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PG&E Urges Proposed $2B Penalty Aimed at Pipeline Safety, Not General Revenue

Undaunted by a series of public rebukes, Pacific Gas and Electric Co. (PG&E) late Thursday filed with the California Public Utilities Commission (CPUC), seeking to limit where the monies go from the upcoming penalties the utility will be ordered to pay for the 2010 natural gas transmission pipeline rupture in San Bruno, CA.

Separately, PG&E also responded to a CPUC show-cause order related to questionable communications between the utility and regulatory commission that PG&E self-reported Sept. 15 (see Daily GPI, Sept. 16). PG&E in the filing admits the violations and concedes it expects to be penalized in addition to the fines it already faces. It will appear before the CPUC on Tuesday regarding the show-cause order.

In the penalty appeal, PG&E said it wants all of whatever amounts are paid -- more than $2 billion has been proposed by CPUC hearing judges -- to go toward enhancing gas pipeline safety as opposed to parts of the payments going to the state's general revenue fund as CPUC judges have proposed (see Daily GPI, Sept. 2).

In its filing to the CPUC, the San Francisco-based combination utility said it asked that "any penalty associated with San Bruno be reasonable, proportionate and focus on what matters most to all parties involved: investing in gas safety."

In a separate joint filing by a leading utility consumer group, the CPUC's independent consumer unit, the Office of Ratepayer Advocates, and the city/county of San Francisco, state regulators were urged not to funnel most of the penalty funds to the state coffers. It also seeks to deny PG&E any recovery in rates of the costs for the utility's ongoing pipeline repair/maintenance work. They want more monies directed at fixing what they described as "PG&E's neglected pipelines."

The Utility Reform Network (TURN), along with the other groups, suggested that rather than $950 million in penalties to the state general fund, $877 million should be directed at pipe repairs and $473 million could be paid to the general fund. In addition, they contend there should be full disallowance of any of the pipeline work PG&E is doing in pending rate cases.

"There is no question that PG&E deliberately evaded safety requirements and knowingly engaged in unsafe practices for many, many years," said Tom Long, TURN legal director. Long wants tens of millions of dollars that PG&E allegedly has spent on legal fees in defending its actions also disallowed in any subsequent rate cases.

The CPUC characterizes the penalty that is pending as $2 billion, but PG&E in its filing argued that the company already is approaching $4.75 billion paid for by shareholders since the Sept. 9, 2010 pipeline rupture that killed eight people, injured scores more and devastated a quiet residential neighborhood. The nearly $5 billion total quoted by PG&E includes $2.7 billion that its shareholders "have incurred or are forecast to incur" to improve and enhance the safety of the utility's gas operations.

PG&E said its estimated shareholder impact is a "forward-looking statement and the ultimate amount of costs could differ materially, depending on the scope and timing of work and other factors." It also said the largest penalty ever previously assessed in the United States for a gas pipeline accident was $101.5 million.

While PG&E's filing stresses a long list of actions it has taken since San Bruno to beef up the safety of its pipeline system, the consumer advocates filing emphasizes that state regulatory staff has already verified that PG&E "knowingly created an unacceptable risk to public harm, violating state and federal rules by neglecting essential gas transmission work; [the utility] cut costs and boosted its profits."

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