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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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Rico October 13, 2012 at 06:31 PM
It is interesting to note that the SmartMeter and the radio SmartGrid project also costed $2.2 billion. But all of that was paid for by the ratepayers, and PG&E wasted untold tens of millions of dollars on installing 830,000 first generation PLC SmartMeters that did not work on our old electrical power grid. PG&E quietly recalled all the first generation SmartMeters and never told the public or the media, I found out about buried in a report that PG&E had to file with the CPUC. Hopefully, with the gas department upgrades, PG&E will be more careful not to waste money since two thirds of it will come from the shareholders

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