Both sides unhappy with $2.2B PG&E safety plan

AP File PhotoPG&E’s safety plan

While state regulators approved a new pipeline safety plan for PG&E on Thursday, neither the utility nor its opponents voiced pleasure with the ruling and how it will affect company ratepayers or shareholders.

The California Public Utilities Commission unanimously signed off on a plan that requires PG&E to pressure-test 783 miles of natural-gas pipeline, replace or upgrade 385 miles of pipes and install 228 miles of safety valves. The safety plan, in the works for more than a year, came as a direct response to the PG&E pipeline explosion in San Bruno that killed eight people and injured 58 more in September 2010.

PG&E projects the total cost of this effort at $2.2 billion, and had hoped to recoup $768 million of that total through rate increases passed on to its customers. But the commission is only letting PG&E recover $299 million of that sum over the next three years, just 39 percent of what it asked for.

The commission also reduced PG&E’s requested profit for its shareholders. The utility had sought an 11.35 percent return on its investment, but the commission granted it just 6.35 percent.

As a result of the decision, PG&E ratepayers will experience a 1.5 percent rate increase on their monthly bills, which will equate to 88 cents more a month in 2013 and $1.36 more in 2014 for the average residential customer.

Commissioner Mark Ferron said his organization’s decision “strikes the right balance between the share of costs borne by PG&E shareholders and those borne by ratepayers.”

Utility officials expressed satisfaction that their long-discussed safety plan was finally approved, but they were unhappy about the financial burden their shareholders will have to weather as a result of the commission’s decision.

“PG&E is pleased that the CPUC approved the vast majority of work proposed in its comprehensive and aggressive plan,” PG&E President Chris Johns said. “But we’re disappointed that the decision fails to provide reasonable cost recovery for the new standards and requirements that were designed to deliver a much higher level of public safety for decades to come.”

And while the utility provider chafed at the decision, its foes were not much happier. Tom Long, legal director of The Utility Reform Network, noted that the commission could still let PG&E recover another $1.2 billion in project costs through rate increases that take place after 2014.

“The commission had an opportunity to send PG&E a message that lax pipeline safety practices are unacceptable, but failed to do so,” Long said. “Customers should be held harmless for PG&E’s mistakes.”

Many commissioners expressed reticence to punish PG&E too severely as part of Thursday’s decision, since they still have to decide how much to fine the utility for the San Bruno blast. Estimates of those penalties range from $200 million to $2.5 billion. PG&E also still has to settle scores of private lawsuits related to the incident.

wreisman@sfexaminer.com

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