CPUC gives initial nod to $2.2B gas safety plan

SAN FRANCISCO -- A judge tentatively agreed Friday to have customers pay a little more than half the estimated $2.2 billion cost to improve Pacific Gas & Electric Co.'s gas lines, rejecting the utility's request to have ratepayers shoulder 84 percent of safety upgrades required after the deadly San Bruno explosion.

The money is aimed at improving record-keeping and safety testing of PG&E's gas transmission lines after the Sept. 9, 2010, blast that killed eight people and destroyed 38 homes in the bedroom community.

The explosion prompted a series of investigations and new requirements for state utilities. Among them, the commission required state utilities last year to forecast how they would pressure-test or replace the untested segments of their gas transmission lines.

On Friday, Administrative Law Judge Maribeth Bushey of the California Public Utilities Commission issued a proposed decision to have ratepayers cover about 55 percent of the company's $2.2 billion plan, according to agency officials' analysis of the plan.

PG&E had previously acknowledged the plan's total cost could balloon to ultimately reach an estimated $5 billion, including the cost of financing and recuperating investments over many years.

PG&E Senior Vice President Tom Bottorff called the proposed ruling "wholly inadequate" in a statement Friday.

In the coming months, the commission will review public comments on the judge's proposal. The full five-member commission may vote on the proposal as soon as December.

Tom Long, an attorney with The Utility Reform Network, a San Francisco-based nonprofit consumer advocacy group, said the plan did not go far enough to penalize the company for its shoddy record-keeping leading up to the explosion, and would still allow PG&E to earn a sizeable profit.

Under the judge's proposed decision, the return that PG&E can earn from ratepayers on its capital investments is capped at 6.05 percent annually for five years. But after that, the company can earn an 11.35 percent return for decades to come.

"PG&E is going to get to make a lot of money off the mess they created," Long said. "Their failure to keep good records means that all this work needs to be done because they can't prove that their pipes can withstand the right pressures. It's not fair to stick ratepayers with the bill."

Bottorff said the company had hoped the commission would pay for more of the upgrades but the company is committed to getting necessary work done.

"When this comes before the entire commission, we're hopeful that they will consider the ramifications of this work and its critical importance to California," he said.

PG&E could face hundreds of millions of dollars in possible fines in other proceedings before the commission. On Thursday, two CPUC judges granted a request to temporarily suspend public hearings to determine the amount of fines collected from the company, and instead hold closed-door negotiations to reach a settlement.

Relatives who lost loved ones in the blast and San Bruno officials had urged the commission to continue open hearings to foster trust in the process.

The commission's president, Michael Peevey, said holding private negotiations could bring about a settlement sooner.