Talks for the settlement of outstanding state regulatory cases relating to the 2010 San Bruno natural gas transmission pipeline rupture and explosion have broken down, and Pacific Gas and Electric Co. (PG&E) now expects to litigate the issues at the California Public Utilities Commission (CPUC), said PG&E Corp. CEO Tony Earley.

Earley told analysts during an earnings conference call Thursday that he expects the CPUC proceedings can be wrapped up by the end of this year. The company said quarter-over-quarter profits were essentially flat ($239 million, or 55 cents/share, for 1Q2013, compared to $233 million, or 56 cent/share, for the same period last year).

Filings of parties in the fines and penalties phase of the CPUC proceedings will be made later this month with an initial administrative law judge’s decision this summer, PG&E executives on the conference call said.

“While we remain open to settlement, it now appears that the most likely path will be completion of the litigation,” said Earley, who last year was predicting a settlement would be reached by the end of 2012. “Even though it is a slower process involving briefings, we believe the CPUC proceedings will be completed this year.”

PG&E CFO Kent Harvey said the company has reserved $1-1.2 billion for possible penalties and fines, including $200 million already assessed.

In response to an analyst’s questioning about the penalty proceedings, Earley said there have been no active settlement negotiations “for some time, but we continue to indicate we are open to those talks.” Once the regulatory case gets into the briefing stages, however, “positions become more hardened, and that is why I think the most likely outcome is that we just continue through the [CPUC] litigation process,” he said.

“We can see the light at the end of the tunnel; we can work our way through the process and certainly get it done this year.”

Earley said a litigated decision does not limit the flexibility the CPUC will have in issuing disallowances for utility rate coverage and/or fines. However, he thinks other parties won’t be able to get concessions in a litigated decision while they could in a settlement.

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