PG&E 2012 Annual Report Download - page 36

Residential Rate Design
In June 2012, the CPUC opened a rulemaking proceeding to examine electric rate design for residential
customers among California’s electric utilities and consider regulatory and legislative changes that may be needed to
the current rate structure. PG&E Corporation and the Utility are uncertain how the outcome of this rulemaking
proceeding will affect the Utility’s future electric rate structure.
ENVIRONMENTAL MATTERS
The Utility’s operations are subject to extensive federal, state, and local laws and permits relating to the
protection of the environment and the safety and health of the Utility’s personnel and the public. (See ‘‘Risk
Factors’’ below.) These laws and requirements relate to a broad range of the Utility’s activities, including the
remediation of hazardous wastes; the reporting and reduction of carbon dioxide and other GHG emissions; the
discharge of pollutants into the air, water, and soil; and the transportation, handling, storage, and disposal of spent
nuclear fuel.
Remediation
The Utility has been, and may be, required to pay for environmental remediation costs at sites where it is
identified as a potentially responsible party under federal and state environmental laws. These sites include former
manufactured gas plant (‘‘MGP’’) sites, current and former power plant sites, former gas gathering and gas storage
sites, sites where natural gas compressor stations are located, current and former substations, service center and
general construction yard sites, and sites currently and formerly used by the Utility for the storage, recycling, or
disposal of hazardous substances. Under federal and California laws, the Utility may be responsible for remediation
of hazardous substances even if it did not deposit those substances on the site. (See Note 15 of the Notes to the
Consolidated Financial Statements.)
The Utility is legally responsible for remediating groundwater contamination caused by hexavalent chromium
used in the past at the Utility’s natural gas compressor sites. The Utility is also required to take measures to abate
the effects of the contamination on the environment. At the Hinkley natural gas compressor site, the Utility’s
remediation and abatement efforts are subject to the regulatory authority of the California Regional Water Quality
Control Board, Lahontan Region (‘‘Regional Board’’). The Regional Board has issued several orders directing the
Utility to implement interim remedial measures to reduce the mass of the underground plume of hexavalent
chromium, monitor and control movement of the plume, and provide replacement water to affected residents.
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. Following certification of the EIR, the Regional
Board is expected to issue the final cleanup standards.
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 (‘‘California Water 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
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