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PG&E to Resolve Pipeline Disputes, CEO Says

November 5, 2012
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PG&E Corp. CEO Anthony Earley predicted last week that the San Francisco-based utility Pacific Gas and Electric Co. will resolve pending regulatory and enforcement issues related to the fatal San Bruno, CA, natural gas transmission pipeline rupture and explosion two years ago.

PG&E reported 3Q2012 income of $361 million (84 cents/share), compared with $200 million (50 cents) for the same period last year when the utility booked significant one-time charges related to San Bruno and other outstanding legal issues. Earley has estimated that the utility and its holding company will ultimately pay between $1 billion and $2 billion in settlements. Current estimates on third-party liability claims could amount to $600 million.

Separately, utility officials reiterated that PG&E still can settle the majority of the outstanding civil cases that it faces, despite a pretrial judge's decision last Tuesday that denied a request to limit the potential damages in the more than 300 cases that were consolidated in a California Superior Court in San Mateo County. Judge Steven Dylina ruled against PG&E's attempt to take punitive damages off the table and only allow compensatory damages. Thus, both can be considered if the consolidated cases numbering more than 300 go to trial.

Like three major enforcement cases at the California Public Utility Commission (CPUC) now being negotiated by PG&E and the parties, the civil litigation in San Mateo County may still be settled without a long court battle, said a utility spokesperson. Seventy settlements already have been reached in wrongful death lawsuits tied to the explosion, which killed eight people in September 2010.

"The ruling was about several things, but primarily the question of whether to allow punitive damages," said the utility spokesperson of Dylina's ruling. Dylina is said to have made it clear that he would like to see the majority of the pending cases settled, and the utility continues to stress that goal.

Earlier this month PG&E encountered setbacks in pending cases related to the San Bruno tragedy as the CPUC issued a proposed decision on the utility's multi-year, multi-billion-dollar pipeline enhancement plan, which would require PG&E shareholders to absorb two-thirds of the initial costs (see NGI, Oct. 15). CPUC last month also announced it had dropped attempts at a mediated settlement among PG&E and various San Bruno parties (see NGI, Oct. 29).

Earley said the CPUC staff proposal "fails to recognize that much of work [to upgrade the utility pipeline system] has been created by new standards and requirements" imposed since the San Bruno incident, which killed eight people. He also reiterated PG&E's belief that a mediated settlement of the enforcement cases would be the best approach.

In both cases, Earley said he is "optimistic" that the CPUC will see the merits of the utility's pipeline plan being supported by ratepayers and that a settlement of the enforcement cases can still be achieved before the end of this year, although it likely will not be approved by the CPUC until sometime next year. "While we are deeply disappointed in the proposed decision we will continue to move forward with projects to meet new safety standards, and we will continue to work with regulators and others to reach a balanced agreement that resolves the various regulatory issues and provides adequate support for critical investments," Earley said.

Noting that shareholders have paid for nearly all of the $915 million spent so far in pipeline-related work in San Bruno's aftermath, PG&E utility President Chris Johns said 85 miles of transmission pipelines were tested in 3Q2012 and an additional 350 miles will be completed through 2014.

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