SAN BRUNO -- PG&E says it may seek a rate hike for natural gas and electricity customers -- by as much as 4 percent -- should its borrowing costs increase if state regulators impose $4 billion worth of fines and penalties for the deadly 2010 gas pipeline explosion in San Bruno.

The utility's proposal may contradict a state Public Utilities Commission staff proposal in July, which recommended against allowing PG&E to pass on to its rate payers the costs of any penalties imposed on it relating to the blast, which killed eight people and destroyed 38 homes.

PG&E argues that it is not directly passing along the costs of the fines but feels entitled to pass along the increased costs of borrowing money as a result of the fines. While the PUC did not respond Monday, critics of the utility harshly criticized its stance.

"PG&E's mistakes and negligence caused the explosion," said San Bruno City Manager Connie Jackson. "It was not ratepayer negligence that led to the tragedy in San Bruno."

Among the estimated $4 billion in penalties recommended by the PUC staff is a minimum $300 million fine, which would be the largest ever imposed on a California utility. The full commission is expected to rule on a penalty for PG&E before the end of the year.

In a filing with the PUC last week, PG&E said the huge fine would make it more difficult to raise capital, make the company a less attractive investment and make it more expensive for the utility to borrow money.


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That could cost $800 million "due to increases in its cost of capital and other costs," the utility said in the document. "This would correspond to roughly a 4 percent increase in the average residential gas and electric bill."

PG&E spokeswoman Brittany Chord said Monday that the utility does not plan to pass along the direct costs of any penalties to its customers but does feel entitled to pass along its borrowing costs. She said that if PG&E is forced to pay out $4 billion in penalties, it will need to collect from its rate payers an additional $800 million to cover the costs of raising the capital "to complete projects on our gas system."

PG&E's critics were not buying that argument.

"PG&E pulled these numbers out of thin air," said Thomas Long, legal director with The Utility Reform Network, a San Francisco-based consumer group. "They are not at all credible. Their credit rating won't go down because the credit rating will be based on PG&E's ability to pay back its debts."

He accused the utility of attempting to influence regulators.

"This is a scare tactic," Long said.

PG&E's Chord, however, defended the utility's proposal, saying it is common for utilities to seek to recoup some costs through a regulatory proceeding and approval process.

"This is only an estimate," she said of the proposed 4 percent increase in rates. "This is not set in stone by any stretch of the imagination."

Contact George Avalos at 408-859-5167 or 408-373-3556. Follow him at Twitter.com/georgeavalos.