Sempra Energy subsidiaries Southern California Gas Co. and San Diego Gas & Electric Co. are suggesting unnecessary upgrades in their Pipeline Safety Enhancement Plan, proposing measures without adequate supporting analysis and asking too much of ratepayers, according to a California consumer advocacy group.

The companies should "concentrate on [ensuring that] the pipeline system is safe and not on using this occasion to add to their bottom line with unsupported and possibly unnecessary system enhancements," Joe Como, the Division of Ratepayer Advocates' acting director, said in a statement. "It's wrong to ask customers to pay for upgrades that [SoCalGas and SDG&E] cannot demonstrate are needed."

In the Sempra subsidiaries' Pipeline Safety Enhancement Plan, or PSEP, proceeding filings, the companies acknowledge that some of the work they are proposing is outside the scope of the California Public Utilities Commission's request for pipeline safety upgrades.

"Although not required by the June 9 [CPUC] decision, SoCalGas and SDG&E believe the work that will be performed in compliance with that order provides an ideal opportunity to retrofit pipelines with existing and emerging technologies to provide advance warning of a potential pipeline failure and decrease the time to identify, investigate, prevent and remedy or manage the effects of such an event," the companies wrote.

Included in the proposed updates that fall outside of the CPUC requirements are fiber optic cables and real-time gas detection devices, along with a data management system to incorporate information received from the new technologies.

Fiber optic technology, which SoCalGas and SDG&E said can help pipeline operators identify structural integrity concerns such as pipeline movement or disturbance, is typically not cost-effective to install on pipelines that are already buried and in service. However, the PSEP will require gaslines to be exposed during pressure testing or replacement, and the utilities proposed installing 280 miles of fiber optic cable at the same time.

The companies also have found 2,100 locations that could benefit from methane detection devices, saying the technology could help identify gas leaks sooner and dispatch operations personnel. The sensors would be capable of identifying methane concentration levels roughly 25% or less of what people typically detect by smell.

SoCalGas and SDG&E have estimated that the technology enhancement component of their proposal would cost $8.33 million.

But the DRA, a division of the CPUC, contended that the utilities have failed to demonstrate why these proposals are necessary and objected to the companies' request that customers pay $1.4 billion for SoCalGas and $235.2 million for SDG&E's pipeline testing, repairs and renovations.

"DRA found that [the utilities] offered no engineering or cost-benefit analysis, or any other studies, to support the level of work it proposes to undertake," the division said in a statement. "DRA submitted testimony to the CPUC concluding that much of the work that [the companies are] planning to perform, at ratepayer expense, goes beyond the CPUC's directives, which were aimed at addressing high-priority safety measures."

The DRA further argued that the companies' rates of return on equity should be lowered for the replacement of pipelines installed from 1935 to 1955 for which reliable pressure test records cannot be found. The gas utilities have been responsible for complying with safety laws and industry guidelines for more than 70 years, the DRA reasoned, and customers have already been paying for service that should have been in keeping with those guiding principles.

But the utilities want to pay for their PSEP through a designated surcharge, and they estimated that residential average monthly bills would go up 7.5% for customers of both SoCalGas and SDG&E.

Copyright 2012 SNL Financial LC. All Rights Reserved.

(Originally published June 27, 2012, in SNL Daily Gas Report.)