Pacific Gas and Electric Company, a subsidiary of
), has filed a 2014 General Rate Case ("GRC") with the California
Public Utilities Commission ("CPUC"). The electric utility
requested for an increase in electric bills from 2014 to 2016 for
financing its additional infrastructure investments.
For a typical residential customer, the company has made a
request for an increase of $5 per month to about $95 per month. For
natural gas customers, the typical residential bill would increase
by $7 per month to about $53. Despite the increase, a typical
residential electric or natural gas bill will remain well below the
national averages of approximately $108 and just over $65 per
Over the current authorized level, the company has made a total
funding request of $1.25 billion for 2014. However, it has
requested an additional increase of $500 million for both 2015 and
2016 to take into account infrastructure improvements, and
increased costs of labor, materials, supplies and other
The main aim behind the filing was to recover for additional
infrastructure investment necessary for the smooth and reliable
generation of power, and efficient electric and gas distribution.
The objectives include the upgrade of electric distribution
infrastructure to improve safety, lessen outages, and restore
service to customers more quickly.
New technologies like SmartMeter devices, increasing the length
of distribution gas pipe six times, setting up advanced technology
to detect and repair gas leaks more quickly, and building and
operating a new, modern gas distribution control facility to
monitor and manage the entire gas distribution system would go a
long way to meet these objectives.
The request, if approved, will also be used to implement new
safety regulations for both hydroelectric and nuclear power
generating facilities and provide improvements in customer
Earlier in 2012, the company had made a funding request for its
Pipeline Safety Enhancement Plan to fund important safety
improvements to meet or exceed new regulatory standards in the
company's gas transmission business. If approved, the typical
residential gas customer's bill would increase by less than $2 per
Once approved, these investments will also help in generating
new jobs and stimulating economic growth throughout the state.
Specifically, the GRC request would help in generating $9 billion
annually from the sale of goods and services worldwide and would
create 39,000 jobs. As a result of added business sales, the
company expects the uprate to generate $685 million per year in
California as local tax revenue.
CPUC's Division of Ratepayer Advocates will review the filing
and inform the company of any changes to be made. After receiving
approval from the Division of Ratepayer Advocates, PG&E will
formally file its GRC application. The company expects a decision
from CPUC at the end of 2013.
San Francisco, California-based PG&E Corp. is the parent
holding company of California's largest regulated electric and gas
utility, Pacific Gas and Electric Company. The company's supportive
regulatory environment in California, particularly its decoupling
mechanism and forward looking rate cases, ensures a steady stream
of earnings and returns.
Going forward, favorable decisions from regulators, long-term
supply contracts, diversification into alternative power sources
and infrastructure improvement programs such as Smart Meter bode
well for the company.
Overall, the current request would help the company to modernize
the system and accelerate the progress towards the long-term goal
of being the safest utility in the country. It will also make
California stronger and help revitalize the state's economy.
However, these positives will be partially tempered by risks,
including the present unfavorable macro backdrop, headwinds in the
California economy, tepid demand for electricity and power-price
volatility. The company presently retains a short-term Zacks #2
Rank (Buy). We have a long-term Neutral recommendation on the
The company mainly competes with
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