PG&E 2013 Annual Report Download - page 37

RISK FACTORS
PG&E Corporation’s and the Utility’s reputations have been significantly affected by the negative publicity about the San
Bruno accident, the related investigations and civil litigation, the Utility’s noncompliance with certain natural gas
regulations, and the fines imposed on the Utility for noncompliance with these regulations and for violation of certain CPUC
rules. Their reputations may be further adversely affected by publicity regarding developments in the pending CPUC and
criminal investigations, and by future investigations or other regulatory or governmental proceedings or action that may be
commenced. In addition, the Utility’s electricity and natural gas operations generally are subject to continuous public
scrutiny and criticism that could lead to further reputational harm. Additional 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 extensive media
coverage of the San Bruno accident, the investigative findings from the NTSB and the CPUC’s independent review
panel that placed the blame for the accident primarily on the Utility, the ensuing civil litigation, the criminal
investigation, and the CPUC investigations that were commenced to determine whether the Utility violated any laws,
rules, regulations or orders relating to safety recordkeeping, pipeline installation, integrity management, or other
operational practices. (See ‘‘Natural Gas Matters’’ above.) PG&E Corporation and the Utility anticipate that there
will be additional media coverage of future developments in the pending investigations, especially after the final
outcomes are determined.
In addition, there could be additional negative publicity as the SED takes action with respect to numerous
reports the Utility has submitted to notify the SED about the Utility’s noncompliance with certain natural gas
regulations. In January 2012, the SED imposed fines of $16.8 million on the Utility for self-reported failure to
perform certain leak surveys and in 2013 the SED imposed fines ranging from $50,000 to $8.1 million for
self-reported violations. The SED may impose additional fines based on other self-reported violations. The media
also has published reports about two orders to show cause that were issued by the CPUC in August 2013 regarding a
filing the Utility submitted in July 2013 to correct certain factual errors made in documents submitted in October
2011 that provided support for an order to restore operating pressure on certain pipelines. In December 2013, the
Utility was fined $14.4 million for violating a CPUC rule prohibiting misleading disclosures to the CPUC.
The Utility’s reputation can also be affected by media coverage of highly debated public policy issues such as
those relating to the Utility’s nuclear generation operations and nuclear decommissioning activities; environmental
remediation or permitting activities; the accuracy, privacy, and safety of the Utility’s information, operating, and
billing systems; and the future development of the state-mandated California High Speed Rail project through the
Utility’s service territory. Media coverage of outages, vandalism, physical attacks on the Utility’s facilities (such as the
attack on the Metcalf electric substation), gas leaks, accidents causing injury or death, or other operational events, as
well as concerns about the risks of terrorist acts, climate change, earthquakes, or a nuclear accident, can also
negatively affect the Utility’s reputation. These public policy debates and operational 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.
The outcome of pending ratemaking proceedings, such as the GRC and the GT&S rate case, also could affect
PG&E Corporation’s and the Utility’s reputations, with unfavorable regulatory outcomes having a negative
reputational effect. Alternatively, PG&E Corporation’s or the Utility’s unfavorable reputation could have a negative
influence on the regulatory decision-making process.
Investors may question management’s ability to repair the reputational harm that PG&E Corporation and the
Utility have suffered, resulting in an adverse impact on the market price of PG&E Corporation common stock. The
issuance of common stock by PG&E Corporation to fund the Utility’s unrecovered costs has materially diluted
PG&E Corporation’s EPS. Additional share issuances following a declining stock price would cause further dilution.
The extent to which PG&E Corporation’s and the Utility’s reputations can be restored will depend, in part, on the
success of the Utility’s efforts to improve the safety and reliability of the natural gas system as planned in the
Utility’s PSEP, whether they can implement the remaining recommendations made by the CPUC’s independent
review panel and the NTSB, and whether they are able to adequately show regulators, legislators, law enforcement
officials, city officials, the media and the public that they have done so. If PG&E Corporation and the Utility are
unable to repair their reputations, their financial conditions, results of operations and cash flows may continue to be
negatively affected.
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