CPUC Okays $2B for PG&E Gas Pipes, Storage

15 Apr 2011

The California Public Utilities Commission approved an 11 percent increase in natural gas revenue to cover Pacific Gas & Electric’s operating costs for gas transmission and storage over the next four years. In addition to the rate hike, the 4-0 ruling approved April 14 also requires the utility to submit gas pipeline and storage safety reports in light of the Sept. 9, 2010, explosion in San Bruno that killed eight people and destroyed more than three dozen homes.

“The CPUC’s decision today marks an important step in preserving the long-term safety and reliability of natural gas service for our customers at reasonable rates,” stated Tom Bottorff, PG&E’s regulatory relations senior vice president.

Under the gas accord approved by all the commissioners except Mike Florio, who abstained, PG&E would recover in rates $514.2 million this year--up from $461.8 million in 2010--$541.4 million next year, $565.1 million in 2013, and $581.8 million in 2014, the final year of the gas settlement.

The total $2.2 billion tab for running its gas system the next four years is $77 million below what the utility requested, according to the Division of Ratepayer Advocates.

PG&E said the rate increase translates for small commercial customers into an average monthly bill increase of 0.9 percent, equaling $3.10 to $271.40, and about 40 cents or more for average monthly residential utility bills to $44.51.

The ruling, by commissioner Tim Simon, requires PG&E to file semi-annual safety reports about activities on its storage facilities and 6,400 miles of intrastate gas pipelines. The first filing is due October 1. The reports are suppose to allow the CPUC to better monitor the utility’s storage and pipeline-related capital safety projects, maintenance activities, and to determine if upgrades or replacements on gas lines identified as “high risk” were carried out. They also are to help the commission assess PG&E’s reasons for project reprioritizations.

A subsequent decision is planned to address other safety gas transmission issues following the San Bruno accident, including providing fire personnel with information about the location of PG&E’s transmission pipes and shutoff valves and ensuring rapid deployment of PG&E workers during an emergency.

This is the fifth gas settlement and “represents a negotiated compromise of many different interests,” states the decision.

In other news, commissioners unanimously approved altering the renewable auction mechanism adopted at the end of last year.

Last December, the commission directed utilities to hold competitive auctions twice a year until they have purchased a statewide total of 1,000 MW of power capacity from small renewable energy project developers. Under the mechanism, renewable energy projects up to 20 MW in size can submit competitive bids to the state’s investor-owned utilities (Current, Dec. 17, 2010).

“This is an important step to move towards a stable, predictable, and hopefully increasingly transparent market and ultimately one that keeps prices down,” said commissioner Catherine Sandoval of the renewable auction mechanism expansion.

Simon expressed concerns about the closed-door nature of bilateral deals allowed under the auction mechanism. Along with Sandoval, he urged contract openness.

Expanding the auction mechanism is seen as another tool to help increase the state’s level of alternative power supplies.

CPUC president Mike Peevey pointed out how the decision dovetails with this week’s enactment of the 33 percent renewables portfolio mandate. He noted that in addition to signing the one-third renewable bill, the governor is calling for a 40 percent alternative energy goal. “I am confident we can reach 40 percent” he said, if projects obtain financing and necessary transmission to move the non-fossil power from where it’s generated to where it’s needed.

Peevey and Sandoval stressed the need for renewables and energy efficiency gains to go hand in hand. “Effective energy efficiency programs make it easier to reach a 40 percent renewable portfolio,” said Peevey.

It expands the mechanism to include contracts between utilities and independent generators outside a bidding process.

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