a 29% decline in quarterly earnings. The combination utility said the bulk of the decline was due to added costs the it has borne in the wake of the gas transmission pipeline rupture in San Bruno, CA, last September.

The California Public Utilities Commission (CPUC) approval of the all-parties settlement included an increase of $395 million this year, less than 40% of PG&E's requested more than $1 billion total, and subsequent boosts of $180 million each year in 2012 and 2013, instead of $300 million each year as originally requested by the utility. Last month the CPUC had separately approved expenditure levels for the next four years in the troubled gas pipeline and storage segment of PG&E (see Daily GPI, April 15).

PG&E on Thursday also announced a major realignment of its natural gas operations, placing everything under Nick Stavropoulos, a 30-year gas pipeline industry veteran who was named executive vice president for gas operations, effective June 13. The move drew an immediate response from CPUC President Michael Peevey who said the naming of the former COO of National Grid's gas operations was appropriately "elevating the importance of natural gas safety in the company."

Christopher Johns, president of the PG&E utility, said Stavropoulos will lead a broad-based improvement effort, ranging from upgrading and replacing critical infrastructure to revamping its operating policies and practice. Stavropoulos will report to Johns.

The interim CEO at PG&E Corp. since Peter Darbee's sudden retirement at the end of April, C. Lee Cox, said Stavropoulos has the clear mandate for "change and a clear mission to overhaul the company's gas operations and bring them up to world-class safety and performance standards."

As part of the rate settlement approval the CPUC is requiring the utility to pay for an independent audit of its costs related to the transition to smart meters, along with making semi-annual pipeline safety reports on its distribution pipeline system and detailed capital expenditure annual reports with explanations of discrepancies between budget and actual expenditures on gas distribution projects, as well as electric generation and distribution projects.

The principal parties are CPUC staff, The Utility Reform Network (TURN) consumer group, the CPUC's independent Division of Ratepayer Advocates, along with 14 other parties in the proceeding.

PG&E Senior Vice President Tom Bottorff, who oversees regulatory matters, said the increased funds are needed by the utility to connect new customers, repair and replace aging infrastructure and restore service during storms. The decision will have no immediate impact on the utility electric rates because the difference between the newly approved revenue levels and what PG&E is already collecting in rates is less than a tenth of 1%. The next electric rate change will be held off until Jan. 1 next year.

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