As its first major decision following the San Bruno pipeline failure two years ago, California regulators on Thursday approved a three-year pipeline enhanced safety plan for Pacific Gas and Electric Co. (PG&E) but denied utility ratepayer support for most of the cost of the utility proposal.
Separately, the state regulators also adopted new protections for safety whistle blowers as directed by a new state law (AB 705).
The San Francisco-based combination utility said the five-member California Public Utilities Commission’s (CPUC) unanimous action confirms its plan “is on the right path forward,” but they regretted that more of its costs cannot be supported by utility customers. Utility consumer group The Utility Reform Network (TURN) praised the small rate increases but said PG&E ultimately “will profit” from the rupture and explosion in San Bruno.
Three pending penalty phase proceedings continue at the CPUC that could result in hundreds of millions of dollars in penalties for the utility (see Daily GPI, May 16).
The CPUC action effectively approved the proposed decision granting $299 million in increased rates through 2014 to pay for some of the comprehensive pipeline enhancement plan, compared to the $768 million being sought by PG&E to cover the costs of its safety and upgrade efforts over the next three years.
PG&E has been arguing publicly for some time that it needed “reasonable cost recovery” for the many new standards and requirements in place because of San Bruno (see Daily GPI, Dec. 13). The CPUC commissioners did not agree.
The CPUC said it approved 39% of what PG&E had requested, resulting in about a 1.5% rate increase for its residential customers. PG&E shareholders bear the risk of cost overruns “because past management decisions led to the need to undertake this massive project on an expedited schedule,” said a CPUC spokesperson.
“Additionally, PG&E shareholders will bear the costs of pressure testing pipelines for which pressure test records are missing,” the CPUC spokesperson said. “PG&E is required to continue its record management improvement project (see Daily GPI, April 3); however, due to past deficiencies in document management, the costs of this project and its computer database may not be recovered from ratepayers.”
PG&E utility President Chris Johns said the utility “has made and will continue to make significant investments to fund critically important infrastructure upgrades to its network of gas transmission pipelines.” Johns said the utility will continue to forge ahead with its overall plan, which originally carried a $2.2 billion price tag through 2014.
In contrast, TURN criticized a “last-minute, back-room deal” between the utility and regulators, alleging it will allow PG&E to ultimately profit from the San Bruno explosion because it earns an authorized return on equity on all of its new capital investment in utility infrastructure.
“The decision does not resolve all the pipeline safety issues exposed by the San Bruno explosion and resultant investigations,” a TURN spokesperson said. “PG&E is expected back at the trough in the near future.”
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