Pacific Gas and Electric Company s Natural Gas Leak Abatement Program Incremental 2018 and 2019 Cost Estimates and Caps

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1 Erik Jacobson Director Regulatory Relations Pacific Gas and Electric Company 77 Beale St., Mail Code B13U P.O. Box San Francisco, CA Fax: October 31, 2017 Advice 3902-G (Pacific Gas and Electric Company D U 39 G) Public Utilities Commission of the State of California Subject: Pacific Gas and Electric Company s Natural Gas Leak Abatement Program ncremental 2018 and 2019 Cost Estimates and Caps Purpose Pursuant to Ordering Paragraph ( OP ) 10 of California Public Utilities Commission ( CPUC or Commission ) Decision ( D. ) , Pacific Gas and Electric Company ( PG&E ) respectfully submits this advice letter to establish 2018 and 2019 cost estimates and caps for the Natural Gas Leak Abatement Program. PG&E also proposes tariff revisions to distinguish distribution and transmission costs in its New Environmental Regulations Balancing Account ( NERBA ), Natural Gas Leak Abatement Program Balancing Account ( NGLAPBA ), Core Fixed Cost Account ( CFCA ), and Noncore Customer Class Charge Account ( NCA ) balancing accounts. The requirement in D states that the utilities shall submit the following: a) dentify the costs for incremental costs associated with each individual Best Practice, Pilot Projects and Research & Development ( R&D ), broken down by type of expenditure including capital, operations and maintenance, and administrative. b) Provide the justifications consistent with the criteria to evaluate Pilot Projects and R&D in Pub. Util. Code c) The proposed allocation methodology for amortization of the account and the corresponding Commission decision authorizing the allocation methodology. Background On January 22, 2015, the CPUC opened the Order nstituting Rulemaking ( R. ) ( OR ) to implement the provisions of Senate Bill ( SB ) 1371 (Statutes 2014, Chapter 525). SB 1371 requires the adoption of rules and procedures to minimize

2 Advice 3902-G October 31, 2017 natural gas leakage from Commission-regulated natural gas pipeline facilities. On March 17, 2015, the Safety and Enforcement Division ( SED ) developed a report that identified technologies and practices presently in use and technologies and practices which are in various stages of R&D. The report, entitled Survey of Natural Gas Leakage Abatement Best Practices, recognized the responsibility of all stakeholders to engage in the identification of Best Practices ( BP ) and investment in R&D of new technologies. This report served as the basis for the scope of Phase 1 of R On October 27, 2015, SED and the Air Resources Board ( ARB ) hosted a workshop to discuss BP cost effectiveness, and related presentations from various parties. This workshop led to a series of working group meetings hosted by SED and ARB Staff, in which over 100 potential BP were identified for policies and procedures, recordkeeping, training, leak detection, leak repair, and leak prevention. From this effort, SED and stakeholders identified the 26 BP that were adopted by D on June 15, Additionally, D provides for the creation of three new PG&E accounts to record and recover the incremental costs associated with implementation of the 26 BP. Specifically, within 30 days of the decision, the utilities were required to file a Tier 1 advice letter to 1) establish a NERBA for incremental Natural Gas Leak Abatement Program expenditures (OP 7); 1 2) create a Memorandum Account for incremental administrative costs associated with the Natural Gas Leak Abatement Program expenditures (OP 8); and, 3) create a new Natural Gas Leak Abatement Program oneway balancing account for the costs of Pilot Projects and Research and Development activities (OP 9). PG&E filed Tier 1 Advice Letter 3855-G on July 19, 2017, which was approved on August 30, 2017 with an effective date of July 19, The Commission has not adopted an annual cost ratemaking forecast (i.e., annual revenue requirements) for the incremental costs of BP implementation at this time. D requires PG&E to file this Tier 3 Advice Letter with cost estimates for each BP by October 31, PG&E will supplement this advice letter to propose the annual revenue requirements associated with the incremental costs of BP implementation shown in Table 1 of this advice letter, which, once approved, will be the authorized amount for recovery in rates via the CFCA and NCA. However, PG&E may begin to incur costs for BP implementation prior to Commission adoption of a revenue requirement. As authorized by D , PG&E is allowed to record incurred costs in the new balancing accounts and to track and record administrative costs in the new Natural Gas Leak Abatement Program Memorandum Account. 2 1 D , p. 132 states, t is reasonable to authorize the utilities to establish two-way balancing accounts to recover their best practices implementation costs. 2 D , p. 132.

3 Advice 3902-G October 31, 2017 Annual Forecast Pursuant to D , p. 132 and OP 10, PG&E provides its forecast for its incremental costs in 2018 and 2019 to implement the 26 BP for the Natural Gas Leak Abatement Program in Attachment B of this filing. This forecast identifies the incremental costs associated with each individual BP, as well as Pilot Projects and R&D for each individual BP, broken down by type of expenditure including capital, operations and maintenance, and administrative. After PG&E fully scopes out its Pilot Projects and R&D, PG&E will provide in its March 15, 2018 Compliance Plan the justifications consistent with the criteria to evaluate Pilot Projects and R&D in Pub. Util. Code PG&E does provide justifications in Section of Attachment A based on current information. Tariff Revisions Gas Preliminary Statement Part DZ: New Environmental Regulations Balancing Account (NERBA): Add a Distribution Subaccount and Transmission Subaccount Gas Preliminary Statement Part EA: Natural Gas Leak Abatement Program Balancing Account (NGLAPBA): Add a Distribution Subaccount and Transmission Subaccount Gas Preliminary Statement Part F: Core Fixed Cost Account (CFCA): Add separate entries to record the gas distribution-related activities Clarify that the entries recorded in the Core Cost Subaccount relate to gas transmission adopted amounts. Gas Preliminary Statement Part J: Noncore Customer Class Charge Account (NCA): Add separate entries to record the gas distribution-related activities Clarify that the entries recorded in the Noncore Subaccount relate to gas transmission adopted amounts. Protests Anyone wishing to protest this filing may do so by letter sent via U.S. mail, facsimile or , no later than November 20, 2017, which is 20 days after the date of this filing. Protests must be submitted to: CPUC Energy Division ED Tariff Unit 505 Van Ness Avenue, 4 th Floor San Francisco, California 94102

4 Advice 3902-G October 31, 2017 Facsimile: (415) EDTariffUnit@cpuc.ca.gov Copies of protests also should be mailed to the attention of the Director, Energy Division, Room 4004, at the address shown above. The protest shall also be sent to PG&E either via or U.S. mail (and by facsimile, if possible) at the address shown below on the same date it is mailed or delivered to the Commission: Erik Jacobson Director, Regulatory Relations c/o Megan Lawson Pacific Gas and Electric Company 77 Beale Street, Mail Code B13U P.O. Box San Francisco, California Facsimile: (415) PGETariffs@pge.com Any person (including individuals, groups, or organizations) may protest or respond to an advice letter (General Order 96-B, Section 7.4). The protest shall contain the following information: specification of the advice letter protested; grounds for the protest; supporting factual information or legal argument; name, telephone number, postal address, and (where appropriate) address of the protestant; and statement that the protest was sent to the utility no later than the day on which the protest was submitted to the reviewing ndustry Division (General Order 96-B, Section 3.11). Effective Date PG&E requests that this Tier 3 advice filing become effective upon Commission approval. Pursuant to OP 13 of D , if the Commission s Resolution is not approved before PG&E submits its consolidated rate update, PG&E shall submit a supplemental Advice Letter within 60 days of Resolution approval with the ratemaking grossed-up to recover 2018 s authorized amount. Notice n accordance with General Order 96-B, Section V, a copy of this advice letter is being sent electronically and via U.S. mail to parties shown on the attached list and the parties on the service list for R Address changes to the General Order 96-B

5 Advice 3902-G October 31, 2017 service list should be directed to PG&E at address PGETariffs@pge.com. For changes to any other service list, please contact the Commission s Process Office at (415) or at Process_Office@cpuc.ca.gov. Send all electronic approvals to PGETariffs@pge.com. Advice letter filings can also be accessed electronically at: /S/ Erik Jacobson Director, Regulatory Relations Attachments cc: Service List R

6 Advice 3902-G October 31, 2017 ATTACHMENT A PACFC GAS AND ELECTRC COMPANY S NCREMENTAL 2018 and 2019 ANNUAL COST ESTMATES AND CAPS FOR NATURAL GAS LEAK ABATEMENT PROGRAM. NTRODUCTON Pursuant to Ordering Paragraph ( OP ) 10 and p. 132 of the CPUC s Decision ( D. ) , Pacific Gas and Electric Company ( PG&E ) presents the following incremental annual cost estimates and caps for the calendar years 2018 and 2019 to implement the 26 Best Practices ( BP ) for the Natural Gas Leak Abatement Program as outlined in D The inputs for these values are based on analysis for anticipated increase in personnel, increased pace and scope of work, and currently expected investments in pilot projects and research and development ( R&D ) projects. As noted in PG&E s June 5, 2017 Comments on Proposed Decision Approving Natural Gas Leak Abatement Program Consistent with Senate Bill 1371, these costs may need to be modified once PG&E s Compliance Plan is finalized in 2018, and PG&E requests that any such revisions be considered as amendments to the estimates provided below.. NCREMENTAL 2018 and 2019 ANNUAL COST ESTMATES AND CAPS Several of the 26 BP are underway and no incremental capital, operations and maintenance, or administrative costs would be incurred for those BP. These BP include work PG&E already performs as part of its normal operations. These BP are focused around processes and company culture that are already underway at PG&E. As part of its March 15, 2018 Compliance Plan Filing, PG&E will submit additional details and documentation demonstrating how these activities meet the intent of the BP. For some of the other BP where PG&E anticipates incremental spend, PG&E has grouped the costs for several BP that focus on related activities such as work to formalize or enhance an existing process. These BP focus on reducing emissions from transmission blowdown activities. Additional incremental costs will be incurred from implementing an accelerated leak survey cycle, which requires additional personnel, who will identify and fix more leaks. PG&E proposes using the accelerated super emitter leak survey and leak repair in lieu of eliminating the grade 3 leak backlog which is shown below to be cost prohibitive. ncremental capital, operations and maintenance ("O&M") or administrative costs focused around R&D efforts or changes to pace of work that are associated with specific BP are identified in Attachment B. These efforts primarily focus on research efforts to enhance methane detection and technologies to quantify emissions more accurately. t also includes research on solutions to reduce emissions and prevent leaks. Enhancing methane detection or improving emission quantification not only increases the safety of PG&E s pipeline system (as more leaks will be identified and repaired), it also allows PG&E to gain a better understanding of the sources of methane emissions within our system, and develop mitigation activities to minimize or eliminate

7 Advice 3902-G October 31, 2017 them. Since PG&E has not fully scoped out all of its Pilots & R&D Projects, the administrative costs associated with its Pilots & R&D Projects are projections for new personnel to support R&D efforts. Additional details will be included in PG&E s March 15, 2018 Compliance Plan. An estimated breakdown by BP is presented in Attachment B. For both the implementation of BP, as well as any R&D efforts associated with BP, PG&E defines administrative costs (labeled as Admin in Table 1 below) to capture expenditures associated with hiring and onboarding new employees and contractor personnel. A. mplementation of Best Practices Cost Estimates For implementation of BP, PG&E estimates capital spending of $7,276,000 and $7,376,000 for 2018 and 2019, respectively. PG&E estimates O&M expense of $17,775,500 and $17,885,500 for 2018 and 2019, respectively. PG&E estimates administrative expense of $1,014,000 and $34,000 for 2018 and 2019, respectively. PG&E further breaks down these expenditures by type of expenditure including capital, O&M and administrative in Table 1 below. PG&E groups BP 1-7, and 12 since these measures are interrelated in developing processes, procedures, and policies to reduce blowdown emissions. For these BP, a majority of these capital costs are from the development of a SAP database to provide better documentation, transparency, and repeatability. PG&E also anticipates replacing more high-bleed pneumatic devices. For BP 21, PG&E believes repairing entirely its current backlog of grade 3 leaks within 3 years will be cost prohibitive, and for this reason plans to propose to leverage its modern leak detection technology to identify and repair, through an accelerated process, these large leaks. 1 The estimated cost difference is as follows: Super Emitter: $21/MCF of emissions reductions Super Emitter total cost for 2018 and 2019: $4M Annual Savings for 2018 and 2019: BCF Backlog: $167/MCF of emissions reductions 2 Backlog total cost for 2018 and 2019: $132.8M Annual Savings for 2018 and 2019: 0.18 BCF As noted within BP 21, if an Operator identifies that eliminating their leak backlog is cost prohibitive, an Operator may seek an exemption for this work. PG&E s super emitter leak detection and repair proposal provides similar emission reductions over 1 t has been shown by numerous studies that large leaks, also called super emitters, while representing a minor number of leaks, dominate gas systems methane emissions. 2 Assuming that the leaks stay open for 4.4 years and continue to emit 4.4 years (0.18BCF/year X 4.4 years).

8 Advice 3902-G October 31, and 2019, and approximately 33 times less than the cost of repairing the existing backlog. B. Pilots & R&D Cost Estimates and Caps For Pilots and R&D work that support the BP, PG&E estimates $1,899,000 and $2,320,000 for 2018 and 2019 respectively and proposes those amounts to be the caps for 2018 and All costs for PG&E s R&D efforts will be expense dollars. PG&E further breaks down these expenditures by type of expenditure including capital, O&M and administrative in Table 1 below. PG&E has included planned R&D efforts for BP 5, 15, n accordance with p.133 of D , if the expenditures do not meet the caps specified above, unspent funds are returned to ratepayers. f expenditures are greater than the caps, the amount over the cap/limit cannot be recovered by the utility and is absorbed by shareholders. C. General Administrative Cost Estimate PG&E does not anticipate any additional personnel or contract support for preparing and filing its Compliance Plan on March 15, 2018, and therefore would have no ($0) incremental general administrative spend expected for 2018 and 2019, as shown in Table 1 below. n compliance with Conclusion of Law 37 of D , PG&E plans to provide its incremental cost forecast for each of its BP, broken down by cost category (e.g., capital, administrative, and O&M) in its March 15, 2018 Compliance Plan. Table 1: ncremental 2018 and 2019 Annual Cost Estimates Type mplementation of Best Practices Cost Category Capital O&M Dist/Trans Transmission $2,576,000 $2,576,000 Distribution $4,700,000 $4,800,000 Total Capital $7,276,000 $7,376,000 Transmission $205,500 $205,500 Distribution $17,570,000 $17,680,000 Total O&M $17,775,500 $17,885,500

9 Advice 3902-G October 31, 2017 Type mplementation of Best Practices (Continued) Cost Category Admin Capital Dist/Trans Transmission $34,000 $34,000 Distribution $980,000 $0 Total Admin $1,014,000 $34,000 Transmission $0 $0 Distribution $0 $0 Pilots & R&D for Best Practices O&M Transmission Distribution $325,000 $460,000 $1,335,000 $1,635,000 General Administrative Admin Admin Transmission $56,250 $56,250 Distribution $182,750 $168,750 Total Expense $1,899,000 $2,320,000 Transmission $0 $0 Distribution $0 $0 PG&E proposes to allocate the distribution and transmission costs between core and noncore customers using the adopted cost allocation factors shown in Gas Preliminary Statement Part C, Gas Accounting Terms and Definitions, 3.a. Cost Allocation Factors. These factors are derived from the allocation policies adopted in the last Cost Allocation Proceeding, D , and are used to allocate costs to customer classes. PG&E allocates distribution costs using the Distribution Base Revenue Requirements allocation factors and allocates transmission costs using the Other-Equal Distribution Based on All Transportation allocations factors.

10 Advice Filing 3902-G: Attachment B Transmission Distribution way (R&D) Red 2-way (BP mpl) Black Best Practice Cap O&M Admin Cap O&M Admin Cap O&M Admin Cap O&M Admin Cost Breakdown 1 Compliance Plan Written Compliance Plan identifying the policies, programs, procedures, instructions, documents, etc. used to comply with the Final Decision in this Proceeding (R ). Exact wording TBD by the company and approved by the CPUC, in consultation with CARB. Compliance Plans shall be signed by company officers $ certifying their company s compliance. Compliance Plans shall - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - include copies of all policies and procedures related to their Compliance Plans. Compliance Plans shall be filed biennially (i.e. every other year) to evaluate best practices based on progress and effectiveness of Companies natural gas leakage abatement and minimization of methane emissions. 2 Methane GHG Policy Written company policy stating that methane is a potent Green House Gas (GHG) whose emissions to the atmosphere must be minimized. nclude reference to SB 1371 and SB Exact wording TBD by the company and approved by the CPUC, in consultation with CARB, as part of Compliance Plan filing. $ 576,000 $ 205,500 $ 34,000 $ 576,000 $ 205,500 $ 34,000 $ - $ - $ - $ - $ - $ - 1-way: 0% 2-way: 100% 3 Pressure Reduction Policy Written company policy stating that pressure reduction to the lowest operationally feasible level in order to minimize methane emissions is required before non-emergency venting of highpressure distribution (above 60 psig), transmission and underground storage infrastructure consistent with safe operations and considering alternative potential sources of supply to reliably serve customers. Exact wording TBD by the company and approved by the CPUC, in consultation with CARB, as part of Compliance Plan filing. See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 $ - $ - $ - $ - $ - $ - 4 Project Scheduling Policy Written company policy stating that any high pressure distribution (above 60 psig), transmission or underground storage infrastructure project that requires evacuating methane will build time into the project schedule to minimize methane emissions to the atmosphere consistent with safe operations and considering alternative potential sources of supply to reliably serve customers. Projected schedules of high pressure distribution (above 60 psig), transmission or underground storage infrastructure work, requiring methane evacuation, shall also be submitted to facilitate audits, with line venting schedule updates TBD. Exact wording TBD by the company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing. See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 $ - $ - $ - $ - $ - $ - Page 1 of 8

11 Advice Filing 3902-G: Attachment B Transmission Distribution way (R&D) Red 2-way (BP mpl) Black Best Practice Cap O&M Admin Cap O&M Admin Cap O&M Admin Cap O&M Admin Cost Breakdown 5 Methane Evacuation Procedures Written company procedures implementing the BPs approved for use to evacuate methane for non-emergency venting of high pressure distribution (above 60 psig), transmission or underground storage infrastructure and how to use them consistent with safe operations and considering alternative potential sources of supply to reliably serve customers. Exact wording TBD by the company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing. See BP 2 $ 70,000 See BP 2 See BP 2 $ 50,000 See BP 2 $ - $ - $ - $ - $ - $ - 1-way: 100% 2-way: 0% 6 Methane Evacuation Work Orders Policy Written company policy that requires that for any high pressure distribution (above 60 psig), transmission or underground storage infrastructure projects requiring evacuating methane, Work Planners shall clearly delineate, in procedural documents, such as work orders used in the field, the steps required to safely and efficiently reduce the pressure in the lines, prior to lines being vented, considering alternative potential sources of supply to reliably serve customers. Exact wording TBD by the company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing. See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 $ - $ - $ - $ - $ - $ - 7 Bundling Work Policy Written company policy requiring bundling of work, whenever practicable, to prevent multiple venting of the same piping consistent with safe operations and considering alternative potential sources of supply to reliably serve customers. Company policy shall define situations where work bundling is not practicable. Exact wording TBD by the company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 $ - $ - $ - $ - $ - $ - 8 Company Emergency Procedures Written company emergency procedures which describe the actions company staff will take to prevent, minimize and/or stop the uncontrolled release of methane from the gas system or storage facility consistent with safe operations and considering alternative potential sources of supply to reliably serve customers. Exact wording TBD by the company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing. $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Page 2 of 8

12 Advice Filing 3902-G: Attachment B Transmission Distribution way (R&D) Red 2-way (BP mpl) Black Best Practice Cap O&M Admin Cap O&M Admin Cap O&M Admin Cap O&M Admin Cost Breakdown 9 Recordkeeping Written Company Policy directing the gas business unit to maintain records of all SB 1371 Annual Emissions nventory Report methane emissions and leaks, including the calculations, data and assumptions used to derive the volume of methane released. Records are to be maintained in accordance with G.O. 112 F and succeeding revisions, and 49 CFR 192. Currently, the record retention time in G.O. 112 F is at least 75 years for the transmission system. 49 CFR requires a record retention time of at least 10 years for the distribution system. Exact wording TBD by the company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing. $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 10 Minimize Uncontrolled Natural Gas Emissions Training Training to ensure that personnel know how to use company emergency procedures which describe the actions staff shall take to prevent, minimize and/or stop the uncontrolled release of natural gas from the gas system or storage facility. Training programs to be designed by the Company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing. f integration of training and program development is required with the company s General Rate Case (GRC) and/or Collective Bargaining Unit (CBC) processes, then the company shall file a draft training program and plan with a process to update the program once finalized into its Compliance Plan. $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 11 Methane Emissions Minimization Policies Training Ensure that training programs educate workers as to why it is necessary to minimize methane emissions and abate natural gas leaks. Training programs to be designed by the Company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing. f integration of training and program development is required with the company s GRC and/or CBC processes, then the company shall file a draft training program and plan with a process to update the program once finalized into its Compliance Plan. See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 See BP 2 $ - $ - $ - $ - $ - $ - Page 3 of 8

13 Advice Filing 3902-G: Attachment B Transmission Distribution way (R&D) Red 2-way (BP mpl) Black Best Practice Cap O&M Admin Cap O&M Admin Cap O&M Admin Cap O&M Admin Cost Breakdown 12 Knowledge Continuity Training Programs Knowledge Continuity (Transfer) Training Programs to ensure knowledge continuity for new methane emissions reductions best practices as workers, including contractors, leave and new workers are hired. Knowledge continuity training programs to be designed by the Company and approved by the CPUC, in consultation with CARB, as part of the Compliance Plan filing. f integration of training and program development is required with the company s GRC and/or CBC processes, then the company shall file a draft training program and plan with a process to update the program once finalized into its Compliance Plan. $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 13 Performance Focused Training Programs Create and implement training programs to instruct workers, including contractors, on how to perform the BPs chosen, efficiently and safely. Training programs to be designed by the Company and approved by the CPUC, in consultation with CARB, $ as part of the Compliance Plan filing. f integration of training and - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - program development is required with the company s GRC and/or CBC processes, then the company shall file a draft training program and plan with a process to update the program once finalized into its Compliance Plan. 14 Formal Job Classifications Create new formal job classifications for apprentices, journeyman, specialists, etc., where needed to address new methane emissions minimization and leak abatement best practices, and filed as part of the Compliance Plan filing, to be approved by the CPUC, in consultation with CARB. $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 15 Gas Distribution Leak Surveys Utilities should conduct leak surveys of the gas distribution system every 3 years, not to exceed 39 months, in areas where G.O. 112-F, or its successors, requires surveying every 5 years. n lieu of a system-wide three-year leak survey cycle, utilities may propose and justify in their Compliance Plan filings, subject to Commission approval, a risk-assessment based, more costeffective methodology for conducting gas distribution pipeline leak surveys at a less frequent interval. However, utilities shall always meet the minimum requirements of G.O. 112-F, and its successors. $ - $ - $ - $ - $ - $ - $ 4,700,000 $ 15,570,000 $ 980,000 $ 4,800,000 $ 15,680,000 $ - 1-way: 0% 2-way: 100% Page 4 of 8

14 Advice Filing 3902-G: Attachment B Transmission Distribution way (R&D) Red 2-way (BP mpl) Black Best Practice Cap O&M Admin Cap O&M Admin Cap O&M Admin Cap O&M Admin Cost Breakdown 16 Special Leak Surveys Utilities shall conduct special leak surveys, possibly at a more frequent interval than required by G.O. 112-F (or its successors) or BP 15, for specific areas of their transmission and distribution pipeline systems with known risks for natural gas leakage. Special leak surveys may focus on specific pipeline materials known to be susceptible to leaks or other known pipeline integrity risks, such as geological conditions. Special leak surveys shall be coordinated with transmission and distribution integrity management programs (TMP/DMP) and other utility safety programs. Utilities shall file in their Compliance Plan proposed special leak surveys for known risks and proposed methodologies for identifying additional special leak surveys based on risk assessments (including predictive and/or historical trends analysis). As surveys are conducted over time, utilities shall report as part of their Compliance Plans, details about leakage trends. Predictive analysis may be defined differently for differing companies based on company size and trends. $ - $ - $ - $ - $ - $ - $ - $ 1,000,000 $ - $ - $ 1,000,000 $ - 1-way: 100% 2-way: 0% 17 Enhanced Methane Detection Utilities shall utilize enhanced methane detection practices (e.g. mobile methane detection and/or aerial leak detection) including gas speciation technologies. $ - $ 75,000 $ - $ - $ 75,000 $ - $ - $ 75,000 $ - $ - $ 75,000 $ - 1-way: 100% 2-way: 0% 18 Stationary Methane Detectors Utilities shall utilize Stationary Methane Detectors for early detection of leaks. Locations include: Compressor Stations, Terminals, Gas Storage Facilities, City Gates, and Metering & Regulating (M&R) Stations (M&R above ground and pressures above 300 psig only). Methane detector technology should be capable of transferring leak data to a central database, if appropriate for location. $ - $ 50,000 $ - $ - $ 70,000 $ - $ - $ 10,000 $ - $ - $ 10,000 $ - 1-way: 100% 2-way: 0% Page 5 of 8

15 Advice Filing 3902-G: Attachment B Transmission Distribution way (R&D) Red 2-way (BP mpl) Black Best Practice Cap O&M Admin Cap O&M Admin Cap O&M Admin Cap O&M Admin Cost Breakdown 19 Above Ground Leak Surveys Utilities shall conduct frequent leak surveys and data collection at above ground transmission and high pressure distribution (above 60 psig) facilities including Compressor Stations, Gas Storage Facilities, City Gates, and Metering & Regulating (M&R) Stations (M&R above ground and pressures above 300 psig only). At a minimum, above ground leak surveys and data collection must be conducted on an annual basis for compressor stations and gas storage facilities. $ - $ 80,000 $ - $ - $ 140,000 $ - $ - $ 80,000 $ - $ - $ 140,000 $ - 1-way: 100% 2-way: 0% 20 a) Quantification & Geographic Tracking Utilities shall develop methodologies for improved quantification and geographic evaluation and tracking of leaks from the gas systems. Utilities shall file in their Compliance Plan how they propose to address quantification. Utilities shall work together, with CPUC and ARB staff, to come to agreement on a similar methodology to improve emissions quantification of leaks to assist demonstration of actual emissions reductions. $ - $ - $ - $ - $ - $ - $ - $ 50,000 $ - $ - $ 65,000 $ - 1-way: 100% 2-way: 0% 20 b) Geographic Tracking Utilities shall develop methodologies for improved geographic tracking and evaluation of leaks from the gas systems. Utilities shall work together, with CPUC and ARB staff, to come to agreement on a similar methodology to improve geographic evaluation and tracking of leaks to assist demonstrations of actual emissions reductions. Leak detection technology should be capable of transferring leak data to a central database in order to provide data for leak maps. Geographic leak maps shall be publicly available with leaks displayed by zip code or census tract. See BP 20a See BP 20a See BP 20a See BP 20a See BP 20a See BP 20a See BP 20a See BP 20a See BP 20a See BP 20a See BP 20a See BP 20a 21 "Find t/fix t"utilities shall repair leaks as soon as reasonably possible after discovery, but in no event, more than three (3) years after discovery. Utilities may make reasonable exceptions for leaks that are costly to repair relative to the estimated size of the leak. $ - $ - $ - $ - $ - $ - $ - $ 2,020,000 $ - $ - $ 2,020,000 $ - 1-way: 0.9% ($20,000)/yr 2-way: 99.1% ($2,000,000)/yr to total $2,020,000 *Note: Approx cost for repairing the grade 3 backlog is $132,800,000 and therefore cost prohibitive Page 6 of 8

16 Advice Filing 3902-G: Attachment B Transmission Distribution way (R&D) Red 2-way (BP mpl) Black Best Practice Cap O&M Admin Cap O&M Admin Cap O&M Admin Cap O&M Admin Cost Breakdown 22 Pipe Fitting Specifications Companies shall review and revise pipe fitting specifications, as necessary, to ensure tighter tolerance/better quality pipe threads. Utilities are required to review any available data on its threaded fittings, and if necessary, propose a fitting replacement program for threaded connections with significant leaks or comprehensive procedures for leak repairs and meter set assembly installations and repairs as part of their Compliance Plans. A fitting replacement program should consider components such as pressure control fittings, service tees, and valves metrics, among other things. $ - $ 25,000 $ - $ - $ 25,000 $ - $ - $ 25,000 $ - $ - $ 25,000 $ - 1-way: 100% 2-way: 0% 23 Minimize Emissions from Operations, Maintenance and Other Activities Utilities shall minimize emissions from operations, maintenance and other activities, such as new construction or replacement, in the gas distribution and transmission systems and storage facilities. Utilities shall replace high-bleed pneumatic devices with $ 2,000,000 $ - $ - $ 2,000,000 $ - $ - $ - $ - $ - $ - $ - $ - technology that does not vent gas (i.e. no-bleed) or vents significantly less natural gas (i.e. low-bleed) devices. Utilities shall also reduce emissions from blowdowns, as much as operationally feasible. 1-way: 0% 2-way: 100% 24 Dig-ns / Public Education Program Dig-ns Expand existing public education program to alert the public and third-party excavation contractors to the Call Before You Dig 811 program. n addition, utilities must provide procedures for excavation contractors to follow when excavating to prevent damaging or rupturing a gas line. $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 25 Dig-ns / Company Standby Monitors Dig-ns Utilities must provide company monitors to witness all excavations near gas transmission lines to ensure that contractors are following utility procedures to properly excavate and backfill around transmission lines. $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Page 7 of 8

17 Advice Filing 3902-G: Attachment B Transmission Distribution way (R&D) Red 2-way (BP mpl) Black Best Practice Cap O&M Admin Cap O&M Admin Cap O&M Admin Cap O&M Admin Cost Breakdown 26 Dig-ns / Repeat Offenders Utilities shall document procedures to address Repeat Offenders such as providing post-damage safe excavation training and onsite spot visits. Utilities shall keep track and report multiple incidents, within a 5-year period, of dig-ins from the same party in their Annual Emissions nventory Reports. These incidents and leaks shall be recorded as required in the recordkeeping best practice. n addition, the utility should report egregious offenders to appropriate enforcement agencies including the California Contractor s State License Board. The Board has the authority to investigate and punish dishonest or negligent contractors. Punishment can include suspension of their contractor s license. $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Various Costs associated with additional personnel and future R&D projects currently not scoped out. $ - $ 25,000 $ 56,250 $ - $ 100,000 $ 56,250 $ - $ 75,000 $ 182,750 $ - $ 300,000 $ 168,750 1-way: 100% 2-way: 0% Page 8 of 8

18 CALFORNA PUBLC UTLTES COMMSSON ADVCE LETTER FLNG SUMMARY ENERGY UTLTY MUST BE COMPLETED BY UTLTY (Attach additional pages as needed) Company name/cpuc Utility No. Pacific Gas and Electric Company (D U39 G) Utility type: Contact Person: Annie Ho ELC GAS Phone #: (415) PLC HEAT WATER and EXPLANATON OF UTLTY TYPE ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water (Date Filed/ Received Stamp by CPUC) Advice Letter (AL) #: 3902-G Tier: 3 Subject of AL: Pacific Gas and Electric Company s Natural Gas Leak Abatement Program ncremental 2018 and 2019 Cost Estimates and Caps Keywords (choose from CPUC listing): Compliance, CORE AL filing type: Monthly Quarterly Annual One-Time Other f AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #: D Does AL replace a withdrawn or rejected AL? f so, identify the prior AL: No Summarize differences between the AL and the prior withdrawn or rejected AL: s AL requesting confidential treatment? f so, what information is the utility seeking confidential treatment for: No Confidential information will be made available to those who have executed a nondisclosure agreement: N/A Name(s) and contact information of the person(s) who will provide the nondisclosure agreement and access to the confidential information: Resolution Required? Yes No Requested effective date: Upon Commission Approval No. of tariff sheets: 13 Estimated system annual revenue effect (%): N/A Estimated system average rate effect (%): N/A When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/, agricultural, lighting). Tariff schedules affected: See Attachment 1 Service affected and changes proposed: N/A Pending advice letters that revise the same tariff sheets: N/A Protests, dispositions, and all other correspondence regarding this AL are due no later than 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to: California Public Utilities Commission Energy Division EDTariffUnit 505 Van Ness Ave., 4 th Flr. San Francisco, CA EDTariffUnit@cpuc.ca.gov Pacific Gas and Electric Company Attn: Erik Jacobson Director, Regulatory Relations c/o Megan Lawson 77 Beale Street, Mail Code B13U P.O. Box San Francisco, CA PGETariffs@pge.com

19 Cal P.U.C. Sheet No. Title of Sheet Attachment 1 Advice 3902-G Cancelling Cal P.U.C. Sheet No G GAS PRELMNARY STATEMENT PART DZ NEW ENVRONMENTAL REGULATONS BALANCNG ACCOUNT (NERBA) Sheet G G GAS PRELMNARY STATEMENT PART DZ NEW ENVRONMENTAL REGULATONS BALANCNG ACCOUNT (NERBA) Sheet G GAS PRELMNARY STATEMENT PART EA NATURAL GAS LEAK ABATEMENT PROGRAM BALANCNG ACCOUNT (NGLAPBA) Sheet G G GAS PRELMNARY STATEMENT PART EA NATURAL GAS LEAK ABATEMENT PROGRAM BALANCNG ACCOUNT (NGLAPBA) Sheet G GAS PRELMNARY STATEMENT PART F CORE FXED COST ACCOUNT Sheet G GAS PRELMNARY STATEMENT PART F CORE FXED COST ACCOUNT Sheet G GAS PRELMNARY STATEMENT PART F CORE FXED COST ACCOUNT Sheet G G G G GAS PRELMNARY STATEMENT PART F CORE FXED COST ACCOUNT Sheet G GAS PRELMNARY STATEMENT PART J NONCORE CUSTOMER CLASS CHARGE ACCOUNT Sheet G GAS PRELMNARY STATEMENT PART J NONCORE CUSTOMER CLASS CHARGE ACCOUNT Sheet G GAS TABLE OF CONTENTS Sheet G GAS TABLE OF CONTENTS Sheet G GAS TABLE OF CONTENTS Sheet G G G G G Page 1 of 1

20 Revised Cal. P.U.C. Sheet No G Cancelling Revised Cal. P.U.C. Sheet No G U 39 San Francisco, California GAS PRELMNARY STATEMENT PART DZ Sheet 1 NEW ENVRONMENTAL REGULATONS BALANCNG ACCOUNT (NERBA) DZ. New Environmental Regulations Balancing Account (NERBA) 1. PURPOSE: The purpose of the NERBA is to record and track actual expenses and capital revenue requirements compared to the adopted budget for incremental best practice activities related to minimizing methane emissions consistent with new regulatory requirements pursuant to Senate Bill 1371 and Commission Decision These best practices pertain to policies and procedures, recordkeeping, training, leak detection, leak repair, and leak prevention. The NERBA is a two-way balancing account. 2. APPLCABLTY: The NERBA applies to all customer classes, except for those specifically excluded by the Commission. 3. REVSON DATE: After the Commission approves the cost forecasts, disposition of the balance in this account will be annually through the Annual Gas True-up advice filing through the Core Fixed Cost Account (CFCA) and Noncore Customer Class Charge Account (NCA), or as otherwise authorized by the Commission. The balance in the Distribution Subaccount will be transferred to the Distribution Cost Subaccount and Distribution Subaccount in the CFCA and NCA, respectively. The balance in the Transmission Subaccount will be transferred to the Core Cost Subaccount and the Noncore Subaccount of the CFCA and NCA, respectively. 4. RATES: The NERBA does not have a rate component. 5. ACCOUNTNG PROCEDURE: The NERBA consists of the following subaccounts: The Distribution Subaccount records and tracks actual gas distribution expenses and capital revenue requirements compared to the adopted gas distribution revenue requirements for incremental best practice activities related to minimizing methane emissions. The Transmission Subaccount records and tracks actual gas transmission expenses and capital revenue requirements compared to the adopted gas transmission revenue requirements for incremental best practice activities related to minimizing methane emissions. a. Distribution Subaccount The following entries will be made to this subaccount each month, or as applicable, excluding an allowance for Revenue Fees and Uncollectible (RF&U) accounts expense: 1) A credit entry equal to one-twelfth of the adopted annual gas distribution revenue requirements. Corresponding debit entries allocated to core and noncore customers that total this credit entry are recorded in Gas Preliminary Statement Part F, CFCA, Distribution Subaccount and in Gas Preliminary Statement Part J, NCA, Distribution Subaccount; 2) A debit entry to record incremental best practice gas emission reduction costs incurred for gas distribution related expenses; / / (Continued) Advice 3902-G ssued by Date Filed October 31, 2017 Decision Robert S. Kenney Effective Vice President, Regulatory Affairs Resolution

21 h Original Cal. P.U.C. Sheet No G U 39 San Francisco, California GAS PRELMNARY STATEMENT PART DZ Sheet 2 NEW ENVRONMENTAL REGULATONS BALANCNG ACCOUNT (NERBA) DZ. New Environmental Regulations Balancing Account (NERBA) 5. ACCOUNTNG PROCEDURE: (Cont d.) a. Distribution Subaccount (Cont d.) 3) A debit entry equal to the capital revenue requirement based on actual capital expenditures incurred for gas distribution related costs. Capital-related revenue requirements include depreciation expense, the return on investment, federal and state income taxes, and property taxes associated with the costs of installed equipment; 4) A debit or credit entry to transfer the balance to other accounts for recovery in rates, upon approval by the Commission; 5) A debit or credit entry equal to the interest on the average balance in the account at the beginning of the month and the balance after the above entry at a rate equal to the average interest rate on three month Commercial paper for the previous month, as reported in the Federal Reserve Statistical Release, H.15, or its successor. b. Transmission Subaccount The following entries will be made to this subaccount each month, or as applicable, excluding an allowance for Revenue Fees and Uncollectible (RF&U) accounts expense: 1) A credit entry equal to one-twelfth of the adopted annual gas transmission revenue requirements. Corresponding debit entries allocated to core and noncore customers that total this credit entry are recorded in the CFCA, Core Cost Subaccount and the NCA, Noncore Subaccount; 2) A debit entry to record incremental best practice gas emission reduction costs incurred for gas transmission related expenses; 3) A debit entry equal to the capital revenue requirement based on actual capital expenditures incurred for gas transmission related costs. Capital-related revenue requirements include depreciation expense, the return on investment, federal and state income taxes, and property taxes associated with the costs of installed equipment; 4) A debit or credit entry to transfer the balance to other accounts for recovery in rates, upon approval by the Commission; 5) A debit or credit entry equal to the interest on the average balance in the account at the beginning of the month and the balance after the above entry at a rate equal to the average interest rate on three month Commercial paper for the previous month, as reported in the Federal Reserve Statistical Release, H.15, or its successor. / / / / / (Continued) Advice 3902-G ssued by Date Filed October 31, 2017 Decision Robert S. Kenney Effective Vice President, Regulatory Affairs Resolution

22 Revised Cal. P.U.C. Sheet No G Cancelling Revised Cal. P.U.C. Sheet No G U 39 San Francisco, California GAS PRELMNARY STATEMENT PART EA Sheet 1 NATURAL GAS LEAK ABATEMENT PROGRAM BALANCNG ACCOUNT (NGLAPBA) EA. Natural Gas Leak Abatement Program Balancing Account (NGLAPBA) 1. PURPOSE: The purpose of the NGLAPBA is to compare the adopted budget to actual costs incurred, up to the adopted budget, related to incremental costs of pilot projects and research and development costs (R&D) related to minimizing methane emissions consistent with new regulatory requirements pursuant to Senate Bill 1371 and Commission Decision The NGLAPBA is a one-way balancing account. 2. APPLCABLTY: The NGLAPBA applies to all customer classes, except for those schedules or contracts specifically excluded by the Commission. 3. REVSON DATE: After the Commission approves the cost forecasts, disposition of the balances in this account shall be determined through the Annual Gas True-up advice filing through the Core Fixed Cost Account (CFCA) and Noncore Customer Class Charge Account (NCA) at the end of the program cycle, or as otherwise authorized by the Commission. The balance in the Distribution Subaccount will be transferred to the Distribution Cost Subaccount and Distribution Subaccount of the CFCA and NCA, respectively. The balance in the Transmission Subaccount will be transferred to the Core Cost Subaccount and the Noncore Subaccount of the CFCA and NCA, respectively. 4. RATES: The NGLAPBA does not have a rate component. 5. ACCOUNTNG PROCEDURE: The NGLAPBA consists of the following subaccounts: The Distribution Subaccount records and tracks actual gas distribution expenses and capital revenue requirements compared to the adopted gas distribution revenue requirements for incremental costs of pilot projects and research and development costs (R&D) related to minimizing methane emissions. The Transmission Subaccount records and tracks actual gas transmission expenses and capital revenue requirements compared to the adopted gas transmission revenue requirements for incremental costs of pilot projects and research and development costs (R&D) related to minimizing methane emissions. a. Distribution Subaccount The following entries will be made each month, or as applicable, excluding an allowance for Revenue Fees and Uncollectible (RF&U) accounts expense: 1) A credit entry equal to one-twelfth of the adopted annual gas distribution revenue requirements. Corresponding debit entries allocated to core and noncore customers that total this credit entry are recorded in Gas Preliminary Statement Part F, CFCA, Distribution Subaccount, and Gas Preliminary Statement Part J, NCA, Distribution Subaccount; 2) A debit entry to record incremental incurred expenses related to pilot projects and R&D for gas distribution related expenses; (Continued) Advice 3902-G ssued by Date Filed October 31, 2017 Decision Robert S. Kenney Effective Vice President, Regulatory Affairs Resolution

23 Original Cal. P.U.C. Sheet No G U 39 San Francisco, California GAS PRELMNARY STATEMENT PART EA Sheet 2 NATURAL GAS LEAK ABATEMENT PROGRAM BALANCNG ACCOUNT (NGLAPBA) EA. Natural Gas Leak Abatement Program Balancing Account (NGLAPBA) 5. ACCOUNTNG PROCEDURE: (Cont d.) a. Distribution Subaccount (Cont d.) 3) A debit entry equal to the revenue requirement related to the capital costs incurred for gas distribution related costs, as authorized by the Commission. Capital-related revenue requirements include depreciation expense, the return on investment, federal and state income taxes, and property taxes associated with the costs of installed equipment; 4) An entry to record the transfer of amounts to or from other accounts as approved by the Commission; 5) A debit or credit entry equal to the interest on the average of the balance in this account at the beginning of the month and the balance in this account after the above entries at a rate equal to one-twelfth the interest rate on three month Commercial paper for the previous month, as reported in the Federal Reserve Statistical Release, H.15, or its successor. b. Transmission Subaccount The following entries will be made each month, or as applicable, excluding an allowance for Revenue Fees and Uncollectible (RF&U) accounts expense: 1) A credit entry equal to one-twelfth of the adopted annual gas transmission revenue requirements. Corresponding debit entries allocated to core and noncore customers that total this credit entry are recorded in CFCA, Core Cost Subaccount and NCA, Noncore Subaccount; 2) A debit entry to record incremental incurred expenses related to pilot projects and R&D for gas transmission related expenses; 3) A debit entry equal to the revenue requirement related to the capital costs incurred for gas transmission related costs, as authorized by the Commission. Capital-related revenue requirements include depreciation expense, the return on investment, federal and state income taxes, and property taxes associated with the costs of installed equipment; 4) An entry to record the transfer of amounts to or from other accounts as approved by the Commission; 5) A debit or credit entry equal to the interest on the average of the balance in this account at the beginning of the month and the balance in this account after the above entries at a rate equal to one-twelfth the interest rate on three month Commercial paper for the previous month, as reported in the Federal Reserve Statistical Release, H.15, or its successor. / / / / (Continued) Advice 3902-G ssued by Date Filed October 31, 2017 Decision Robert S. Kenney Effective Vice President, Regulatory Affairs Resolution