PG&E Corp officials on Wednesday said they are hopeful they can reach settlement agreements soon to close the door on three penalty proceedings at the California Public Utilities Commission, which continues to investigate the fatal San Bruno pipeline blast at its Pacific Gas and Electric utility.
San Francisco-based PG&E recorded $163 million in natural gas costs during the first quarter 2012, mostly related to continuing work to validate operating pressures and conduct strength tests on its transmission pipelines, as well as legal and other expenses related to the September 2010 explosion of its transmission line that killed eight people in San Bruno.
So far, the company has recorded $650 million in shareholder costs related to the incident.
First quarter results included a $70 million payment to the city of San Bruno for recovery costs, and the benefit of an $11 million insurance recovery for third-party liability. So far, insurance recoveries related to the blast have totaled $110 million, PG&E said.
First quarter results also included environmental costs of $71 million, related to a program under which PG&E is offering whole-house water systems or a home buyout option to residents affected by chromium contamination in Hinkley, California.
PG&E reported $233 million in net income, or 56 cents/share for the quarter, up 17% from $199 million and 50 cents/share in the year-ago period.
The utility is facing three penalty proceedings at the PUC related to San Bruno, as well as consideration of its multi-year pipeline enhancement plan to upgrade its system. The company has previously said that San Bruno-related penalties could amount to as much as $200 million.
"Some parties have indicated an interest in the settlement of regulatory proceedings," Chairman, CEO and President Tony Earley said on a earnings call. "We are clearly interested in settling, as it is the fastest path to closure, but we have not had any substantive discussions at this point."
PG&E lowered its 2012 earnings guidance to a range of $1.80-$2.49/share compared with $1.88-$2.67/share earlier, reflecting the payment to the city of San Bruno and the insurance recovery.
The company maintained its 2012 guidance of pipeline-related costs of $450 million-$550 million, saying recent increases in legal expenses suggests that costs will trend toward the upper end of the range. Third-party liability claims guidance was also maintained at up to $225 million for the year.
Guidance includes the assumption that PG&E will issue some $700 million of common stock this year, up $100 million over a prior estimate due to the city of San Bruno payment. The estimate does not include any future insurance recoveries or penalties or potential punitive damages, the company noted.
Earley noted that the company will face a "challenging" period in the coming months as the regulatory proceedings heat up. "We will have more review of those issues" related to San Bruno "that will not put the company in a favorable light," he said on the call. "But we cannot let that distract us from moving forward with our plan" to improve pipeline systems and get restitution to the victims of San Bruno, the chairman added.
