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Regulators Give PG&E $460M Rate Hike With Safety Ties

Pacific Gas and Electric Co., still facing multi-billion-dollar penalties for its natural gas system safety lapses, was granted a 2014 general rate increase of $460 million, or 6.9% above current rates, by California regulators Thursday with heavy implications for its current and future safety programs. This case is separate from still-pending pipeline penalty cases (see Daily GPI, May 7, 2013).

"This is not in any sense a business-as-usual rate case," said Mike Florio, the lead state regulator on the case at the California Public Utilities Commission (CPUC), adding that it was PG&E's first general rate case following the September 2010 gas pipeline rupture that killed eight people in San Bruno, CA.

Regulators characterized the case as forward looking, determining what the combination San Francisco-based utility needs in the future to ensure safe and reliable service. Issues from the San Bruno explosion still unsettled will be decided by the CPUC in coming months, Florio said (see Daily GPI, Aug. 14).

Utility consumer watchdog The Utility Reform Network (TURN) blasted the CPUC decision, saying it will drive up customer bills by more than $100 annually, raise overall rates by $2.4 billion during the next three years and fund many programs that have nothing to do with safety and reliability. TURN Executive Director Mark Toney repeated his allegations made earlier in the week that the CPUC is "too cozy" with PG&E.

PG&E originally requested a $1.16 billion rate hike, or 17.5%, for this year through 2016. In this case because of the state regulators' increased focus on safety issues, the CPUC hired outside experts to evaluate risk assessment and risk mitigation issues as well as PG&E's corporate policies, goals and culture.

The gas distribution system part of PG&E was given a 20.4% funding increase of $260 million, and lesser increases for electric distribution and generation operations. Part of the added gas distribution funds will be used to develop what Florio described as a "gas distribution control center to provide real-time visibility and remote control of dynamic pressures and flows within the system."

As PG&E has been scrambling to enhance its transmission pipeline integrity management programs, the rate case spells out new and more comprehensive programs for the distribution pipeline system.

The newest CPUC Commissioner, Michael Picker, said the state regulators' new policy for injecting safety into the ratemaking process is "probably precedent-setting and groundbreaking" nationally. Picker said as evidenced by the PG&E rate case the CPUC is now requiring the major investor-owned utilities to "identify significant risks and the ways in which their spending helps to reduce those risks. That's a new set of actions, and I think we will continue to learn."

Separately, the CPUC unanimously decided to penalize Southern California Edison Co. (SCE) with a $24.5 million  fine for violations of state utility codes in its handling of severe windstorms and an electrocution accident in 2011. The fine is the result of a CPUC investigation of two alleged legal violations by SCE in regard to two electrical equipment failures in the windstorms three years ago.

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