Consumer Advocates Object to Utility Pipeline Cost Recovery Plan

By Published On: March 23, 2012

The Division of Ratepayer Advocates wants regulators to avoid double billing utility ratepayers for natural gas pipeline safety improvements. “We have a pretty good case that if customers paid for the work they should not pay again,” DRA acting director Joe Como told Current. He said customers have picked up the tab for pipeline upgrades under a variety of gas utility dockets, in particular via the massive triennial general rate cases. DRA is set to testify at the end of this week at the California Public Utilities Commission’s hearing, which began March 19, on new proposed “Safety and Reliability Regulations for Natural Gas Transmission and Distribution Pipelines and Related Ratemaking Mechanisms.” The two-week hearing is focusing on Pacific Gas & Electric, San Diego Gas & Electric, Southern California Gas, and Southwest Gas. PG&E has been at center stage of the gas pipeline safety issue since the 2010 pipe blast in San Bruno. During the ongoing hearing on proposed safety mechanisms, the Division and others plan to raise concerns that the problems exposed at PG&E--including shoddy record keeping, testing, and replacement work--may exist at the other utilities. DRA also insists that the $2.2 billion PG&E seeks for its pipeline upgrade costs from 2012-14 should be borne entirely by the utility shareholders, not ratepayers as called for by PG&E. The utility said its shareholders should pay no more than $360 million (Current, March 2, 2012). PG&E also seeks to offset the CPUC’s proposed $221 million fine for the San Bruno explosion that killed eight people and destroyed or damaged dozens of homes. DRA further wants PG&E’s rate of return on its pipeline investments whittled down to 9.5 percent from 11.2 percent. Decades-old rules require utilities to test pipes and to maintain them for their lifetimes, according to DRA. In addition, a rule dating back to 1912 requires record maintenance, Como said. Thus, he maintained, the cost of any pipeline testing, repair, or replacement when records are lacking should come out of shareholder pockets. “Any time there is a violation of a code or standard, shareholders should foot the bill,” Como said. “We are only asking that the system be brought into the 20th Century and we are in the 21st Century.” The Division seeks to get PG&E to scale back the amount of pipe it hydrostatically tests in “high consequence areas,” asserting miles of rural pipeline were included in the utility’s requests for ratepayer recovery. Como said a big problem area was in tracking utility cost recovery of pipeline work. It is complex and involves requests and approvals in various dockets. He said the general rate cases routinely include record keeping costs, but that the lack of standard accounting among the utilities makes tracking costs highly challenging. The Division plans to urge the CPUC to standardize the utilities’ general rate case accounting, which is also different from the Federal Energy Regulatory Commission’s process. Midweek, the CPUC postponed voting on its order directing PG&E to pay $3 million to the state’s general fund for failing to assure the safety of its maximum operating pressure used in more than 400 miles of gas pipelines, and failing to run pressure tests. The stipulated agreement was announced last March (Current, March 25, 2011).

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