PG&E Requests 12.6% Rate Hike on Same Day It Is Fined Millions by PUC

PG&E wants huge rate hikes to catch up on neglected pipeline safety

Last Thursday was a busy day at California’s Public Utilities Commission (PUC).

It received a request from Pacific Gas & Electric (PG&E) for a 12.6% natural gas rate increase—partially to pay for repairs to the troubled San Carlos pipeline—on the same day the agency fined the utility $14.35 million for mistakes that contributed to those problems.

The rate increase, which would take effect in 2015 and cover maintenance and upgrades to its aging 6,750-mile system of pipelines, comes against a backdrop of steadily dropping natural gas prices since 2008. The rate boost would generate an additional $1.29 billion.

The PG&E request also comes while its request for additional rate increases over the next three years is still pending before the commission. The PUC’s independent Office of Ratepayer Advocates (ORA) calculated that those rate changes between 2014-16 constitute a 33.4% increase and would generate $2.3 billion.

The advocates’ office recommended that the PUC reject the request and grant much more modest increases for each year. “PG&E has demonstrated a pattern of not spending authorized funds as intended,” the office said. “ORA proposes that the PUC establish mechanisms to ensure that PG&E has a process by which to recover funds for projects which they actually complete which will prevent approval of excessive funds up front, in order to prevent customers from over-paying.”

Utility Reform Network spokeswoman Mindy Spatt estimated that if all the rate increases are approved, customers would pay 43% more after three years. “Overall, in the next three years, consumers could be looking at, on average, approximately $18 more per month,” Spatt told the Bakersfield Californian.

Critics say that PG&E is charging ratepayers for routine maintenance and modernization that has already been paid for, but ignored by the utility to the benefit of its stockholders. Longstanding complaints about PG&E came to a head in 2010 when a gas pipeline exploded in San Bruno, killing eight people and leveling a neighborhood. In October, internal PG&E emails indicated that the utility was ignoring warnings that a similar pipeline problem existed in San Carlos.

Instead of responding to the problems in those two cities by using its existing resources to upgrade, critics say, the utility used the incidents as arguments for boosting rates to pay for work that should have already been done. Those upgrades include: “Testing pipelines to verify safe operating pressures, replacing older pipelines, installing more valves and inspecting the interior of more pipelines,” according to PG&E.

The $14.35 million fine levied by the PUC was for the utility’s failure to inform the commission that its records on the San Carlos pipeline were incorrect and problematic. The city declared a state of emergency in early October when the utility refused to respond to leaked emails from a PG&E engineer about the pipeline and shut it down.

PUC Commissioner Mark Ferron told the Oakland Tribune, “This penalty is to serve as a deterrent against similar future behavior.” The penalty was assessed moments after the PUC ruled that the suspect San Carlos pipeline, which had been temporarily shut down, could now be operated at normal levels. He called it “a balance of risks.”

San Carlos Mayor Mark Olbert called the PUC decision “a charade.”