PG&E 2012 Annual Report Download - page 122

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 15: COMMITMENTS AND CONTINGENCIES (Continued)
The Utility submitted its proposed final remediation plan to the Regional Board in September 2011
recommending a combination of remedial methods to clean up groundwater contamination, including using pumped
groundwater from extraction wells to irrigate agricultural land and in-situ treatment of the contaminated water. In
August 2012, the Regional Board issued a draft environmental impact report (‘‘EIR’’) that evaluated the Utility’s
proposed methods and the potential environmental impacts. The Utility expects that the Regional Board will
consider certification of the final EIR in the second quarter of 2013. Upon certification of the EIR, the Regional
Board is expected to issue the final cleanup standards in late 2013.
The Regional Board ordered the Utility in October 2011 to provide an interim and permanent replacement
water system for resident households located near the chromium plume that have domestic wells containing
hexavalent chromium in concentrations greater than 0.02 parts per billion. The Utility filed a petition with the
California State Water Resources Control Board to contest certain provisions of the order. In June 2012, the
Regional Board issued an amended order to allow the Utility to implement a whole house water replacement
program for resident households located near the chromium plume boundary. Eligible residents may decide whether
to accept a replacement water supply or have the Utility purchase their properties, or alternatively not participate in
the program. As of January 31, 2013, approximately 350 residential households are covered by the program and the
majority have opted to accept the Utility’s offer to purchase their properties. The Utility is required to complete
implementation of the whole house water replacement systems by August 31, 2013. The Utility will maintain and
operate the whole house replacement systems for five years or until the State of California has adopted a drinking
water standard specifically for hexavalent chromium at which time the program will be evaluated.
At December 31, 2012 and 2011, $226 million and $149 million, respectively, were accrued in PG&E
Corporation’s and the Utility’s Consolidated Balance Sheets for estimated undiscounted future remediation costs
associated with the Hinkley site. The increase primarily reflects the Utility’s best estimate of costs associated with the
developments described above. Remediation costs for the Hinkley natural gas compressor site are not recovered from
customers through rates. Future costs will depend on many factors, including the Regional Board’s certification of
the final EIR, the levels of hexavalent chromium the Utility is required to use as the standard for remediation, the
Utility’s required time frame for remediation, and adoption of a final drinking water standard currently under
development by the State of California, as mentioned above. As more information becomes known regarding these
factors, these estimates and the assumptions on which they are based regarding the amount of liability incurred may
be subject to further changes. Future changes in estimates or assumptions may have a material impact on PG&E
Corporation’s and the Utility’s future financial condition, results of operations, and cash flows.
Topock Site
The Utility’s remediation and abatement efforts are subject to the regulatory authority of the Department of
Toxic Substances Control (‘‘DTSC’’) and the U.S. Department of the Interior (‘‘DOI’’). As directed by the DTSC,
the Utility has implemented interim remediation measures, including a system of extraction wells and a treatment
plant designed to prevent movement of a hexavalent chromium plume toward the Colorado River. The DTSC has
certified the final EIR and approved the Utility’s final remediation plan for the groundwater plume, under which the
Utility will implement an in-situ groundwater treatment system to convert hexavalent chromium into a non-toxic and
non-soluble form of chromium. The Utility has completed the preliminary design stage for implementing the final
groundwater remedy and is required to submit its intermediate design plan to the DTSC and DOI by April 5, 2013
and a final plan for approval in 2014. In developing its intermediate plan, the Utility is currently evaluating input
received from regulatory agencies and other stakeholders, exploring potential sources of fresh water to be used as
part of the remedy, and performing other engineering activities necessary to complete the remedial design.
At December 31, 2012 and 2011, $239 million and $218 million, respectively, were accrued in PG&E
Corporation’s and the Utility’s Consolidated Balance Sheets for estimated undiscounted future remediation costs
associated with the Topock site. The CPUC has authorized the Utility to recover 90% of its remediation costs for the
Topock site from customers through rates without a reasonableness review. As the Utility completes its remedial
design plan and more information becomes known regarding the extent of work to be performed to implement the
final groundwater remedy, these estimates and the assumptions on which they are based regarding the amount of
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