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Will Puc Let Utilities Saddle Consumers With Gas Pipeline Costs?:

Investigation after investigation into last year’s San Bruno gas pipeline explosion that killed eight persons and destroyed 38 homes has revealed bad welds, inconsistent safety testing and maintenance so inconsistent that Pacific Gas & Electric Co. didn’t know the condition of its own pipes.

The final report of the National Transportation Safety Board concluded that a series of avoidable errors by PG&E contributed heavily to the blast.

Now PG&E and the state’s other big gas utilities want their customers to pay for fixes to the whole dismal situation. What’s more, they want it done in a way that will let them reap greater profits from the tragedy.

That’s the almost unbelievable upshot of the latest rate increase request PG&E has put before the state Public Utilities Commission, one that San Diego Gas & Electric Co. and the Southern California Gas Co. would clearly like to ape. (The transportation board also reported that lax enforcement by the PUC contributed to the San Bruno disaster.)

Because both SDG&E and SoCal Gas are owned by San Diego-based Sempra Energy; their gas pipeline systems are operated as one.

The outrageous utility plans are the result of a PUC order that gas companies file plans to test or replace pipelines for which they now have no record of pressure tests. PG&E proposes to spend $2.2 billion over 10 years fixing its network, while SoCal Gas wants to expend $2.6 billion and SDG&E $600 million over the same time span.

The astonishing aspect of this is that even though gas rates paid by consumers for decades have included payments to assure safety and reliability, PG&E now wants consumers to foot 90 percent of its bill for testing and improvements. Plans of the other big utilities are similar.

Which means that unless the five-member utilities commission prevents it, consumers who have already paid billions of dollars for safety-related charges will have to pay billions more because of failures and negligence by the utility company and the PUC itself. No one questions the work must be done – San Bruno made that tragically obvious.

The proposed charges would add about $1.93 per month to the average PG&E bill and 68 cents per month at the outset for customers of Sempra’s companies, increasing to $2.83 per month for them by 2015.

The entire exercise, as proposed by the utilities, would enable them to make about $4 billion in additional new profits over the next 20 years. That would happen because whatever money is spent on new or replacement pipeline work would be a capital expense for the firms, and thus go into what is known as their “rate base.”

The rate base is the total amount they’ve spent on equipment or lines over the past 20 years. The PUC allows each company a “reasonable rate of return” on its rate base, now 11.35 percent for PG&E. In short, for every dollar it has spent on equipment or lines with an expected life span of at least 20 years, the company gets 11.35 cents profit each year. The higher the rate base, the higher the profits.

If the utilities commission allows consumers to be saddled with this new expense, it will mean big rewards for the companies for decades to come because of a tragedy that investigations have shown probably could have been prevented by PG&E.

The alternative, of course, would be forcing the companies to pay most of the bills for needed repairs and updates from their ongoing profits. As now proposed, less than 15 percent of the total costs would be paid out of profits.

“We knew this day was coming, when PG&E would expect the ratepayers to pick up the cost of the repairs,” Democratic Assemblyman Jerry Hill of San Mateo County told a reporter. Hill represents San Bruno. “They should not be allowed to profit from this,” he said.

He’s right. Therefore, the utilities’ proposals will provide a signal test of how the new utility commission majority appointed earlier this year by Gov. Jerry Brown will treat customers of the companies it regulates.

The commission was set up in the early 1900s to prevent the very kind of utility company excesses the current proposals embody. Under recent Govs. Arnold Schwarzenegger, Gray Davis, Pete Wilson and George Deukmejian, the PUC has mostly given utilities whatever they wanted and would almost surely have approved these proposals.

If that pattern continues in this case, it would be grossly unfair to consumers whose rates have long included money for safety work and repairs. The question now is whether the people Brown placed in control of one of California’s most powerful agencies are more interested in handing out corporate welfare than they are in what is just and fair.

in Opinion
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