In response to state and federal regulatory mandates tied to the natural gas pipeline rupture last year in San Bruno, CA, Sempra Energy’s California utilities have completed reviews and testing of their system in the southern half of the state, concluding that current operating pressures on pipes in highly populated areas are safe and appropriate, Sempra’s new CEO Debra Reed told financial analysts Tuesday during a second quarter earnings conference call.
While reporting robust growth in earnings quarter over quarter, mainly due to a one-time gain of $277 million, Reed noted that her first major focus as the new head of the San Diego-based energy holding company is to complete an annual five-year strategic outlook, looking closely at all of its assets: utility and nonutility, and gas and electric.
Earnings with the one-time 2Q gain were $511 million, or $2.12/share, compared with $222 million, or 89 cents/share, for the same period in 2010; without the added $277 million, earnings increased 9% (97 cents/share vs. 89 cents/share in the second quarter last year).
Reed said that so far the Sempra utilities have satisfied the California Public Utilities Commission’s (CPUC) mandate that all gas pipeline in heavily populated areas have the appropriateness of their maximum allowable operating pressures (MAOP) verified through extensive record searches and/or hydrostatic testing. This includes 1,600 miles of the 4,000 miles of transmission pipelines in the system owned and operated by Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co. (SDG&E).
“We conducted an extensive review that renewed our confidence that the MAOP has been appropriately set according to current standards and regulations, and that we operate our system safely,” said Reed, noting that the Sempra utilities also on Aug. 26 will file with the CPUC implementation plans for the testing or replacement of all pipeline systems that have not been pressure tested.
Reed said the utilities expect to recover all of their future added costs related to the gas pipeline system, and that potentially there are “several hundreds of millions of dollars annually” that may be spent on upgrading the gas infrastructure. “Ultimately, it will be up to the CPUC to set the appropriate levels of investment going forward,” she said.
In response to a specific question from an analyst related to whether Sempra’s utilities have any potential pipeline problems similar to what Pacific Gas and Electric Co. has encountered in its review, Reed was emphatic about there being no similar concerns in the southern part of the state’s major gas transmission pipeline systems. A CPUC audit of the Sempra system gave it a clean bill of health, she said.
“We’ve gone through a thorough review with the same [CPUC] reporting requirements [as PG&E], and we have not found anything that concerns us in terms of our past practices or how we operate our pipelines,” Reed said. “We operate our system very safely.
“We have looked at the ‘lessons learned’ from the San Bruno incident, and we are making modifications as we move forward in areas where we think we could improve our responsiveness if something like that occurred, but we have not found any big concerns at all regarding the way we operate our system. We just had a recent audit by the CPUC, and they didn’t find any concerns either.”
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