In an attempt to save PG&E ratepayers hundreds of millions of dollars over the next 50 years, state Assemblyman Jerry Hill introduced legislation Tuesday morning that aims to use fines levied against the utility to reduce costs associated with upgrading its pipeline system.
PG&E executives said earlier this year that the company expects to pay at least $200 million in fines associated with three separate investigations by the California Public Utilities Commission into the deadly September 2010 San Bruno that killed eight people and destroyed 38 homes.
In January, the CPUC also slapped PG&E with a $16.8 million citation for the utility's failure to conduct gas safety tests on more than 13 miles of gas distribution pipelines in several Contra Costa County cities.
Because of a CPUC order issued last year, all state gas corporations were responsible for developing a plan to implement National Transportation Safety Board recommendations for all transmission pipelines that were issued in response to the San Bruno explosion.
Current law stipulates the money paid by PG&E for its fines will be deposited into the state's general fund, money that can be used throughout the state.
According to Hill, Northern California ratepayers would be paying for 95 percent of PG&E's plan for the first phase of work to comply with the NTSB recommendations -- work that would address pipelines in San Bruno and other high-consequence areas.
Without the legislation, Hill's office estimates PG&E ratepayers would be paying off more than $5 billion over 50 years for the $2.27 billion borrowed when the financing costs, PG&E profits and taxes associated with the improvements are included.
The cost of the second phase is estimated to be as much as $9 billion. Hill's legislation would ensure the fine money is directly applied to the pipeline improvements, applying the fine money toward paying down interest on the loans associated with paying for the Phase 1 work.
"Given the unprecedented amount of pipeline investment that PG&E is proposing to make, any fines assessed to the utility as a result of the explosion should go toward offsetting the costs that ratepayers would otherwise bear for safety upgrades," Hill said in a statement.
"The fine money that would be generated should benefit the people who have been the victims and those that have really suffered over the years because of the improper maintenance and operation of the PG&E gas and transmission system," Hill said by phone Tuesday afternoon.
PG&E spokesman David Eisenhauer said Tuesday that PG&E has not taken a position on Hill's legislation. Eisenhauer said the company supports the concept and registered support for a similar bill introduced by Sen. Mark Leno in February, SB 1350, which, because of concerns on its impact on the general fund, stalled in the Senate Appropriations Committee.
Hill said that his bill, which was co-authored by Leno, differs in that it is specifically tied to the San Bruno disaster.
Because the fines have yet to be levied, Hill does not expect strong opposition within the Legislature over the loss of the General Fund revenue source.
"These funds are not going to be budgeted this year, regardless, and it could be years down the road before those fines are imposed," Hill said. "This gets more to the issue of equity and fairness."
— Bay City News
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