PCG 2015 GT&S Final Decision

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Market Price (6/25/2016): $63.17/share; ST-Target: $68/share; NIV: $102/share

PCG: GT&S Final Decision Forces Utility to Make Difficult Choices; Does this Set-up a Future San Bruno?

  • Of course, we cannot say for sure; however, it is our contention that San Bruno was not solely the responsibility of the company and that regulators and intervenors share partial responsibility for the tragic San Bruno accident
  • Therefore, the 2015 GT&S final decision (FD), which continues to penalize PG&E (in Phase 2, which is pending) for San Bruno and ex parte communications has the potential to contribute to a future San Bruno-type accident, in our opinion
  • The FD not only reduces PG&E request for $1.263B in 2015 revenue requirement to $1.046B, a reduction of some 17.2%, but also the $850MM in safety costs disallowance is still pending in a phase 2 decision that is expected mid-October 2016
  • The estimated impact of the ex parte communications disallowance is about $138MM, which reduces 2015 GT&S revenue to $908MM, an increase of some $193MM or about 27.0% over 2014 authorized revenue of approximately $715MM
  • Of the $850MM of disallowed safety spending, about $689MM is to come from capital expenditures and another approximately $161MM is expected to be cut from expenses – both items are to be determined by the CPUC taking into consideration public comments, briefs and reply briefs
  • Due to the delay in the FD, the CPUC allowed for attrition revenues to be determined through 2018 as part of the 2015 GT&S, allowing for $64MM increase in 2016 to $1.110B, $110MM increase in 2017 to $1.220B, and a further $104MM increase in 2018 to $1.324B, representing some 22.2%, 9.9%, and 8.5% increase, respectively, excluding any consideration for the $850MM reduction in safety spending to be determined – please see below table for more details

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