If PG&E has its way in a case now being considered by the California Public Utilities Commission, customers across Northern California will pay billions of dollars for safety upgrades meant to prevent another tragedy like the September 2010 blast in San Bruno.
After a natural-gas pipeline exploded in San Bruno, questions arose about how a transmission line running through such a densely populated area could have failed in so deadly a fashion. Months of investigation ensued, and state and federal officials stepped forward with mandates regarding what PG&E needs to do to ensure the safety of all its customers.
Those mandates are now a point of contention between PG&E and ratepayer advocates. PG&E’s planned testing and pipeline upgrades will cost at least $2.2 billion. PG&E has argued before the commission that the state and federal mandates are new requirements. Consequently, it is asking to raise residential and business customers’ rates to cover the costs.
Ratepayer advocates counter that the requirements are not new, but rather just clearer guidance on very old rules. As examples, they point out that pressure-testing of pipelines has been an “industry standard” since 1935 and that proper pipeline record-keeping has been required since 1955. Both are included in the mandates PG&E must now comply with.
In addition to making customers cover the costs of the required improvements, the utility also is proposing that its shareholders be allowed to make money off of that investment. When PG&E makes infrastructure improvements, its shareholders receive an 11.35 percent annual return on their investment. But while that makes sense in the case of new investment, this situation is an exception.
The financial burdens of running a safe gas company should fall upon everyone involved, but this plan places the full burden only on one side of the scale. Long before the San Bruno blast, PG&E should have been performing the kind of safety tests that are the norm for its industry. It also should have been keeping proper records. It is unfair for the company to now ask its customers to pay for the work they had every reason to expect PG&E had been routinely performing for decades.
Company shareholders need to shoulder some of the costs for testing and pipeline upgrades. A simple formula could determine what the profits from the upgrades would be and divert that amount back into the program.
That would make the needed upgrades a zero-sum game for shareholders. It would also lessen the burden on customers.
The best solution, however, would be for the utility and shareholders to pay for the bulk of the plan’s implementation. Customers surely are not to blame for PG&E’s poor testing and record-keeping, and they should not be on the hook to fix problems they had no part in making.
There is still time for the right thing to be done regarding the proposed fees for customers. The judge hearing the case can reject PG&E’s proposal, and the CPUC can vote down the approval as well.
Company shareholders have long benefited from PG&E’s historic underinvestment in maintenance. Company shareholders must now pay the bills for that neglect.