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Pipe Safety Prompts CPUC to Re-Examine Basic Rate Cases

Dipping into a regulatory body's bread and butter, California regulators on Thursday voted unanimously to re-tool the state's general rate case process to make public safety determinations about the utility infrastructure they oversee. The specter of the fatal 2010 San Bruno natural gas transmission pipeline failure and its aftermath were cited as drivers for the new statewide examination.

Almost a quarter-century since it tweaked its basic rate proceeding processes, the California Public Utilities Commission (CPUC) was responding directly to one of the recommendations from the National Transportation Safety Board's (NTSB) 2011 report (see Daily GPI, Sept. 27, 2011) on the San Bruno pipeline tragedy that was critical of the CPUC and Pacific Gas and Electric Co. (PG&E).

The envisioned changes in the rate case process would expand the proceedings to look at more than cost of service by factoring in issues of safety and reliability and how each can be affected by new technologies.

Commissioner Carla Peterman said she thinks safety already is a priority for the commission, but "this [rulemaking] will constitute another step in institutionalizing a safety focus at both the utilities we regulate and at the commission."

Other commissioners voiced similar support, although they cautioned that it would not be easy to take the normally economically focused rate process and inject the concepts of risk analysis and risk management.

CPUC President Michael Peevey said tinkering with the state's general rate case process in the name of safety will satisfy several recommendations the commission received from an independent review panel it convened following the San Bruno rupture (see Daily GPI, June 10, 2011).

"Historically, general rate cases have focused on costs-benefits of utilities' safety related expenditures without including a process to evaluate the relative risk and benefits from competing options and new technologies," Peevey said.

The new rulemaking will allow all stakeholders to offer their perspectives on what Peevey called "the metrics utilities should use in evaluating the potential risks and benefits of their [safety related] operational investment decisions."

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