Already subjected to pointed criticism from regulators and lawmakers, a $2.2 billion, four-year plan for enhancing Pacific Gas and Electric Co.’s (PG&E) natural gas pipeline system is not likely to be approved by the California Public Utilities Commission (CPUC) anytime soon, PG&E utility President Chris Johns told financial analysts Thursday on an earnings conference call.

The bottom line ramifications of the inaction mean PG&E is unlikely to have authorization to begin recovering some of its costs in rates that relate to the substantial upgrades anticipated to conform with new, more stringent federal and state requirements for operating and ensuring the safety of the state’s tens of thousands of miles of gas transmission and distribution pipelines (see Daily GPI, Feb. 17).

PG&E’s Pipeline Safety Enhancement Plan, submitted to the CPUC last year, is part of an ongoing state regulatory rulemaking, but it is only one of four major proceedings at the CPUC in the wake of the Sept. 9, 2010 pipeline rupture that killed eight people, injured more than 50 others and devastated a quiet residential neighborhood about 10 miles south of San Francisco.

The other proceedings have raised more public attention — dealing with the utility’s past pipeline recordkeeping, pressure verification of pipelines in heavily populated areas and a comprehensive pipeline audit by the CPUC’s Consumer Protection and Safety Division (CPSD).

In an initial audit completed by the CPSD, PG&E was strongly criticized and a $16.8 million fine was levied against it. The San Francisco-based combination utility has appealed the fine as “excessive” due to numerical errors in the CPUC unit’s counting of violations allegedly committed by the utility (see Daily GPI, Feb. 3).

“There are no precedents to rely on here, so we cannot predict the final outcome [of the appeal],” Johns said. “Given all these recent developments and the CPUC’s wide discretion in these matters, the magnitude of the San Bruno event, and developments like the new staff citation authority, we have taken a charge [against earnings] for $200 million.”

Johns stressed that the charge is an estimate that he would place at the “low end of the range of the expected fines and penalties” coming out of San Bruno.

Meanwhile, in the rulemaking involving the pipe safety plan, Johns said PG&E has gotten no action on its request to set up an account to begin tracking costs related to the prospective safety upgrades. “The procedural schedule beyond the scheduled March hearings remains unclear,” he said.

“Previously, we assumed we would be able to begin recovering the costs for the work we do regarding the pipeline safety enhancement plan in 2012 to comply with new standards. But that now is much less likely. To be conservative, we are now assuming that resolution will not occur until the end of this year, meaning costs incurred in 2012 related to the safety plan and prior to a CPUC order will fall to the bottom line [negatively impacting earnings].”

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