Utilities Plan $5.25B of Pipeline Safety Catch Up Investments

By Published On: September 2, 2011

To help ensure natural gas pipeline safety, California utilities are seeking approval from the California Public Utilities Commission to spend $5.25 billion for new pipes, technology, and testing. SoCal gas is planning the most spending, at $2.26 billion over the next decade. The next most ambitious is Pacific Gas & Electric--whose pipeline procedures and protocol were found responsible for the Sept. 9, 2010, San Bruno explosion that triggered new pipeline safety investigations (see story on page 4). PG&E expects to invest a total of $2.2 billion. It’s proposing that utility shareholders cover only a small fraction of that spending. The Utility Reform Network executive director Mark Toney called for the commission to “reject the cost-sharing scheme.” He stated it was PG&E management that “neglected safety and maintenance” and the pipeline repair should not be shouldered by ratepayers. If regulators find utilities to be deferring maintenance on pipelines, the responsibility for the cost of that maintenance would be shareholders’ responsibility, according to Mark Pocta, Division of Ratepayer Advocates’ energy cost-of-service branch project manager. He said there may be “deficiencies in utilities’ programs.” While utilities like PG&E were spending what their programs projected on maintenance, and not undercutting that fiscal responsibility, it is unclear whether the program amounts were sufficient, he said. Utilities plan on replacing major sections of old pipelines. Other pre-1970 pipes that were grandfathered should be treated for safety precautions the same as newer pipelines, according to PG&E. Automated shut-off valves for transmission sections are also proposed by utilities. They would prevent part of what fueled the fire in the San Bruno explosion when crews had to fight their way through traffic to manually shut off gas instead of being able to shut it off electronically. Sempra utilities SoCal Gas and SDG&E propose using fiber optics along the pipelines, not for communications--for which fiber optics are traditionally known--but for ground motion sensitivity. Fiber optics “act as a listening device for ground movements associated with heavy equipment operating on/near our large pipeline routes,” according to SoCal Gas spokesperson Denise King. “It is directly buried above/near the pipe (as opposed to running through the pipe as was the case a decade ago) and similar to what the military/security agencies use to identify intrusion at/near ground-based assets. It will be used to pre-empt dig-ins, identify areas where pipe has moved and help us track areas we believe may have been subject to impact and, thus, head off the progression of a latent pipeline structural problem from a gouge, stress, vibration or wrapping failure.” Investments and prices included in utilities’ Aug. 26 plans are as follows: -Pacific Gas & Electric--New investments in infrastructure for its 5,786 miles of pipe are pegged at $2.2 billion, with ratepayers expected to bear $1.9 billion of that through 2014. Of that $1.4 billion is in capital investments. Those investments could have a rate of return as high as 11.35 percent. Another $750 million is expected in expenses during that period, which is a cost passed on to ratepayers without a shareholder return on investment. PG&E plans to replace 186 miles of pipe. -San Diego Gas & Electric--Pipeline spending through 2021 in capital investment is set at $583 million. That investment has a rate of return as high as 10.7 percent. The utility plans to expense another $21 million over that time period. The utility maintains 250 miles of pipe. -SoCal Gas--The self-identified “largest gas distribution company in the nation” plans to invest $2.26 billion between 2012 and 2021 in new infrastructure. Another $279 million is set for expenses. SoCal is authorized a 10.82 percent rate of return by the state on equity investments in infrastructure. SoCal has 3,700 miles of pipe. -Southwest Gas--This Southeastern California utility expects to replace 7.5 miles of its 15.4 miles of transmission pipelines at a cost of $7.4 million, translated into a 72 cent/month rate increase. The utility is allowed a 9.4 percent return on equity investment. It did not break out expenses in its CPUC filing.

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