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 September 30, 2017

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 the 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) has been subject to such filing requirements for the past 90 days. 

PG&E Corporation:

[X] Yes [  ] No

Pacific Gas and Electric Company:

[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, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

PG&E Corporation:

[X] Large accelerated filer

[  ] Accelerated filer

 

[  ] Non-accelerated filer (Do not check if a smaller reporting company)

 

 

[  ] Smaller reporting company

[  ] Emerging growth company

Pacific Gas and Electric Company:

[  ] Large accelerated filer

[  ] Accelerated filer

 

[X] Non-accelerated filer (Do not check if a smaller reporting company)

 

[  ] Smaller reporting company

[  ] Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

PG&E Corporation:

[  ]

Pacific Gas and Electric 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 October 24, 2017:

 

PG&E Corporation:

514,422,806

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 SEPTEMBER 30, 2017

 

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

NOTE 10: SUBSEQUENT EVENTS

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

REGULATORY MATTERS

FEDERAL INITIATIVES

ENVIRONMENTAL MATTERS

CONTRACTUAL COMMITMENTS

RISK MANAGEMENT ACTIVITIES

CRITICAL ACCOUNTING POLICIES

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

FORWARD-LOOKING STATEMENTS

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.

 

2016 Form 10-K

PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2016

AFUDC

allowance for funds used during construction

ALJ

administrative law judge

ARO

asset retirement obligation

ASU

accounting standard update issued by the FASB (see below)

CAISO

California Independent System Operator

Cal Fire

California Department of Forestry and Fire Protection

CARB

California Air Resources Board

CCA

Community Choice Aggregator

CEC

California Energy Resources Conservation and Development Commission

CO2

carbon dioxide

CEMA

Catastrophic Event Memorandum Account

CP

cathodic protection

CPUC

California Public Utilities Commission

CRRs

congestion revenue rights

DER

distributed energy resources

DIDF

Distribution Investment Deferral Framework

Diablo Canyon

Diablo Canyon nuclear power plant

DOGGR

Division of Oil, Gas, and Geothermal Resources

DOI

U.S. Department of the Interior

DRP

electric distribution resources plan

DTSC

Department of Toxic Substances Control

EDA

equity distribution agreement

EPS

earnings per common share

EV

electric vehicle

FASB

Financial Accounting Standards Board

FERC

Federal Energy Regulatory Commission

GAAP

U.S. Generally Accepted Accounting Principles

GHG

greenhouse gas

GRC

general rate case

GT&S

gas transmission and storage

IOU(s)

investor-owned utility(ies)

IRS

Internal Revenue Service

MD&A

Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2, of this Form 10-Q

NAV

net asset value

NDCTP

Nuclear Decommissioning Cost Triennial Proceedings

NEIL

Nuclear Electric Insurance Limited

NERC

North American Electric Reliability Corporation

NRC

Nuclear Regulatory Commission

OES

State of California Office of Emergency Services

OII

order instituting investigation

OIR

order instituting rulemaking

ORA

Office of Ratepayer Advocates

PCIA

Power Charge Indifference Adjustment

PD

proposed decision

PFM

petition for modification

PHMSA

Pipeline and Hazardous Materials Safety Administration

 

 


ROE

return on equity

SEC

U.S. Securities and Exchange Commission

SED

Safety and Enforcement Division of the CPUC

TE

transportation electrification

TO

transmission owner

TURN

The Utility Reform Network

Utility

Pacific Gas and Electric Company

VIE(s)

variable interest entity(ies)

WEMA

Wildfire Expense Memorandum Account

Westinghouse

Westinghouse Electric Company, LLC

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

PG&E CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

 

(Unaudited)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

(in millions, except per share amounts)

2017

 

2016

 

2017

 

2016

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

Electric

$

3,648 

 

$

3,994 

 

$

10,036 

 

$

10,590 

Natural gas

 

869 

 

 

816 

 

 

2,999 

 

 

2,363 

Total operating revenues

 

4,517 

 

 

4,810 

 

 

13,035 

 

 

12,953 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

Cost of electricity

 

1,466 

 

 

1,613 

 

 

3,436 

 

 

3,719 

Cost of natural gas

 

78 

 

 

80 

 

 

524 

 

 

377 

Operating and maintenance

 

1,364 

 

 

1,783 

 

 

4,414 

 

 

5,631 

Depreciation, amortization, and decommissioning

 

710 

 

 

694 

 

 

2,134 

 

 

2,090 

Total operating expenses

 

3,618 

 

 

4,170 

 

 

10,508 

 

 

11,817 

Operating Income

 

899 

 

 

640 

 

 

2,527 

 

 

1,136 

Interest income

 

9 

 

 

8 

 

 

22 

 

 

17 

Interest expense

 

(220)

 

 

(211)

 

 

(663)

 

 

(621)

Other income, net

 

25 

 

 

24 

 

 

59 

 

 

74 

Income Before Income Taxes

 

713 

 

 

461 

 

 

1,945 

 

 

606 

Income tax provision (benefit)

 

160 

 

 

70 

 

 

403 

 

 

(105)

Net Income

 

553 

 

 

391 

 

 

1,542 

 

 

711 

Preferred stock dividend requirement of subsidiary

 

3 

 

 

3 

 

 

10 

 

 

10 

Income Available for Common Shareholders

$

550 

 

$

388 

 

$

1,532 

 

$

701 

Weighted Average Common Shares Outstanding, Basic

 

513 

 

 

501 

 

 

511 

 

 

497 

Weighted Average Common Shares Outstanding, Diluted

 

516 

 

 

503 

 

 

514 

 

 

500 

Net Earnings Per Common Share, Basic

$

1.07 

 

$

0.77 

 

$

3.00 

 

$

1.41 

Net Earnings Per Common Share, Diluted

$

1.07 

 

$

0.77 

 

$

2.98 

 

$

1.40 

Dividends Declared Per Common Share

$

0.53 

 

$

0.49 

 

$

1.55 

 

$

1.44 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.


 

 

PG&E CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

(Unaudited)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

(in millions)

2017

 

2016

 

2017

 

2016

Net Income

$

553 

 

$

391 

 

$

1,542 

 

$

711 

Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

Pension and other postretirement benefit plans obligations

 

 

 

 

 

 

 

 

 

 

 

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

 

- 

 

 

- 

 

 

1 

 

 

- 

Total other comprehensive income (loss)

 

- 

 

 

- 

 

 

1 

 

 

- 

Comprehensive Income

 

553 

 

 

391 

 

 

1,543 

 

 

711 

Preferred stock dividend requirement of subsidiary

 

3 

 

 

3 

 

 

10 

 

 

10 

Comprehensive Income Attributable to

 

 

 

 

 

 

 

 

 

 

 

Common Shareholders

$

550 

 

$

388 

 

$

1,533 

 

$

701 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.


 


PG&E CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

 

Balance At

 

September 30,

 

December 31,

(in millions)

2017

 

2016

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

191 

 

$

177 

Restricted cash

 

7 

 

 

7 

Accounts receivable:

 

 

 

 

 

Customers (net of allowance for doubtful accounts of $58

 

 

 

 

 

at both periods)

 

1,368 

 

 

1,252 

Accrued unbilled revenue

 

972 

 

 

1,098 

Regulatory balancing accounts

 

1,478 

 

 

1,500 

Other

 

992 

 

 

801 

Regulatory assets

 

573 

 

 

423 

Inventories:

 

 

 

 

 

Gas stored underground and fuel oil

 

138 

 

 

117 

Materials and supplies

 

360 

 

 

346 

Income taxes receivable

 

25 

 

 

160 

Other

 

279 

 

 

283 

Total current assets

 

6,383 

 

 

6,164 

Property, Plant, and Equipment

 

 

 

 

 

Electric

 

54,148 

 

 

52,556 

Gas

 

18,938 

 

 

17,853 

Construction work in progress

 

2,421 

 

 

2,184 

Other

 

2 

 

 

2 

Total property, plant, and equipment

 

75,509 

 

 

72,595 

Accumulated depreciation

 

(22,986)

 

 

(22,014)

Net property, plant, and equipment

 

52,523 

 

 

50,581 

Other Noncurrent Assets

 

 

 

 

 

Regulatory assets

 

8,546 

 

 

7,951 

Nuclear decommissioning trusts

 

2,793 

 

 

2,606 

Income taxes receivable

 

52 

 

 

70 

Other

 

1,229 

 

 

1,226 

Total other noncurrent assets

 

12,620 

 

 

11,853 

TOTAL ASSETS

$

71,526 

 

$

68,598 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 


PG&E CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

(Unaudited)

 

Balance At

 

September 30,

 

December 31,

(in millions, except share amounts)

2017

 

2016

LIABILITIES AND EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Short-term borrowings

$

869 

 

$

1,516 

Long-term debt, classified as current

 

700 

 

 

700 

Accounts payable:

 

 

 

 

 

Trade creditors

 

1,419 

 

 

1,495 

Regulatory balancing accounts

 

1,328 

 

 

645 

Other

 

483 

 

 

433 

Disputed claims and customer refunds

 

240 

 

 

236 

Interest payable

 

163 

 

 

216 

Other

 

2,271 

 

 

2,323 

Total current liabilities

 

7,473 

 

 

7,564 

Noncurrent Liabilities

 

 

 

 

 

Long-term debt

 

16,619 

 

 

16,220 

Regulatory liabilities

 

7,265 

 

 

6,805 

Pension and other postretirement benefits

 

2,707 

 

 

2,641 

Asset retirement obligations

 

4,758 

 

 

4,684 

Deferred income taxes

 

11,085 

 

 

10,213 

Other

 

2,333 

 

 

2,279 

Total noncurrent liabilities

 

44,767 

 

 

42,842 

Commitments and Contingencies (Note 9)

 

 

 

 

 

Equity

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

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

 

 

 

 

 

513,773,072 and 506,891,874 shares outstanding at respective dates

 

12,560 

 

 

12,198 

Reinvested earnings

 

6,482 

 

 

5,751 

Accumulated other comprehensive loss

 

(8)

 

 

(9)

Total shareholders' equity

 

19,034 

 

 

17,940 

Noncontrolling Interest - Preferred Stock of Subsidiary

 

252 

 

 

252 

Total equity

 

19,286 

 

 

18,192 

TOTAL LIABILITIES AND EQUITY

$

71,526 

 

$

68,598 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.


 

 


PG&E CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

Nine Months Ended September 30,

(in millions)

2017

 

2016

Cash Flows from Operating Activities

 

 

 

 

 

Net income

$

1,542 

 

$

711 

Adjustments to reconcile net income to net cash provided by

 

 

 

 

 

operating activities:

 

 

 

 

 

Depreciation, amortization, and decommissioning

 

2,134 

 

 

2,090 

Allowance for equity funds used during construction

 

(63)

 

 

(84)

Deferred income taxes and tax credits, net

 

848 

 

 

644 

Disallowed capital expenditures

 

47 

 

 

517 

Other

 

204 

 

 

293 

Effect of changes in operating assets and liabilities:

 

 

 

 

 

     Accounts receivable

 

(58)

 

 

(283)

     Butte-related insurance receivable

 

(166)

 

 

(263)

     Inventories

 

(35)

 

 

(38)

     Accounts payable

 

76 

 

 

189 

     Butte-related third-party claims

 

12 

 

 

321 

     Income taxes receivable/payable

 

135 

 

 

(63)

     Other current assets and liabilities

 

23 

 

 

(32)

     Regulatory assets, liabilities, and balancing accounts, net

 

(30)

 

 

(634)

Other noncurrent assets and liabilities

 

68 

 

 

(85)

Net cash provided by operating activities

 

4,737 

 

 

3,283 

Cash Flows from Investing Activities

 

 

 

 

 

Capital expenditures

 

(3,938)

 

 

(4,128)

Decrease in restricted cash

 

- 

 

 

66 

Proceeds from sales and maturities of nuclear decommissioning

 

 

 

 

 

trust investments

 

1,043 

 

 

1,019 

Purchases of nuclear decommissioning trust investments

 

(1,071)

 

 

(1,050)

Other

 

16 

 

 

10 

Net cash used in investing activities

 

(3,950)

 

 

(4,083)

Cash Flows from Financing Activities

 

 

 

 

 

Net issuances (repayments) of commercial paper, net of discount of

 

 

 

 

 

     $4 and $5 at respective dates

 

(652)

 

 

(128)

Short-term debt financing

 

250 

 

 

250 

Short-term debt matured

 

(250)

 

 

- 

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

 

 

 

 

 

     issuance costs of $11 and $6 at respective dates

 

734 

 

 

594 

Long-term debt matured or repurchased

 

(345)

 

 

- 

Common stock issued

 

345 

 

 

727 

Common stock dividends paid

 

(754)

 

 

(678)

Other

 

(101)

 

 

(17)

Net cash provided by (used in) financing activities

 

(773)

 

 

748 

Net change in cash and cash equivalents

 

14 

 

 

(52)

Cash and cash equivalents at January 1

 

177 

 

 

123 

Cash and cash equivalents at September 30

$

191 

 

$

71 

 

 

10


 

 


Supplemental disclosures of cash flow information

 

 

 

 

 

Cash received (paid) for:

 

 

 

 

 

Interest, net of amounts capitalized

$

(644)

 

$

(611)

Income taxes, net

 

158 

 

 

154 

Supplemental disclosures of noncash investing and financing activities

 

 

 

 

 

Common stock dividends declared but not yet paid

$

272 

 

$

248 

Capital expenditures financed through accounts payable

 

301 

 

 

325 

Noncash common stock issuances

 

16 

 

 

15 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.


 

 

PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

 

(Unaudited)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

(in millions)

2017

 

2016

 

2017

 

2016

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

Electric

$

3,647 

 

$

3,993 

 

$

10,038 

 

$

10,590 

Natural gas

 

869 

 

 

816 

 

 

2,999 

 

 

2,363 

Total operating revenues

 

4,516 

 

 

4,809 

 

 

13,037 

 

 

12,953 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

Cost of electricity

 

1,466 

 

 

1,613 

 

 

3,436 

 

 

3,719 

Cost of natural gas

 

78 

 

 

80 

 

 

524 

 

 

377 

Operating and maintenance

 

1,428 

 

 

1,782 

 

 

4,477 

 

 

5,630 

Depreciation, amortization, and decommissioning

 

710 

 

 

694 

 

 

2,134 

 

 

2,090 

Total operating expenses

 

3,682 

 

 

4,169 

 

 

10,571 

 

 

11,816 

Operating Income

 

834 

 

 

640 

 

 

2,466 

 

 

1,137 

Interest income

 

10 

 

 

8 

 

 

22 

 

 

16 

Interest expense

 

(217)

 

 

(209)

 

 

(655)

 

 

(614)

Other income, net

 

24 

 

 

23 

 

 

52 

 

 

68 

Income Before Income Taxes

 

651 

 

 

462 

 

 

1,885 

 

 

607 

Income tax provision (benefit)

 

138 

 

 

73 

 

 

394 

 

 

(99)

Net Income

 

513 

 

 

389 

 

 

1,491 

 

 

706 

Preferred stock dividend requirement

 

3 

 

 

3 

 

 

10 

 

 

10 

Income Available for Common Stock

$

510 

 

$

386 

 

$

1,481 

 

$

696 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 
 

 

PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

(Unaudited)

 

 

 

Three Months Ended

   

Nine Months Ended

 

 

 

September 30,

   

September 30,

 

(in millions)

 

2017

   

2016

   

2017

   

2016

 

Net Income

 

$

513

   

$

389

   

$

1,491

   

$

706

 

Other Comprehensive Income

                               

Pension and other postretirement benefit plans obligations

                               

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

   

-

     

-

     

1

     

1

 

Total other comprehensive income (loss)

   

-

     

-

     

1

     

1

 

Comprehensive Income

 

$

513

   

$

389

   

$

1,492

   

$

707

 

 

                               

See accompanying Notes to the Condensed Consolidated Financial Statements.

 
                               

 

 


PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

 

Balance At

 

September 30,

 

December 31,

(in millions)

2017

 

2016

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

70 

 

$

71 

Restricted cash

 

7 

 

 

7 

Accounts receivable:

 

 

 

 

 

Customers (net of allowance for doubtful accounts of $58

 

 

 

 

 

  at both periods)

 

1,368 

 

 

1,252 

Accrued unbilled revenue

 

972 

 

 

1,098 

Regulatory balancing accounts

 

1,478 

 

 

1,500 

Other

 

992 

 

 

801 

Regulatory assets

 

573 

 

 

423 

Inventories:

 

 

 

 

 

Gas stored underground and fuel oil

 

138 

 

 

117 

Materials and supplies

 

360 

 

 

346 

Income taxes receivable

 

24 

 

 

159 

Other

 

279 

 

 

282 

Total current assets

 

6,261 

 

 

6,056 

Property, Plant, and Equipment

 

 

 

 

 

Electric

 

54,148 

 

 

52,556 

Gas

 

18,938 

 

 

17,853 

Construction work in progress

 

2,421 

 

 

2,184 

Total property, plant, and equipment

 

75,507 

 

 

72,593 

Accumulated depreciation

 

(22,984)

 

 

(22,012)

Net property, plant, and equipment

 

52,523 

 

 

50,581 

Other Noncurrent Assets

 

 

 

 

 

Regulatory assets

 

8,546 

 

 

7,951 

Nuclear decommissioning trusts

 

2,793 

 

 

2,606 

Income taxes receivable

 

52 

 

 

70 

Other

 

1,104 

 

 

1,110 

Total other noncurrent assets

 

12,495 

 

 

11,737 

TOTAL ASSETS

$

71,279 

 

$

68,374 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

 

Balance At

 

September 30,

 

December 31,

(in millions, except share amounts)

2017

 

2016

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Short-term borrowings

$

869 

 

$

1,516 

Long-term debt, classified as current

 

700 

 

 

700 

Accounts payable:

 

 

 

 

 

Trade creditors

 

1,419 

 

 

1,494 

Regulatory balancing accounts

 

1,328 

 

 

645 

Other

 

502 

 

 

453 

Disputed claims and customer refunds

 

240 

 

 

236 

Interest payable

 

163 

 

 

214 

Other

 

1,999 

 

 

2,072 

Total current liabilities

 

7,220 

 

 

7,330 

Noncurrent Liabilities

 

 

 

 

 

Long-term debt

 

16,270 

 

 

15,872 

Regulatory liabilities

 

7,265 

 

 

6,805 

Pension and other postretirement benefits

 

2,612 

 

 

2,548 

Asset retirement obligations

 

4,758 

 

 

4,684 

Deferred income taxes

 

11,377 

 

 

10,510 

Other

 

2,279 

 

 

2,230 

Total noncurrent liabilities

 

44,561 

 

 

42,649 

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

 

8,455 

 

 

8,050 

Reinvested earnings

 

9,460 

 

 

8,763 

Accumulated other comprehensive income

 

3 

 

 

2 

Total shareholders' equity

 

19,498 

 

 

18,395 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

71,279 

 

$

68,374 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 


PACIFIC GAS AND ELECTRIC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

Nine Months Ended September 30,

(in millions)

2017

 

2016

Cash Flows from Operating Activities

 

 

 

 

 

Net income

$

1,491 

 

$

706 

Adjustments to reconcile net income to net cash provided by

 

 

 

 

 

operating activities:

 

 

 

 

 

Depreciation, amortization, and decommissioning

 

2,134 

 

 

2,090 

Allowance for equity funds used during construction

 

(63)

 

 

(84)

Deferred income taxes and tax credits, net

 

848 

 

 

648 

    Disallowed capital expenditures

 

47 

 

 

517 

    Other

 

196 

 

 

234 

Effect of changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(58)

 

 

(283)

Butte-related insurance receivable

 

(166)

 

 

(263)

Inventories

 

(35)

 

 

(38)

Accounts payable

 

76 

 

 

194 

Butte-related third-party claims

 

12 

 

 

321 

Income taxes receivable/payable

 

135 

 

 

(64)

Other current assets and liabilities

 

36 

 

 

(28)

Regulatory assets, liabilities, and balancing accounts, net

 

(30)

 

 

(634)

    Other noncurrent assets and liabilities

 

69 

 

 

(75)

Net cash provided by operating activities

 

4,692 

 

 

3,241 

Cash Flows from Investing Activities

 

 

 

 

 

Capital expenditures

 

(3,938)

 

 

(4,128)

Decrease in restricted cash

 

- 

 

 

66 

Proceeds from sales and maturities of nuclear decommissioning

 

 

 

 

 

trust investments

 

1,043 

 

 

1,019 

Purchases of nuclear decommissioning trust investments

 

(1,071)

 

 

(1,050)

Other

 

16 

 

 

10 

Net cash used in investing activities

 

(3,950)

 

 

(4,083)

Cash Flows from Financing Activities

 

 

 

 

 

Net issuances (repayments) of commercial paper, net of discount of

 

 

 

 

 

     $4 and $5 at respective dates

 

(652)

 

 

(293)

Short-term debt financing

 

250 

 

 

250 

Short-term debt matured

 

(250)

 

 

- 

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

 

 

 

 

 

     issuance costs of $11 and $6 at respective dates

 

734 

 

 

594 

Long-term debt matured or repurchased

 

(345)

 

 

- 

Preferred stock dividends paid

 

(10)

 

 

(10)

Common stock dividends paid

 

(784)

 

 

(423)

Equity contribution from PG&E Corporation

 

405 

 

 

740 

Other

 

(91)

 

 

(7)

Net cash provided by (used in) financing activities

 

(743)

 

 

851 

Net change in cash and cash equivalents

 

(1)

 

 

9 

Cash and cash equivalents at January 1

 

71 

 

 

59 

Cash and cash equivalents at September 30

$ 

70 

 

$ 

68 

 

 

16


 

 


Supplemental disclosures of cash flow information

 

 

 

 

 

Cash received (paid) for:

 

 

 

 

 

Interest, net of amounts capitalized

$

(636)

 

$

(602)

Income taxes, net

 

158 

 

 

151 

Supplemental disclosures of noncash investing and financing activities

 

 

 

 

 

Common stock dividends declared but not yet paid

$

- 

 

$

244 

Capital expenditures financed through accounts payable

 

301 

 

 

325 

 

 

 

 

 

 

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 serving 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.

 

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 assess financial performance and allocate resources on a consolidated basis (i.e., the companies 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’s and the Utility’s financial condition, results of operations, and cash flows for the periods presented.  The information at December 31, 2016 in the Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets in the 2016 Form 10-K.  This quarterly report should be read in conjunction with the 2016 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, insurance recoveries, environmental remediation liabilities, AROs, 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.  A change in management’s estimates or assumptions could result in an adjustment that would have a material impact on PG&E Corporation’s and the Utility’s financial condition and results of operations during the period in which such change occurred.

 

Beginning on October 8, 2017, multiple wildfires spread through Northern California, including Napa, Sonoma, Butte, Humboldt, Mendocino, Del Norte, Lake, Nevada, and Yuba Counties, as well as in the area surrounding Yuba City (the “Northern California wildfires”).  According to the Cal Fire California Statewide Fire Summary dated October 30, 2017, at the peak of the wildfires, there were 21 major wildfires in California that, in total, burned over 245,000 acres, resulted in 43 fatalities, and destroyed an estimated 8,900 structures.  The causes of these fires are being investigated by Cal Fire and the CPUC, including the possible role of the Utility’s power lines and other facilities.  See Note 10 below. 

 

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 2016 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. 

 

 

18


 

 


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 has a controlling interest or was the primary beneficiary of any of these VIEs at September 30, 2017, the Utility 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 September 30, 2017, it did not consolidate any of them.

 

Asset Retirement Obligations

 

Detailed studies of the cost to decommission the Utility’s nuclear generation facilities are conducted every three years in conjunction with the NDCTP.  On May 25, 2017, the CPUC issued a final decision in the 2015 NDCTP adopting a nuclear decommissioning cost estimate of $1.1 billion for Humboldt Bay, corresponding to the Utility’s request, and $2.4 billion for Diablo Canyon, compared to the Utility’s request of $3.8 billion, or 64 percent of its request.  On an aggregate basis, the final decision adopted a $3.5 billion total nuclear decommissioning cost estimate, compared to $4.8 billion requested by the Utility.  Compared to the Utility’s estimated cost to decommission Diablo Canyon, the final decision adopts assumptions which lower costs for large component removal, site security, decommissioning contractor staff, spent nuclear fuel storage, and waste disposal.  The Utility can seek recovery of these costs in the 2018 NDCTP.  The CPUC’s final decision resulted in a $66 million reduction to the ARO on the Condensed Consolidated Balance Sheets related to the assumed length of the wet cooling period of spent nuclear fuel after plant shut down. 

 

The estimated nuclear decommissioning cost is discounted for GAAP purposes and recognized as an ARO on the Condensed Consolidated Balance Sheets.  The total nuclear decommissioning obligation accrued in accordance with GAAP was $3.4 billion at September 30, 2017, and $3.5 billion at December 31, 2016.  These estimates are based on decommissioning cost studies, prepared in accordance with the CPUC requirements.  Changes in these estimates could materially affect the amount of the recorded ARO for these assets.

 

Pension and Other Post-retirement Benefits

 

PG&E Corporation and the Utility sponsor a non-contributory defined benefit pension plan and cash balance plan.  Both plans are included in “Pension Benefits” below.  Post-retirement medical and life insurance plans are included in “Other Benefits” below.

 

The net periodic benefit costs reflected in PG&E Corporation’s Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2017 and 2016 were as follows:

 

 

Pension Benefits

 

Other Benefits

 

Three Months Ended September 30,

(in millions)

2017

 

2016

 

2017

 

2016

Service cost for benefits earned

$

118 

 

$ 

113 

 

$ 

14 

 

$ 

13 

Interest cost

 

178 

 

 

179 

 

 

20 

 

 

19 

Expected return on plan assets

 

(193)

 

 

(207)

 

 

(24)

 

 

(26)

Amortization of prior service cost

 

(1)

 

 

2 

 

 

4 

 

 

3 

Amortization of net actuarial loss

 

6 

 

 

6 

 

 

1 

 

 

1 

Net periodic benefit cost

 

108 

 

 

93 

 

 

15 

 

 

10 

Regulatory account transfer (1)

 

(23)

 

 

(8)

 

 

- 

 

 

- 

Total

$ 

85 

 

$ 

85 

 

$ 

15 

 

$ 

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.

 

 


 

Pension Benefits

 

Other Benefits

 

Nine Months Ended September 30,

(in millions)

2017

 

2016

 

2017

 

2016

Service cost for benefits earned

$

354 

 

$ 

339 

 

$ 

44 

 

$ 

39 

Interest cost

 

535 

 

 

537 

 

 

58 

 

 

57 

Expected return on plan assets

 

(578)

 

 

(621)

 

 

(73)

 

 

(80)

Amortization of prior service cost

 

(5)

 

 

6 

 

 

12 

 

 

11 

Amortization of net actuarial loss

 

17 

 

 

18 

 

 

3 

 

 

3 

Net periodic benefit cost

 

323 

 

 

279 

 

 

44 

 

 

30 

Regulatory account transfer (1)

 

(69)

 

 

(25)

 

 

- 

 

 

- 

Total

$ 

254 

 

$ 

254 

 

$ 

44 

 

$ 

30 

 

 

 

 

 

 

 

 

 

 

 

 

(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 (Loss)

 

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

 

 

Pension

 

Other

 

 

 

 

Benefits

 

Benefits

 

Total

(in millions, net of income tax)

Three Months Ended September 30, 2017

Beginning balance

$

(25)

 

$

17 

 

$

(8)

Amounts reclassified from other comprehensive income: (1)

 

 

 

 

 

 

 

 

Amortization of prior service cost

 

 

 

 

 

 

 

 

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

 

(1)

 

 

2 

 

 

1 

Amortization of net actuarial loss

 

 

 

 

 

 

 

 

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

 

4 

 

 

1 

 

 

5 

Regulatory account transfer

 

 

 

 

 

 

 

 

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

 

(3)

 

 

(3)

 

 

(6)

Net current period other comprehensive gain (loss)

 

- 

 

 

- 

 

 

- 

Ending balance

$ 

(25)

 

$ 

17 

 

$ 

(8)

 

 

 

 

 

 

 

 

 

(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

 

 

 

 

Benefits

 

Benefits

 

Total

(in millions, net of income tax)

Three Months Ended September 30, 2016

Beginning balance

$

(23)

 

$

16 

 

$

(7)

Amounts reclassified from other comprehensive income: (1)

 

 

 

 

 

 

 

 

Amortization of prior service cost

 

 

 

 

 

 

 

 

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

 

2 

 

 

1 

 

 

3 

Amortization of net actuarial loss

 

 

 

 

 

 

 

 

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

 

3 

 

 

1 

 

 

4 

Regulatory account transfer

 

 

 

 

 

 

 

 

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

 

(5)

 

 

(2)

 

 

(7)

Net current period other comprehensive gain (loss)

 

- 

 

 

- 

 

 

- 

Ending balance

$

(23)

 

$ 

16 

 

$ 

(7)

 

 

 

 

 

 

 

 

 

(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.)

 

 

21


 


 

Pension

 

Other

 

 

 

 

Benefits

 

Benefits

 

Total

(in millions, net of income tax)

Nine Months Ended September 30, 2017

Beginning balance

$

(25)

 

$

16 

 

$

(9)

Amounts reclassified from other comprehensive income: (1)

 

 

 

 

 

 

 

 

Amortization of prior service cost

 

 

 

 

 

 

 

 

(net of taxes of $2 and $5, respectively)

 

(3)

 

 

7 

 

 

4 

Amortization of net actuarial loss

 

 

 

 

 

 

 

 

(net of taxes of $7 and $1, respectively)

 

10 

 

 

2 

 

 

12 

Regulatory account transfer

 

 

 

 

 

 

 

 

(net of taxes of $5 and $6, respectively)

 

(7)

 

 

(8)

 

 

(15)

Net current period other comprehensive gain (loss)

 

- 

 

 

1 

 

 

1 

Ending balance

$

(25)

 

$

17 

 

$

(8)

 

 

 

 

 

 

 

 

 

(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

 

 

 

 

Benefits

 

Benefits

 

Total

(in millions, net of income tax)

Nine Months Ended September 30, 2016

Beginning balance

$

(23)

 

$

16 

 

$

(7)

Amounts reclassified from other comprehensive income: (1)

 

 

 

 

 

 

 

 

Amortization of prior service cost

 

 

 

 

 

 

 

 

(net of taxes of $2 and $5, respectively)

 

4 

 

 

6 

 

 

10 

Amortization of net actuarial loss

 

 

 

 

 

 

 

 

(net of taxes of $7 and $1, respectively)

 

11 

 

 

2 

 

 

13 

Regulatory account transfer

 

 

 

 

 

 

 

 

(net of taxes of $9 and $6, respectively)

 

(15)

 

 

(8)

 

 

(23)

Net current period other comprehensive gain (loss)

 

- 

 

 

- 

 

 

- 

Ending balance

$

(23)

 

$ 

16 

 

$

(7)

 

 

 

 

 

 

 

 

 

(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.

 

Recently Adopted Accounting Guidance

 

Share-Based Payment Accounting

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718), which amends the existing guidance relating to the accounting for share-based payment awards issued to employees, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows.  PG&E Corporation and the Utility have adopted this standard as of the fourth quarter of 2016. 

 

ASU 2016-09 requires, on a retrospective basis, that employee taxes paid for withheld shares be classified as cash flows from financing activities rather than as cash flows from operating activities.  As such, the Condensed Consolidated Statements of Cash Flows for PG&E Corporation and the Utility for the prior periods presented were retrospectively adjusted.  This change resulted in an increase to cash flows from operating activities and a decrease to cash flows from financing activities of $35 million for the nine months ended September 30, 2016.

 

 

 


Accounting Standards Issued But Not Yet Adopted

 

Presentation of Net Periodic Pension Cost

 

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715), which amends the existing guidance relating to the presentation of net periodic pension cost and net periodic postretirement benefit cost. On a retrospective basis, the amendment requires an employer to disaggregate the service cost component from the other components of net benefit cost and provides explicit guidance on how to present the service cost component and other components in the income statement.  In addition, on a prospective basis, the ASU limits the component of net benefit cost eligible to be capitalized to service costs.  The ASU will be effective for PG&E Corporation and the Utility on January 1, 2018, with early adoption permitted.  Although PG&E Corporation and the Utility are currently evaluating the impact the guidance will have on the Condensed Consolidated Financial Statements and related disclosures, it is not expected to have a material impact to financial results.

 

Restricted Cash

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows – Restricted Cash (Topic 230), which amends the existing guidance relating to the disclosure of restricted cash and restricted cash equivalents on the statement of cash flows.  The ASU will be effective for PG&E Corporation and the Utility on January 1, 2018, with early adoption permitted.  PG&E Corporation and the Utility will adopt this ASU in the first quarter of 2018 and do not expect a material impact to the Condensed Consolidated Statements of Cash Flows and related disclosures as a result of this ASU.

 

Recognition of Lease Assets and Liabilities

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the existing guidance relating to the definition of a lease, recognition of lease assets and lease liabilities on the balance sheet, and the disclosure of key information about leasing arrangements.  Under the new standard, all lessees must recognize an asset and liability on the balance sheet.  Operating leases were previously not recognized on the balance sheet.  The ASU will be effective for PG&E Corporation and the Utility on January 1, 2019, with early adoption permitted.  PG&E Corporation and the Utility plan to early adopt this guidance in the fourth quarter of 2018 using a modified retrospective approach.  The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply.  PG&E Corporation and the Utility expect this standard to increase lease assets and lease liabilities on the Condensed Consolidated Balance Sheets, and are still evaluating the impact the guidance will have on the Condensed Consolidated Statements of Income, Statements of Cash Flows and lease disclosures. 

 

Recognition and Measurement of Financial Assets and Financial Liabilities

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the existing guidance relating to the recognition, measurement, presentation, and disclosure of financial instruments.  The amendments require equity investments (excluding those accounted for under the equity method or those that result in consolidation) to be measured at fair value, with changes in fair value recognized in net income.  The majority of PG&E Corporation’s and the Utility’s investments are held in the nuclear decommissioning trusts.  These investments are classified as “available-for-sale” and gains or losses are refundable, or recoverable, from customers through rates.  The ASU will be effective for PG&E Corporation and the Utility on January 1, 2018.  PG&E Corporation and the Utility do not expect a material impact to the Condensed Consolidated Financial Statements and related disclosures as a result of this ASU.

 

Revenue Recognition Standard

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends existing revenue recognition guidance, effective January 1, 2018.  The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across entities, industries, jurisdictions, and capital markets and to provide more useful information to users of financial statements through improved and expanded disclosure requirements.   

 

The majority of the Utility’s revenue, including energy provided to customers, is from tariff offerings that provide natural gas or electricity without a defined contractual term.  For such arrangements, the Utility generally expects that the revenue from contracts with these customers will continue to be equivalent to the electricity or natural gas supplied and billed in that period (including unbilled revenues) and the adoption of the new guidance will not result in a significant shift in the timing of revenue recognition for such sales.

 

PG&E Corporation and the Utility intend to use the modified retrospective method when adopting the new standard on January 1, 2018.  PG&E Corporation and the Utility expect that the impact of the new guidance will be immaterial to the Condensed Consolidated Financial Statements.  Upon adoption of ASU 2014-09, the Utility plans to disclose revenues from contracts with customers separately from regulatory balancing account revenue and disaggregate customer contract revenue by customer class.

 

NOTE 3: REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS

 

Regulatory Assets and Liabilities

 

Current Regulatory Assets

 

At September 30, 2017, the Utility had current regulatory assets of $573 million, which included $392 million of costs related to CEMA fire prevention and vegetation management.  In 2014, the CPUC directed the Utility to perform additional vegetation management work in response to the severe drought in California.

 

Long-Term Regulatory Assets

 

Long-term regulatory assets are comprised of the following:

 

 

Asset Balance at

(in millions)

September 30,

2017

 

December 31,

2016

Deferred income taxes

$

4,373 

 

$ 

3,859 

Pension benefits

 

2,487 

 

 

2,429 

Environmental compliance costs

 

779 

 

 

778 

Utility retained generation

 

331 

 

 

364 

Price risk management

 

77 

 

 

92 

Unamortized loss, net of gain, on reacquired debt

 

65 

 

 

76 

Other

 

434 

 

 

353 

Total long-term regulatory assets

$

8,546 

 

$

7,951 

 

 

 

 

 

 

 

At September 30, 2017, other long-term regulatory assets included $189 million of catastrophic event-related costs incurred 2012 through 2017 that the Utility believes is recoverable through CEMA based on historical experience in recovering costs for these types of events. 

 

Long-Term Regulatory Liabilities

 

Long-term regulatory liabilities are comprised of the following:

 

 

Liability Balance at

(in millions)

September 30,

2017

 

December 31,

2016

Cost of removal obligations

$

5,456 

 

$

5,060 

Recoveries in excess of AROs

 

622 

 

 

626 

Public purpose programs

 

573 

 

 

567 

Other

 

614 

 

 

552 

Total long-term regulatory liabilities

$

7,265 

 

$

6,805 

 

 

 

 

 

 

 

For more information, see Note 3 of the Notes to the Consolidated Financial Statements in Item 8 of the 2016 Form 10-K.

 

 

24



 
 

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

 

 

Receivable

 

Balance at

(in millions)

September 30,

2017

 

December 31,

2016

Electric distribution

$

- 

 

$

132 

Electric transmission

 

182 

 

 

244 

Utility generation

 

- 

 

 

48 

Gas distribution and transmission

 

654 

 

 

541 

Energy procurement

 

135 

 

 

132 

Public purpose programs

 

116 

 

 

106 

Other

 

391 

 

 

297 

Total regulatory balancing accounts receivable

$

1,478 

 

$

1,500 

 

 

Payable

 

Balance at

(in millions)

September 30,

2017

 

December 31,

2016

Electric distribution

$

197 

 

$

- 

Utility generation

 

150 

 

 

- 

Electric transmission

 

142 

 

 

99 

Gas distribution and transmission

 

- 

 

 

48 

Energy procurement

 

131 

 

 

13 

Public purpose programs

 

426 

 

 

264 

Other

 

282 

 

 

221 

Total regulatory balancing accounts payable

$

1,328 

 

$

645 

 

For more information, see Note 3 of the Notes to the Consolidated Financial Statements in Item 8 of the 2016 Form 10-K.

 

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 September 30, 2017:

 

 

 

 

 

 

Letters of

 

 

 

 

 

Termination

 

Facility

 

Credit

 

Commercial

 

Facility

(in millions)

Date

 

Limit

 

Outstanding

 

Paper

 

Availability

PG&E Corporation

April 2022

 

$

300 

(1)

$

- 

 

$

- 

 

$

300 

Utility

April 2022

 

 

3,000 

(2)

 

50 

 

 

369 

 

 

2,581 

Total revolving credit facilities

 

 

$

3,300 

 

$

50 

 

$

369 

 

$

2,881 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes a $50 million lender commitment to the letter of credit sublimit 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 $500 million lender commitment to the letter of credit sublimit and a $75 million commitment for swingline loans.

 

In May 2017, PG&E Corporation and the Utility each extended the termination dates of their existing revolving credit facilities by one year from April 27, 2021 to April 27, 2022.

 

 

 

Other Short-term Borrowings

 

In February 2017, the Utility’s $250 million floating rate unsecured term loan, issued in March 2016, matured and was repaid.

 

Additionally, in February 2017, the Utility entered into a $250 million floating rate unsecured term loan that matures on February 22, 2018.  The proceeds were used for general corporate purposes, including the repayment of a portion of the Utility’s outstanding commercial paper.

 

Senior Notes Issuances

 

In March 2017, the Utility issued $400 million principal amount of 3.30% Senior Notes due March 15, 2027 and $200 million principal amount of 4.00% Senior Notes due December 1, 2046. The proceeds were used for general corporate purposes, including the repayment of a portion of the Utility’s outstanding commercial paper.

 

Pollution Control Bonds

 

In June 2017, the Utility repurchased and retired $345 million principal amount of pollution control bonds Series 2004 A through D.  Additionally in June 2017, the Utility remarketed three series of pollution control bonds, previously held in treasury, totaling $145 million in principal amount.  Series 2008 F and 2010 E bear interest at 1.75% per annum and mature on November 1, 2026. Series 2008 G bears interest at 1.05% per annum and matures on December 1, 2018.

 

At September 30, 2017, 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 0.88% to 0.95%.  At September 30, 2017, the interest rates on the $149 million principal amount of pollution control bonds Series 2009 A and B, and the related loan agreements, were 0.89%.

 

NOTE 5: EQUITY

 

PG&E Corporation’s and the Utility’s changes in equity for the nine months ended September 30, 2017 were as follows:

 

 

PG&E Corporation

 

Utility

 

Total

 

Total

(in millions)

Equity

 

Shareholders' Equity

Balance at December 31, 2016

$

18,192 

 

$

18,395 

Comprehensive income

 

1,543 

 

 

1,492 

Equity contributions

 

- 

 

 

405 

Common stock issued

 

361 

 

 

- 

Share-based