PG&E 2012 Annual Report Download - page 44

RISK FACTORS
PG&E Corporation’s and the Utility’s reputations have been significantly affected by the negative publicity surrounding the
San Bruno accident, the related investigations and civil litigation, and the various reports the Utility has submitted to the
CPUC to disclose noncompliance with applicable regulations. Their reputations may be further adversely affected by publicity
regarding developments in the pending CPUC and criminal investigations, and by future investigations or other regulatory or
governmental proceedings that may be commenced, and by media or public scrutiny of the Utility’s electricity and natural
gas operations. Such further reputational harm or the inability of PG&E Corporation and the Utility to restore their
reputations may further affect their financial conditions, results of operations and cash flows.
The reputations of PG&E Corporation and the Utility have seriously suffered as a result of the San Bruno
accident for which the Utility has acknowledged liability; the June 2011 investigative report from the CPUC’s
independent review panel and the August 2011 National Transportation Safety Board (‘‘NTSB’’) report, both of
which criticized the Utility’s safety recordkeeping for its natural gas transmission system and the Utility’s pipeline
installation, integrity management, and other operational practices; and the media coverage of the accident and the
related investigations and lawsuits. After the San Bruno accident, the CPUC initiated three investigations pertaining
to the Utility’s natural gas transmission pipeline operations, including an investigation of the San Bruno accident.
(See ‘‘Natural Gas Matters’’ above.) A criminal investigation of the San Bruno accident also has been commenced.
The media also has widely reported on the civil lawsuits arising from the San Bruno accident which seek
compensation and punitive damages for personal injuries, deaths, and property damage.
In addition, the Utility has notified the SED of various self-identified violations of regulations applicable to
natural gas safety and operating practices since December 2011 when the CPUC imposed the self-reporting
requirement and authorized the SED to impose penalties based on the self-identified violations. In January 2012, the
SED imposed penalties of $17 million on the Utility for self-reported failure to perform certain leak surveys and the
SED may impose additional penalties based on other self-reported violations. These self-reports also have received
negative media attention.
The Utility’s operations are also subject to heightened and well-publicized concerns about many aspects of its
operations, such as the Utility’s nuclear generation operations at Diablo Canyon and the risks of terrorist acts,
earthquakes, or a nuclear accident; the Utility’s environmental remediation activities; and the accuracy, privacy, and
safety of the Utility’s information and operating systems, including those used to measure customer energy usage and
generate bills. These concerns have often led to additional adverse media coverage and could later result in
investigations or other action by regulators, legislators and law enforcement officials or in lawsuits.
Further, these concerns may cause investors to question management’s ability to repair the reputational harm
that PG&E Corporation and the Utility have suffered, resulting in an adverse impact on the market price of PG&E
Corporation common stock. Given PG&E Corporation’s and the Utility’s greater equity needs, a declining stock
price would cause further dilution in net income per share. The extent to which their reputations can be restored will
depend, in part, on the success of the Utility’s efforts to improve the safety and reliability of the natural gas system
as planned in the Utility’s pipeline safety enhancement plan, whether they can respond to the findings and
recommendations made by the CPUC’s independent review panel and the NTSB, and whether they are able to
adequately convince regulators, legislators, law enforcement officials, the media and the public that they have done
so. Their ability to repair their reputations also may be affected by developments that may occur in the pending
investigations, including the amount of civil or criminal penalties that may be imposed on the Utility; whether there
are new investigations or citations; and developments that may occur in the San Bruno accident-related civil
litigation. If PG&E Corporation and the Utility are unable to repair their reputations, their financial conditions,
results of operations and cash flows may be further negatively affected.
PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash flows could be materially affected
by the ultimate amount of penalties imposed on the Utility; the costs of taking required remedial actions; the ultimate
amount of criminal penalties, if any, imposed by governmental authorities; and the ultimate amount of third-party liability
arising from the San Bruno accident and the availability, timing and amount of related insurance recoveries.
The CPUC has stated that it is prepared to impose substantial penalties on the Utility in connection with the
investigations. Although the parties have engaged in settlement discussions in an effort to reach a stipulated outcome
to resolve the investigations, the parties have not reached an agreement. If a stipulated outcome is not reached and
the CPUC issues a decision that finds that the Utility violated applicable laws, rules or orders, the CPUC can impose
penalties of up to $20,000 per day, per violation. (For violations that are considered to have occurred on or after
January 1, 2012, the statutory penalty has increased to a maximum of $50,000 per day, per violation.) The CPUC has
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