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Should public pay for PG&E gas line mistakes?

 

Investigation into last year's San Bruno gas pipeline explosion that killed eight people and destroyed 38 homes has revealed bad welds, inconsistent safety testing, and maintenance so spotty PG&E 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, and in a way that will let them reap greater profits from the tragedy.

That's the 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.)

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.

All of 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.

The proposed charges would add about $1.93 a month to the average PG&E bill and 68 cents a month at the outset for customers of the other companies, increasing to $2.83 a 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.