PG&E 2013 Annual Report Download - page 25

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Disallowed Capital Costs
In 2011, the CPUC ordered all natural gas operators in California to submit proposed plans to modernize and
upgrade their natural gas transmission systems as well as associated cost forecasts and ratemaking proposals. In
December 2012, the CPUC approved most of the projects proposed in the Utility’s PSEP application that was filed
in August 2011, but disallowed the Utility’s request for rate recovery of a significant portion of costs the Utility
forecasted it would incur through 2014. In October 2013, the Utility updated its PSEP application to present the
results of its completed search and review of records relating to validation of operating pressure for all of the
approximately 6,750 miles of the Utility’s natural gas transmission pipelines. The Utility requested that the CPUC
approve changes to the scope and prioritization of PSEP work, including deferring some projects to after 2014 and
accelerating other projects, and that the CPUC adjust authorized revenue requirements to reflect these changes. The
Utility has requested that the CPUC issue a final decision by August 2014.
As of December 31, 2013, the Utility has recorded cumulative charges of $549 million for PSEP capital costs
that are expected to exceed the amount to be recovered. The Utility has requested that the CPUC authorize capital
costs of $766 million under the PSEP, reflecting the proposed changes in the PSEP update application. Of this
amount, approximately $280 million is recorded in Property, Plant, and Equipment on the Consolidated Balance
Sheets at December 31, 2013. The Utility could record additional charges to the extent PSEP capital costs are higher
than currently expected, or if additional capital costs are disallowed by the CPUC. The Utility’s ability to recover
PSEP capital costs also could be affected by the final decisions to be issued in the CPUC’s pending investigations
discussed above.
Criminal Investigation
In June 2011, the U.S. Department of Justice, the California Attorney General’s Office, and the San Mateo
County District Attorney’s Office began an investigation of the San Bruno accident and indicated that the Utility is a
target of the investigation. Although the San Mateo County District Attorney’s Office has publicly indicated that it
will not pursue state criminal charges, the U.S. Department of Justice may still bring criminal charges, including
charges based on claims that the Utility violated the federal Pipeline Safety Act, against PG&E Corporation or the
Utility. It is uncertain whether any criminal charges will be brought against any of PG&E Corporation’s or the
Utility’s current or former employees. The Utility is continuing to cooperate with federal investigators. A criminal
charge or finding would further harm the Utility’s reputation. PG&E Corporation and the Utility are unable to
estimate the amount or range of reasonably possible losses associated with any civil or criminal penalties that could
be imposed and such penalties could have a material impact on PG&E Corporation’s and the Utility’s financial
condition, results of operations, and cash flows. In addition, the Utility’s business or operations could be negatively
affected by any remedial measures that the Utility may undertake, such as operating its natural gas transmission
business subject to the supervision and oversight of an independent monitor.
Third-party Liability Claims
See Note 14 of the Notes 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. The plaintiffs allege that PG&E Corporation and the Utility engaged in unfair business
practices in violation of California state law. The plaintiffs seek restitution and disgorgement, as well as
compensatory and punitive damages.
PG&E Corporation and the Utility contest the plaintiffs’ allegations. On May 23, 2013, the court granted PG&E
Corporation’s and the Utility’s request to dismiss the complaint on the grounds that the CPUC has exclusive
jurisdiction to adjudicate the issues raised by the plaintiffs’ allegations. The plaintiffs have appealed the court’s ruling
to the California Court of Appeal. PG&E Corporation and the Utility are unable to estimate the amount or range of
reasonably possible losses, if any, that may be incurred in connection with this matter if the lower court’s ruling is
reversed.
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