The California Public Utilities Commission Thursday approved a plan that will allow PG&E to charge ratepayers for more than half of a $2.2
billion project to upgrade its natural gas pipelines.

The approval of the plan, with a last-minute change removing a requirement that the utility take lower profits for five years, angered officials from San Bruno where a ruptured pipeline resulted in an explosion that killed eight people and destroyed 38 homes in 2010.

PG&E's project includes pressure testing 783 miles of natural gas pipelines, replacing 186 miles of pipelines while upgrading another 199 miles and installing 228 automatic shutoff valves.

The plan approved by the CPUC at its meeting in San Francisco Thursday requires PG&E ratepayers to foot the bill for roughly 55 percent of the projects while the utility's shareholders will fund the rest.

An initial ruling had initially put ratepayers on the hook for roughly 49 percent of the project and initially included a five-year term in 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.

But Wednesday evening, regulators amended the plan to disallow that recommendation and raise the rate to about 11 percent, giving what San Bruno Mayor Jim Ruane said equated to a $130 million "Christmas present" to PG&E.

"It's a slap in the face," Ruane said. "They blew up our town, they killed eight people, and here we are giving them cash."

State Sen. Jerry Hill, D-San Mateo, said the change showed that "PG&E owns the state of California and the PUC."

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

Thomas Long, legal director for the watchdog group The Utility Reform Network, said many of the pipelines in the project are only being replaced because PG&E lost the records for them.

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

PG&E spokeswoman Brittany Chord said the utility's shareholders have 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."

Chord said, "We know we made a lot of mistakes, and we know we have a lot of work to do."

She said PG&E had sought to have ratepayers fund a higher percentage of the pipeline project -- which is expected to add about $2 to the average monthly residential utility bill -- but they were rebuffed by the CPUC.

In announcing the commission's decision, Commissioner Mike Florio said the project was "about moving forward and creating the safest natural gas infrastructure in the nation."

Florio said the ruling was a balance between the requests of PG&E and those of San Bruno officials and survivors of the blast.

"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," he said.

— Bay City News Service

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