Future utility bills could bring a shock

Consumers will be asked to help pay for billions in gas pipeline upgrades needed after Bay Area blast.

September 09, 2011|By Dan Weikel, Los Angeles Times
  • A massive fire roars through a mostly residential neighborhood in San Bruno, Calif., after a gas pipeline explosion in September 2010.
A massive fire roars through a mostly residential neighborhood in San Bruno,… (Paul Sakuma, Associated…)

Three of California's largest utilities are asking customers to help pay for nearly $4 billion in pipeline safety projects needed after last year's deadly San Bruno disaster.

Power companies and private operators across the nation are racing to improve the safety of about 150,000 miles of natural gas pipelines built before 1970 — about half of all gas transmission lines in the United States.

The National Transportation Safety Board, which just completed a yearlong investigation of the San Bruno explosion, found that the older pipelines might be particularly vulnerable and in need of immediate inspection and repair.

To help pay for the work, three main gas suppliers in California have requested rate increases from state regulators. Paul Clanon, executive director of the California Public Utilities Commission, estimated that utility customers could see an increase of 5% to 10% in their bills depending on what commissioners decide.

In a joint proposal, the Southern California Gas Co. and San Diego Gas & Electric are seeking rate hikes to pay for $1.75 billion in pipeline improvements by 2015, which would steadily increase monthly utility bills by more than $2.80.

Both utilities have yet to seek rate hikes for an additional $1.25 billion in planned pipeline projects to be completed by 2021.

Pacific Gas & Electric Co, which serves the Bay Area and Northern California, wants to spend $2.2 billion by 2014 to test and improve its 6,000-mile network of natural gas pipelines. The monthly bill for a typical household is expected to rise by about $2, and business customers can expect an increase of about $15.

For many Southern California residents, the proposed hikes are coming on top of $3.2 billion in rate increases sought by Southern California Edison to upgrade its aging electrical grid.

If approved, the plan would result in a 9.1% increase in the monthly bill of the average residential Edison customer. Consumer advocates have opposed the plan, which, they claim, is salted with questionable allocations for pensions and pay raises.

The effort to hike rates to finance pipeline projects could become just as controversial.

Consumer groups, such as the Utility Reform Network based in San Francisco, are reviewing the proposals to determine if the costs and new charges are justified. They can lodge responses with the Public Utilities Commission.

"We want to make sure the utilities pay their fair share," said Mindy Spatt, a spokeswoman for the statewide organization. "We don't want them to make a profit on deferred maintenance. They also make high profits. Some of the money needs to come out of that."

Nationally, the improvements will cost utilities and pipeline operators tens of billions of dollars in the next decade — and that will probably mean more efforts to recover the additional expenses.

"It is fair to assume that the cost will get passed through to consumers," said Don Santa, chief executive of the Interstate Natural Gas Assn. of America, an industry group of pipeline operators, including large power companies.

Helping to drive the improvements are 29 recommendations issued more than a week ago by the NTSB. They are designed to improve the safety, inspections, emergency plans and regulation of the nation's extensive grid of natural gas transmission lines.

The recommendations were announced almost a year after eight people died and 38 homes were destroyed when a defective natural gas pipeline built in 1956 ruptured and sent a huge pillar of fire into San Bruno, a Bay Area community.

Board members blamed the inferno on a long history of safety problems at PG&E and weak oversight by state and federal agencies. The utility is also under investigation by the Public Utilities Commission and could face substantial fines, Clanon said.

Regulators and gas industry representatives say various initiatives are already underway by the government, private companies and local utilities to more thoroughly inspect pipelines and repair or replace at-risk sections.

Clanon said that earlier this year, the state Public Utilities Commission ordered all pipeline operators to pressure-test their transmission lines built before 1970.

One of the NTSB's priorities is elimination of a "grandfathering" clause in federal and state law that has exempted utilities and companies from performing high-pressure water tests on natural gas pipelines built before 1970.

Another key recommendation would require operators to modify their lines to accommodate inspection tools that can run inside a pipe and detect flaws, such as bad welds, cracks and corrosion.

The two methods of testing had been previously opposed by industry groups.

Other recommendations call for automatic and remotely controlled shut-off valves, reviews of regulatory agencies and PG&E's procedures, better emergency management plans and more thorough record-keeping.

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