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Customers to Foot Half of Pipeline Bill

Thursday, January 3, 2013

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Two years after a California pipeline explosion killed eight people and demolished a neighborhood, the utility's customers have been handed the bill: $299 million.

Rate increases for the next two years will follow state regulators' unanimous decision to approve a planned upgrade to Pacific Gas and Electric Co.’s natural gas pipeline system.

“PG&E blew up our town and killed eight people, and here we are giving them cash,” said San Bruno Mayor Jim Ruane, whose city was the site of the Sept. 9, 2010, explosion and blaze that destroyed much of the community.

"PG&E is making a profit on those lives. It’s disgusting and unfair.”


California officials recently approved a rate increase for PG&E customers to help fund the cost of upgrading the company's problem-riddled pipeline system.

Profits Protected

The California Public Utilities Commission (CPUC) ruled 5-0 on Dec. 20 that PG&E could raise its rates by about $299 million between now and the end of 2014 to cover its efforts to upgrade its network of pipelines.

The increase will add about 88 cents per month to a typical residential bill in 2013 and an additional 48 cents in 2014, according to The Oakland Tribune.

The approved plan also includes a last-minute change removing a requirement that PG&E take lower profits for five years, according to NBC.

Ruane and other critics say the commission's decision lets the utility off the hook for the 2010 disaster.

In March 2012, the utility agreed to pay the city of San Bruno $70 million in restitution, which was later capped at $50 million. The funds were to replace and repair the city’s infrastructure and other costs related to the accident and restoration of the neighborhood.

At the time, PG&E said that neither those funds nor the $200 million it expected to pay in state fines would come from rate increases or insurance.

Substandard Pipe

The explosion tore a 28-foot-long rupture in PG&E’s 30-inch-diameter Line 132 and blew open a 72-by-26-foot crater in the ground, launching the ruptured section 100 feet. Dozens of homes were destroyed, in addition to the eight fatalities.

The blast was traced directly to the use of a substandard, poorly welded pipe section that investigators said should never have been installed—and whose use should have been discovered later by appropriate record-keeping, testing and inspection. PG&E’s records had described the pipe as seamless.

An investigation by The San Francisco Chronicle found that the utility had recorded dozens of leaks along the doomed line in the decades before the blast. A dozen lines in the system “had a total of more than 100 leaks that the company never accounted for,” the newspaper reported. “None, however, had more unexplained leaks in its history than Line 132.”

PG&E also reported in June 2012 that it had found 180 areas of excessive corrosion on its pipeline network, some of them dating to 2004.

Planned Upgrades

PG&E’s proposed work through 2014 includes pressure testing 783 miles of gas lines, replacing 186 miles of pipe, installing 228 automated valves, and upgrading 199 miles of pipe so inspection devices can run inside them.

The rate increases are only 39 percent of the $768 million that PG&E had proposed.

PG&E officials said they were disappointed in the ruling because it would force the company’s shareholders to bear too much of the cost. The company argued that ratepayers should finance the improvements because the upgrades are required by new rules from state and federal regulators.

The ruling has customers paying for about 55 percent of the upgrade costs, with shareholders responsible for the rest. An initial ruling had ratepayers responsible for roughly 49 percent of the project and included a five-year term during which PG&E’s rate of profit on its improvement investments would be reduced to 6.05 percent as part of a judge’s recommendation.

Flickr / Smi23le

In 2010, a Pacific Gas & Electric pipeline blast in San Bruno, CA, destroyed dozens of homes and left eight people dead.

Mixed Emotions

PG&E spokeswoman Brittany Chord said that shareholders had already spent $1.5 billion since 2010 on work to meet previously existing regulations and that “this proposed plan was put forward to address new safety expectations that were set by the CPUC.”

“We have to make sure PG&E isn’t rewarded for the past … but we can’t expect PG&E in the past to meet standards that didn’t exist until now,” said Mike Florio, CPUC Commissioner.

Florio defended the ruling, calling it “a well-balanced, well-thought-out decision” that balanced the requests of PG&E with those of San Bruno officials and survivors.

Commission officials said the ruling would help the utility and its customers turn the corner and restore confidence in the safety of PG&E’s natural gas system.

Local officials disagreed. State Sen. Jerry Hill, D-San Bruno, called it a “Christmas gift to PG&E.”

“It’s shameful that they would allow PG&E to profit from their behavior, their negligence, their poor maintenance,” said Hill.

Lost Records

The Utility Reform Network (TURN) complained that the ruling would allow PG&E to profit from the upgrades. Thomas Long, legal director for TURN, said many of the pipelines in the project were being replaced because only PG&E lost the records for them.

“They had no idea if these pipelines were operating at safe pressures,” said Long. “PG&E loses records, and we should pay for it?”

In March, the Public Utility Commision released two reports that detailed widespread lapses by PG&E in keeping records on its thousands of miles of high-pressure gas transmission lines.

“The reports conclude that PG&E’s gas transmission records and safety related documents were scattered, disorganized, duplicated, and were difficult, if not impossible, to access in a prompt and efficient manner,” said the commission, whose Consumer Protection and Safety Division (CPSD) gathered the information as part of the utility’s effort to assess penalties in the case.

Flickr / Smi23le

PG&E still faces multiple lawsuits and millions of dollars in possible fines related to the 2010 blast.

Before the 2010 rupture, “PG&E stored its pipeline records for any given job in up to 10 different locations, without the necessary document control processes in place to track their location, existence, or contents,” the division found.

“PG&E failed to keep and maintain information needed to promote gas safety.”  Alleged recordkeeping failures “include the location of re-used pipe in service, numbers and conditions of leaks, pressure information, and other information critical to pipeline safety,” the agency said.

Concluded one report: "In lay terms, PG&E's record keeping was in a mess and had been for years.”

Settlement Offered

PG&E has reportedly offered a $550 million settlement for state regulatory charges connected with the San Bruno blast, according to KCBS News.

State regulators rejected the offer.

The utility is facing a potentially large fine for the explosion. PG&E offered the money as a settlement but refused to admit that it had failed to maintain a safe gas system. A chunk of the money would have gone to the state’s general fund, on the condition that the company would not have to admit violating a state law requiring it to maintain a safe system.

PG&E said making such an admission could expose it to criminal charges.

If a deal isn’t reached by Jan. 7, the case could go to trial.


Tagged categories: Accidents; Corrosion; Corrosion protection; Explosions; Fatalities; Health and safety; Pipeline; Pipelines; Site/field testing

Comment from Eric Rosenthal, (1/3/2013, 4:01 AM)

These must be the shovel ready jobs Obama was looking for

Comment from John Fauth, (1/3/2013, 9:04 AM)

When will the uninformed voter finally accept that companies do not pay taxes, people do (ie: they pass along the costs to their customers)? If they weren't so destructive they'd be outrageously funny.

Comment from Karen Fischer, (1/3/2013, 11:07 AM)

Isn't it the job of CPUC, and all Public Utility Commissions, to look out for the public? (Sarcasm intended....)Just one more "pseudo-Government" entity gone astray.

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