PG&E Gets 6.9% Rate Boost for Safety

By Published On: August 15, 2014

Pacific Gas & Electric customers will pay 6.9 percent more on their gas and electricity bills on average in the wake of the California Public Utilities Commission’s approval of the utility’s 2014 general rate case Aug. 14. PG&E initially requested a hike of 17.5 percent in its 2014 revenue requirement. The company argued it needed that much to make its sprawling gas pipeline system, as well as its electric transmission and distribution lines, safer in the wake of a catastrophic gas line explosion in 2010. That disaster in San Bruno killed eight and leveled a neighborhood. However, after almost two years of review involving extensive safety and risk assessment work by outside consultants, the commission pared back the utility’s revenue increase by $707 million, or 61 percent, from $1.160 billion to $453 million. Commissioner Carla Peterman maintained the final decision “strikes a good balance between a safe system and reasonable rates.” The commission’s overarching aim in examining the rate case was to ensure “maintenance, replacement, and improvement of PG&E’s aging infrastructure,” said commissioner Mike Florio, who supervised the decision. Commission approval, he explained, clears the way for the utility to carry out massive upgrades of its gas distribution system. Work is to include accelerated pipeline replacement, more systematic leak detection, and centralized tracking of pipeline network conditions using automated monitors. The decision provides money too for the utility to improve the safety of its electric grid—for instance, through accelerated pole inspection and replacement. Florio said the cost of that work will be partly borne by ratepayers. The decision boosts funding for the utility’s gas distribution system by 18.7 percent, its power distribution system by 3.5 percent, and electric generation by 5 percent. The Utility Reform Network executive director Mark Toney said the rate increase will add almost $100 to the amount the average customer pays the utility each year, which he called “a huge burden” for low-income workers. However, PG&E president Chris Johns countered that the utility's "residential bills will remain well below the national averages for gas and electric service." In reviewing the utility’s rate case, the commission employed risk assessment and safety analysis techniques that commissioner Mike Picker characterized as “unique in the country” in an effort to prioritize expenditures to maximize protection. “This process in this particular rate case will make us safer,” he said. Yet, Picker admitted the commission has a long way to go in developing “metrics” to determine which investments truly bring the biggest reduction in operational risk for the dollar. Picker said the commission’s review of PG&E’s general rate case displayed a dearth of real advocacy for safety within the commission. All staff could do at the commission and Office of Ratepayer Advocates, he said, was essentially seek to cut what the utility proposed, rather than promoting certain safety expenditures or even proposing safety expenditures not included in the utility’s plan. “Institutionally,” he concluded, “we’re all complicit in cutting the kind of investment we need.” The rate hike will take effect once PG&E files updated tariffs. In addition, the commission authorized rate increases to cover the cost of inflation and other changing cost factors, known as “attrition.” Rates are to go up by an additional 4.5 percent in 2015 and another 5 percent in 2016. PG&E requested 5.9 percent more in 2015 and 6.1 percent more in 2016.

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