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Ratepayers Probably on the Hook for Pacific Gas & Electric's Neglect

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Message Ralph E. Stone
On September 9, 2010, a gas pipeline segment exploded in San Bruno, California, killing seven, injuring many others, destroying 53 homes, and damaging at least 120 others.

On September 20th, Pacific Gas & Electric (PG&E) released a list of its top 100 "projects," or aging pipelines, in need of replacement or repair. The San Bruno pipeline segment wasn't even on the list.

Regulators had approved PG&E's request for $4.9 million to repair the South San Francisco segment of the pipeline, but PG&E spent the money elsewhere, and then in 2009 came back with a request for $5 million more to do the job.

Consider that PG&E enjoys a near monopoly over much of Northern and Central California with 15 million customers. The California Public Utilities Commission (CPUC) allows the company to charge 30 percent higher than the national average and as a regulated utility, the publicly traded company's shareholders benefit from a guaranteed 11.35 percent return on equity, which is also above the national average of about 10.5 percent.

Given these facts, who do you think should pay for the aging infrastructure identified by PG&E?

But remember the 2003 record bankruptcy bailout that put ratepayers on the hook to pay PG&E's creditors and resuscitate the corporation. It added to the $8 billion in previous bailout funds already paid to PG&E by its ratepayers since 1998, bringing the bailout total to over $16 billion. The bailout plan was approved by the CPUC and the Bankruptcy Judge despite accusations that PG&E's officers siphoned $4 billion to its unregulated holding company, PGE Corporation, out of the $8 billion in "Competition Transition Surcharge" funds already paid to PG&E by its ratepayers between 1998 and 2000.

And to add insult to injury, just weeks after handing out $50 million in bonuses while on the verge of financial collapse, PG&E received the judge's permission to award $17.5 million in additional payouts to the management team that guided the utility into bankruptcy.

Reportedly, California State Senator Mark Leno with help from the consumer rights group The Utility Reform Network (TURN) is crafting a bill that would block publicly regulated utilities from seeking a rate increase to cover the cost from fires or other catastrophes that were the cause of their own negligence. Senator Leno stated: "Ratepayers should not be on the hook to provide utilities with an open checkbook to cover excess expenses when catastrophic damages happen because the utility failed to do its job to protect the public."

However, given PG&E's history vis -a-vis the State, guess who's actually going to pay for the repair of the aging infrastructure that PG&E neglected for decades? You guessed it. We ratepayers.
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I was born in Massachusetts; graduated from Middlebury College and Suffolk Law School; served as an officer in the Vietnam war; retired from the Federal Trade Commission (consumer and antitrust law); travel extensively with my wife Judi; and since (more...)
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