The financial impact of more than a billion dollars of regulatory fines and penalties against Pacific Gas and Electric Co. (PG&E) last year were felt in the 4Q2015 and full-year results of its parent company, PG&E Corp. Meanwhile, senior company officials reported on the pending activity in regulatory and criminal court proceedings, which is still unfolding.
During an earnings conference call Thursday, PG&E officials said they are not concerned about legislative efforts announced earlier this month (see Daily GPI, Feb. 4) to change the state's constitution and shut down the California Public Utilities Commission (CPUC). The company is open to acquisitions, but it has nothing specific it is pursuing at present, they said.
For all of 2015, there was a one-time charge of more than $1 billion ($1.33/share), including $190 million (23 cents) in the fourth quarter primarily covering payments and accruals related to the fines and penalties assessed by the CPUC in the wake of the 2010 San Bruno, CA, natural gas transmission pipeline rupture and explosion that killed eight people (see Daily GPI, April 9, 2015).
The charges included expenses for pipeline safety and right-of-way work as well as legal and regulatory work related to the 2010 pipeline break. The charges were partially offset by insurance, according to PG&E officials.
"Our 2015 investments and operating strategies drove additional progress on safety, including additional third-party certifications for gas safety," said CEO Tony Earley, who characterized last year's financial results as "solid," despite the fines and penalties.
For 2015, earnings for common shareholders were $874 million ($1.79), compared with $1.4 billion ($3.06) in 2014. For 4Q2015, those earnings were $134 million (27 cents), compared to $131 million (27 cents) for the same period in 2014.
In another sign of progress, Earley said the utility earlier in the week completed the next-to-last significant safety recommendation mandated after San Bruno by the National Transportation Safety Board (NTSB), regarding the installation of more than 200 remote, automatic shutoff valves on the PG&E transmission pipeline system (see Daily GPI, Aug. 31, 2011).
"We're also well on our way to completing the last NTSB recommendation to strength-test more than 1,000 miles of our transmission pipeline system," Earley said. Meanwhile, the CPUC has closed out the San Bruno investigation, and hearings have been completed on the state commission's recordkeeping investigation case, which should be resolved this year, he said.
In the criminal proceeding set to go to a jury trial in San Francisco next month, Earley said the case against the combination utility was "narrowed considerably" late last year. "The [federal] government still has to prove in the early phases of the trial that PG&E 'knowingly and willfully' violated the national pipeline safety law," Earley said. "We continue to believe that the evidence doesn't support the charges.
Earley said PG&E would be open to settlement discussions in the criminal case, but none are anticipated and the trial is expected to start March 22. "We continue to believe we have a solid case going forward," he said.
In response to an analyst's question about a state legislative proposal to amend the California Constitution to reform the CPUC, Earley said that the state has "good regulatory structures in place, and there is nothing to lead any of us to believe that the fundamental positive structures that we have are going to change."
And regarding another question on possible acquisitions, Earley indicated that taking such steps in California is more difficult than in other states, but that PG&E regularly looks at potential additions inside and outside the utility company. Earley said in his four-plus years heading PG&E the focus has been on "back-to-basics" and getting the company running smoothly.
"We do think there are opportunities, but the affiliate rules in California make it very difficult to use the expertise you develop within the utility to work on things outside the utility framework. You have to have a big enough opportunity to decide to set up a whole separate operation. That said, I don't think a week goes by that we don't have someone come in with proposals on how technology can improve this business; we look at many of them to see if we can incorporate them into the utility."