PG&E 2013 Annual Report Download - page 47

change, PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash flows could be
materially affected.
The Utility is subject to fines and penalties for failure to comply with federal, state, or local statutes and regulations.
Changes in the political and regulatory environment could cause federal and state statutes, regulations, rules, and orders to
become more stringent and difficult to comply with, and required permits, authorizations, and licenses may be more difficult
to obtain, increasing the Utility’s expenses or making it more difficult for the Utility to execute its business strategy.
The Utility must comply in good faith with all applicable statutes, regulations, rules, tariffs, and orders of the
CPUC, the FERC, the NRC, and other regulatory agencies relating to the aspects of its electricity and natural gas
utility operations that fall within the jurisdictional authority of such agencies. In addition to the NRC requirements
described above, these include meeting new renewable energy delivery requirements, resource adequacy
requirements, federal electric reliability standards, customer billing, customer service, affiliate transactions, vegetation
management, operating and maintenance practices, and safety and inspection practices. The Utility is subject to
penalties and sanctions for failure to comply with applicable statutes, regulations, rules, tariffs, and orders.
The CPUC can impose fines up to $50,000 per day, per violation. The CPUC has wide discretion to determine,
based on the facts and circumstances, whether a single violation or multiple violations were committed and to
determine the length of time a violation existed for purposes of calculating the amount of fines. The CPUC has
delegated authority to the SED to levy citations and impose fines for violations of certain regulations related to the
safety of natural gas facilities and utilities’ natural gas operating practices. Like the CPUC, the SED has discretion to
determine how to count the number of violations, but the delegated authority requires the SED to assess the
maximum statutory fine per violation with discretion to adjust the amount of the fine based on the risk-level of the
violation as determined by the SED. (For a discussion of pending investigations and potential enforcement
proceedings, see MD&A ‘‘Natural Gas Matters’’ above.) A California law enacted in 2013 requires the CPUC to
establish a safety enforcement program for gas facilities by July 1, 2014 and for electric facilities by January 1, 2015.
The law requires the CPUC to delegate enforcement authority to the SED under these programs. The CPUC may
make changes to its gas safety enforcement program to implement the new law. These programs may increase the
risk that penalties will be imposed on the Utility.
In addition, the federal Pipeline and Hazardous Materials Safety Administration has independent authority to
impose fines for violation of federal pipeline safety regulations in amounts that range from $100,000 to $200,000 for
an individual violation and from $1 million to $2 million for a series of violations.
The Utility must comply with federal electric reliability standards that are set by the North American Electric
Reliability Corporation and approved by the FERC. These standards relate to maintenance, training, operations,
planning, vegetation management, facility ratings, and other subjects. These standards are designed to maintain the
reliability of the nation’s bulk power system and to protect the system against potential disruptions from cyber-
attacks and physical security breaches. Regulatory authorities conduct frequent compliance audits of the Utility’s
operating practices. The FERC can impose fines (up to $1 million per day, per violation) for failure to comply with
these mandatory electric reliability standards. As these and other standards and rules evolve, and as the wholesale
electricity markets become more complex, the Utility’s risk of noncompliance may increase.
In addition, statutes, regulations, rules, tariffs, and orders, or their interpretation and application, may become
more stringent and difficult to comply with in the future. If this occurs, the Utility could be exposed to increased
costs to comply with the more stringent requirements or new interpretations and to potential liability for customer
refunds, penalties, or other amounts. If it is determined that the Utility did not comply with applicable statutes,
regulations, rules, tariffs, or orders, and the Utility is ordered to pay a material amount in customer refunds,
penalties, or other amounts, PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash
flows would be materially affected.
The Utility also must comply with the terms of various governmental permits, authorizations, and licenses. These
permits, authorizations, and licenses may be revoked or modified by the agencies that granted them if facts develop
that differ significantly from the facts assumed when they were issued. In addition, waste discharge permits and other
approvals and licenses often have a term that is less than the expected life of the associated facility. Licenses and
permits may require periodic renewal, which may result in additional requirements being imposed by the granting
agency. In connection with a license renewal for one or more of the Utility’s hydroelectric generation facilities or
assets, the FERC may impose new license conditions that could, among other things, require increased expenditures
or result in reduced electricity output and/or capacity at the facility.
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