PG&E 2011 Annual Report Download - page 42

RISK FACTORS
PG&E Corporation’s and the Utility’s reputations have been significantly impacted by the publicity surrounding the San
Bruno accident and related investigations, and may be further adversely affected by current and future CPUC investigations
or other regulatory, governmental, media or public scrutiny of the Utility’s operations and negative publicity associated with
the utility industry in general or PG&E Corporation and the Utility in particular. Such further reputational harm or the
inability of PG&E Corporation and the Utility to restore their reputations may further affect their financial conditions,
results of operations and cash flows.
The reputations of PG&E Corporation and the Utility have seriously suffered as a result of the San Bruno
accident. In June 2011, the CPUC’s independent review panel appointed to investigate the San Bruno accident issued
a report that criticized many aspects of the Utility’s operations and corporate culture. In August 2011, the NTSB
determined that the probable cause of the San Bruno accident was the Utility’s inadequate quality assurance and
quality control in 1956 and inadequate pipeline integrity management program. The CPUC commenced two
investigations pertaining to the Utility’s natural gas transmission pipeline operations, and commenced a third
investigation on January 12, 2012 to investigate the CPSD’s allegations about the cause of the San Bruno accident. In
its January 12, 2012 report on the San Bruno accident the CPSD stated that the San Bruno accident was caused by
the Utility’s failure to follow accepted industry practice when installing the section of pipe that failed, the Utility’s
failure to comply with federal pipeline integrity management requirements, the Utility’s inadequate record keeping
practices, deficiencies in the Utility’s data collection and reporting system, inadequate procedures to handle
emergencies and abnormal conditions, the Utility’s deficient emergency response actions after the incident, and a
systemic failure of the Utility’s corporate culture that emphasized profits over safety. In December 2011, the CPUC
delegated authority to the CPSD to issue citations and impose penalties, at the maximum daily amount, for violations
of natural gas regulations and rules. The CPSD has recently exercised this authority and imposed penalties of
approximately $17 million on the Utility for self-reported violations. A criminal investigation of the San Bruno
accident has also been commenced.
These reports, statements and other published information, including the CPSD’s recently issued citation, and
adverse media coverage of the San Bruno accident, have significantly harmed the reputations of PG&E Corporation
and the Utility, and similar reports, statements and other published information, and future citations that the CPSD
may issue, are likely to continue to do so as the various governmental investigations and San Bruno accident-related
lawsuits proceed. In addition, the Utility’s operations are also subject to heightened and well-publicized concerns
about many issues, such as the Utility’s nuclear generation operations at Diablo Canyon and the risks of terrorist
acts, earthquakes, or a nuclear accident, the Utility’s environmental remediation activities, and the accuracy, privacy,
and safety of the Utility’s newly installed advanced metering infrastructure. These issues and concerns have often led
to additional adverse media coverage and could later result in investigations or other action by regulators, legislators
and law enforcement officials or in lawsuits. These concerns, particularly those related to the San Bruno accident,
also may have an adverse impact on the market price of PG&E Corporation common stock.
PG&E Corporation’s and the Utility’s ability to repair the reputational harm that they have suffered will
depend, in part, on whether they adequately and timely respond to the findings and recommendations made by the
NTSB and CPUC’s independent review panel and cure the deficiencies that have been identified in the Utility’s
operating practices and procedures and corporate culture and whether they are able to adequately convince
regulators, legislators, law enforcement officials, the media and the public that they have done so. Their ability to
repair their reputations also may be affected by new developments that may occur in the various investigations of the
San Bruno accident and natural gas matters; the amount of civil or criminal penalties that may be imposed on the
Utility; new developments that may occur in the San Bruno accident-related civil litigation; if the CPSD issues
additional citations, and the extent of service disruptions that may occur due to changes in pipeline pressure as the
Utility continues to inspect and test pipelines. If PG&E Corporation and the Utility are unable to repair their
reputations, their financial conditions, results of operations and cash flows may be further negatively impacted.
PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash flows could be materially affected
by the ultimate amount of third—party liability the Utility incurs in connection with the San Bruno accident and the
availability, timing and amount of related insurance recoveries, the ultimate amount of penalties the CPUC imposes on the
Utility in connection with the pending investigations, and the amount of penalties the CPSD imposes on the Utility pursuant
to authority delegated to it by the CPUC.
Following the San Bruno accident on September 9, 2010, various civil lawsuits, regulatory investigations and
proceedings, and a criminal investigation were commenced. The Utility has stated publicly that it is liable for the San
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