Fitch: Criminal Indictment Won't Alter PG&E's Ratings

NEW YORK, Apr 09, 2014 -- BUSINESS WIRE

The criminal indictment of Pacific Gas & Electric Co. (PG&E) for violations of the Pipeline Safety Act will not affect its ratings or the ratings of its corporate parent PG&E Corp. (PCG), according to Fitch Ratings. Fitch rates both PG&E and PCG 'BBB+'.

The criminal indictment, in connection with the San Bruno pipeline explosion in 2010, is an additional source of headline risk and uncertainty for PG&E. However, Fitch expects other key events to have more significant influence on PG&E's creditworthiness. The most notable event will be the final decision later this year in California Public Utilities Commission (CPUC) orders instituting investigation into PG&E's role in the explosion. Other key events include the utility's pending 2014 general rate case, which could be finalized around mid 2014, and its 2015 gas transmission and storage rate case.

The 12 count federal indictment seeks a penalty of $500,000 per felony count. On that basis, PG&E's incremental exposure to the criminal indictment would total $6 million.

Fitch continues to believe that San Bruno-related financial exposure in the wake of the criminal indictment is manageable within the current ratings. Our continued review will focus on investigations underway at the CPUC. Fitch believes that an administrative law judge opinion could be issued in the next few weeks and a final CPUC decision should be issued around mid-year. The CPUC's Safety and Enforcement Division supports a proposed $2.25 billion of fines and penalties. Fitch calculates that PG&E, from 2010 through 2013, has already incurred pipeline-related direct costs totaling $2.5 billion.

The federal government filed its indictment alleging violations of the Pipeline Safety Act of 1968 on April 1. The case relates to the San Bruno pipeline explosion and fire in Sept. 2010 that killed eight people, injured many others and caused extensive property damage. PG&E was notified in June 2011 that it was the target of a criminal investigation by the U.S. Department of Justice, the California Attorney General's Office and the San Mateo County District Attorney's Office.

For further information please refer to Fitch Ratings' full reports published March 19, 2014 for PG&E and PCG.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Applicable Criteria and Related Research:

Pacific Gas & Electric Company (A Subsidiary of PG&E Corporation)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=740844

PG&E Corporation

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=741316

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SOURCE: Fitch Ratings

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