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No Quick Fix for CPUC Gas Cases, PG&E CEO Says

Pacific Gas and Electric Co.'s (PG&E) regulatory and legal woes will not be over anytime soon, and in the meantime the combination utility continues to push back against what it considers excessive penalties proposed by state regulators, CEO Tony Earley said Tuesday.

While the fallout from the penalty phase of the 2010 San Bruno natural gas transmission pipeline incident is nearing resolution, the recently self-reported communications violations between PG&E and the California Public Utilities Commission (CPUC) will take a long time to be fully resolved, Earley said during a quarterly earnings conference call.

On the positive side, PG&E's 3Q2014 net income on a generally accepted accounting principles basis was $811 million ($1.71/share), compared with $161 million (36 cents) in 3Q2013. PG&E attributed most of the increase to the fact that this year's results include a 2014 general rate case. PG&E also reported that the current estimated cost to shareholders for its pipeline safety work following the San Bruno pipeline explosion will total $2.7 billion over the next several years.

Earley said he agrees that PG&E should be penalized, but the latest proposals following email communications revelations would restrict legitimate communications between the utility and the CPUC. "Silencing the company is not the answer," he said. "We believe it is a bad regulatory practice, particularly since the company self-reported and has taken responsibility for the action.” PG&E last month fired its top three regulatory executives.

"We look to the CPUC to strike the right balance going forward, but whatever its ultimate decision, we are committed to complying with it, and we will work through these issues,” Earley said.

Since the emails were made public identifying violations of the CPUC's ex parte communications rules last month (see Daily GPI, Sept. 16), two regulators have recused themselves from PG&E's penalty and gas pipeline/storage rate cases, and both the U.S. Attorneys Office in San Francisco and the California Attorney General's Office have launched investigations.

"These issues are going to take some time to be resolved," said Earley, vowing that no matter how long it takes, PG&E is "going to continue to do the right thing, including rebuilding trust with the CPUC and other parties."

Earley and other senior PG&E executives indicated they do not expect a final decision this year from the $1.4 billion CPUC penalty proposals (see Daily GPI, Sept. 2). Asked if PG&E intends to appeal, Earley said the utility has filed objections to parts of the proposed decision, but "on the flip side, there are benefits to getting finality and getting [a final decision].

"We'll take a look at the totality of the circumstances when we get that decision and then decide whether we want to appeal pieces of it, or just move on."

While its pending $1.29 billion gas pipeline/storage rate case has yet to get started since the email flap that was centered on the selection of a regulatory judge for the case, the penalty case sits with presiding officers decisions being reviewed by the CPUC commissioners. So far they have not indicated to PG&E that they wanted to hold a final determination because of the two regulators who recused themselves in the case, Earley said.

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