A California Public Utilities Commission rulemaking aimed at increasing the safety of the state’s massive and aging gas pipeline system so far is prompting only muted concern about cost as regulators contemplate new safety valves, pipe replacement, community preparedness training, and ongoing testing and reporting requirements. The CPUC launched the rulemaking proceeding in February following the Pacific Gas & Electric pipeline explosion in San Bruno last year that killed eight people and leveled a neighborhood. SoCal Gas spokesperson Denise King said the cost of the requirements the CPUC is contemplating remain unknown. Sempra Energy’s gas utilities (SoCal and San Diego Gas & Electric) aim to detail costs in July, she added. Meanwhile, new federal safety requirements and state actions are prompting the state’s investor-owned gas utilities to increase spending on pipeline system operation, maintenance, and replacement. Just last week, for instance, the commission increased the annual revenue requirement for PG&E’s gas system from $462 million in 2010 to $514 million this year--rising to $582 million by 2014. The commission said it did so in the wake of the San Bruno blast largely to bolster safety. Sempra’s gas utilities are seeking a several-fold increase in spending on gas system operation and maintenance largely to meet new federal safety requirements. To help formulate new state requirements, the CPUC is holding a series of public engagement hearings this spring around the state that is firing up public interest. The rulemaking and hearings have created a wellspring of ideas. In an April 13 filing, for instance, San Bruno attorney Steven Meyers called for “full replacement of high pressure gas transmission pipelines, especially those installed prior to 1970” that run through heavily-populated areas. A coalition of Asian, Latino, and black business groups called for the commission to form and fund “locally-trained Emergency Gas Transmission Corps” that could respond to any pipeline disaster within five minutes. The corps could be composed of the unemployed and underemployed, the group suggested. Yet, amid the calls for urgent and highly visible action, concern about the cost of the various proposed measures is apparently percolating quietly in the background. Among the few so far to address the potential cost is the Division of Ratepayer Advocates. In an April 13 filing with the commission, DRA attorney Marion Paleo emphasized that the cost of pipeline safety measures won’t be “trivial,” and thus the commission should ultimately make sure it is split in some way between utility shareholders and ratepayers. “DRA is particularly interested in the ratemaking implications of implementing and monitoring compliance with any new or modified rules,” wrote Peleo. Splitting the expenses between shareholders and ratepayers would help make sure that investments provide “value” to utility customers, she explained. To shift some of the expense of anticipated pipeline upgrades to shareholders, she suggested the commission consider reducing PG&E’s rate of return on some gas-safety related investments. She further suggested that the commission could establish balancing accounts for the state’s gas utilities from which any money collected but not spent on safety would be returned to ratepayers periodically. DRA is scrutinizing pipeline system expenditures in the general rate cases that both SDG&E and SoCal Gas filed late last year, according to Paleo. In testimony in those cases, SoCal Gas engineering design manager Raymond Stanford explained that new federal pipeline standards already are requiring both utilities to increase expenditures on pipeline testing, maintenance, retrofits, and replacement. Compared to spending in 2009, the first year of the last three-year rate case cycle, SoCal Gas is set to spend $78.4 million in 2012 on pipeline-related operation and maintenance alone. That’s $50.4 million more than the $28 million it spent in 2009, the test year in its last three-year general rate case. Likewise, SDG&E is seeking to similarly increase pipeline operation and maintenance spending, according to Stanford. In 2009, it was $2.2 million. The utility is proposing spending $11.9 million in 2012, an increase of about $9.7 million.
