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PG&E could get 32% raise in gas transmission, storage revenue requirement

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PG&E could get 32% raise in gas transmission, storage revenue requirement

Pacific Gasand Electric Co. could see a 32% increase in its gas transmissionand storage revenue requirement, according to a long-awaited California PublicUtilities Commission announcement that authorizes funding for significantsafety improvements and addresses past penalty-related costs.

The primary proposed decision, issued by CPUC AdministrativeLaw Judge Amy Yip-Kikugawa on May 5, would raise PG&E's authorized revenue requirementto $945 million for 2015, compared to about $715.4 million in 2014. For 2016and 2017, the proposed decision would raise the company's revenue requirementto $1.18 billion and $1.31 billion, respectively. All three of these totalsfall substantially short of PG&E's requests.

Because the rate case has been in the works since December2013, it applies to some past spending, encompassing 2015-2017.

An alternate proposed decision, issued by CPUC CommissionerCarla Peterman, is substantively the same as the main proposal but would havePG&E produce more information about its gas storage facilities, in largepart because of the multi-month gas leak at a fellow California gas utility'sAliso Canyon gas storage field. Bothproposals include $850 million in front-loaded, shareholder-funded safetyimprovements, which was required by a penalty the CPUC imposed on PG&E forthe company's 2010 fatal San Bruno pipeline rupture.

The 457-page proposed decision, accompanied by multipleappendices, includes many major initiatives geared toward safety improvements.

The proposed decision would have PG&E hydrostaticallytest 510 miles of pipeline during the rate case period but would disallow $33.4million in costs for certain sections that the commission said PG&E shouldhave tested and kept records for in the past.

The proposed decision would let PG&E to slow down itsefforts to make pipelines piggable — able to receive in-line inspection tools —from 10 years to 12 years.

PG&E is also in the process of removing its "vintage"pipe that cannot easily be pigged or hydrostatically tested, aiming to replace370 miles by the end of 2025. Over the rate case period, PG&E said it hopesto replace 60 miles, focusing on areas with high population density.

Under the proposed decision, PG&E could recover fromratepayers $148.4 million in expenses to test the strength of about 170 milesof transmission pipe for manufacturing defects and other concerns, along withadditional funding to manage corrosion on the utility's system.

The proposed decision agreed with many of PG&E's plannedinitiatives and costs to improve safety. PG&E proposed enhancing its gasstorage asset management work, specifically with an eye to implementing an "industry-leading"well integrity management program to find and fix threats at storage wells andreservoirs. The company said it also wanted to centralize its records relatedto storage well and reservoir construction and maintenance, field and wellpressures, and other performance data.

The company also asked to augment its integrity managementprogram by beefing up its root cause analysis practices and risks analysisprocess improvement efforts, aiming to investigate incidents in greater depth.

The company's gas transmission valve automation programspending also went unopposed, and PG&E plans to automate 120 isolationvalves at 60 different sites during the rate case period. PG&E said itexpected that work to cost about $152 million, with a per-valve cost of about$1.3 million, or more than double earlier replacement work.

PG&E also plans to replace 99 inoperable orhard-to-operate valves during the rate case period, and the proposed decisionwould allow PG&E to recover its full requested capital expenditures ofabout $22.2 million.

According to the proposed decision, subsidiary should alsoget about $52.3 million for capital expenditures related to strength testingunder the company's pipeline classification program, to make sure that segmentsare being operated at pressures that make sense for the surrounding populationdensities.