SECTION 1.
The Legislature finds and declares all of the following:(a) On September 9, 2010, a natural gas transmission pipeline owned and operated by Pacific Gas and Electric Company exploded under the intersection of Earl Avenue and Glenview Drive in the Crestmoor neighborhood of San Bruno, killing eight people, injuring more than 50, and destroying 38 homes.
(b) The explosion was in a section of pipeline thought by Pacific Gas and Electric Company to be seamless. Inspection by the National Transportation Safety Board (NTSB) determined that the pipe
in fact had a double-submerged arc weld.
(c) The revelation that the utility did not know such basic and vital information as seam type for this pipeline led the NTSB to issue an urgent recommendation that Pacific Gas and Electric Company find traceable, verifiable, and complete records for all pipe in class 3 and 4 locations, and in class 1 and 2 high consequence areas, that had not had their maximum allowable operating pressures established through prior hydrostatic testing. The NTSB recommended that, should the utility not be able to comply with this recommendation, it establish a maximum allowable operating pressure through hydrostatic pressure testing.
(d) The Public Utilities Commission (PUC), in Decision 11-06-017, ordered all California
gas corporations to develop a plan to implement these NTSB recommendations for all transmission pipelines. Pacific Gas and Electric Company’s plan for Phase 1, which addressed pipelines in high-consequence areas, proposed to incur expenses of seven hundred fifty million five hundred thousand dollars ($750,500,000) and to make capital expenditures of one million four hundred thirty-three thousand dollars ($1,433,000) between 2011 and 2013. Pacific Gas and Electric Company officials have stated that Phase 2 could cost between six billion eight hundred million dollars ($6,800,000,000) and nine billion dollars ($9,000,000,000).
(e)This investment will greatly exceed the total net investment that Pacific Gas and Electric Company has placed in its pipeline system over the past several decades. The vast majority of this cost is proposed to be borne by the utility’s ratepayers.
(f)Given Pacific Gas and Electric Company’s current 11.35 percent authorized return on equity, each dollar of capital investment in pipeline replacement will cost ratepayers more than three dollars and fifty cents ($3.50) in repayment of principal, debt service, return on shareholder equity, and taxes on the return on shareholder equity over the 45-year amortization of the investment.
(g)
(e) Pacific Gas and Electric Company is currently under investigation in three PUC penalty proceedings related to the pipeline accident: Investigation 11-02-016, Investigation 11-11-009, and Investigation 12-01-007. The utility projects that fines in these penalty proceedings will likely exceed two hundred million dollars ($200,000,000).
(h)
(f) Currently, all fines in PUC penalty proceedings are required by statute to be
deposited into the state’s General Fund.
(i)
(g) Prior to the current investigations involving the San Bruno pipeline explosion, the largest safety-related fine the PUC had levied was a thirty-eight million dollar ($38,000,000) fine for a fatal natural gas distribution pipeline explosion on Christmas Eve of 2008 in Rancho Cordova.
(j)
(h) Given the unprecedented amount of pipeline investment that Pacific Gas and Electric Company is proposing to make in the aftermath of the San Bruno explosion and the unprecedented size of the likely fine that the utility faces as a result of the explosion, any fines assessed to the utility as a result of the explosion should go toward offsetting the costs that the utility’s ratepayers would otherwise bear for safety upgrades to the utility’s pipeline system.