More than two years after the San Bruno, CA, natural gas transmission pipeline rupture and explosion, PG&E Corp. senior executives said the company’s bottom line is still feeling the aftershocks. The company last week reported a loss for 4Q2012 in part because of gas pipeline-related issues.
Acknowledging that there is an impasse in settlement discussions regarding outstanding multi-billion-dollar regulatory investigations, CEO Tony Earley said there is progress being made — but not as extensively as the company had hoped to achieve by the end of last year.
As a result, PG&E reported a loss of $13 million for 4Q2012, compared with profits of $83 million in the same period in 2011. Earnings for 2012 were $816 million, compared with $844 million in 2011. Absent $488 million in gas-related charges against earnings, the full-year results in 2012 would have been more than $1.3 billion. The net costs incurred in 4Q2012 ($426 million) and for the full year ($812 million) related to continuing work tied to San Bruno.
In addition to facing pipeline safety enhancement costs of several billion dollars, some of which have been disallowed for recovery in Pacific Gas and Electric Co.’s utility rates, PG&E senior executives said during a quarterly conference call that there will be added pipeline-rated costs over a five-year period to resolve still not fully defined encroachments in its 6,000 miles of transmission pipe rights-of-way. Those costs could run up to $500 million, senior executives said.
With the failure to reach a settlement on the major outstanding investigative proceedings from the September 2010 San Bruno explosion, PG&E is forced to move forward with the scheduled regulatory process at the California Public Utilities Commission.
“We’re committed to bringing this to a conclusion that is favorable to all the parties involved, including our shareholders,” said Earley, who noted that in San Bruno’s aftermath PG&E has spent $1.4 billion of shareholder dollars on unrecovered pipeline and related expenses. In addition, the company spent $500 million of shareholder funds for insurance against future potential penalties and a contribution to the city of San Bruno as part of a separate settlement.
Earley said even though the investigations continue to hang over the utility operations, in other areas the company is “well on the path to resolve many other issues,” such as a state-approved pipeline enhancement plan, which disallowed about 40% of what the utility had asked to have included in retail rates.
“The CPUC decision on the pipeline plan provides more certainty on how it will be implemented, but the punitive disallowances are disappointing,” said Christopher Johns, the PG&E utility president. All of the most serious third-party liability legal cases against the company have been settled, and it is now focused on the rest of the outstanding legal actions.
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