The cost to Pacific Gas and Electric Co. (PG&E) shareholders to deal with the aftermath of the deadly San Bruno natural gas pipeline rupture and explosion in September 2010 is approaching $1.5 billion, senior executives at the utility said Thursday.

Noting the added costs for its gas system last year were $1 billion above the previous year’s level, PG&E said 4Q2011 profits were $83 million (20 cents/share), compared with $250 million (63 cents) for the same period in 2010. A 4Q2011 loss of $283 million for gas matters was recorded, compared with a $27 million loss for the same reason in the similar period in 4Q2010.

The total cost of San Bruno to shareholders includes $550 million spent to date, and “our guidance indicates we could spend nearly that same amount in 2012,” CFO Kent Harvey said during a conference call with financial analysts Thursday. PG&E also faces a $200 million penalty from state regulators, and the company has committed to spending $200 annually this year and next for all operations. “That pushes our total shareholder costs to $1.6-1.7 billion, which is a very significant price tag. In fact, that total is approaching the total net investment in our pipelines over the past decade,” Harvey said.

San Bruno has asked the California Public Utilities Commission (CPUC) to help them reach a “global settlement” with PG&E (see related story).

Utility executives pointed out that the total bill for shareholders does not include any of PG&E’s $2 billion, four-year pipeline safety enhancement plan, which they said would probably not be acted on by state regulators until the end of this year.

The gas side of PG&E’s business is authorized to earn about $100 million a year, Harvey said, meaning that the costs shareholders now face represent 15-20 years worth of earnings.

In some of the ongoing proceedings at the CPUC regulatory staff are alleging that in the past PG&E did not spend hundreds of millions of dollars of ratepayer funds allocated for gas pipeline maintenance and safety programs. Thus, the staff is asking why ratepayers should have to pay again for an added level of safety.

PG&E executives said they adamantly disagree with the regulatory staff and will be making the utility’s case in the upcoming proceedings.

The utility is proposing to spend nearly $2 billion of ratepayer-supported programs in its pipeline enhancement plan now awaiting a CPUC decision.

CEO Tony Earley said the definitions and expectations of a “safe and reliable gas pipeline system” have been changed considerably since the explosion occurred Sept. 9, 2010. “You have to look at what were the standard practices, and we have acknowledged there were some places where we weren’t following standards, and to the extent that was the case, then we ought to absorb those added costs.

“But to the extent that the standards are being changed and being increased, those new requirements ought to be recoverable from our customers through our [retail] rates,” Earley said. “I think you are going to see this issue come up across the country with new national standards. Other states are going to look at what has happened in California, and they’ll say the same thing.

“While people are following accepted practices from the past, technology has changed; the understanding of the risks has changed, and therefore the costs of adhering to these new standards should be recoverable as a normal course of business.”

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