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PG&E, Not Customers, to Pay Majority of Costs to Upgrade Pipelines

In issuing the preliminary decision about PG&E's proposed gas pipeline safety plan, the state's public utility commission said this is only the beginning of a permanent change that has to take place with PG&E and other pipeline opera

The state issued a preliminary decision Friday to approve PG&E's new safety plan that would modernize its pipeline system, but PG&E will have to absorb two-thirds of the costs.

PG&E initially proposed that the upgrades to its natural gas transmission operations, which came in the wake of the 2010 San Bruno fire, would cost about $2.2 billion over several years. The utility wanted ratepayers to pick up 85 percent of the tab because the billions PG&E would be spending represents costs to meet new, industrywide standards set by the California Public Utilities Commission.

According to the plan, PG&E requested $768.7 million in rate increases through 2014 to cover initial costs. However, the CPUC only authroized $277.8 million, or 36 percent, of the amount PG&E requested because of the utility's previous mismanagement of pipeline safety.

The decision, which still has to be approved by the five-member commission, also stated:

  • PG&E shareholders will bear the costs of pressure testing pipeline for which pressure test records are missing.
  • PG&E must continue its gas pipeline record management improvement project; however, due to past deficiencies in document management, the costs of this project and the proposed new computer database may not be recovered from ratepayers.
  • PG&E’s shareholders must bear the risk of cost overruns because PG&E’s past management decisions led to the need to undertake the massive project on an expedited schedule.
  • Shareholder return on equity for all safety enhancement capital expenditures is reduced from 11.35 percent to 6.05 percent for five years.

The commenting period is now open for members of the public to respond to the CPUC's proposal. Comments by parties involved in the proceeding are due by Nov. 13, and comments from the public are due by Nov. 26.

A copy of the preliminary decision can be found on the CPUC's website.

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Craig Belfor October 13, 2012 at 03:41 PM
How does PGE get the money to fix things? They only have one source of income -rates. Figure it out. We'll pay. I believe that PGE shareholders should get no returns on investment until the bill is paid. When I screw up, I pay, and sometimes it exceeds the price of the job. That's what makes me careful not to screw up, either with bad maintenance or cheap labor. It's the risk of doing business. Sometimes you laugh, sometimes you cry. According to this article, PGE shareholders have been getting 11.35% on investment, which is nearly 10 times the CD interest rate. The new proposed rate is still 5 times the CD rate. That's wrong. For getting a high return, they should have risk. That's the stock market risk, to get more, but be liable. But if their risk is gone, then they should only get CD rates. Let them suffer. For all those years of getting big returns, they now should have to pay. If the shareholders don't like it, they should reduce their return to put more into maintenance, but they chose not to, so time to pay back some of that unearned profit. Maybe they could elect a better board that would do a better job.
janna nikkola October 13, 2012 at 05:39 PM
Let PG&E suffer. I save all the notices about requested rate increases that come with my monthly bill. The print is too small to read, but at least I have a record of how often they try to raise rates. PG&E paid no income taxes for the period 2008-2010 despite showing $4,855,000 in profit. Yet they still demonstrated gross negligence by not properly inspecting and maintaining gas pipelines which caused the San Bruno explosion (they referred to this disaster as a "natural disaster" in one of the small print flyers in which they were requesting a rate increase). They demonstrated bad faith by installing Smart Meters on thousands of homes without the homeowners' knowledge or permission, where many feel these meters emit dangerous toxins which may cause a health hazard to residents. Then they tried to pass on the cost of these Smart Meters to customers and charge for "opting out". San Bruno is not the only explosion of a defective, improperly maintained pipeline. If you Google "PG&E pipeline explosions", you'll find a long list of the others. At some point the taxpayers of California must consider whether or not PG&E is even worthy of holding the monopoly of providing gas and electric power in our state, given their poor record of safety violations, gross negligence and bad faith. It may be time for the taxpayers to form a new company since PG&E does not deserve the privilege.
Craig Belfor October 13, 2012 at 06:57 PM
You'd have no shortage of investors. Just tell them they can get 11% return on investment, and if they screw up, it only goes down to 6%. This beats Wall Street, Fannie May, T-bills, CDs, the Franklin Fund, and all other forms of investment.
Edward Mainland October 14, 2012 at 08:26 PM
Why should ratepayers shoulder ANY of the costs of PG&E's misfeasance, incompetence and irresponsibility?

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