PG&E Plans for Customers to Pick Up Post-San Bruno Costs

Gas safety-a new concept for PG&E?

The California Public Utilities Commission will hear from PG&E and ratepayer advocates over the next two weeks, as it weighs whether to allow the company to charge customers for safety upgrades mandated by regulators after the deadly 2010 San Bruno explosion.

In September 2010, a PG&E natural gas transmission line exploded, and the blast and subsequent fire destroyed 38 homes and killed eight people. After the incident, state and federal regulators required PG&E to test and modernize its pipeline system.

PG&E submitted its “Pipeline Safety Enhancement Plan” last summer and estimated that the work required by the mandates would cost $2.2 billion. The utility is seeking permission to charge customers for the bulk of the work. 

“We believe that what we put forward is in the best interest of serving our customers long term,” Tom Bottorff, PG&E’s vice president for regulatory relations, said under questioning from ratepayer advocates Monday.

In written testimony submitted to the commission last month, the utility argued that ratepayers should cover work to comply with what the company characterized as new requirements. While PG&E says that it will charge shareholders for work to test pipelines placed into service after 1970, the utility argued that before that date tests were not required.

But the commission’s Division of Ratepayer Advocates and The Utility Reform Network, or TURN, an independent watchdog, argued that the were not new. Instead, pressure testing of pipelines has been an “industry standard” since 1935, and recordkeeping has been required since 1955.

“The fact that PG&E did not keep the records is not the ratepayer’s fault,” said the division’s acting director, Joe Como.

TURN has also taken issue with the 11.35 percent annual shareholder return PG&E stands to make from investing in infrastructure, a potential profit of $1.5 billion. Ratepayers would be on the hook not just for the initial expense, the group argued, but for shareholder profits, taxes on those profits and financing of the work– a total of $5 billion over 50 years.

“The problem with PG&E’s estimate is it doesn’t include the interest, the taxes, all the other things they want to charge ratepayers for,” said Mindy Spatt, a TURN spokeswoman. “They’re kind of disingenuous.”

PG&E has acknowledged that the total cost of the work would be financed.

“Just as homebuyers when they purchase a home usually finance the home… we have the same situation with investments in our pipeline,” Bottorf said.