PG&E 2014 Annual Report Download - page 61

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If the presiding officer joint decision becomes final, the Utility estimates that its total pre-tax unrecovered costs and fines
related to natural gas transmission operations would be about $4.85 billion based on current forecasts, allocated as follows:
Description of Component:Amounts (in millions)
Fine payable to the State General Fund $950
Refund of revenues previously authorized 400
Additional estimated unrecoverable costs (1) 50
Total penalty 1,400
PSEP costs previously disallowed 635
Total penalty and PSEP cost disallowance 2,035
Gas pipeline safety costs incurred or committed (2) 2,800
Less: Credit for PSEP costs previously disallowed (635)
Total estimated shareholder impact before non-deductibility of nes 4,200
Estimated impact of non-deductibility of nes for tax purposes (3) 650
Total estimated shareholder impact (pre-tax) $ 4,850
(1) The presiding officer joint decision estimates that the Utility would incur at least $50 million to implement remedial measures. Actual costs could differ
materially based on the scope and timing of work. In addition, the decision requires shareholders to reimburse intervenors for legal and litigation expenses.
(2) Actual and forecast costs for gas pipeline safety work in 2010 and beyond that will not be recovered through rates, including previously disallowed PSEP capital
and expense. This amount includes charges of $665 million, including an additional charge of $116 million recorded during the three months ended December 31,
2014, for PSEP capital costs that are forecasted to exceed the authorized amounts.
(3) Estimated impact calculated based on the Utility’s statutory tax rate.
Federal Criminal Indictment
On July 29, 2014, a federal grand jury in the Northern District of California returned a 28-count superseding criminal
indictment against the Utility in federal district court replacing the indictment that had been returned on April 1, 2014. The
superseding indictment charges 27 felony counts (increased from 12 counts charged in the original indictment) alleging that the
Utility knowingly and willfully violated minimum safety standards under the Natural Gas Pipeline Safety Act relating to record
keeping, pipeline integrity management, and identification of pipeline threats. The superseding indictment also includes one
felony count charging that the Utility illegally obstructed the NTSB’s investigation into the cause of the San Bruno accident. The
maximum statutory fine for each felony count is $500,000, for total fines of $14 million. The superseding indictment also alleges
an alternative fine under the Alternative Fines Act which states, in part: “If any person derives pecuniary gain from the offense, or
if the offense results in pecuniary loss to a person other than the defendant, the defendant may be fined not more than the greater of
twice the gross gain or twice the gross loss.” Based on the superseding indictment’s allegations that the Utility derived gross gains
of approximately $281 million and that the victims suffered losses of approximately $565 million, the maximum alternate fine
would be approximately $1.13 billion.
The Utility entered a plea of not guilty. The Utility believes that criminal charges and the alternate fine allegations are not
merited and that it did not knowingly and willfully violate minimum safety standards under the Natural Gas Pipeline Safety Act or
obstruct the NTSB’s investigation, as alleged in the superseding indictment. A status conference is scheduled to be held in court on
March 9, 2015. PG&E Corporation and the Utility have not accrued any charges for criminal fines in their consolidated financial
statements as such amounts are not considered to be probable.
Other Enforcement Matters
PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash flows also may be affected by
the outcome of the following matters.
Improper CPUC Communications
On September 15, 2014, the Utility notified the CPUC and the ALJ overseeing the 2015 GT&S rate case that it believes
certain communications between the Utility and CPUC personnel relating to the 2015 GT&S rate case violated the CPUC’s
rules regarding ex parte communications. Ex parte communications include any communication between a decision maker
and an interested person concerning substantive issues in certain identified categories of formal proceedings before the CPUC.
(The Utility discovered the communications as part of an internal review of communications between the Utility and the CPUC
undertaken after the City of San Bruno filed a motion at the CPUC in late July 2014 alleging that various email communications