If Pacific Gas and Electric customers have their way, the members of the state Public Utilities Commission will get big lumps of coal in their stockings come Tuesday. That's because the commission voted last week to have PG&E customers pay for the majority of the natural-gas pipeline upgrades needed largely because of the utility giant's own mismanagement over the years. Customers will pay $300 million in the next two years and then about $1 billion more over several decades for the improvements.
Those needed improvements came to light in the wake of the San Bruno explosion. Investigators determined that PG&E had failed to keep proper records on pipeline testing and that many lines had gone untested and not properly maintained. The company was eventually ordered to overhaul its pipelines system. Plans call for replacing and testing hundreds of miles of pipelines, adding automated shutoff valves and modifying pipelines to make it easier to detect problems like the one that led to the San Bruno disaster. The rate increases approved last week will help pay for those improvements, many of which were already paid for in the past or should already be in place under current standards, according to ratepayer advocates.
To add insult to injury, not only did the PUC saddle ratepayers with most of the project expenses but it also rejected the recommendation of an administrative law judge to reduce for five years the amount of profit PG&E can collect on the upgrades. Yes, that's right. Under state law, the utility company gets to collect an 11.35 percent guaranteed rate of return on investment for infrastructure upgrades. The administrative law judge had proposed dropping that profit to 6 percent for five years as penalty for "long-standing avoidance of sound, safety engineering-based decision-making in favor of financially motivated, nominal regulatory compliance." In other words, penalize PG&E for not doing the right thing in the first place.
But PG&E argued that slashing its profits could jeopardize the company's financial standing as it prepares to pay for the massive upgrades. Somehow, PUC commissioners bought that line. We understand not wanting to rock the company's financial boat too much with major safety improvements ahead but the PUC's decision might have been more palatable had it come with other restrictions, like barring PG&E from spending millions on political campaigns or executive bonuses. Or the commission could have scaled back the duration of the profit reduction from five years to something less than that.
While it was highly unlikely PG&E would get stuck paying the entire $2.2 billion that the upgrades are expected to cost, the commission basically decided to hold PG&E entirely unaccountable for its mismanagement, shoddy recordkeeping and the fact that the public utility has already collected money from ratepayers to make many of the very same system improvements that it's now been authorized to charge them for again.
This is the type of mutual back-scratching we had hoped we'd seen the last of between PG&E and the PUC. Significant recent turnover on the PUC board had been accompanied by talk of a more firm regulatory body that would hold public utilities more accountable to ratepayers. So much for that hope.
At the end of the day, ratepayers are paying for PG&E's continuing mismanagement. That hardly seems fair. Typical, but not fair.