PG&E 2015 Annual Report Download - page 115

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PART II
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NOTE 13: Contingencies and Commitments
PG&E Corporation and the Utility have significant
contingencies arising from their operations, including
contingencies related to enforcement and litigation
matters and environmental remediation. The Utility also
has substantial financial commitments in connection
with agreements entered into to support its operating
activities. See “Purchase Commitments” below. PG&E
Corporation has financial commitments described in
“Other Commitments” below.
Enforcement and Litigation Matters
CPUC Matters
Order Instituting an Investigation into Compliance
with Ex Parte Communication Rules
During 2014 and 2015, the Utility filed several reports
to notify the CPUC of communications that the Utility
believes may have constituted or described ex parte
communications that either should not have been made
or that should have been timely reported to the CPUC. Ex
parte communications include communications between a
decision maker or a Commissioner’s advisor and interested
persons concerning substantive issues in certain formal
proceedings. Certain communications are prohibited and
others are permissible with proper noticing and reporting.
On November 23, 2015, the CPUC issued an OII into whether
the Utility should be sanctioned for violating rules pertaining
to ex parte communications and Rule 1.1 of the CPUC’s
Rules of Practice and Procedure governing the conduct of
those appearing before the CPUC. The OII cites some of
the communications the Utility reported to the CPUC. The
OII also cites the ex parte violations alleged in the City of
San Bruno’s July 2014 motion, which it filed in the CPUC
investigations related to the Utility’s natural gas transmission
pipeline operations and practices. A prehearing conference
in the OII has been scheduled for March 1, 2016.
The CPUC will determine any penalties that might be
imposed on the Utility and determine whether shareholders
or ratepayers will bear the costs of the investigation. The
CPUC can impose fines up to $50,000 for each violation,
per day. The CPUC has wide discretion to determine
the amount of penalties based on the totality of the
circumstances, including such factors as how many days
each violation continued; the gravity of the violations; the
type of harm caused by the violations and the number of
persons aected; and the good faith of the entity charged
in attempting to achieve compliance, after notification
of a violation. The CPUC is also required to consider the
appropriateness of the amount of the penalty to the size
of the entity charged. The CPUC has historically exercised
this discretion in determining penalties.
PG&E Corporation and the Utility believe it is probable
that the CPUC will impose penalties on the Utility in the
OII but they are unable to reasonably estimate the amount
or range of future charges that could be incurred, because
it is uncertain how the CPUC will calculate the number of
violations or the penalty for any violations, and whether
the CPUC will consider additional communications in
the OII, including those identified in a motion filed on
December 1, 2015, by the City of San Bruno in the 2015
GT&S rate case. It is also uncertain whether the CPUC will
take additional action in any of the proceedings in which
the Utility has self-reported communications that may
have violated the CPUC’s ex parte rules.
Finally, the U.S. Attorney’s Oce in San Francisco and
the California Attorney General’s oce also have been
investigating matters related to allegedly improper
communications between the Utility and CPUC personnel.
The Utility is cooperating with the federal and state
investigators. It is uncertain whether any charges will be
brought against the Utility.
CPUC Investigation Regarding Natural Gas
Distribution Facilities Record-Keeping
On November 20, 2014, the CPUC began an investigation
into whether the Utility violated applicable laws pertaining
to record-keeping practices with respect to maintaining
safe operation of its natural gas distribution service and
facilities. The order also requires the Utility to show cause
why (1) the CPUC should not find that the Utility violated
provisions of the California Public Utilities Code, CPUC
general orders or decisions, other rules, or requirements,
and/or engaged in unreasonable and/or imprudent practices
related to these matters, and (2) the CPUC should not
impose penalties, and/or any other forms of relief, if any
violations are found. In particular, the order cites the SED’s
investigative reports alleging that the Utility violated rules
regarding safety record-keeping in connection with six
natural gas distribution incidents, including the natural gas
explosion that occurred in Carmel, California on March
3, 2014, for which the CPUC has previously imposed a
penalty of $10.85 million.
On September 30, 2015, the SED submitted its supplemental
testimony, which included incidents allegedly related to
record-keeping that had not been identified in the initial
order, and also asserted violations related to the Utility’s
pre-excavation location and marking practices, causal
evaluation practices, and compliance with regulations
governing pressure validation for certain distribution
facilities. Evidentiary hearings were held during January
2016. Opening briefs are due by February 26, 2016 and reply
briefs are due by March 31, 2016. The SED has indicated
it will seek significant penalties, the amount of which is
expected to be disclosed in its brief.
PG&E Corporation and the Utility believe it is probable
that the CPUC will impose penalties on the Utility in the
form of fines or other remedies, including possible future
unrecoverable costs to implement operational remedies.
The Utility is unable to determine the form or amount of
penalties or reasonably estimate the amount or range of
future charges that could be incurred given the CPUC’s
wide discretion (discussed above).