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San Bruno 'Closure' Coming, But PG&E Still Faces Criticism, Says CEO

The CEO of Pacific Gas and Electric Co. (PG&E) told financial analysts Wednesday that "closure" is coming for the fatal natural pipeline tragedy in San Bruno, CA, in September 2010, but before it is reached the combination utility will be subjected to more public scrutiny.

In reporting the 1Q2012 earnings, Tony Earley emphasized that the San Francisco-based combination utility would like to conclude the outstanding proceedings at the California Public Utilities Commission (CPUC) "as soon as possible" to provide what he called "clarity" on the issues for everyone concerned -- the regulators, utility and PG&E's customers. "We support the settlement approach as a way to accelerate the process," he told analysts.

"In the next several months, there will be some very important challenges for the company," Earley said. "As we work to bring to a close the various San Bruno regulatory proceedings, we will see a whole new round of public discussion about the tragedy that quite honestly will not put [PG&E] in a favorable light because it will review all the past issues, but I told our employees that this is part of the closure process and we can't let that distract us from moving forward."

In response to specific questions from analysts on the utility's expectation for wrapping up all of the CPUC proceedings this year, Early said some of the parties have indicated "directly and indirectly" that they would like to seek a settlement, and PG&E has made it clear that this is its preferred route -- "a fast path to closure." However, there haven't been any "substantiative discussions at this point."

On a related subject of the penalties incurred by PG&E so far, Earley said that is something that senior officials have "put behind us," but they nevertheless are in discussions with the CPUC about what they believed was an unfair process in which shortcomings that were discovered and voluntarily reported to the state regulators were assessed penalties (see Daily GPI, April 20).

PG&E was slapped twice by the CPUC last month when it denied the utility's appeal of a $16.7 million staff-imposed pipeline fine and assessed a separate $3 million penalty for shoddy record-keeping. However, the action was not unexpected given two proposed decisions released earlier in the year (see Daily GPI, April 16). The fines are payable by PG&E shareholders to the state's general fund. A PG&E spokesperson told NGI the utility would not appeal the $16.7 million fine in court.

"We're disappointed in that decision because it used the principle of assigning maximum penalties for self-identified violations and that is simply not consistent with regulatory practices in many agencies," Earley said. "We'll continue our discussions with the CPUC on how we might modify that approach [in the future], but the one particular proceeding is behind us right now."

PG&E reported net income in 1Q2012 of $233 million (56 cents/share), compared with $199 million (50 cents) for the same period in 2011. Earley noted that the results from both years "reflect significant charges incurred in connection with the company's natural gas pipeline operations."

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