PG&E 2015 Annual Report Download - page 117

109
PART II
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Capital Expenditures Relating to Pipeline
Safety Enhancement Plan
At December 31, 2015, approximately $664 million of
PSEP-related capital costs is recorded in property, plant,
and equipment on the Consolidated Balance Sheets.
The Utility would be required to record charges to the
statement of income in future periods to the extent total
forecasted PSEP-related capital costs are higher than
currently expected.
Penalty Decision Related to the CPUC’s
Investigative Enforcement Proceedings Related
to Natural Gas Transmission
On April 9, 2015, the CPUC approved final decisions in the
three investigations that had been brought against the
Utility relating to (1) the Utility’s safety record-keeping
for its natural gas transmission system, (2) the Utility’s
operation of its natural gas transmission pipeline system
in or near locations of higher population density, and (3)
the Utility’s pipeline installation, integrity management,
record-keeping and other operational practices, and other
events or courses of conduct, that could have led to or
contributed to the natural gas explosion that occurred in
the City of San Bruno, California on September 9, 2010.
A decision was issued in each investigative proceeding
to determine the violations that the Utility committed.
The CPUC also approved a fourth decision (the “Penalty
Decision”) which imposes penalties on the Utility totaling
$1.6 billion comprised of: (1) a $300 million fine to be
paid to the State General Fund, (2) a one-time $400
million bill credit to the Utility’s natural gas customers,
(3) $850million to fund future pipeline safety projects
and programs, and (4) remedial measures that the CPUC
estimates will cost the Utility at least $50 million. In August
2015, the Utility paid the $300 million fine. At December
31, 2015, the Consolidated Balance Sheets include $400
million in current regulatory liabilities for the one-time
bill credit that will be provided to the Utility’s natural gas
customers in 2016. On January 14, 2016, the CPUC issued
final decisions to close these investigative proceedings.
The Penalty Decision requires that at least $689 million
of the $850 million disallowance be allocated to capital
expenditures, and that the Utility be precluded from
including these capital costs in rate base. The CPUC
will determine which safety projects and programs will
be funded by shareholders in the Utility’s pending 2015
GT&S rate case. If the $850 million is not exhausted by
designated safety-related projects and programs in the
2015 GT&S proceeding, the CPUC will identify additional
projects in future proceedings to ensure that the full
$850 million is spent. The CPUC is expected to issue a
final decision in the Utility’s 2015 GT&S rate case in 2016
to identify safety-related projects and programs that
will be subject to the disallowance. It is uncertain how
much of the Utility’s costs to perform the safety-related
projects and programs the CPUC will identify as counting
toward the $850 million shareholder-funded obligation.
If the Utility’s actual costs exceed costs that the CPUC
counts towards the $850 million maximum, the Utility
would record additional charges if such costs are not
otherwise authorized by the CPUC. As a result, the total
shareholder-funded obligation could exceed $850 million.
For the year ended December 31, 2015, the Utility recorded additional charges in operating and maintenance expenses
in the Consolidated Statements of Income of $907 million as a result of the Penalty Decision. The cumulative charges
at December 31, 2015, and the additional future charges to reach the $1.6 billion total are shown in the following table:
(inmillions)
Year
Ended
December

Cumulative
Charges
December

Future
Charges
and
Costs
Total
Amount
Finepayabletothestate()      -  
Customerbillcredit   - 
Chargefordisallowedcapital()    
Disallowedrevenueforpipelinesafetyexpenses() - -  
CPUCestimatedcostofotherremedies() - - - 
Totalpenaltydecisionfinesandremedies     
() InMarchtheUtilityincreaseditsaccrualfrommillionatDecembertomillion
() ThePenaltyDecisionprohibitstheUtilityfromrecoveringcertainexpensesandcapitalspendingassociatedwithpipeline
safety-relatedprojectsandprogramsthattheCPUCwillidentifyinthefinaldecisiontobeissuedintheUtility’sGT&S
ratecaseTheUtilityestimatesthatapproximatelymillionofcapitalspending(whichincludelessthanmillionfor
remedyrelatedcapitalcosts)intheyearendedDecemberisprobableofdisallowancesubjecttoadjustmentbased
onthefinalGT&Sratecasedecision
() ThesecostsarebeingexpensedasincurredFutureGT&Srevenueswillbereducedfortheseunrecoveredexpenses
() InthePenaltyDecisiontheCPUCestimatedthattheUtilitywouldincurmilliontocomplywiththeremediesspecifiedin
thePenaltyDecisionanddoesnotreflecttheUtility’sremedy-relatedcostsalreadyincurrednortheUtility’sestimatedfuture
remedy-relatedcostsThesecostsarebeingexpensedasincurred