PG&E 2012 Annual Report Download - page 31

The second phase of the Utility’s pipeline safety enhancement plan in 2015 will focus on pipeline segments in
less populated areas, as well as certain pressure testing and pipeline replacement work that the CPUC deferred from
the first phase. The Utility expects to address the scope, timing, and cost recovery of the second phase in late 2013
and request that changes to rates be made effective January 1, 2015.
Criminal Investigation
The U.S. Department of Justice, the California Attorney General’s Office, and the San Mateo County District
Attorney’s Office are conducting an investigation of the San Bruno accident and have indicated that the Utility is a
target of the investigation. The Utility is cooperating with the investigation. PG&E Corporation and the Utility are
uncertain whether any criminal charges will be brought against either company or any of their current or former
employees.
PG&E Corporation and the Utility are unable to estimate the amount (or range of amounts) of reasonably
possible losses associated with any civil or criminal penalties that could be imposed on the Utility as a consequence
of this investigation.
Third-Party Claims
In addition to the investigations and proceedings discussed above, at December 31, 2012, approximately 140
lawsuits involving third-party claims for personal injury and property damage, including two class action lawsuits, had
been filed against PG&E Corporation and the Utility in connection with the San Bruno accident on behalf of
approximately 450 plaintiffs. The lawsuits seek compensation for personal injury and property damage, and other
relief, including punitive damages. These cases were coordinated and assigned to one judge in the San Mateo County
Superior Court. Many of the plaintiffs’ claims have been resolved through settlements. The trial of the first group of
remaining cases began on January 2, 2013 with pretrial motions and hearings. On January 14, 2013, the court vacated
the trial and all pending hearings due to the significant number of cases that have been settled outside of court. The
court has urged the parties to settle the remaining cases. As of February 8, 2013, the Utility has entered into
settlement agreements to resolve the claims of approximately 140 plaintiffs. It is uncertain whether or when the
Utility will be able to resolve the remaining claims through settlement.
At December 31, 2012, the Utility had recorded cumulative charges of $455 million for estimated third-party
claims related to the San Bruno accident, including an $80 million charge made during 2012, primarily to reflect
settlements and information exchanged by the parties during the settlement and discovery process. The Utility
estimates it is reasonably possible that it may incur as much as an additional $145 million for third-party claims, for a
total possible loss of $600 million. PG&E Corporation and the Utility are unable to estimate the amount (or range
of amounts) of reasonably possible losses associated with punitive damages, if any, related to these matters. The
Utility has publicly stated that it is liable for the San Bruno accident and will take financial responsibility to
compensate all of the victims for the injuries they suffered as a result of the accident. (See Note 15 to the
Consolidated Financial Statements.)
The Utility has recognized cumulative insurance recoveries of $284 million for third-party claims, which included
$185 million for 2012 and $99 million for 2011. Although the Utility believes that a significant portion of costs
incurred for third-party claims relating to the San Bruno accident will ultimately be recovered through its insurance,
it is unable to predict the amount and timing of additional insurance recoveries. (See Note 15 to the Consolidated
Financial Statements.)
Class Action Complaint
On August 23, 2012, a complaint was filed in the San Francisco Superior Court against PG&E Corporation and
the Utility (and other unnamed defendants) by individuals who seek certification of a class consisting of all California
residents who were customers of the Utility between 1997 and 2010, with certain exceptions. The plaintiffs allege that
the Utility collected more than $100 million in customer rates from 1997 through 2010 for the purpose of various
safety measures and operations projects but instead used the funds for general corporate purposes such as executive
compensation and bonuses. To state their claims, the plaintiffs cited the SED’s January 2012 investigative report of
the San Bruno accident that alleged, from 1996 to 2010, the Utility spent less on capital expenditures and operations
and maintenance expense for its natural gas transmission operations than it recovered in rates, by $95 million and
$39 million, respectively. The SED recommended that the Utility should use such amounts to fund future gas
transmission expenditures and operations. Plaintiffs allege that PG&E Corporation and the Utility engaged in unfair
business practices in violation of Section 17200 of the California Business and Professions Code (‘‘Section 17200’’)
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