Pressure Building on PG&E Pipeline Tab

By Published On: February 3, 2012

Consumer advocates and Assemblymember Jerry Hill (D-San Bruno) claim that Pacific Gas & Electric has low-balled how much it will cost ratepayers to upgrade pipeline safety following the September 2010 natural gas blast in San Bruno. The utility seeks $2.2 billion from its customers. After the devastating explosion, consumer advocates fear that the utility may use some of the additional ratepayer funds not only for work needed to meet new safety standards adopted since San Bruno, but also to pay for work neglected under the old safety standards. They want shareholders to address such legacy costs. Hill released figures Feb. 1 suggesting that the actual cost of PG&E’s pipeline upgrade plan to ratepayers would run more than $5 billion over the long run--not $2.2 billion as claimed by the utility. The $2.2 billion the utility seeks from ratepayers over several years are “investments that will meet new, industry-wide safety standards and a much-needed next generation of infrastructure upgrades--not toward addressing PG&E’s past issues,” the utility stated Feb. 1 in a press release. “All told, the investments will be more than $1 billion to improve the safe operations of PG&E’s systems, not a penny of which is coming from customers.” Hill said PG&E’s lower figure was like quoting the price for a house devoid of the interest on the mortgage. The utility proposes having ratepayers pay 90 percent of the cost, with utility shareholders on tap for the remainder. “It seems that the 90/10 split that had seemed so unfair is, in fact, much less fair than we had thought,” Hill said. A newly released study commissioned by the legislator attributed the doubling of PG&E’s costs to shareholder profit, debt interest, and state and federal taxes on shareholder profit. PG&E disputed Hill’s numbers and the impact on ratepayers. It drew its own line between repairs needed to address past system shortcomings versus those necessary to comply with tighter standards. The Division of Ratepayer Advocates attributed the need for PG&E’s pipeline system upgrades to the utility’s poor record-keeping and maintenance over several decades. DRA--in testimony submitted to the commission Jan. 31--recommended that PG&E not be allowed to increase rates to recover the upgrade costs incurred during this three-year period and that it pursue other funding sources, such as reducing bonuses and shareholders’ earnings. “PG&E’s own failure to maintain its gas pipeline and record-keeping systems over decades led to the extraordinary need for infrastructure upgrades the company is dealing with now,” said Joe Como, the Division’s acting director. The Utility Reform Network also called on the commission to require PG&E to justify its $2.2 billion planned rate recovery. It urged that recovery of costs be denied for several reasons, including “unreasonable errors or omissions in the pipeline management.” It asserted that PG&E should not receive ratepayer funds for work done incorrectly or previously funded and not performed. “PG&E’s shareholders should not enjoy the privilege of collecting a profit on expenditures to bring PG&E’s pipeline system to acceptable levels of safety,” according to Mindy Spatt, TURN spokesperson. The cost apportionment of the pipeline upgrade is pending before the CPUC.

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