10-Q 1 form10q.htm FORM 10-Q


 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., 20549
FORM 10-Q

(Mark One)

 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2015

OR

 

 

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from ___________ to __________

 

 


Commission
File
Number
_______________

Exact Name of
Registrant
as Specified
in its Charter
_______________


State or Other
Jurisdiction of
Incorporation
______________


IRS Employer
Identification
Number
___________

 

 

 

 

1-12609

PG&E Corporation

California 

94-3234914

1-2348

Pacific Gas and Electric Company

California 

94-0742640

 

PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
________________________________________

Pacific Gas and Electric Company
77 Beale Street
P.O. Box 770000
San Francisco, California 94177

______________________________________

Address of principal executive offices, including zip code

 

PG&E Corporation
(415) 973-1000
________________________________________

Pacific Gas and Electric Company
(415) 973-7000
______________________________________

Registrant's telephone number, including area code

 

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  [X] Yes     [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

PG&E Corporation:

[X] Yes [  ] No

Pacific Gas and Electric Company:

[X] Yes [  ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

PG&E Corporation:

[X] Large accelerated filer

[  ] Accelerated filer

 

[  ] Non-accelerated filer

[  ] Smaller reporting company

Pacific Gas and Electric Company:

[  ] Large accelerated filer

[  ] Accelerated filer

 

[X] Non-accelerated filer

[  ] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

PG&E Corporation:

[  ] Yes [X] No

Pacific Gas and Electric Company:

[  ] Yes [X] No

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common stock outstanding as of April 20, 2015:

 

PG&E Corporation:

479,973,603

Pacific Gas and Electric Company:

264,374,809



PG&E CORPORATION AND
PACIFIC GAS AND ELECTRIC COMPANY
FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015

 

TABLE OF CONTENTS

 

GLOSSARY

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PG&E CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

NOTE 3: REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS

NOTE 4: DEBT

NOTE 5: EQUITY

NOTE 6: EARNINGS PER SHARE

NOTE 7: DERIVATIVES

NOTE 8: FAIR VALUE MEASUREMENTS

NOTE 9: CONTINGENCIES AND COMMITMENTS

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

OVERVIEW

RESULTS OF OPERATIONS

LIQUIDITY AND FINANCIAL RESOURCES

ENFORCEMENT AND LITIGATION MATTERS

RATEMAKING PROCEEDINGS

ELECTRIC DISTRIBUTION RESOURCES

ENVIRONMENTAL MATTERS

CONTRACTUAL COMMITMENTS

RISK MANAGEMENT ACTIVITIES

CRITICAL ACCOUNTING POLICIES

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

SIGNATURES



GLOSSARY

 

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.

 

2014 Form 10-K

PG&E Corporation's and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2014

AFUDC

allowance for funds used during construction

CAISO

California Independent System Operator

CPUC

California Public Utilities Commission

CRRs

congestion revenue rights

EPS

earnings per common share

EV

electric vehicle

FERC

Federal Energy Regulatory Commission

GAAP

U.S. Generally Accepted Accounting Principles

GRC

general rate case

GT&S

gas transmission and storage

IRS

Internal Revenue Service

NRC

Nuclear Regulatory Commission

NTSB

National Transportation Safety Board

ORA

Office of Ratepayer Advocates

PSEP

pipeline safety enhancement plan

Regional Board

California Regional Water Control Board, Lahontan Region

SEC

U.S. Securities and Exchange Commission

SED

Safety and Enforcement Division of the CPUC, formerly known as the Consumer Protection and Safety Division or the CPSD

TO

transmission owner

TURN

The Utility Reform Network

Utility

Pacific Gas and Electric Company

VIE(s)

variable interest entity(ies)

 

 

 

 

 

 

 

 



PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

PG&E CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

 

(Unaudited)

 

Three Months Ended

 

March 31,

(in millions, except per share amounts)

2015

 

2014

Operating Revenues

 

 

 

 

 

Electric

$

3,013 

 

$

3,001 

Natural gas

 

886 

 

 

890 

Total operating revenues

 

3,899 

 

 

3,891 

Operating Expenses

 

 

 

 

 

Cost of electricity

 

1,000 

 

 

1,210 

Cost of natural gas

 

274 

 

 

360 

Operating and maintenance

 

1,923 

 

 

1,299 

Depreciation, amortization, and decommissioning

 

631 

 

 

538 

Total operating expenses

 

3,828 

 

 

3,407 

Operating Income

 

71 

 

 

484 

Interest income

 

1 

 

 

3 

Interest expense

 

(189)

 

 

(185)

Other income, net

 

58 

 

 

19 

Income (Loss) Before Income Taxes

 

(59)

 

 

321 

Income tax provision (benefit)

 

(93)

 

 

91 

Net Income

 

34 

 

 

230 

Preferred stock dividend requirement of subsidiary

 

3 

 

 

3 

Income Available for Common Shareholders

$

31 

 

$

227 

Weighted Average Common Shares Outstanding, Basic

 

477 

 

 

459 

Weighted Average Common Shares Outstanding, Diluted

 

481 

 

 

460 

Net Earnings Per Common Share, Basic

$

0.06 

 

$

0.49 

Net Earnings Per Common Share, Diluted

$

0.06 

 

$

0.49 

Dividends Declared Per Common Share

$

0.46 

 

$

0.46 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PG&E CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

(Unaudited)

 

Three Months Ended March 31,

(in millions)

2015

 

2014

Net Income

$

34 

 

$

230 

Other Comprehensive Income

 

 

 

 

 

Pension and other postretirement benefit plans obligations

 

 

 

 

 

(net of taxes of $0 and $0, at respective dates)

 

- 

 

 

- 

Net change in investments

 

 

 

 

 

(net of taxes of $12 and $4, at respective dates)

 

(17)

 

 

5 

Total other comprehensive income (loss)

 

(17)

 

 

5 

Comprehensive Income

 

17 

 

 

235 

Preferred stock dividend requirement of subsidiary

 

3 

 

 

3 

Comprehensive Income Attributable to Common Shareholders

$

14 

 

$

232 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PG&E CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

 

Balance At

 

March 31,

 

December 31,

(in millions)

2015

 

2014

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

145 

 

$

151 

Restricted cash

 

298 

 

 

298 

Accounts receivable:

 

 

 

 

 

Customers (net of allowance for doubtful accounts of $60 and $66

 

 

 

 

 

   at respective dates)

 

905 

 

 

960 

Accrued unbilled revenue

 

651 

 

 

776 

Regulatory balancing accounts

 

2,227 

 

 

2,266 

Other

 

314 

 

 

377 

Regulatory assets

 

451 

 

 

444 

Inventories:

 

 

 

 

 

Gas stored underground and fuel oil

 

108 

 

 

172 

Materials and supplies

 

310 

 

 

304 

Income taxes receivable

 

195 

 

 

198 

Other

 

422 

 

 

443 

Total current assets

 

6,026 

 

 

6,389 

Property, Plant, and Equipment

 

 

 

 

 

Electric

 

45,888 

 

 

45,162 

Gas

 

15,970 

 

 

15,678 

Construction work in progress

 

2,115 

 

 

2,220 

Other

 

2 

 

 

2 

Total property, plant, and equipment

 

63,975 

 

 

63,062 

Accumulated depreciation

 

(19,534)

 

 

(19,121)

Net property, plant, and equipment

 

44,441 

 

 

43,941 

Other Noncurrent Assets

 

 

 

 

 

Regulatory assets

 

6,412 

 

 

6,322 

Nuclear decommissioning trusts

 

2,526 

 

 

2,421 

Income taxes receivable

 

94 

 

 

91 

Other

 

1,048 

 

 

963 

Total other noncurrent assets

 

10,080 

 

 

9,797 

TOTAL ASSETS

$

60,547 

 

$

60,127 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PG&E CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

 

Balance At

 

March 31,

 

December 31,

(in millions, except share amounts)

2015

 

2014

LIABILITIES AND EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Short-term borrowings

$

856 

 

$

633 

Accounts payable:

 

 

 

 

 

Trade creditors

 

1,007 

 

 

1,244 

Regulatory balancing accounts

 

1,039 

 

 

1,090 

Other

 

545 

 

 

476 

Disputed claims and customer refunds

 

446 

 

 

434 

Interest payable

 

150 

 

 

197 

Other

 

2,110 

 

 

1,846 

Total current liabilities

 

6,153 

 

 

5,920 

Noncurrent Liabilities

 

 

 

 

 

Long-term debt

 

15,051 

 

 

15,050 

Regulatory liabilities

 

6,307 

 

 

6,290 

Pension and other postretirement benefits

 

2,551 

 

 

2,561 

Asset retirement obligations

 

3,595 

 

 

3,575 

Deferred income taxes

 

8,626 

 

 

8,513 

Other

 

2,309 

 

 

2,218 

Total noncurrent liabilities

 

38,439 

 

 

38,207 

Commitments and Contingencies (Note 9)

 

 

 

 

 

Equity

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

Common stock, no par value, authorized 800,000,000 shares;

 

 

 

 

 

479,490,832 and 475,913,404 shares outstanding at respective dates

 

10,583 

 

 

10,421 

Reinvested earnings

 

5,126 

 

 

5,316 

Accumulated other comprehensive income (loss)

 

(6)

 

 

11 

Total shareholders' equity

 

15,703 

 

 

15,748 

Noncontrolling Interest - Preferred Stock of Subsidiary

 

252 

 

 

252 

Total equity

 

15,955 

 

 

16,000 

TOTAL LIABILITIES AND EQUITY

$

60,547 

 

$

60,127 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PG&E CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

(Unaudited)

 

Three Months Ended March 31,

(in millions)

2015

 

2014

Cash Flows from Operating Activities

 

 

 

 

 

Net income

$

34 

 

$

230 

Adjustments to reconcile net income to net cash provided by

 

 

 

 

 

operating activities:

 

 

 

 

 

Depreciation, amortization, and decommissioning

 

631 

 

 

538 

Allowance for equity funds used during construction

 

(28)

 

 

(22)

Deferred income taxes and tax credits, net

 

113 

 

 

15 

Disallowed capital expenditures

 

53 

 

 

- 

Other

 

52 

 

 

56 

Effect of changes in operating assets and liabilities:

 

 

 

 

 

     Accounts receivable

 

236 

 

 

321 

     Inventories

 

58 

 

 

62 

     Accounts payable

 

(46)

 

 

31 

     Income taxes receivable/payable

 

3 

 

 

(28)

     Other current assets and liabilities

 

(114)

 

 

(37)

     Regulatory assets, liabilities, and balancing accounts, net

 

195 

 

 

(376)

Other noncurrent assets and liabilities

 

(107)

 

 

(19)

Net cash provided by operating activities

 

1,080 

 

 

771 

Cash Flows from Investing Activities

 

 

 

 

 

Capital expenditures

 

(1,191)

 

 

(1,197)

Proceeds from sales and maturities of nuclear decommissioning

 

 

 

 

 

     trust investments

 

417 

 

 

530 

Purchases of nuclear decommissioning trust investments

 

(505)

 

 

(536)

Other

 

7 

 

 

14 

Net cash used in investing activities

 

(1,272)

 

 

(1,189)

Cash Flows from Financing Activities

 

 

 

 

 

Repayments under revolving credit facilities

 

- 

 

 

(260)

Net issuances of commercial paper, net of discount of $0

 

 

 

 

 

     and $1 at respective dates

 

223 

 

 

15 

Proceeds from issuance of long-term debt, net of premium, discount,

 

 

 

 

 

    and issuance costs of $13 in 2014

 

- 

 

 

1,237 

Repayments of long-term debt

 

- 

 

 

(889)

Common stock issued

 

151 

 

 

302 

Common stock dividends paid

 

(211)

 

 

(202)

Other

 

23 

 

 

27 

Net cash provided by financing activities

 

186 

 

 

230 

Net change in cash and cash equivalents

 

(6)

 

 

(188)

Cash and cash equivalents at January 1

 

151 

 

 

296 

Cash and cash equivalents at March 31

$

145 

 

$

108 

Supplemental disclosures of cash flow information

 

 

 

 

 

Cash received (paid) for:

 

 

 

 

 

Interest, net of amounts capitalized

$

(216)

 

$

(199)

Income taxes, net

 

- 

 

 

1 

 



 

Supplemental disclosures of noncash investing and financing activities

 

 

 

 

 

Common stock dividends declared but not yet paid

$

218 

 

$

213 

Capital expenditures financed through accounts payable

 

217 

 

 

171 

Noncash common stock issuances

 

5 

 

 

5 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

 

(Unaudited)

 

Three Months Ended

 

March 31,

(in millions)

2015

 

2014

Operating Revenues

 

 

 

 

 

Electric

$

3,014 

 

$

3,000 

Natural gas

 

886 

 

 

890 

Total operating revenues

 

3,900 

 

 

3,890 

Operating Expenses

 

 

 

 

 

Cost of electricity

 

1,000 

 

 

1,210 

Cost of natural gas

 

274 

 

 

360 

Operating and maintenance

 

1,923 

 

 

1,297 

Depreciation, amortization, and decommissioning

 

631 

 

 

538 

Total operating expenses

 

3,828 

 

 

3,405 

Operating Income

 

72 

 

 

485 

Interest income

 

1 

 

 

2 

Interest expense

 

(187)

 

 

(179)

Other income, net

 

26 

 

 

20 

Income (Loss) Before Income Taxes

 

(88)

 

 

328 

Income tax provision (benefit)

 

(92)

 

 

100 

Net Income

 

4 

 

 

228 

Preferred stock dividend requirement

 

3 

 

 

3 

Income Available for Common Stock

$

1 

 

$

225 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

Three Months Ended March 31,

(in millions)

2015

 

2014

Net Income

$

4 

 

$

228 

Other Comprehensive Income

 

 

 

 

 

Pension and other postretirement benefit plans obligations

 

 

 

 

 

(net of taxes of $0 and $0, at respective dates )

 

- 

 

 

- 

Total other comprehensive income (loss)

 

- 

 

 

- 

Comprehensive Income

$

4 

 

$

228 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

 

Balance At

 

March 31,

 

December 31,

(in millions)

2015

 

2014

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

50 

 

$

55 

Restricted cash

 

298 

 

 

298 

Accounts receivable:

 

 

 

 

 

Customers (net of allowance for doubtful accounts of $60 and $66

 

 

 

 

 

  at respective dates)

 

905 

 

 

960 

Accrued unbilled revenue

 

651 

 

 

776 

Regulatory balancing accounts

 

2,227 

 

 

2,266 

Other

 

333 

 

 

375 

Regulatory assets

 

451 

 

 

444 

Inventories:

 

 

 

 

 

Gas stored underground and fuel oil

 

108 

 

 

172 

Materials and supplies

 

310 

 

 

304 

Income taxes receivable

 

166 

 

 

168 

Other

 

408 

 

 

409 

Total current assets

 

5,907 

 

 

6,227 

Property, Plant, and Equipment

 

 

 

 

 

Electric

 

45,888 

 

 

45,162 

Gas

 

15,970 

 

 

15,678 

Construction work in progress

 

2,115 

 

 

2,220 

Total property, plant, and equipment

 

63,973 

 

 

63,060 

Accumulated depreciation

 

(19,532)

 

 

(19,120)

Net property, plant, and equipment

 

44,441 

 

 

43,940 

Other Noncurrent Assets

 

 

 

 

 

Regulatory assets

 

6,412 

 

 

6,322 

Nuclear decommissioning trusts

 

2,526 

 

 

2,421 

Income taxes receivable

 

94 

 

 

91 

Other

 

943 

 

 

864 

Total other noncurrent assets

 

9,975 

 

 

9,698 

TOTAL ASSETS

$

60,323 

 

$

59,865 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

 

Balance At

 

March 31,

 

December 31,

(in millions, except share amounts)

2015

 

2014

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Short-term borrowings

$

856 

 

$

633 

Accounts payable:

 

 

 

 

 

Trade creditors

 

1,007 

 

 

1,243 

Regulatory balancing accounts

 

1,039 

 

 

1,090 

Other

 

584 

 

 

444 

Disputed claims and customer refunds

 

446 

 

 

434 

Interest payable

 

149 

 

 

195 

Other

 

1,873 

 

 

1,604 

Total current liabilities

 

5,954 

 

 

5,643 

Noncurrent Liabilities

 

 

 

 

 

Long-term debt

 

14,701 

 

 

14,700 

Regulatory liabilities

 

6,307 

 

 

6,290 

Pension and other postretirement benefits

 

2,465 

 

 

2,477 

Asset retirement obligations

 

3,595 

 

 

3,575 

Deferred income taxes

 

8,885 

 

 

8,773 

Other

 

2,266 

 

 

2,178 

Total noncurrent liabilities

 

38,219 

 

 

37,993 

Commitments and Contingencies (Note 9)

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

Preferred stock

 

258 

 

 

258 

Common stock, $5 par value, authorized 800,000,000 shares;

 

 

 

 

 

264,374,809 shares outstanding at respective dates

 

1,322 

 

 

1,322 

Additional paid-in capital

 

6,613 

 

 

6,514 

Reinvested earnings

 

7,952 

 

 

8,130 

Accumulated other comprehensive income

 

5 

 

 

5 

Total shareholders' equity

 

16,150 

 

 

16,229 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

60,323 

 

$

59,865 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

(Unaudited)

 

Three Months Ended March 31,

(in millions)

2015

 

2014

Cash Flows from Operating Activities

 

 

 

 

 

Net income

$

4 

 

$

228 

Adjustments to reconcile net income to net cash provided by

 

 

 

 

 

operating activities:

 

 

 

 

 

Depreciation, amortization, and decommissioning

 

631 

 

 

538 

Allowance for equity funds used during construction

 

(28)

 

 

(22)

Deferred income taxes and tax credits, net

 

112 

 

 

(19)

    Disallowed capital expenditures

 

53 

 

 

- 

    Other

 

45 

 

 

39 

Effect of changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

215 

 

 

312 

Inventories

 

58 

 

 

62 

Accounts payable

 

26 

 

 

53 

Income taxes receivable/payable

 

2 

 

 

(25)

Other current assets and liabilities

 

(123)

 

 

26 

Regulatory assets, liabilities, and balancing accounts, net

 

195 

 

 

(376)

    Other noncurrent assets and liabilities

 

(89)

 

 

(37)

Net cash provided by operating activities

 

1,101 

 

 

779 

Cash Flows from Investing Activities

 

 

 

 

 

Capital expenditures

 

(1,191)

 

 

(1,197)

Proceeds from sales and maturities of nuclear decommissioning

 

 

 

 

 

trust investments

 

417 

 

 

530 

Purchases of nuclear decommissioning trust investments

 

(505)

 

 

(536)

Other

 

7 

 

 

11 

Net cash used in investing activities

 

(1,272)

 

 

(1,192)

Cash Flows from Financing Activities

 

 

 

 

 

Net issuances (repayments) of commercial paper, net of discount of $0 and $1

 

 

 

 

 

at respective dates

 

223 

 

 

(33)

Proceeds from issuance of long-term debt, net of premium, discount,

 

 

 

 

 

and issuance costs of $10 in 2014

 

- 

 

 

890 

Repayments of long-term debt

 

- 

 

 

(539)

Preferred stock dividends paid

 

(3)

 

 

(3)

Common stock dividends paid

 

(179)

 

 

(179)

Equity contribution from PG&E Corporation

 

100 

 

 

250 

Other

 

25 

 

 

30 

Net cash provided by financing activities

 

166 

 

 

416 

Net change in cash and cash equivalents

 

(5)

 

 

3 

Cash and cash equivalents at January 1

 

55 

 

 

65 

Cash and cash equivalents at March 31

$

50 

 

$

68 

Supplemental disclosures of cash flow information

 

 

 

 

 

Cash received (paid) for:

 

 

 

 

 

Interest, net of amounts capitalized

$

(211)

 

$

(188)

Income taxes, net

 

- 

 

 

1 

Supplemental disclosures of noncash investing and financing activities

 

 

 

 

 

Capital expenditures financed through accounts payable

$

217 

 

$

171 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

 

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

 

PG&E Corporation is a holding company whose primary operating subsidiary is Pacific Gas and Electric Company, a public utility operating in northern and central California.  The Utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers.  The Utility is primarily regulated by the CPUC and the FERC.  In addition, the NRC oversees the licensing, construction, operation, and decommissioning of the Utility’s nuclear generation facilities. 

 

On April 9, 2015, the CPUC approved final decisions in the three investigations pending against the Utility relating to (1) the Utility’s safety recordkeeping for its natural gas transmission system, (2) the Utility’s operation of its natural gas transmission pipeline system in or near locations of higher population density, and (3) the Utility’s pipeline installation, integrity management, recordkeeping and other operational practices, and other events or courses of conduct, that could have led to or contributed to the natural gas explosion that occurred in the City of San Bruno, California on September 9, 2010.  A decision was issued in each investigative proceeding to determine the violations that the Utility committed.  The CPUC also approved a fourth decision (the “Penalty Decision”) which imposes penalties on the Utility totaling $1.6 billion.  As a result of the Penalty Decision, the March 31, 2015 Condensed Consolidated Statements of Income reflect total charges of $553 million, consisting of $400 million for a bill credit due to natural gas customers, $100 million of accrued fines payable to the State General Fund (bringing the total accrual for fines payable to $300 million), and $53 million of estimated disallowances related to pipeline safety improvements.  (See Note 9 below.)

 

This quarterly report on Form 10-Q is a combined report of PG&E Corporation and the Utility.  PG&E Corporation’s Condensed Consolidated Financial Statements include the accounts of PG&E Corporation, the Utility, and other wholly owned and controlled subsidiaries.  The Utility’s Condensed Consolidated Financial Statements include the accounts of the Utility and its wholly owned and controlled subsidiaries.  All intercompany transactions have been eliminated in consolidation.  The Notes to the Condensed Consolidated Financial Statements apply to both PG&E Corporation and the Utility.  PG&E Corporation and the Utility operate in one segment.

 

The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with GAAP and in accordance with the interim period reporting requirements of Form 10-Q and reflect all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair presentation of PG&E Corporation and the Utility’s financial condition, results of operations, and cash flows for the periods presented.  The information at December 31, 2014 in the Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets in the 2014 Form 10-K.  This quarterly report should be read in conjunction with the 2014 Form 10-K. 

 

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities.  Some of the more significant estimates and assumptions relate to the Utility’s regulatory assets and liabilities, legal and regulatory contingencies, environmental remediation liabilities, asset retirement obligations, and pension and other postretirement benefit plans obligations.  Management believes that its estimates and assumptions reflected in the Condensed Consolidated Financial Statements are appropriate and reasonable.  Actual results could differ materially from those estimates.

 

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

 

The significant accounting policies used by PG&E Corporation and the Utility are discussed in Note 2 of the Notes to the Consolidated Financial Statements in the 2014 Form 10-K.

 

Variable Interest Entities

 

A VIE is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, or whose equity investors lack any characteristics of a controlling financial interest.  An enterprise that has a controlling financial interest in a VIE is a primary beneficiary and is required to consolidate the VIE. 

 


Some of the counterparties to the Utility’s power purchase agreements are considered VIEs.  Each of these VIEs was designed to own a power plant that would generate electricity for sale to the Utility.  To determine whether the Utility was the primary beneficiary of any of these VIEs at March 31, 2015, it assessed whether it absorbs any of the VIE’s expected losses or receives any portion of the VIE’s expected residual returns under the terms of the power purchase agreement, analyzed the variability in the VIE’s gross margin, and considered whether it had any decision-making rights associated with the activities that are most significant to the VIE’s performance, such as dispatch rights and operating and maintenance activities.  The Utility’s financial obligation is limited to the amount the Utility pays for delivered electricity and capacity.  The Utility did not have any decision-making rights associated with any of the activities that are most significant to the economic performance of any of these VIEs.  Since the Utility was not the primary beneficiary of any of these VIEs at March 31, 2015, it did not consolidate any of them.

 

Pension and Other Postretirement Benefits

 

PG&E Corporation and the Utility sponsor a non-contributory defined benefit pension plan for eligible employees hired before December 31, 2012 and a cash balance plan for those eligible employees hired after this date or who made a one-time election to participate. Net periodic costs for both are included in Pension Benefits in the table below. 

 

The net periodic benefit costs reflected in PG&E Corporation’s Condensed Consolidated Financial Statements for the three months ended March 31, 2015 and 2014 were as follows:

 

 

Pension Benefits

 

Other Benefits

 

Three Months Ended March 31,

(in millions)

2015

 

2014

 

2015

 

2014

Service cost for benefits earned

$

119 

 

$

99 

 

$

13 

 

$

11 

Interest cost

 

168 

 

 

173 

 

 

18 

 

 

19 

Expected return on plan assets

 

(218)

 

 

(202)

 

 

(28)

 

 

(26)

Amortization of prior service cost

 

4 

 

 

5 

 

 

5 

 

 

6 

Amortization of net actuarial loss

 

3 

 

 

- 

 

 

1 

 

 

- 

Net periodic benefit cost

 

76 

 

 

75 

 

 

9 

 

 

10 

Regulatory account transfer (1)

 

9 

 

 

9 

 

 

- 

 

 

- 

Total

$ 

85 

 

$ 

84 

 

$ 

9 

 

$ 

10 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The Utility recorded these amounts to a regulatory account since they are probable of recovery from, or refund to, customers in future rates.

 

There was no material difference between PG&E Corporation and the Utility for the information disclosed above.


Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

 

The changes, net of income tax, in PG&E Corporation’s accumulated other comprehensive income (loss) are summarized below:

 

 

Pension

 

Other

 

Other

 

 

 

 

Benefits

 

Benefits

 

Investments

 

Total

(in millions, net of income tax)

Three Months Ended March 31, 2015

Beginning balance

$

(21)

 

$ 

15 

 

$

17 

 

$

11 

Amounts reclassified from other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior service cost

 

 

 

 

 

 

 

 

 

 

 

(net of taxes of $2, $2, and $0, respectively) (1)

 

2 

 

 

3 

 

 

- 

 

 

5 

Amortization of net actuarial loss

 

 

 

 

 

 

 

 

 

 

 

(net of taxes of $1, $0, and $0, respectively) (1)

 

2 

 

 

- 

 

 

- 

 

 

2 

Regulatory account transfer

 

 

 

 

 

 

 

 

 

 

 

(net of taxes of $3, $2, and $0, respectively) (1)

 

(4)

 

 

(3)

 

 

- 

 

 

(7)

Change in investments

 

 

 

 

 

 

 

 

 

 

 

(net of taxes of $0, $0, and $12, respectively)

 

- 

 

 

- 

 

 

(17)

 

 

(17)

Net current period other comprehensive loss

 

- 

 

 

- 

 

 

(17)

 

 

(17)

Ending balance

$

(21)

 

$ 

15 

 

$ 

- 

 

$ 

(6)

 

 

 

 

 

 

 

 

 

 

 

 

(1) These components are included in the computation of net periodic pension and other postretirement benefit costs.  (See the “Pension and Other Postretirement Benefits” table above for additional details.)

 

 

Pension

 

Other

 

Other

 

 

 

 

Benefits

 

Benefits

 

Investments

 

Total

(in millions, net of income tax)

Three Months Ended March 31, 2014

Beginning balance

$

(7)

 

 

15 

 

 

42 

 

 

50 

Other comprehensive income before reclassifications:

 

 

 

 

 

 

 

 

 

 

 

Change in investments

 

 

 

 

 

 

 

 

 

 

 

(net of taxes of $0, $0, and $4, respectively)

 

- 

 

 

- 

 

 

5 

 

 

5 

Amounts reclassified from other comprehensive income: (1)

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior service cost

 

 

 

 

 

 

 

 

 

 

 

(net of taxes of $2, $2, and $0, respectively)

 

3 

 

 

4 

 

 

- 

 

 

7 

Regulatory account transfer

 

 

 

 

 

 

 

 

 

 

 

(net of taxes of $2, $2, and $0, respectively)

 

(3)

 

 

(4)

 

 

- 

 

 

(7)

Net current period other comprehensive income

 

- 

 

 

- 

 

 

5 

 

 

5 

Ending balance

$

(7)

 

$

15 

 

$

47 

 

$

55 

 

 

 

 

 

 

 

 

 

 

 

 

(1) These components are included in the computation of net periodic pension and other postretirement benefit costs.  (See the “Pension and Other Postretirement Benefits” table above for additional details.)

 

There was no material difference between PG&E Corporation and the Utility for the information disclosed above, with the exception of other investments which are held by PG&E Corporation.

 


Accounting Standards Issued But Not Yet Adopted

 

Presentation of Debt Issuance Costs

 

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which amends existing presentation of debt issuance costs.  PG&E Corporation and the Utility currently disclose debt issuance costs in current assets – other and noncurrent assets – other.  The amendments in this Accounting Standard Update, effective on January 1, 2016, require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  PG&E Corporation and the Utility will adopt this standard starting in the first quarter of 2016.

 

Accounting for Fees Paid in a Cloud Computing Arrangement

 

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which adds guidance to help entities evaluate the accounting treatment for cloud computing arrangements.  The accounting standards update will be effective on January 1, 2016.  PG&E Corporation and the Utility are currently evaluating the impact the guidance will have on their consolidated financial statements and related disclosures.

 

Revenue Recognition Standard

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which amends existing revenue recognition guidanceThe accounting standards update will be effective on January 1, 2017.  PG&E Corporation and the Utility are currently evaluating the impact the guidance will have on their consolidated financial statements and related disclosures.

 

NOTE 3: REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS

 

Regulatory Assets

 

Long-term regulatory assets are composed of the following:

 

 

Balance at

 

March 31,

 

December 31,

(in millions)

2015

 

2014

Pension benefits

$

2,332 

 

$

2,347 

Deferred income taxes

 

2,521 

 

 

2,390 

Environmental compliance costs

 

674 

 

 

717 

Utility retained generation

 

446 

 

 

456 

Price risk management

 

170 

 

 

127 

Unamortized loss, net of gain, on reacquired debt

 

108 

 

 

113 

Electromechanical meters

 

53 

 

 

70 

Other

 

108 

 

 

102 

Total long-term regulatory assets

$

6,412 

 

$

6,322 

 


Regulatory Liabilities

 

Long-term regulatory liabilities are composed of the following:

 

 

Balance at

 

March 31,

 

December 31,

(in millions)

2015

 

2014

Cost of removal obligations

$

4,307 

 

$

4,211 

Recoveries in excess of asset retirement obligations

 

760 

 

 

754 

Public purpose programs

 

743 

 

 

701 

Other

 

497 

 

 

624 

Total long-term regulatory liabilities

$

6,307 

 

$

6,290 

 

Regulatory Balancing Accounts

 

The Utility’s recovery of revenue requirements and costs is generally decoupled from the volume of sales.  The Utility tracks (1) differences between the Utility’s authorized revenue requirement and customer billings, and (2) differences between incurred costs and customer billings.  To the extent these differences are probable of recovery or refund over the next 12 months, the Utility records a current regulatory balancing account receivable or payable.  Regulatory balancing accounts that the Utility expects to collect or refund over a period exceeding 12 months are recorded as other noncurrent assets – regulatory assets or noncurrent liabilities – regulatory liabilities, respectively, in the Condensed Consolidated Balance Sheets.  Balancing accounts will fluctuate during the year based on seasonal electric and gas usage and the timing of when costs are incurred and customer revenues are collected. 

 

Current regulatory balancing accounts receivable and payable are composed of the following:

 

 

Receivable

 

Balance at

 

March 31,

 

December 31,

(in millions)

2015

 

2014

Electric distribution

$

643 

 

$

344 

Utility generation

 

434 

 

 

261 

Gas distribution

 

413 

 

 

566 

Energy procurement

 

412 

 

 

608 

Public purpose programs

 

87 

 

 

109 

Other

 

238 

 

 

378 

Total regulatory balancing accounts receivable

$

2,227 

 

$

2,266 

 

 

Payable

 

Balance at

 

March 31,

 

December 31,

(in millions)

2015

 

2014

Energy procurement

$

217 

 

$

188 

Public purpose programs

 

144 

 

 

154 

Other (1)

 

678 

 

 

748 

Total regulatory balancing accounts payable

$

1,039 

 

$

1,090 

 

 

 

 

 

 

(1) At March 31, 2015 Other regulatory balancing accounts payable mostly includes energy supplier settlements related to the Utility’s outstanding bankruptcy claims.  (See “Resolution of Remaining Chapter 11 Disputed Claims” in Note 9 below).

 

 


NOTE 4: DEBT

 

Revolving Credit Facilities and Commercial Paper Program

 

The following table summarizes PG&E Corporation’s and the Utility’s outstanding borrowings under their revolving credit facilities and commercial paper programs at March 31, 2015:

 

 

 

 

 

 

Letters of

 

 

 

 

 

Termination

 

Facility

 

Credit

 

Commercial

 

Facility

(in millions)

Date

 

Limit

 

Outstanding

 

Paper

 

Availability

PG&E Corporation

April 2019

 

$

300 

(1)

$

- 

 

$

- 

 

$

300 

Utility

April 2019

 

 

3,000 

(2)

 

33 

 

 

556 

 

 

2,411 

Total revolving

 

 

 

 

 

 

 

 

 

 

 

 

 

credit facilities

 

 

$

3,300 

 

$

33 

 

$

556 

 

$

2,711 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes a $100 million sublimit for letters of credit and a $100 million commitment for “swingline” loans defined as loans that are made available on a same-day basis and are repayable in full within 7 days.

(2) Includes a $1.0 billion sublimit for letters of credit and a $300 million commitment for swingline loans.

 

PG&E Corporation and the Utility can issue commercial paper up to the maximum amounts of $300 million and $1.75 billion, respectively.  PG&E Corporation and the Utility treat the amount of outstanding commercial paper as a reduction to the amount available under their respective revolving credit facilities.

 

On April 27, 2015, PG&E Corporation and the Utility amended and restated their respective $300 million and $3.0 billion revolving credit facilities that were entered into on April 1, 2013.  The amendments and restatements extended the termination dates of the credit facilities from April 1, 2019 to April 27, 2020, reduced the amount of lender commitments to the letter of credit sublimits from $100 million to $50 million for PG&E Corporation’s credit facility and from $1.0 billion to $500 million for the Utility’s credit facility, and reduced the swingline commitment on the Utility’s credit facility from $300 million to $75 million.

 

Borrowings under each amended and restated credit agreement (other than swing line loans) will bear interest based, at each borrower’s election, on (1) a London Interbank Offered Rate (“LIBOR”) plus an applicable margin or (2) the base rate plus an applicable margin. The base rate will equal the higher of the following: the administrative agent’s announced base rate, 0.5% above the overnight federal funds rate, and the one-month LIBOR plus an applicable margin.  The applicable margin for LIBOR loans will range between 0.9% and 1.475% under PG&E Corporation’s amended and restated credit agreement and between 0.8% and 1.275% under the Utility’s amended and restated credit agreement.  The applicable margin for base rate loans will range between 0% and 0.475% under PG&E Corporation’s amended and restated credit agreement and between 0% and 0.275% under the Utility’s amended and restated credit agreement.  In addition, the facility fee under PG&E Corporation’s and the Utility’s amended and restated credit agreements will range between 0.1% and 0.275% and between 0.075% and 0.225%, respectively.

 

Pollution Control Bonds

 

At March 31, 2015, the interest rates on the $614 million principal amount of pollution control bonds Series 1996 C, E, F, and 1997 B and the related loan agreements ranged from 0.01% to 0.02%.  At March 31, 2015, the interest rates on the $309 million principal amount of pollution control bonds Series 2009 A-D and the related loan agreements ranged from 0.01% to 0.03%.

 



 

NOTE 5: EQUITY

 

PG&E Corporation’s and the Utility’s changes in equity for the three months ended March 31, 2015 were as follows:

 

 

PG&E Corporation

 

Utility

 

Total

 

Total

(in millions)

Equity

 

Shareholders' Equity

Balance at December 31, 2014

$

16,000 

 

$

16,229 

Comprehensive income

 

17 

 

 

4 

Equity contributions

 

- 

 

 

100 

Common stock issued

 

156 

 

 

- 

Share-based compensation

 

6 

 

 

(1)

Common stock dividends declared

 

(221)

 

 

(179)

Preferred stock dividend requirement

 

- 

 

 

(3)

Preferred stock dividend requirement of subsidiary

 

(3)

 

 

- 

Balance at March 31, 2015

$

15,955 

 

$

16,150