The California Public Utilities Commission (CPUC) has concluded that Pacific Gas and Electric Co. (PG&E) acted imprudently in deciding to enter a 15-year contract for interstate capacity on Transwestern Pipeline Co. expansion projects that came on line in 1992. It disallowed recovery of the costs associated with the Transwestern commitments in 1992 and in each subsequent year of the 15-year contract. The disallowed amount for 1992 is $13.6 million for the utility's gas department and $4.5 million for its electric department. The company will have an opportunity to recover some of the future costs if it can show that its gas customers received a net benefit directly attributable to the Transwestern commitment.
The CPUC said that PG&E had entered the agreement at a time when its supply procurement and interstate transportation roles were shrinking. It added that the utility undertook the $200-million commitment without a cost/benefit analysis while simultaneously launching its own pipeline expansion project, thereby knowingly stranding significant amounts of capacity on its own facilities. In addition, the utility had acted imprudently in assigning a portion of its gas department's Transwestern commitment to its electric department. The CPUC also found that the pipeline capacity acquired by the electric department had a diminished market value and no additional reliability benefits. Re Pacific Gas & Electric Co., Application 93-04-011, Decision 95-12-046, Dec. 18, 1995 (Cal.P.U.C.).
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