While still posting in excess of $1 billion in profits for all of last year, San Francisco-based PG&E Corp. reported Thursday that it took $283 million, or 43 cents/share, in charges for its utility's fatal San Bruno transmission pipeline rupture last September.
Net income on a generally accepted accounting principles (GAAP) basis was $1.10 billion, or $2.82/share, for 2010, compared to $1.22 billion, or $3.20/share, in 2009.
In addition to the booked costs, PG&E is projecting up to $760 million in costs, including some $400 of potential third-party liability costs, related to the San Bruno incident by the end of this year, PG&E executives said. The bulk of the liability costs are expected to be covered by the $992 million of insurance coverage the utility has in place.
Both PG&E CEO Peter Darbee and Pacific Gas and Electric Co. President Christopher Johns indicated that the utility needs to improve and modernize its pipeline system maintenance and integrity programs, and longer term this may result in higher operating costs for its natural gas system. While noting that earnings expectations for this year are "unchanged," Darbee said that "based on our latest assessment we're estimating a substantial increase in the direct costs required to respond to the issues raised in the wake of San Bruno."
With the additional findings and recommendations from the National Transportation Safety Board (NTSB), which is continuing a probe into the cause of the pipeline failure and added directives from the California Public Utilities Commission (CPUC) (see Daily GPI, Jan. 19), the estimated added work required this year is reflected in the utility's projections for higher 2011 operating costs, Darbee said.
Darbee said that any company experiencing something like the Sept. 9 explosion and fire "has an obligation to learn everything it can from what occurred and a responsibility to apply those lessons to make sure nothing like this ever happens again."
PG&E has hired the consulting firm KPMG to help in transforming more than a million hard copy records of pipeline maintenance and testing -- some dating back to the 1940s -- into electronic records.
"We are in the process of working aggressively to collect, scan and index more than one million individual hard copy records into an electronic data base that will provide high quality documentation to verify the determination of the maximum operating pressure on our pipelines," Johns said. "We recognize that we have to improve our overall operations and maintenance of our gas system, and we have taken additional steps to implement the highest industry standards for pipeline assessment and testing practices."
The next report the utility owes the CPUC is due March 15, and in the meantime, the combination utility has launched a search for "a top-flight gas operations executive for our senior executive team."
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