PG&E to Pay $2.2 Billion to Upgrade Pipelines After San Bruno

PG&E Corp. (PCG) will pay $2.2 billion to replace natural-gas pipelines in the wake of its fatal 2010 explosion in San Bruno, California.

The utility will pay $1.4 billion in capital costs and $750 million in expenses between 2011 and 2014, according to a filing today with the Securities and Exchange Commission. PG&E has applied for permission to pass some of the costs to customers. Shareholders will absorb $535 million, according to the filing.

PG&E, based in San Francisco, said in the filing that parts of its system have never been pressure-tested, a process that allows the operator to determine the line’s safe operating pressure. PG&E will replace at least 186 miles of pipeline, conduct strength tests on 783 miles of line, conduct inspections of 234 miles of line and retrofit 199 miles of pipe, according to the filing.

The 55-year-old pipeline that ruptured last September in San Bruno had welding flaws, federal investigators have said. Eight people were killed and 38 homes were destroyed.

PG&E had misidentified its construction design and poor record-keeping may have meant the line was operated at a higher pressure than it was built to withstand, investigators said.

The National Transportation Safety Board is scheduled to hold a hearing Aug. 30 to determine the cause of the accident and recommend safety improvements, according to today’s filing.

PG&E this month named Anthony Earley as its new chief executive officer, replacing Peter A. Darbee, who resigned in April.

To contact the reporter on this story: Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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