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13 Sep 2010
New York, September 13, 2010 -- Moody's Investors Service said today that the ratings of Pacific
Gas and Electric Company (A3: senior unsecured; stable outlook)
and its parent, PG&E Corporation (Baa1: senior unsecured;
stable outlook) are unaffected by the explosion in a residential community
in San Bruno, California. According to the company's
8-K filing, the explosion and fire damaged at least 45 homes
and resulted in several fatalities. Although the exact cause of
the explosion has not been determined, a 30-inch steel gas
transmission pipeline owned and operated by PG&E in this area was
The company has indicated in its 8-K filing that it has liability
insurance for damages caused by fire of approximately $992 million
in excess of a $10 million deductible. Both the National
Transportation Safety Board and the
California Public Utilities Commission (CPUC) continue to investigate
the cause of the explosion and fire. Moody's view of PG&E's
and PCG's ratings consider the financial protection provided by
the company's existing insurance policy and reflects the fact that
the utility is currently well positioned in its rating category.
Of greater concern is the potential impact the explosion and other recent
negative events at PG&E may have on its relationship with its regulator
and other key constituents in the state.
While it is premature to access the potential liability for PG&E from
this tragic event, we do observe that the San Bruno explosion represents
yet another piece of negative news involving the company in its service
territory during the past year. Specifically, in a recent
report issued by the CPUC, PG&E has been criticized for its
customer communications in implementing a SmartGrid program in its service
territory which contributed to substantial negative customer reaction
in certain PG&E communities. Additionally, the company's
sponsorship and funding of a ballot initiative measure, Proposition
16, was viewed negatively by certain communities and by several
legislators. The initiative, which was not successful,
would have made it more difficult for municipalities to set up power-buying
agencies that could compete with the utility.
While it is difficult to determine what impact the San Bruno explosion
in conjunction with these other events may have on the outcome of the
company's General Rate Case (GRC) filed with the CPUC, we
do believe that these events will lead to increased scrutiny of PG&E's
operations and may lead to an even greater focus around improving system
reliability and enhancing preventive maintenance. As greater clarity
surfaces around the potential financial impact to PG&E from the San
Bruno explosion, we will comment accordingly about its impact,
if any, to company ratings. Importantly, to the extent
that the San Bruno explosion along with other above-mentioned developments
collectively lead a deterioration in the regulatory compact within the
state for PG&E, the ratings for the utility and its parent could
potentially be negatively impacted.
Headquartered in San Francisco, PG&E is a California based integrated
electric utility engaged in the electric and natural gas distribution,
electric generation, procurement, and transmission businesses
as well as natural gas procurement, transportation, and storage.
PG&E serves 5.1 million electric distribution customers and
approximately 4.3 million natural gas customers. PG&E
is wholly-owned by PCG.
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
William L. Hess
MD - Utilities
Infrastructure Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's: PG&E's ratings unaffected by San Bruno explosion
250 Greenwich Street
New York, NY 10007
No Related Data.
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