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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedJune 30, 2023
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
1-12609PG&E CorporationCalifornia94-3234914
1-2348Pacific Gas and Electric CompanyCalifornia94-0742640
PG&E CorporationPacific Gas and Electric Company
300 Lakeside Drive300 Lakeside Drive
Oakland,California94612Oakland, California 94612
Address of principal executive offices, including zip code
PG&E CorporationPacific Gas and Electric Company
415973-1000415973-7000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par valuePCGThe New York Stock Exchange
Equity UnitsPCGUThe New York Stock Exchange
First preferred stock, cumulative, par value $25 per share, 6% nonredeemablePCG-PANYSE American LLC
First preferred stock, cumulative, par value $25 per share, 5.50% nonredeemablePCG-PBNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 5% nonredeemablePCG-PCNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 5% redeemablePCG-PDNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 5% series A redeemablePCG-PENYSE American LLC
First preferred stock, cumulative, par value $25 per share, 4.80% redeemablePCG-PGNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 4.50% redeemablePCG-PHNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 4.36% redeemablePCG-PINYSE American LLC
1


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:YesNo
Pacific Gas and Electric Company:YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
PG&E Corporation:YesNo
Pacific Gas and Electric Company:YesNo
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:Large accelerated filer
Accelerated filer
 
Non-accelerated filer  
 Smaller reporting companyEmerging growth company
Pacific Gas and Electric Company:Large accelerated filer
Accelerated filer
 
Non-accelerated filer
 Smaller reporting companyEmerging 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
No
Pacific Gas and Electric Company:Yes
No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
PG&E Corporation:
YesNo
Pacific Gas and Electric Company:
YesNo
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 July 19, 2023: 
PG&E Corporation:
2,568,984,928*
Pacific Gas and Electric Company:
264,374,809
*Includes 67,743,590 shares of common stock held by PG&E ShareCo LLC, a wholly-owned subsidiary of PG&E Corporation, and 410,000,000 shares of common stock held by Pacific Gas and Electric Company.


2


PG&E CORPORATION AND
PACIFIC GAS AND ELECTRIC COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023
TABLE OF CONTENTS
SEC Form 10-Q Reference Number
3


4


UNITS OF MEASUREMENT
1 Kilowatt (kW)=One thousand watts
1 Kilowatt-Hour (kWh)=One kilowatt continuously for one hour
1 Megawatt (MW)=One thousand kilowatts
1 Megawatt-Hour (MWh)=One megawatt continuously for one hour
1 Gigawatt (GW)=One million kilowatts
1 Gigawatt-Hour (GWh)=One gigawatt continuously for one hour
1 Kilovolt (kV)=One thousand volts
1 MVA=One megavolt ampere
1 Mcf=One thousand cubic feet
1 MMcf=One million cubic feet
1 Bcf=One billion cubic feet
1 MDth=One thousand decatherms

5


GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
2022 Form 10-KPG&E Corporation’s and the Utility’s joint Annual Report on Form 10-K for the year ended December 31, 2022
Form 10-Q
PG&E Corporation’s and the Utility’s joint Quarterly Report on Form 10-Q for the period ended June 30, 2023
ABAssembly Bill
ALJadministrative law judge
Amended ArticlesAmended and Restated Articles of Incorporation of PG&E Corporation and the Utility, each filed on June 22, 2020, and for PG&E Corporation, as amended by the Certificate of Amendment of Articles of Incorporation, filed on May 24, 2022
AROasset retirement obligation
Bankruptcy Courtthe U.S. Bankruptcy Court for the Northern District of California
CAISOCalifornia Independent System Operator Corporation
Cal FireCalifornia Department of Forestry and Fire Protection
CEMACatastrophic Event Memorandum Account
Chapter 11Chapter 11 of Title 11 of the U.S. Code
Chapter 11 Casesthe voluntary cases commenced by each of PG&E Corporation and the Utility under Chapter 11 on January 29, 2019
Confirmation Orderthe order confirming the Plan, dated as of June 20, 2020, with the Bankruptcy Court
CPPMACOVID-19 Pandemic Protections Memorandum Account
CPUCCalifornia Public Utilities Commission
CRRcongestion revenue rights
D&O Insurancedirectors and officers liability insurance
Diablo CanyonDiablo Canyon nuclear power plant
District CourtUnited States District Court for the Northern District of California
DOEUnited States Department of Energy
DOJUnited States Department of Justice
DTSCCalifornia Department of Toxic Substances Control
DWRCalifornia Department of Water Resources
EMANIEuropean Mutual Association for Nuclear Insurance
Emergence Date
July 1, 2020, the effective date of the Plan in the Chapter 11 Cases
EOEPEnhanced Oversight and Enforcement Process
EPSearnings per common share
EPSSEnhanced Powerline Safety Settings
Exchange ActSecurities Exchange Act of 1934, as amended
FERCFederal Energy Regulatory Commission
FHPMAFire Hazard Prevention Memorandum Account
Fire Victim TrustThe trust established pursuant to the Plan for the benefit of holders of the Fire Victim Claims into which the Aggregate Fire Victim Consideration (as defined in the Plan) has been, and will continue to be, funded
First Mortgage Bondsbonds issued pursuant to the Indenture of Mortgage, dated as of June 19, 2020, between the Utility and The Bank of New York Mellon Trust Company, N.A., as amended and supplemented
FRMMAFire Risk Mitigation Memorandum Account
GAAPU.S. Generally Accepted Accounting Principles
GOgeneral order
GRCgeneral rate case
GT&Sgas transmission and storage
HSMAHazardous Substance Memorandum Account
IRCInternal Revenue Code
6


IOUsinvestor-owned utility(ies)
Lakeside Building300 Lakeside Drive, Oakland, California, 94612
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Part I, Item 2, of this Form 10-Q
MGPmanufactured gas plants
NAVnet asset value
NEILNuclear Electric Insurance Limited
New SharesShares of PG&E Corporation common stock held by ShareCo that may be exchanged for Plan Shares as contemplated by the Share Exchange and Tax Matters Agreement
NRCNuclear Regulatory Commission
OEISOffice of Energy Infrastructure Safety (successor to the Wildfire Safety Division of the CPUC)
OIIorder instituting investigation
Pacific GenerationPacific Generation LLC, a subsidiary of the Utility
PERAPublic Employees Retirement Association of New Mexico
PlanPG&E Corporation and the Utility, Knighthead Capital Management, LLC, and Abrams Capital Management, LP Joint Chapter 11 Plan of Reorganization, dated as of June 19, 2020
Plan SharesShares of PG&E Corporation common stock issued to the Fire Victim Trust pursuant to the Plan
PSPSPublic Safety Power Shutoff
Receivables Securitization ProgramThe accounts receivable securitization program entered into by the Utility on October 5, 2020, providing for the sale of a portion of the Utility's accounts receivable and certain other related rights to the SPV, which, in turn, obtains loans secured by the receivables from financial institutions
ROEreturn on equity
RTBARisk Transfer Balancing Account
RUBAResidential Uncollectibles Balancing Account
SBSenate Bill
SECUnited States Securities and Exchange Commission
Securities ActThe Securities Act of 1933, as amended
SEDSafety and Enforcement Division of the CPUC
SFGOThe Utility’s former San Francisco General Office headquarters complex
Share Exchange and
Tax Matters Agreement
Share Exchange and Tax Matters Agreement dated July 8, 2021 between PG&E Corporation, the Utility, ShareCo and the Fire Victim Trust
ShareCoPG&E ShareCo LLC, a limited liability company whose sole member is PG&E Corporation
SPV
PG&E AR Facility, LLC
TCJATax Cuts and Jobs Act of 2017
TOtransmission owner
USFSUnited States Forest Service
UtilityPacific Gas and Electric Company
Utility Revolving Credit Agreement
Credit Agreement, dated as of July 1, 2020, as amended, by and among the Utility, the several banks and other financial institutions or entities party thereto from time to time and Citibank, N.A., as Administrative Agent and Designated Agent
VIE(s)variable interest entity(ies)
VMBAVegetation Management Balancing Account
WEMAWildfire Expense Memorandum Account
WGSCwildfire and gas safety costs
Wildfire Fundstatewide fund established by AB 1054 that will be available for eligible electric utility companies to pay eligible claims for liabilities arising from wildfires occurring after July 12, 2019 that are caused by the applicable electric utility company’s equipment
WMBAWildfire Mitigation Balancing Account
WMCEWildfire Mitigation and Catastrophic Events
7


WMPWildfire Mitigation Plan
WMPMAWildfire Mitigation Plan Memorandum Account

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are necessarily subject to various risks and uncertainties. These statements reflect management’s judgment and opinions that are based on current estimates, expectations, and projections about future events and assumptions regarding these events and management’s knowledge of facts as of the date of this report. These forward-looking statements relate to, among other matters, estimated losses, including penalties and fines associated with various investigations and proceedings; forecasts of capital expenditures; forecasts of expense reduction; estimates and assumptions used in critical accounting estimates, including those relating to insurance receivables, regulatory assets and liabilities, environmental remediation, litigation, third-party claims, the Wildfire Fund, and other liabilities; and the level of future equity or debt issuances. These statements are also identified by words such as “assume,” “expect,” “intend,” “forecast,” “plan,” “project,” “believe,” “estimate,” “predict,” “anticipate,” “commit,” “goal,” “target,” “will,” “may,” “should,” “would,” “could,” “potential,” and similar expressions. PG&E Corporation and the Utility are not able to predict all the factors that may affect future results. Some of the factors that could cause future results to differ materially from those expressed or implied by the forward-looking statements, or from historical results, include, but are not limited to:

the extent to which the Wildfire Fund and revised prudency standard under AB 1054 effectively mitigate the risk of liability for damages arising from catastrophic wildfires, including whether the Utility maintains an approved WMP and a valid safety certification and whether the Wildfire Fund has sufficient remaining funds;

the risks and uncertainties associated with wildfires that have occurred or may occur in the Utility’s service area, including the wildfire that began on October 23, 2019 northeast of Geyserville in Sonoma County, California (the “2019 Kincade fire”), the wildfire that began on September 27, 2020 in the area of Zogg Mine Road and Jenny Bird Lane, north of Igo in Shasta County, California (the “2020 Zogg fire”), the wildfire that began on July 13, 2021 near the Cresta Dam in the Feather River Canyon in Plumas County, California (the “2021 Dixie fire”), the wildfire that began on September 6, 2022 near OxBow Reservoir in Placer County, California (the “2022 Mosquito fire”), and any other wildfires for which the causes have yet to be determined; the damage caused by such wildfires; the extent of the Utility’s liability in connection with such wildfires (including the risk that the Utility may be found liable for damages regardless of fault); investigations into such wildfires, including those being conducted by the CPUC; potential liabilities in connection with fines or penalties that could be imposed on the Utility if the CPUC or any other enforcement agency were to bring an enforcement action in respect of any such fire; the risk that the Utility is not able to recover costs from the Wildfire Fund or other third parties or through rates; and the effect on PG&E Corporation’s and the Utility’s reputations of such wildfires, investigations, and proceedings;

the extent to which the Utility’s wildfire mitigation initiatives are effective, including the Utility’s ability to comply with the targets and metrics set forth in its WMP; or to retain or contract for the workforce necessary to execute its WMP; the effectiveness of its system hardening, including undergrounding; the cost of the program and the timing and outcome of any proceeding to recover such costs through rates; and any determination by OEIS that the Utility has not complied with its WMP;

the impact of the Utility’s implementation of its PSPS program, and whether any fines, penalties, or civil liability for damages will be imposed on the Utility as a result; the costs in connection with PSPS events, the timing and outcome of any proceeding to recover such costs through rates, and the effects on PG&E Corporation’s and the Utility’s reputations caused by implementation of the PSPS program;

the Utility’s ability to safely, reliably, and efficiently construct, maintain, operate, protect, and decommission its facilities, and provide electricity and natural gas services safely and reliably;

significant changes to the electric power and gas industries driven by technological advancements, electrification, and the transition to a decarbonized economy; the impact of reductions in Utility customer demand for electricity and natural gas, driven by customer departures to community choice aggregators, direct access providers, and legislative mandates to replace gas-fuel technologies; and whether the Utility is successful in addressing the impact of growing distributed and renewable generation resources and changing customer demand for its natural gas and electric services;

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cyber or physical attacks, including acts of terrorism, war, and vandalism, on the Utility or its third-party vendors, contractors, or customers (or others with whom they have shared data) which could result in operational disruption; the misappropriation or loss of confidential or proprietary assets, information or data, including customer, employee, financial, or operating system information, or intellectual property; corruption of data; or potential costs, lost revenues, litigation, or reputational harm incurred in connection therewith;

the impact of severe weather events and other natural disasters, including wildfires and other fires, storms, tornadoes, floods, extreme heat events, drought, earthquakes, lightning, tsunamis, rising sea levels, mudslides, pandemics, solar events, electromagnetic events, wind events or other weather-related conditions, climate change, or natural disasters, and other events that can cause unplanned outages, reduce generating output, disrupt the Utility’s service to customers, or damage or disrupt the facilities, operations, or information technology and systems owned by the Utility, its customers, or third parties on which the Utility relies, and the effectiveness of the Utility’s efforts to prevent, mitigate, or respond to such conditions or events; the reparation and other costs that the Utility may incur in connection with such conditions or events; the impact of the adequacy of the Utility’s emergency preparedness; whether the Utility incurs liability to third parties for property damage or personal injury caused by such events; whether the Utility is able to procure replacement power; and whether the Utility is subject to civil, criminal, or regulatory penalties in connection with such events;

existing and future regulation and federal, state or local legislation, their implementation, and their interpretation; the cost to comply with such regulation and legislation; and the extent to which the Utility recovers its associated compliance and investment costs, including those regarding:

wildfires, including inverse condemnation reform, wildfire insurance, and additional wildfire mitigation measures or other reforms targeted at the Utility or its industry;

the environment, including the costs incurred to discharge the Utility’s remediation obligations or the costs to comply with standards for greenhouse gas emissions, renewable energy targets, energy efficiency standards, distributed energy resources, and electric vehicles;

the nuclear industry, including operations, seismic design, security, safety, relicensing, the storage of spent nuclear fuel, decommissioning, and cooling water intake, and whether Diablo Canyon’s operations are extended; and the Utility’s ability to continue operating Diablo Canyon until its planned retirement;

the regulation of utilities and their affiliates, including the conditions that apply to PG&E Corporation as the Utility’s holding company;

privacy and cyber security; and

taxes and tax audits;

the timing and outcomes of the Utility’s pending and future ratemaking and regulatory proceedings, including the extent to which PG&E Corporation and the Utility are able to recover their costs through rates as recorded in memorandum accounts or balancing accounts, or as otherwise requested; the Utility’s application to transfer its non-nuclear generation assets to Pacific Generation and the potential sale of a minority interest in Pacific Generation; and the transfer of ownership of the Utility’s assets to municipalities or other public entities, including as a result of the City and County of San Francisco’s valuation petition;

whether the Utility can control its operating costs within the authorized levels of spending; whether the Utility can continue implementing the Lean operating system and achieve projected savings; the extent to which the Utility incurs unrecoverable costs that are higher than the forecasts of such costs; the risks and uncertainties associated with inflation; and changes in cost forecasts or the scope and timing of planned work resulting from changes in customer demand for electricity and natural gas or other reasons;

the outcome of current and future self-reports, investigations or other enforcement actions, or notices of violation that could be issued related to the Utility’s compliance with laws, rules, regulations, or orders applicable to its gas and electric operations; the construction, expansion, or replacement of its electric and gas facilities; electric grid reliability; audit, inspection and maintenance practices; customer billing and privacy; physical and cyber security protections; environmental laws and regulations; or otherwise, such as fines; penalties; remediation obligations; or the implementation of corporate governance, operational or other changes in connection with the EOEP;
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the risks and uncertainties associated with PG&E Corporation’s and the Utility’s substantial indebtedness and the limitations on their operating flexibility in the documents governing that indebtedness;

the risks and uncertainties associated with the resolution of the Subordinated Claims and the timing and outcomes of PG&E Corporation’s and the Utility’s ongoing litigation, including the Ad Hoc Committee of Holders of Trade Claims (the “Trade Committee”) appeal of the Confirmation Order regarding post-petition interest; certain indemnity obligations to current and former officers and directors, as well as potential indemnity obligations to underwriters for certain of the Utility’s note offerings; the Wildfire-Related Non-Bankruptcy Claims; the purported PSPS class action filed in December 2019; and other third-party claims, including the extent to which related costs can be recovered through insurance, rates, or from other third parties;

the ability of PG&E Corporation and the Utility to securitize the remaining $1.385 billion of fire risk mitigation capital expenditures that were or will be incurred by the Utility;

the risks and uncertainties associated with any future substantial sales of shares of common stock of PG&E Corporation by existing shareholders, including the Fire Victim Trust;

whether PG&E Corporation or the Utility undergoes an “ownership change” within the meaning of Section 382 of the IRC, as a result of which tax attributes could be limited;

the ultimate amount of unrecoverable environmental costs the Utility incurs associated with the Utility’s natural gas compressor station site located near Hinkley, California and the Utility’s fossil fuel-fired generation sites;

the supply and price of electricity, natural gas, and nuclear fuel; the extent to which the Utility can manage and respond to the volatility of energy commodity prices; the ability of the Utility and its counterparties to post or return collateral in connection with price risk management activities; and whether the Utility is able to recover timely its electric generation and energy commodity costs through rates, including its renewable energy procurement costs;

the ability of PG&E Corporation and the Utility to access capital markets and other sources of debt and equity financing in a timely manner on acceptable terms;

the risks and uncertainties associated with rising rates for the Utility’s customers;

actions by credit rating agencies to downgrade PG&E Corporation’s or the Utility’s credit ratings;

the severity, extent and duration of the global COVID-19 pandemic and its impact on PG&E Corporation’s and the Utility’s workforce availability and the ability of the Utility to collect on customer receivables; and

the impact of changes in GAAP, standards, rules, or policies, including those related to regulatory accounting, and the impact of changes in their interpretation or application.

For more information about the significant risks that could affect the outcome of the forward-looking statements and PG&E Corporation’s and the Utility’s future financial condition, results of operations, liquidity, and cash flows, see Item 1A. Risk Factors in the 2022 Form 10-K and a detailed discussion of these matters contained in Item 7. MD&A in the 2022 Form 10-K and Item 2. in this Form 10-Q. PG&E Corporation and the Utility do not undertake any obligation to update forward-looking statements, whether in response to new information, future events, or otherwise.

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PG&E Corporation’s and the Utility’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and proxy statements, are available free of charge on both PG&E Corporation’s website, www.pgecorp.com, and the Utility's website, www.pge.com, as promptly as practicable after they are filed with, or furnished to, the SEC. Additionally, PG&E Corporation and the Utility routinely provide links to the Utility’s principal regulatory proceedings before the CPUC and the FERC at http://investor.pgecorp.com, under the “Regulatory Filings” tab, so that such filings are available to investors upon filing with the relevant agency. PG&E Corporation and the Utility also routinely post or provide direct links to presentations, documents, and other information that may be of interest to investors, including regarding dividends, at http://investor.pgecorp.com, under the “Wildfire and Safety Updates,” “News & Events: Events & Presentations,” and “Shareholders: Dividend Information” tabs, respectively, in order to publicly disseminate such information. Specifically, within two hours during business hours or four hours outside of business hours of the determination that an incident is attributable or allegedly attributable to the Utility’s electric facilities and has resulted in property damage estimated to exceed $50,000, a fatality or injury requiring overnight in-patient hospitalization, or significant public or media attention, the Utility is required to submit an electric incident report including information about such incident to the CPUC. The information included in an electric incident report is limited and may not include important information about the facts and circumstances about the incident due to the limited scope of the reporting requirements and timing of the report and is necessarily limited to information to which the Utility has access at the time of the report. Ignitions are also reportable under CPUC Decision 14-02-015 when they involve self-propagating fire of material other than electrical or communication facilities; the fire traveled greater than one linear meter from the ignition point; and the Utility has knowledge that the fire occurred. It is possible that any of these filings or information included therein could be deemed to be material information. The information contained on such website is not part of this or any other report that PG&E Corporation or the Utility files with, or furnishes to, the SEC. PG&E Corporation and the Utility are providing the address to this website solely for the information of investors and do not intend the address to be an active link.

ITEM 1A. RISK FACTORS

For information about the significant risks that could affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows, see the section of the 2022 Form 10-K entitled “Risk Factors” and the section of this quarterly report entitled “Forward-Looking Statements.”

PART I. FINANCIAL INFORMATION

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

OVERVIEW

This is a combined quarterly report of PG&E Corporation and the Utility and should be read in conjunction with each company’s Condensed Consolidated Financial Statements and the Notes to the Condensed Consolidated Financial Statements included in Item 1. It should also be read in conjunction with the 2022 Form 10-K.

Key Factors Affecting Financial Results

PG&E Corporation and the Utility believe that their financial condition, results of operations, liquidity, and cash flows may be materially affected by the following factors:

The Uncertainties in Connection with Wildfires, Wildfire Mitigation, and Associated Cost Recovery. PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows may be materially affected by the costs and effectiveness of the Utility’s wildfire mitigation initiatives; the extent of damages from wildfires that do occur; the financial impacts of wildfires; and PG&E Corporation’s and the Utility’s ability to mitigate those financial impacts with insurance, the Wildfire Fund, and regulatory recovery.

In response to the wildfire threat facing California, PG&E Corporation and the Utility have taken aggressive steps to mitigate the threat of catastrophic wildfires. The Utility’s wildfire mitigation initiatives include EPSS, PSPS, vegetation management, asset inspections, and system hardening. In particular, in 2022, the Utility expanded the EPSS program to all distribution lines in high fire risk areas. The Utility is also focused on undergrounding more lines each year while using economies of scale to make undergrounding more cost efficient. These initiatives have significantly reduced the number of CPUC-reportable ignitions and the number of acres burned. The success of the Utility’s wildfire mitigation efforts depends on many factors, including whether the Utility can retain or contract for the workforce necessary to execute its wildfire mitigation actions.
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PG&E Corporation and the Utility have incurred and will continue to incur substantial expenditures in connection with these initiatives. For more information on incurred expenditures, see Note 3 of the Notes to the Condensed Consolidated Financial Statements in Item 1. The extent to which the Utility will be able to recover these expenditures and other potential costs through rates is uncertain. If additional requirements are imposed that go beyond current expectations, such requirements could have a substantial impact on the costs of the Utility’s wildfire mitigation initiatives.

The Utility is subject to a number of legal and regulatory requirements related to its wildfire mitigation efforts, which require periodic inspections of electric assets and ongoing reporting related to this work. Although the Utility believes that it has complied substantially with these requirements, it continually reviews and has identified instances of noncompliance. The Utility intends to update the CPUC and OEIS as its review progresses. The Utility could face fines, penalties, enforcement action, or other adverse legal or regulatory consequences for late inspections or other noncompliance related to wildfire mitigation efforts. See “Self-Reports to the CPUC” in “Regulatory Matters” below.

Despite these extensive measures, the potential that the Utility’s equipment will be involved in the ignition of future wildfires, including catastrophic wildfires, is significant. This risk may be attributable to, and exacerbated by, a variety of factors, including climate (in particular extended periods of seasonal dryness coupled with periods of high wind velocities and other storms), infrastructure, and vegetation conditions. Once an ignition has occurred, the Utility is unable to control the extent of damages, which is primarily determined by environmental conditions (including weather and vegetation conditions), third-party suppression efforts, and the location of the wildfire.

The financial impact of past wildfires is significant. As of June 30, 2023, PG&E Corporation and the Utility had recorded aggregate liabilities of $1.025 billion, $400 million, $1.175 billion, and $100 million for claims in connection with the 2019 Kincade fire, the 2020 Zogg fire, the 2021 Dixie fire, and the 2022 Mosquito fire, respectively, and in each case before available insurance, and, in the case of the 2021 Dixie fire and the 2022 Mosquito fire, other probable cost recoveries. These liability amounts correspond to the lower end of the range of reasonably estimable probable losses but do not include all categories of potential damages and losses.

PG&E Corporation and the Utility may be able to mitigate the financial impact of future wildfires in excess of insurance coverage through the Wildfire Fund, or cost recovery through rates. Each of these mitigations involves uncertainties, and liabilities could exceed available recoveries. See “Loss Recoveries” in Note 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

Recorded liabilities in connection with the 2019 Kincade fire and the 2021 Dixie fire have already exceeded potential amounts recoverable under applicable insurance policies. As of June 30, 2023, the Utility has recorded insurance receivables of $430 million for the 2019 Kincade fire, $372 million for the 2020 Zogg fire, $528 million for the 2021 Dixie fire, and $54 million for the 2022 Mosquito fire.

If the eligible claims for liabilities arising from wildfires were to exceed $1.0 billion in any Wildfire Fund coverage year (“Coverage Year”), the Utility may be eligible to make a claim against the Wildfire Fund under AB 1054 for such excess amount. The Wildfire Fund is available to the Utility to pay eligible claims for liabilities arising from wildfires, provided that the Utility satisfies the conditions to the Utility’s ongoing participation in the Wildfire Fund set forth in AB 1054 and that the Wildfire Fund has sufficient remaining funds. However, the impact of AB 1054 on PG&E Corporation and the Utility is subject to numerous uncertainties, including the Utility’s ability to demonstrate to the CPUC that wildfire-related costs paid from the Wildfire Fund were just and reasonable and therefore not subject to reimbursement, and whether the benefits of participating in the Wildfire Fund ultimately outweigh its substantial costs. Finally, recoveries for the 2019 Kincade fire would be subject to a 40% limitation on the allowed amount of claims arising before emergence from bankruptcy. As of June 30, 2023, the Utility has recorded a Wildfire Fund receivable of $175 million for the 2021 Dixie fire. See “Wildfire Fund under AB 1054” in Note 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

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The Utility will be permitted to recover its wildfire-related claims in excess of insurance and legal fees through rates unless the CPUC or the FERC, as applicable, determines that the Utility has not met the applicable prudency standard. The revised prudency standard under AB 1054 has not been interpreted or applied by the CPUC, and it is possible that the CPUC could interpret the standard or apply it to the relevant facts differently from how the Utility has interpreted and applied the standard, in which case the Utility may not be able to recover all or a portion of expenses that it has recorded as receivables. As of June 30, 2023, the Utility has recorded receivables for regulatory recovery of $528 million for the 2021 Dixie fire and $60 million for the 2022 Mosquito fire. See “2021 Dixie Fire,” and “2022 Mosquito Fire” in Note 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1 for more information.

The Timing and Outcome of Ratemaking and Other Proceedings. Regulatory ratemaking proceedings are a key aspect of the Utility’s business. The Utility’s revenue requirements consist primarily of a base amount set to enable the Utility to recover its reasonable operating expenses (e.g., maintenance, administrative and general expenses) and capital costs (e.g., depreciation and financing expenses). In addition, the CPUC authorizes the Utility to collect revenues to recover costs that the Utility is allowed to pass through to customers (referred to as “Utility Revenues and Costs that did not Impact Earnings” below), including its costs to procure electricity and natural gas for customers and to administer public purpose and customer programs. Although the Utility generally seeks to recover its recorded costs on a timely basis, in recent years, the amount of the costs recorded in memorandum and balancing accounts has increased. The Utility has also applied to transfer its non-nuclear generation assets to Pacific Generation and potentially sell a minority interest in Pacific Generation. The outcome of regulatory proceedings can be affected by many factors, including intervening parties’ testimonies, potential rate impacts, the regulatory and political environments, and other factors. See Notes 3 and 11 of the Notes to the Condensed Consolidated Financial Statements in Item 1 and “Regulatory Matters” below.

The Outcome of Other Enforcement, Litigation, and Regulatory Matters, and Other Government Proposals. The Utility is subject to enforcement, litigation, and regulatory matters, including those described above, EOEP proceedings, and actions in connection with the Utility’s WMP, and safety and other self-reports. See Note 11 of the Notes to the Condensed Consolidated Financial Statements in Item 1. In addition, the Utility’s business profile and financial results could be impacted by actions by municipalities and other public entities to acquire the electric assets of the Utility within their respective jurisdictions or by state intervention, including the possibility of a state takeover of the Utility. See “Jurisdictions may attempt to acquire the Utility’s assets through eminent domain” in Item 1A. Risk Factors in the 2022 Form 10-K for more information. These matters could result in penalties, additional regulatory requirements, or changes to the Utility’s operations. PG&E Corporation and the Utility seek to limit these matters by implementing a robust compliance program and by delivering excellent customer experiences.

PG&E Corporation’s and the Utility’s Ability to Control Operating Costs. Under cost-of-service ratemaking, a utility’s earnings depend on its ability to manage costs within the amounts authorized for recovery in its ratemaking proceedings. The Utility has set a goal to increase its capital investments to meet safety and climate goals, while also reducing non-fuel operating and maintenance costs by two percent per year. The Utility’s ability to meet this goal depends, in part, on whether the Utility can improve the planning and execution of its work by continuing to implement the Lean operating system.

For more information about the risks that could materially affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows, or that could cause future results to differ from historical results, see Item 1A. Risk Factors in the 2022 Form 10-K.  In addition, this quarterly report contains forward-looking statements that are necessarily subject to various risks and uncertainties.  These statements reflect management’s judgment and opinions that are based on current estimates, expectations, and projections about future events and assumptions regarding these events and management’s knowledge of facts as of the date of this report.  See “Forward-Looking Statements” above for a list of some of the factors that may cause actual results to differ materially.  PG&E Corporation and the Utility are unable to predict all the factors that may affect future results and do not undertake an obligation to update forward-looking statements, whether in response to new information, future events, or otherwise.

Tax Matters

PG&E Corporation had a U.S. federal net operating loss carryforward of approximately $26.6 billion and a California net operating loss carryforward of approximately $25.2 billion as of December 31, 2022.

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Under Section 382 of the IRC, if a corporation (or a consolidated group) undergoes an “ownership change,” net operating loss carryforwards and other tax attributes may be subject to certain limitations. In general, an ownership change occurs if the aggregate stock ownership of certain shareholders (generally five percent shareholders, applying certain look-through and aggregation rules) increases by more than 50% over such shareholders’ lowest percentage ownership during the testing period (generally three years). PG&E Corporation’s and the Utility’s Amended Articles limit Transfers (as defined in the Amended Articles) that increase a person’s or entity’s (including certain groups of persons) ownership of PG&E Corporation’s equity securities to 4.75% or more prior to the Restriction Release Date (as defined in the Amended Articles) without approval by the Board of Directors of PG&E Corporation (the “Ownership Restrictions”). As discussed below under “Update on Ownership Restrictions in PG&E Corporation’s Amended Articles,” due to the election to treat the Fire Victim Trust as a grantor trust for income tax purposes, the calculation of Percentage Stock Ownership (as defined in the Amended Articles) will effectively be based on a reduced number of shares outstanding, namely the total number of outstanding equity securities less the number of equity securities held by the Fire Victim Trust, the Utility, and ShareCo. As of the date of this report, it is more likely than not that PG&E Corporation has not undergone an ownership change, and consequently, its net operating loss carryforwards and other tax attributes are not limited by Section 382 of the IRC.

Furthermore, the activities of the Fire Victim Trust are treated as activities of the Utility for tax purposes. Accordingly, PG&E Corporation will recognize income tax benefits and the corresponding deferred tax asset as the Fire Victim Trust sells shares of PG&E Corporation common stock, and the amounts of such benefits and assets will be impacted by the price at which the Fire Victim Trust sells the shares, rather than the price at the time such shares were transferred to the Fire Victim Trust. On each of January 9, 2023, April 11, 2023, and July 12, 2023, the Fire Victim Trust exchanged 60,000,000 Plan Shares for an equal number of New Shares in the manner contemplated by the Share Exchange and Tax Matters Agreement; the Fire Victim Trust thereafter reported that it sold the applicable New Shares. During the six months ended June 30, 2023, the Fire Victim Trust’s sale of PG&E Corporation common stock in the aggregate amount of 120,000,000 shares resulted in an aggregate tax benefit of $527 million recorded in PG&E Corporation’s and the Utility’s Condensed Consolidated Financial Statements. Cumulatively through June 30, 2023, the Fire Victim Trust has sold 350,000,000 shares resulting in an aggregate tax benefit of approximately $1.4 billion recorded in PG&E Corporation’s and the Utility’s Condensed Consolidated Financial Statements.

Update on Ownership Restrictions in PG&E Corporation’s Amended Articles

As a result of the grantor trust election, shares of PG&E Corporation common stock owned by the Fire Victim Trust are treated as held by the Utility and, in turn, attributed to PG&E Corporation for income tax purposes. Consequently, any shares of PG&E Corporation common stock owned by the Fire Victim Trust, along with any shares owned by the Utility directly, are effectively excluded from the total number of outstanding equity securities when calculating a person’s Percentage Stock Ownership (as defined in the Amended Articles) for purposes of the 4.75% ownership limitation in the Amended Articles. Shares owned by ShareCo are also effectively excluded because ShareCo is a disregarded entity for income tax purposes. For example, although PG&E Corporation had 2,568,984,928 shares outstanding as of July 19, 2023, only 2,023,497,748 shares (the number of outstanding shares of common stock less the number of shares held by the Fire Victim Trust, the Utility, and ShareCo) count as outstanding for purposes of the ownership restrictions in the Amended Articles. As such, based on the total number of outstanding equity securities and taking into account the shares of PG&E Corporation common stock known to have been sold by the Fire Victim Trust as of July 19, 2023, a person’s effective Percentage Stock Ownership limitation for purposes of the Amended Articles as of July 19, 2023 was 3.74% of the outstanding shares. As of July 19, 2023, to the knowledge of PG&E Corporation, the Fire Victim Trust had sold 410,000,000 shares of PG&E Corporation common stock in the aggregate and owned 67,743,590 shares.

RESULTS OF OPERATIONS

The following discussion presents PG&E Corporation’s and the Utility’s operating results for the three and six months ended June 30, 2023 and 2022. See “Key Factors Affecting Financial Results” above for further discussion about factors that could affect future results of operations.

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PG&E Corporation

The consolidated results of operations consist primarily of results related to the Utility, which are discussed in the “Utility” section below.  The following table provides a summary of net income (loss) attributable to common shareholders for the three and six months ended June 30, 2023 and 2022:
Three Months Ended June 30,Six Months Ended June 30,
(in millions)2023202220232022
Consolidated Total$406 $356 $975 $831 
PG&E Corporation(70)(240)(124)(292)
Utility$476 $596 $1,099 $1,123 

PG&E Corporation’s net loss primarily consists of interest expense on long-term debt.

Utility

The table below shows certain items from the Utility’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022.  The table separately identifies the revenues and costs that impacted earnings from those that did not impact earnings.  In general, expenses the Utility is authorized to pass through directly to customers (such as costs to purchase electricity and natural gas, as well as costs to fund public purpose programs), and the corresponding amount of revenues collected to recover those pass-through costs, do not impact earnings.

Revenues that impact earnings are primarily those that have been authorized by the CPUC and the FERC to recover the Utility’s costs to own and operate its assets and to provide the Utility an opportunity to earn its authorized rate of return on rate base.  Expenses that impact earnings are primarily those that the Utility incurs to own and operate its assets.

CPUC and FERC rates decouple authorized revenue from the volume of electricity and natural gas sales, so the Utility receives revenue equal to the amounts authorized by the relevant regulatory agencies. As a result, the volume of electricity and natural gas sold does not have a direct impact on PG&E Corporation’s and the Utility’s financial results.
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Three Months Ended June 30, 2023Three Months Ended June 30, 2022
Revenues/Costs:Revenues/Costs:
(in millions)That Impacted EarningsThat Did Not Impact EarningsTotal UtilityThat Impacted EarningsThat Did Not Impact EarningsTotal Utility
Electric operating revenues$2,496 $1,356 $3,852 $2,387 $1,303 $3,690 
Natural gas operating revenues1,029 409 1,438 932 496 1,428 
   Total operating revenues3,525 1,765 5,290 3,319 1,799 5,118 
Cost of electricity— 672 672 — 780 780 
Cost of natural gas— 274 274 — 359 359 
Operating and maintenance
1,583 848 2,431 1,437 773 2,210 
SB 901 securitization charges, net289 — 289 40 — 40 
Wildfire-related claims, net of recoveries(1)— (1)145 — 145 
Wildfire Fund expense117 — 117 117 — 117 
Depreciation, amortization, and decommissioning997 — 997 941 — 941 
   Total operating expenses2,985 1,794 4,779 2,680 1,912 4,592 
Operating income (loss)540 (29)511 639 (113)526 
Interest income
140 — 140 20 20 
Interest expense
(553)— (553)(353)— (353)
Other income, net
35 29 64 19 113 132 
Income before income taxes
162  162 325  325 
Income tax benefit (1)
(318)(275)
Net Income
480 600 
Preferred stock dividend requirement (1)
Income Available for Common Shareholders
$476 $596 
(1) These items impacted earnings for the three months ended June 30, 2023 and 2022.

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Six Months Ended June 30, 2023Six Months Ended June 30, 2022
Revenues/Costs:Revenues/Costs:
(in millions)That Impacted EarningsThat Did Not Impact EarningsTotal UtilityThat Impacted EarningsThat Did Not Impact EarningsTotal Utility
Electric operating revenues$5,558 $2,413 $7,971 $5,290 $2,558 $7,848 
Natural gas operating revenues2,011 1,517 3,528 1,855 1,213 3,068 
   Total operating revenues7,569 3,930 11,499 7,145 3,771 10,916 
Cost of electricity— 1,194 1,194 — 1,282 1,282 
Cost of natural gas— 1,190 1,190 — 920 920 
Operating and maintenance
3,504 1,601 5,105 3,522 1,795 5,317 
SB 901 securitization charges, net562 — 562 40 — 40 
Wildfire-related claims, net of recoveries(3)— (3)144 — 144 
Wildfire Fund expense234 — 234 235 — 235 
Depreciation, amortization, and decommissioning2,074 — 2,074 1,913 — 1,913 
   Total operating expenses6,371 3,985 10,356 5,854 3,997 9,851 
Operating income (loss)1,198 (55)1,143 1,291 (226)1,065 
Interest income
250 — 250 29 — 29 
Interest expense
(1,073)— (1,073)(717)— (717)
Other income, net
93 55 148 62 226 288 
Income before income taxes
468  468 665  665 
Income tax benefit (1)
(638)(465)
Net Income
1,106 1,130 
Preferred stock dividend requirement (1)
Income Available for Common Shareholders
$1,099 $1,123 
(1) These items impacted earnings for the six months ended June 30, 2023 and 2022.

Utility Revenues and Costs that Impacted Earnings

The following discussion presents the Utility’s operating results for the three and six months ended June 30, 2023 and 2022, focusing on revenues and expenses that impacted earnings for these periods.

Operating Revenues

The Utility’s electric and natural gas operating revenues that impacted earnings increased by $206 million, or 6%, in the three months ended June 30, 2023, compared to the same period in 2022, primarily due to additional revenues as authorized through the FERC formula rate and other miscellaneous revenues in the three months ended June 30, 2023 as compared to the same period in 2022.

The Utility’s electric and natural gas operating revenues that impacted earnings increased by $424 million, or 6%, in the six months ended June 30, 2023, compared to the same period in 2022, primarily due to the recognition of approximately $585 million in revenues authorized in the final decision of the 2020 WMCE application (see “2020 WMCE Application” below) in the six months ended June 30, 2023, with no comparable revenues in 2022. Additionally, the Utility recognized increased revenues as authorized through the FERC formula rate. These increases were partially offset by the recognition of approximately $310 million in revenues related to the approval of the settlement agreement for the 2018 CEMA application (see “2018 CEMA Application” in Regulatory Matters in the 2022 Form 10-K) in the six months ended June 30, 2022 with no comparable revenues in 2023.

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Operating and Maintenance

The Utility’s operating and maintenance expenses that impacted earnings increased by $146 million, or 10%, in the three months ended June 30, 2023, compared to the same period in 2022, primarily due to the recognition of previously deferred expenses and $50 million related to the Zogg Stipulation (as defined in Note 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1). These increases were partially offset by $85 million in expenses related to the Kincade SED Settlement as well as approximately $55 million in expenses related to the Kincade Stipulation and the Dixie Stipulation (each as defined in Note 15 of the Notes to the Consolidated Financial Statements in Item 8 of the 2022 Form 10-K) in the three months ended June 30, 2022.

The Utility’s operating and maintenance expenses that impacted earnings decreased by $18 million, or 1%, in the six months ended June 30, 2023, compared to the same period in 2022, as a result of the recognition of approximately $310 million of previously deferred expenses which were authorized by the settlement agreement for the 2018 CEMA application (see “2018 CEMA Application” in Regulatory Matters in the 2022 Form 10-K), $85 million in expenses related to the Kincade SED Settlement, and $55 million in expenses related to the Kincade Stipulation and the Dixie Stipulation (each as defined in Note 15 of the Notes to the Consolidated Financial Statements in Item 8 of the 2022 Form 10-K) in the six months ended June 30, 2022, with no comparable charges in 2023, as well as operating cost efficiencies in the six months ended June 30, 2023. These decreases were partially offset by the recognition of approximately $422 million of previously deferred expenses authorized in the final decision of the 2020 WMCE application (see “2020 WMCE Application” below) in the six months ended June 30, 2023. Additionally, the Utility recognized $50 million in expenses related to the Zogg Stipulation (as defined in Note 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1) in the six months ended June 30, 2023.

SB 901 Securitization Charges, Net

SB 901 securitization charges, net, that impacted earnings increased by $249 million, or 623%, and $522 million, or 1305%, in the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022. In the three and six months ended June 30, 2023, the Utility recorded charges of $289 million and $562 million, respectively, representing the amounts that are refundable to ratepayers as a result of tax benefits realized within income tax expense related to the Fire Victim Trust’s sale of PG&E Corporation common stock, compared to charges of $40 million in the same periods in 2022. For more information, see Note 5 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

Wildfire-Related Claims, Net of Recoveries

Costs related to wildfires that impacted earnings decreased by $146 million, or 100%, and $147 million, or 100%, in the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022. The Utility recognized pre-tax charges of $150 million related to the 2019 Kincade fire in the second quarter of 2022, with no comparable charges in 2023.

Wildfire Fund Expense

There was no material change to Wildfire Fund expense that impacted earnings for the periods presented.

Depreciation, Amortization, and Decommissioning

The Utility’s depreciation, amortization, and decommissioning expenses that impacted earnings increased by $56 million, or 6%, and $161 million, or 8%, in the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, primarily due to the growth in plant balance from capital additions and an increase in nuclear decommissioning expense.

Interest Income

Interest income that impacted earnings increased by $120 million, or 600%, and $221 million, or 762%, in the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, primarily due to higher interest rates earned on regulatory balancing accounts.

Interest Expense

Interest expense that impacted earnings increased by $200 million, or 57%, and $356 million, or 50%, in the three and six months ended June 30, 2023, respectively, compared to the same period in 2022, primarily due to the issuance of additional long-term debt and an increase in interest rates on variable-rate debt.

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Other Income, Net

Changes to Other income, net that impact earnings are primarily driven by fluctuations in the balance of construction work in progress that impact the equity component of allowance for funds used during construction, and gains and losses on equity securities held by the customer credit trust.

Income Tax Benefit

Income tax benefit increased by $43 million and $173 million in the three and six months ended June 30, 2023, compared to the same periods in 2022, primarily due to an increase in the tax benefit recognized related to the sale of shares in the Fire Victim Trust in the three and six months ended June 30, 2023, compared to the same periods in 2022.

The following table reconciles the income tax expense at the federal statutory rate to the income tax provision:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Federal statutory income tax rate21.0 %21.0 %21.0 %21.0 %
Increase (decrease) in income tax rate resulting from:
State income tax (net of federal benefit) (1)
(53.6)%(18.6)%(36.0)%(15.0)%
Effect of regulatory treatment of fixed asset differences (2)
(54.1)%(31.9)%(42.1)%(30.9)%
Tax credits
(1.5)%(1.0)%(1.1)%(0.9)%
Fire Victim Trust (3)
(124.5)%(46.9)%(84.4)%(38.1)%
Other, net17.8 %(7.8)%6.4 %(6.1)%
Effective tax rate(194.9)%(85.2)%(136.2)%(70.0)%
(1) Includes the effect of state flow-through ratemaking treatment.
(2) Includes the effect of federal flow-through ratemaking treatment for certain property-related costs. For these temporary tax differences, the Utility recognizes the deferred tax impact in the current period and records offsetting regulatory assets and liabilities. Therefore, the Utility’s effective tax rate is impacted as these differences arise and reverse. The Utility recognizes such differences as regulatory assets or liabilities as it is probable that these amounts will be recovered from or returned to customers in future rates. These amounts also reflect the impact of the amortization of excess deferred tax benefits to be refunded to customers as a result of the TCJA.
(3) Includes the tax benefit related to the sale of shares of stock in the Fire Victim Trust. See “Tax Matters” above and Note 6 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

Utility Revenues and Costs that did not Impact Earnings

Fluctuations in revenues that did not impact earnings are primarily driven by procurement costs.  See below for more information.

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Cost of Electricity

The Utility’s Cost of electricity includes the cost of power purchased from third parties (including renewable energy resources), fuel and associated transmission costs used in its own generation facilities, fuel and associated transmission costs supplied to other facilities under power purchase agreements, costs to comply with California’s cap-and-trade program, and realized gains and losses on price risk management activities. See Note 8 of the Notes to the Condensed Consolidated Financial Statements in Item 1. Cost of electricity also includes net sales (Utility owned generation and third parties) in the CAISO electricity markets. The Utility’s total purchased power is driven by customer demand, net CAISO electricity market activities (purchases or sales), the availability of the Utility’s own generation facilities (including Diablo Canyon and its hydroelectric plants), and the cost-effectiveness of each source of electricity. The Cost of electricity decreased in the three and six months ended June 30, 2023, compared to the same periods in 2022. These decreases were primarily the result of decreased customer demand for the Utility’s bundled electric services, higher energy sales to the CAISO, and $48 million recorded as a deduction to the Cost of electricity for income related to DOE awards for eligible costs incurred to support the extension of Diablo Canyon. These reductions were partially offset by increased fuel costs due to higher natural gas prices occurring in early 2023. See Note 2 of the Notes to the Condensed Consolidated Financial Statements in Item 1 for information on the DOE awards.
Three Months Ended June 30,Six Months Ended June 30,
(in millions)2023202220232022
Cost of purchased power, net
$626 $704 $765 $1,137 
Fuel used in generation facilities46 76 429 145 
Total cost of electricity$672 $780 $1,194 $1,282 

Cost of Natural Gas

The Utility’s Cost of natural gas includes the costs of procurement, storage and transportation of natural gas, costs to comply with California’s cap-and-trade program and realized gains and losses on price risk management activities. See Note 8 of the Notes to the Condensed Consolidated Financial Statements in Item 1.  The Cost of natural gas decreased in the three months ended June 30, 2023, as compared to the same period in 2022 primarily due to lower natural gas prices. The Cost of natural gas increased in the six months ended June 30, 2023, compared to the same period in 2022, primarily due to higher customer demand, lower storage levels, and regional pipeline constraints in early 2023.
Three Months Ended June 30,Six Months Ended June 30,
(in millions)2023202220232022
Cost of natural gas sold$233 $325 $1,111 $846 
Transportation cost of natural gas sold41 34 79 74 
Total cost of natural gas$274 $359 $1,190 $920 

Operating and Maintenance Expenses

The Utility’s operating expenses that did not impact earnings include certain costs that the Utility is authorized to recover as incurred. If the Utility were to spend more than authorized amounts, these expenses could have an impact on earnings.

Other Income, Net

The Utility’s other income, net that did not impact earnings includes pension and other post-retirement benefit costs that fluctuate primarily from market and interest rate changes.

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LIQUIDITY AND FINANCIAL RESOURCES

Overview

The Utility’s ability to fund operations, finance capital expenditures, make scheduled principal and interest payments, and make distributions to PG&E Corporation depends on the levels of its operating cash flows and access to the capital and credit markets. The CPUC authorizes the Utility’s capital structure, the aggregate amount of long-term and short-term debt that the Utility may issue, and the revenue requirements the Utility is able to collect to recover its cost of capital. The Utility generally utilizes retained earnings, equity contributions from PG&E Corporation and long-term debt issuances to maintain its CPUC-authorized long-term capital structure consisting of 52% common equity, 47.5% long-term debt, and 0.5% preferred equity and relies on short-term debt, including its revolving credit facilities, to fund temporary financing needs. On May 28, 2020, the CPUC approved a final decision in the Chapter 11 Proceedings OII, which, among other things, grants the Utility a temporary, five-year waiver from compliance with its authorized capital structure for the financing in place upon the Utility’s emergence from Chapter 11.

PG&E Corporation’s ability to fund operations, make scheduled principal and interest payments, and fund equity contributions to the Utility depends on the level of cash on hand, cash received from the Utility, and PG&E Corporation’s access to the capital and credit markets.

PG&E Corporation’s and the Utility’s credit ratings may be affected by the ultimate outcome of pending enforcement and litigation matters. Credit rating downgrades may impact the cost and availability of short-term borrowings, including credit facilities, and long-term debt costs. In addition, some of the Utility’s commodity contracts contain collateral posting provisions tied to the Utility’s credit rating from each of the major credit rating agencies. The collateral posting provisions for some of the Utility’s power and natural gas commodity and transportation and service agreements state that if the Utility’s credit ratings were to fall below investment grade, the Utility would be required to post additional cash immediately to fully collateralize some or all of its net liability positions.

The Utility’s annual cost of capital adjustment mechanism provides that in any year during the applicable cost of capital period in which the difference between (i) the average Moody’s Baa utility bond rates (as measured in the 12-month period from October of the prior year through September of the year in which the mechanism could trigger (the “Index”)) and (ii) 4.37% (based on the 2023 Cost of Capital decision) exceeds 100 basis points, the Utility’s ROE will be adjusted by one-half of such difference, and the cost of debt will be trued up to the most recent recorded cost of debt. The Utility is to initiate this adjustment mechanism by filing an advice letter on or before October 15 of the year in which the mechanism is triggered, to become effective on January 1 of the next year. As of July 19, 2023, for the period since October 1, 2022, the Index averaged 135 basis points above the Utility’s cost of capital benchmark rate of 4.37%.

PG&E Corporation and the Utility have various contractual commitments which impact cash requirements. These commitments are discussed in “Purchase Commitments” in Note 11 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

Arrearages Related to the COVID-19 Pandemic

The Utility continues to experience increased arrearages as a result of the COVID-19 pandemic. The principal areas of near-term impact include liquidity, financial results and business operations, stemming primarily from the ongoing economic hardship of the Utility’s customers, an annual cap set by the CPUC on the number of service disconnections for residential customers, and the CPUC’s “Emergency Authorization and Order Directing Utilities to Implement Emergency Customer COVID-19 Protections.” The Utility’s accounts receivable balances over 30 days outstanding as of June 30, 2023 were approximately $923 million, or $199 million lower than the balance as of December 31, 2022 and $691 million higher than the balance as of December 31, 2019. The Utility is unable to estimate the portion of the increase directly attributable to the COVID-19 pandemic.

As of June 30, 2023, PG&E Corporation and the Utility had access to approximately $5.0 billion of total liquidity comprised of approximately $545 million of Utility cash, $260 million of PG&E Corporation cash and $4.2 billion of availability under PG&E Corporation’s and the Utility’s revolving credit facilities.

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The Utility established the CPPMA for tracking costs related to the CPUC’s emergency authorization and order for the period the CPPMA was in effect. As of June 30, 2023, costs recorded to the CPPMA totaled $18 million and were reflected in Long-term regulatory assets on the Condensed Consolidated Balance Sheets. In addition to the $18 million recorded to the CPPMA, the Utility recorded approximately $228 million of under-collections from residential customers from January 1, 2023 to June 30, 2023 to the RUBA, which is expected to be recovered in 2024 and is reflected in Regulatory balancing accounts receivable on the Condensed Consolidated Balance Sheets.

The COVID-19 pandemic may continue to impact PG&E Corporation and the Utility financially, and PG&E Corporation and the Utility will continue to monitor the overall impact of the COVID-19 pandemic.

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents consist of cash and short-term, highly liquid investments with original maturities of three months or less.  PG&E Corporation and the Utility maintain separate bank accounts and primarily invest their cash in money market funds. In addition to cash and cash equivalents, the Utility holds restricted cash that primarily consists of AB 1054 and SB 901 fixed recovery charge collections that are to be used to service the associated bonds.

Financial Resources

Equity Financings

PG&E Corporation and the Utility plan to meet their capital requirements for 2023 through internally generated funds and the issuance of long-term and short-term debt. PG&E Corporation and the Utility are also pursuing the potential sale of a minority interest in Pacific Generation. (See “Application with Pacific Generation LLC for Approval to Transfer Non-Nuclear Generation Assets” below.) PG&E Corporation does not plan to issue any equity securities in 2023 or 2024. Factors that could affect PG&E Corporation’s planned equity issuances include liquidity and cash flow needs, capital expenditures, interest rates, the timing and outcome of ratemaking proceedings, and the timing and terms of other financings, including the potential sale of a minority interest in Pacific Generation.

Debt Financings

On January 6, 2023, the Utility completed the sale of (i) $750 million aggregate principal amount of 6.150% First Mortgage Bonds due 2033 and (ii) $750 million aggregate principal amount of 6.750% First Mortgage Bonds due 2053. The proceeds were used for the repayment of borrowings outstanding under the Utility’s revolving credit facility pursuant to the Utility Revolving Credit Agreement.

On March 30, 2023, the Utility completed the sale of $750 million aggregate principal amount of 6.70% First Mortgage Bonds due 2053. The Utility intends to disburse or allocate an amount equal to the net proceeds to finance or refinance, in whole or in part, new or existing eligible green projects and eligible social projects. Pending full disbursement or allocation of an amount equal to the net proceeds from this offering to finance or refinance eligible projects, the Utility expects to use the net proceeds for the repayment of borrowings outstanding under the Utility Revolving Credit Agreement.

On June 5, 2023, the Utility completed the sale of (i) $850 million aggregate principal amount of 6.100% First Mortgage Bonds due 2029, (ii) $1.15 billion aggregate principal amount of 6.400% First Mortgage Bonds due 2033, and (iii) $500 million aggregate principal amount of 6.750% First Mortgage Bonds due 2053. The proceeds were used for the repayment of $375 million aggregate principal amount of 3.25% First Mortgage Bonds due June 15, 2023 and for general purposes, including for the repayment of borrowings outstanding under the Utility’s revolving credit facility pursuant to the Utility Revolving Credit Agreement. The Utility intends to use the remaining net proceeds to repay the $500 million aggregate principal amount of 4.25% First Mortgage Bonds due August 1, 2023.

Credit Facilities

As of June 30, 2023, PG&E Corporation and the Utility had $500 million and $3.7 billion available under their respective $500 million and $4.4 billion revolving credit facilities. The Utility also has access to the Receivables Securitization Program, under which the Utility may borrow the lesser of the facility limit and the facility availability. The facility limit fluctuates between $1.25 billion and $1.5 billion depending on the periods set forth in the transaction documents. Further, the facility availability may vary based on the amount of accounts receivable that the Utility owns that are eligible for sale to the SPV and the portion of those accounts receivable that are sold to the SPV that are eligible for advances by the lenders under the Receivables Securitization Program.
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Utility

On April 18, 2023, the Utility amended its existing term loan agreement to extend the maturity of the $125 million 364-day tranche loan thereunder from April 19, 2023 to April 16, 2024. The 364-day tranche loan bears interest based on the Utility’s election of either (1) Term Secured Overnight Financing Rate (“SOFR”) (plus a 0.10% credit spread adjustment) plus an applicable margin of 1.375%, or (2) the alternative base rate plus an applicable margin of 0.375%.

On June 9, 2023, the Utility entered into an amendment to the Utility Receivables Securitization Program to, among other things, extend the scheduled termination date from September 30, 2024 to June 9, 2025 and increase the low end of the facility limit from $1.0 billion to $1.25 billion.

On June 22, 2023, the Utility amended its existing revolving credit agreement to, among other things, (i) extend the maturity date to June 22, 2028 (subject to two one-year extensions at the option of the Utility), (ii) increase the maximum letter of credit sublimit to $2.0 billion, and (iii) increase the uncommitted incremental facility to up to $1.0 billion.

PG&E Corporation

On June 22, 2023, PG&E Corporation amended its existing revolving credit agreement to, among other things, extend the maturity date to June 22, 2026 (subject to two one-year extensions at the option of PG&E Corporation).

For more information, see “Credit Facilities” in Note 4 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

Dividends

On December 15, 2022, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, which was paid on February 15, 2023, to holders of record on January 31, 2023. On February 16, 2023, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, which was paid on May 15, 2023, to holders of record on April 28, 2023. On May 18, 2023, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, payable on August 15, 2023, to holders of record on July 31, 2023.

On February 16, 2023, the Board of Directors of the Utility declared a common stock dividend of $425 million, which was paid to PG&E Corporation on February 28, 2023. On May 18, 2023, the Board of Directors of the Utility declared a common stock dividend of $450 million, which was paid to PG&E Corporation on June 21, 2023.

On December 20, 2017, the Boards of Directors of PG&E Corporation suspended quarterly cash dividends on PG&E Corporation common stock, beginning the fourth quarter of 2017. Subject to the dividend restrictions described in Note 7 of the Notes to the Consolidated Financial Statements in Item 8 of the 2022 Form 10-K, any decision to declare and pay dividends on PG&E Corporation’s common stock in the future will be made at the discretion of the Board of Directors and will depend on, among other things, results of operations, financial condition, cash requirements, contractual restrictions of PG&E Corporation, and other factors that the Board of Directors of PG&E Corporation may deem relevant. Pursuant to the Confirmation Order, PG&E Corporation may not pay dividends on shares of its common stock until it recognizes $6.2 billion in Non-GAAP Core Earnings following the Emergence Date. “Non-GAAP Core Earnings” means GAAP earnings adjusted for certain non-core items as described in the Plan. PG&E Corporation is unable to predict when it will commence the payment of dividends on its common stock.

Utility Cash Flows

PG&E Corporation’s condensed consolidated cash flows consist primarily of cash flows related to the Utility. The following discussion presents the Utility’s cash flows for the six months ended June 30, 2023 and 2022.

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The Utility’s cash flows were as follows:
Six Months Ended June 30,
 (in millions)20232022
Net cash provided by operating activities$2,627 $1,703 
Net cash used in investing activities(4,420)(4,835)
Net cash provided by financing activities1,772 3,149 
Net change in cash, cash equivalents, and restricted cash$(21)$17 

Operating Activities

The Utility’s cash flows from operating activities primarily consist of receipts from customers less payments of operating expenses, other than expenses such as depreciation that do not require the use of cash. During the six months ended June 30, 2023, net cash provided by operating activities increased by $924 million compared to the same period in 2022. The increase was primarily due to a payment made to the Fire Victim Trust of $592 million during the six months ended June 30, 2022, with no similar activity during the same period in 2023.

Future cash flow from operating activities will be affected by various factors, including:

the timing and amount of costs in connection with the 2019 Kincade fire, the 2020 Zogg fire, the 2021 Dixie fire, and the 2022 Mosquito fire and the timing and amount of any potential related insurance, including funds available from self-insurance (see “2023 General Rate Case” in the “Regulatory Matters” section below for more information), Wildfire Fund, and regulatory recoveries;

the timing and amounts of costs, including fines and penalties, that may be incurred in connection with current and future enforcement, litigation, and regulatory matters (see “Wildfire-Related Securities Litigation” in Note 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1 and “Regulatory Matters” below for more information);

the ability of the Utility to collect on its customer arrearages resulting from the COVID-19 pandemic;

the timing and amount of costs in connection with future wildfires and the timing and amount of any potential related insurance, including funds available from self-insurance, Wildfire Fund, and regulatory recoveries;

the timing and amount of costs in connection with the 2020-2022 and 2023-2025 WMPs and the costs previously incurred in connection with the 2019 WMP that are not currently being recovered through rates (see “Regulatory Matters” below for more information);

the timing of the gain to be returned to customers from the sale of the SFGO and transmission tower wireless licenses and the amounts incurred related to the move to and the purchase of the Lakeside Building; and

the timing and outcomes of the Utility’s 2023 GRC and other pending and future ratemaking and regulatory proceedings, including the extent to which PG&E Corporation and the Utility are able to recover their costs through regulated rates as recorded in memorandum accounts or balancing accounts, or as otherwise requested.

PG&E Corporation and the Utility do not have any off-balance sheet arrangements that have had, or are reasonably likely to have, a current or future material effect on their financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources, other than those discussed under “Purchase Commitments” in Note 16 of the Notes to the Consolidated Financial Statements in Item 8 of the 2022 Form 10-K.

Investing Activities

Net cash used in investing activities decreased by $415 million during the six months ended June 30, 2023 as compared to the same period in 2022. The decrease was primarily driven by a $789 million decrease in purchases, net of proceeds of customer credit trust investments in 2023. The decrease was partially offset by a $141 million increase in capital expenditures during the six months ended June 30, 2023 as compared to the same period in 2022.

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The Utility’s investing activities primarily consist of the construction of new and replacement facilities necessary to provide safe and reliable electricity and natural gas services to its customers. Cash used in investing activities also includes the proceeds from sales of nuclear decommissioning trust and customer credit trust investments which are partially offset by the amount of cash used to purchase new nuclear decommissioning trust and customer credit trust investments. The funds in the decommissioning trusts, along with accumulated earnings, are used exclusively for decommissioning and dismantling the Utility’s nuclear generation facilities. Pursuant to SB 901, the funds in the customer credit trust, along with accumulated earnings, are used exclusively to fund a monthly credit to customers that is anticipated to equal the fixed recovery charges such that the SB 901 securitization is designed to be rate neutral to customers.

Future cash flows used in investing activities are largely dependent on the timing and amount of capital expenditures.  The Utility estimates that it will incur between $7.9 billion and $11.2 billion of capital expenditures in 2023. Additionally, future cash flows used in investing activities will be impacted by the payments related to the purchase of the Lakeside Building, and could be impacted by the timing and amount of contributions to the customer credit trust, including certain shareholder tax benefits, and $1.0 billion of cash to be contributed in 2024.

Financing Activities

Net cash provided by financing activities decreased by $1.4 billion during the six months ended June 30, 2023 as compared to the same period in 2022. The decrease was primarily due to $2.1 billion in higher net repayments under credit facilities in 2023 as compared to 2022. The decrease was partially offset by a $900 million increase in long-term debt (including SB 901 recovery bonds) proceeds, net of repayments, in the six months ended June 30, 2023, as compared to 2022.

Cash provided by or used in financing activities is driven by the Utility’s financing needs, which depend on the level of cash provided by or used in operating activities, the level of cash provided by or used in investing activities, the conditions in the capital markets, and the maturity date or prepayment date of existing debt instruments.  Additionally, the Utility’s future cash flows from financing activities will be affected by the timing and outcome of future AB 1054 securitization transactions, the timing and outcome of the potential sale of a minority interest in Pacific Generation to one or more investors to be identified, dividend payments, and equity contributions from PG&E Corporation.

LITIGATION MATTERS

PG&E Corporation and the Utility have significant contingencies arising from their operations, including contingencies related to the enforcement and litigation matters described in Notes 10 and 11 of the Notes to the Condensed Consolidated Financial Statements in Item 1 and in “Regulatory Matters” below that are incorporated by reference herein. The outcome of these matters, individually or in the aggregate, could have a material effect on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

REGULATORY MATTERS

The Utility is subject to substantial regulation by the CPUC, the FERC, the NRC, and other federal and state regulatory agencies. The resolutions of the proceedings described below and other proceedings may materially affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

During the three months ended June 30, 2023 and through the date of this filing, key updates to regulatory and legislative matters were as follows:

On June 22, the OEIS issued a revision notice requiring the Utility to address eight critical issues in its 2023-2025 WMP.

On June 20, in the Utility’s TO18 rate case before the FERC, the Utility filed a further compliance filing and a request for rehearing of a May 18 FERC order that rejected the Utility’s revised compliance filing concerning the TCJA. The Utility also plans to submit a request for private letter ruling on related issues with the Internal Revenue Service. On July 21, 2023, the FERC issued an order denying rehearing by operation of law.

On June 15, the Utility filed a WGSC application with the CPUC to recover costs related to wildfire mitigation and gas safety and electric modernization. The Utility requested a revenue requirement of $749 million, of which the Utility sought interim rate relief for $631 million.

On June 8, the CPUC approved interim rate relief of $1.1 billion for the 2022 WMCE proceeding.
25



On June 7, the California State Lands Commission approved an extension of the Utility’s lease at Diablo Canyon.

On May 31, the FERC approved the transfer of substantially all of the Utility’s non-nuclear generation assets to Pacific Generation. The Utility’s application regarding hydro licenses remains pending.

On May 24, the CPUC issued a resolution approving the settlement agreement filed jointly by the Utility and the SED regarding the 2020 Zogg fire. On May 31, the Utility and the Shasta County District Attorney’s Office filed a civil stipulated judgment regarding the criminal charges in connection with the 2020 Zogg fire, and the criminal court dismissed the charges with prejudice on June 14.

Cost Recovery Proceedings

Periodically, costs arise that could not have been anticipated by the Utility during CPUC GRC proceedings or that have been deliberately excluded from such requests. These costs may result from catastrophic events, changes in regulation, or extraordinary changes in operating practices. The Utility may seek authority to track incremental costs in a memorandum account and the CPUC may authorize recovery of costs tracked in memorandum accounts if the costs are deemed incremental and prudently incurred. The CPUC may also authorize balancing accounts with limitations or caps to cost recovery. These accounts, which include the CEMA, WEMA, FHPMA, FRMMA, WMPMA, VMBA, WMBA, and RTBA among others, allow the Utility to track the costs associated with work related to disaster and wildfire response, other wildfire prevention-related costs, certain third-party wildfire claims, and insurance costs. While the Utility generally expects such costs to be recoverable, there can be no assurance that the CPUC will authorize the Utility to recover the full amount of its costs.

In recent years, the amount of the costs recorded in these accounts has increased. Because rate recovery may require CPUC authorization for these accounts, there can be a delay between when the Utility incurs costs and when it may recover those costs. As of June 30, 2023, the Utility had recorded an aggregate amount of approximately $6.1 billion in costs for the CEMA, WEMA, FHPMA, FRMMA, WMPMA, VMBA, WMBA, RTBA, and Microgrids Memorandum Account. Of these costs, approximately $1.7 billion was authorized for recovery and accounted for as current, and $4.4 billion was accounted for as long term as of June 30, 2023. See Note 3 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

If the amount of the costs recorded in these accounts continues to increase or the delay between incurring and recovering costs lengthens, PG&E Corporation and the Utility may incur additional financing costs. If the Utility does not recover the full amount of its recorded costs, the difference between the recorded and recovered amounts would be written off as a non-cash disallowance. Such disallowances could materially affect PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

Except as otherwise noted, the Utility is unable to predict the timing and outcome of the following applications. PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows could be materially affected if the Utility is unable to timely recover costs included in these applications.

For more information, see Note 3 of the Notes to the Condensed Consolidated Financial Statements in Item 1, and “Wildfire Mitigation and Catastrophic Events Cost Recovery Applications” below.

The Utility’s cost recovery proceedings for the costs described above that are pending, have pending appeals, or were completed during the three months ended June 30, 2023 are summarized in the following table:
ProceedingRequestStatus
2021 WMCE
Revenue requirement of approximately $1.47 billion
Partial settlement agreement to recover $721 million of revenue requirement filed January 2023. Settlement excludes VMBA’s $591 million proposed revenue requirement.
2022 WMCERevenue requirement of approximately $1.36 billionFiled December 2022. Decision authorizing $1.1 billion of interim rate relief adopted June 2023.
2023 WGSCRevenue requirement of approximately $688 millionApplication filed June 2023


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Wildfire Mitigation and Catastrophic Events Cost Recovery Applications

2020 WMCE Application

On September 30, 2020, the Utility filed an application with the CPUC requesting cost recovery of recorded expenditures related to wildfire mitigation and certain catastrophic events (the “2020 WMCE application”). The recorded expenditures, which excluded amounts disallowed as a result of the CPUC’s decision in the OII into the multiple wildfires that began on October 8, 2017 and spread through Northern California, including Napa, Sonoma, Butte, Humboldt, Mendocino, Lake, Nevada and Yuba Counties, as well as in the area surrounding Yuba City (the “2017 Northern California wildfires”), and the 2018 Camp fire, consisted of $1.18 billion in expense and $801 million in capital expenditures, resulting in a proposed revenue requirement of approximately $1.28 billion.

The costs addressed in the 2020 WMCE application cover activities mainly during the years 2017 to 2019 and were incremental to those previously authorized in the Utility’s 2017 GRC and other proceedings. The majority of costs addressed in this application reflected work necessary to mitigate wildfire risk and to respond to catastrophic events occurring during the years 2017 to 2019. The Utility’s requested revenue included amounts for the FHPMA of $293 million, the FRMMA and the WMPMA of $740 million, and the CEMA of $251 million.

On September 21, 2021, the Utility and certain parties filed a motion with the CPUC seeking approval of a settlement agreement that would resolve all of the issues raised by the settling parties in the 2020 WMCE application. The settlement agreement proposes that the Utility recover a revenue requirement of $1.04 billion. The settlement agreement authorizes the Utility to recover a revenue requirement of $591 million over a 24-month amortization period beginning March 2023, which is in addition to the interim rate relief of $447 million that was approved by an earlier CPUC decision. On February 2, 2023, the CPUC approved a final decision adopting the settlement agreement without modifications.

2021 WMCE Application

On September 16, 2021, the Utility filed an application with the CPUC requesting cost recovery of approximately $1.6 billion of recorded expenditures, resulting in a proposed revenue requirement of approximately $1.47 billion (the “2021 WMCE application”). The costs addressed in this application reflect costs related to wildfire mitigation and certain catastrophic events, as well as implementation of various customer-focused initiatives. These costs were incurred primarily in 2020.

The recorded expenditures consist of $1.4 billion in expenses and $197 million in capital expenditures. The costs addressed in the 2021 WMCE application are incremental to those previously authorized in the Utility’s 2017 GRC, 2020 GRC, and other proceedings.

The Utility’s requested revenue requirement includes amounts recorded to the VMBA of $592 million, the CEMA of $535 million, the WMBA of $149 million, and other memorandum accounts. On November 18, 2021, the Utility filed updates to the application, increasing total costs by $19.4 million. On December 30, 2021, the Utility filed supplemental testimony reducing the cost recovery request of the COVID-19 CEMA costs by $12.2 million. The $12.2 million reduction was a result of costs, such as employee business travel expenses and in-person training costs, that the Utility was able to avoid due to the pandemic.

On January 18, 2023, the Utility, The Utility Reform Network, and the Public Advocates Office of the CPUC filed a joint motion for approval of a settlement agreement, pursuant to which the Utility would receive a revenue requirement of $720.7 million. The settlement agreement does not address $591.9 million recorded to the VMBA, for which cost recovery will be determined separately by the CPUC.

Upon approval, the majority of the Utility’s proposed revenue requirement would be collected over a two-year period.

2022 WMCE Application

On December 15, 2022, the Utility filed an application with the CPUC requesting cost recovery of approximately $1.36 billion of recorded expenditures, resulting in a proposed revenue requirement of approximately $1.29 billion (the “2022 WMCE application”). The costs addressed in this application reflect costs related to wildfire mitigation and certain catastrophic events, as well as implementation of various customer-focused initiatives. These costs were incurred primarily in 2021.

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The recorded expenditures consist of $1.2 billion in expenses and $136 million in capital expenditures. The costs addressed in the 2022 WMCE application are incremental to those previously authorized in the Utility’s 2020 GRC and other proceedings. In connection with the 2022 WMCE application, the Utility also requested interim rate relief of $1.1 billion to be recovered over 12 months beginning June 1, 2023. The remaining $224 million would be recovered after the CPUC issues a final decision. On June 8, 2023, the CPUC adopted a final decision granting the Utility’s request for interim rate relief, which went into effect July 1, 2023.

On April 7, 2023, the assigned commissioner issued a scoping memo pursuant to which a proposed decision would be issued by the first quarter of 2024. On June 23, 2023, the ALJ revised the procedural schedule so that a proposed decision will be issued by the second quarter of 2024.

Wildfire and Gas Safety Costs Recovery Application

On June 15, 2023, the Utility filed a WGSC application with the CPUC requesting cost recovery of approximately $2.5 billion of recorded expenditures related to wildfire mitigation costs and gas safety and electric modernization costs.

The recorded expenditures for wildfire mitigation consist of $726 million in expenses and $1.5 billion in capital expenditures and cover activities during the years 2020 to 2022. The recorded expenditures for gas safety and electric modernization consist of $120 million in expenses and $118 million in capital expenditures and cover activities during the years 2017 to 2022. If approved, the requested cost recovery would result in an aggregate revenue requirement of $749 million. The costs addressed in the WGSC application are incremental to those previously authorized in the Utility’s 2020 GRC and other proceedings.

The Utility recorded these costs to the memorandum and balancing accounts as set forth in the following table:
Recorded Costs (in millions)
WMPMA
$2,095 
FRMMA
165 
Gas storage balancing account (1)
101 
In line inspection memorandum account (2)
92 
Other
45 
Total
$2,498 
(1) Includes costs for the Utility’s natural gas storage facilities, other than Gill Ranch, in excess of amounts authorized in the 2019 GT&S proceeding.
(2) Includes (i) capital expenditure costs for traditional in-line inspection upgrade projects in excess of amounts authorized in the 2019 GT&S rate case, (ii) expenses incurred for the associated initial traditional in-line inspection runs and direct examination and repair resulting from those initial runs, and (iii) costs associated with in-line inspection re-assessments.

In connection with the WGSC application, the Utility also requested interim rate relief of $631 million, to be recovered over 12 months beginning November 1, 2023. The remaining $105 million would be recovered after the CPUC issues a final decision.

The Utility has proposed a schedule that would call for a final decision by the CPUC prior to June 15, 2024.

Forward-Looking Rate Cases

The Utility routinely participates in forward-looking rate case applications before the CPUC and the FERC. Those applications include GRCs, where the revenue required for general operations (“base revenue”) of the Utility is assessed and reset. In addition, the Utility is periodically involved in “cost of capital” proceedings to adjust its regulated return on rate base. The Utility’s future earnings will depend on the revenue requirements authorized in such rate cases.

Decisions in GRC proceedings have historically been expected prior to the commencement of the period to which the rates would apply. In recent years, decisions in GRC proceedings have been delayed. Delayed decisions may cause the Utility to develop its budgets based on possible outcomes, rather than authorized amounts. When decisions are delayed, the CPUC typically provides rate relief to the Utility effective as of the commencement of the rate case period (not effective as of the date of the delayed decision). Nonetheless, the Utility’s spending during the period of the delay may exceed the authorized amount, without an ability for the Utility to seek cost recovery of such excess. If the Utility’s spending during the period of the delay is less than the authorized amount, the Utility could be exposed to operational and financial risk associated with the lower level of work achieved compared to that funded by the CPUC.

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Except as otherwise noted, the Utility is unable to predict the timing and outcome of the following applications. PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows could be materially affected depending on the outcomes of these applications.

The Utility’s forward-looking rate cases that are pending, have pending appeals, or were completed during the three months ended June 30, 2023 are summarized in the following table:
Rate CaseRequestStatus
2023 GRC
Revenue requirement of $15.82 billion for 2023
A final decision is scheduled for the third quarter of 2023.
2023 Cost of Capital
Increase ROE to 11% and cost of debt to 4.31%
Final decision issued December 2022, adopting a 10% ROE. Intervenor filed application for rehearing in January 2023.

2023 General Rate Case

On July 22, 2022, the Utility submitted a request for the second track of the GRC proceeding, requesting cost recovery of recorded expenditures related primarily to the safety and reliability of the Utility’s gas transmission and storage system incurred from January 2015 to December 2021. The recorded expenditures consist of $206 million in expenses and $129 million in capital expenditures, resulting in a proposed revenue requirement of approximately $241 million, most of which is proposed to be collected over a two-year period beginning August 1, 2023. On January 6, 2023, the Utility and the Public Advocates Office of the CPUC filed a motion for approval of a settlement agreement for all amounts at issue in the second track of the proceeding. In the motion, the parties requested that the CPUC approve $183 million in expense and $127 million of capital expenditures for recovery through rates.

On January 12, 2023, the CPUC approved a settlement agreement among the Utility and two parties to the proceeding pursuant to which the Utility’s wildfire liability insurance will be entirely based on self-insurance beginning in 2023. The self-insurance will be funded through CPUC-jurisdictional rates at $400 million for test year 2023 and subsequent years until $1.0 billion of unimpaired self-insurance is reached. If losses are incurred, the settlement agreement contains an adjustment mechanism designed to adjust customer funded self-insurance based on the amount of wildfire related liabilities incurred in the previous year. For 2024, 2025, and 2026, if the estimated claims for wildfire events from the immediately preceding year exceed the amount collected for self-insurance in that same year, the self-insurance amount to be collected in rates during the following year would increase by 50% of the difference between the self-insurance amount collected and estimated claims for events in the immediately preceding year. As a result, the Utility could collect the self-insurance amounts over a longer period than it makes wildfire-related payments. The settlement agreement includes a five percent deductible, capped at a maximum of $50 million, on claims that are incurred each year. The settlement agreement prohibits the Utility from purchasing additional wildfire liability insurance from the commercial insurance market.

The CPUC’s schedule indicated a final decision on both tracks of this proceeding would be issued in the third quarter of 2023.

Cost of Capital Proceedings

2023 Cost of Capital Application

On December 19, 2022, the CPUC issued a final decision adopting a new cost of capital including ratemaking capital structure (i.e., the relative weightings of common equity, preferred equity, and debt for ratemaking), ROE, cost of preferred stock, and cost of debt for the Utility’s electric generation, electric distribution, natural gas distribution, and natural gas transmission and storage rate base beginning on January 1, 2023. On January 10, 2023, the CPUC issued a decision correcting certain typographical errors in the final decision. See the 2022 Form 10-K.

The 2023 cost of capital application also requested that the CPUC approve an upward adjustment above the three-month commercial paper rate for interest on the Utility’s balancing and memorandum accounts to reflect the Utility’s actual cost of short-term debt. The Utility requested that the adjustment be set on an annual basis effective January 1 of each year based on the average difference between the three-month commercial paper rate and the Utility’s actual cost of short-term debt over the preceding twelve-month period from November through October. The decision deferred consideration of the proposal to a second phase of the proceeding. The second phase has not yet commenced.


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Transmission Owner Rate Cases

Transmission Owner Rate Case for 2017 (the “TO18” rate case)

On July 29, 2016, the Utility filed its TO18 rate case with the FERC requesting a 2017 retail electric transmission revenue requirement of $1.72 billion, a $387 million increase over the 2016 revenue requirement of $1.33 billion.  The forecasted network transmission rate base for 2017 was $6.7 billion.  The Utility sought a ROE of 10.9%, which included an incentive component of 50-basis points for the Utility’s continuing participation in the CAISO. 

On October 15, 2020, the FERC issued an order that, among other things, rejected the Utility’s direct assignment of common plant to FERC and required the allocation of all common plant between CPUC and FERC jurisdiction be based on operating and maintenance labor ratios. The order reopened the record for the limited purpose of allowing the participants to the proceeding an opportunity to present written evidence concerning the FERC’s revised ROE methodology adopted in FERC Opinion No. 569-A, issued on May 21, 2020.

On December 17, 2020 and June 17, 2021, the FERC issued orders denying requests for rehearing submitted by the Utility and intervenors. In 2021, the Utility filed four appeals. The appeals related to two issues: (1) impact of the TCJA on TO18 rates in January and February 2018 and (2) aspects of the rehearing order other than the TCJA. The appeals have been consolidated and are being held in abeyance until the FERC addresses the ROE issue on rehearing.

As a result of an order denying rehearing on the common plant allocation, the Utility increased its regulatory liabilities for amounts previously collected during the TO18, TO19, and TO20 rate case periods from 2017 through the second quarter of 2023 by approximately $449 million. A portion of these common plant costs are expected to be recovered at the CPUC in a separate application and as a result, as of June 30, 2023, the Utility had recorded approximately $280 million to Regulatory assets.

On March 17, 2022, the FERC issued a further order in the TO18 rate case proceeding finding that 9.26% is the just and reasonable base ROE for the Utility. With the incentive component of 50-basis points for the Utility’s continuing participation in the CAISO, the resulting ROE would be 9.76%. As a result, the Utility increased its regulatory liability for the potential refund for TO18 by $30 million in the first quarter of 2022. On April 18, 2022, the Utility and several other parties sought rehearing of the FERC’s determination of the base ROE finding. On May 19, 2022, the FERC denied all parties’ rehearing requests. The Utility has filed an appeal in the D.C. Circuit Court of Appeals, as have the other parties that sought rehearing. The appeal is being held in abeyance until the FERC issues a substantive order on rehearing on the ROE issue.

On May 16, 2022 and May 31, 2022, the Utility filed a compliance filing and a refund report describing the adjustments made to the transmission revenue requirement, adjusted rates, and the calculation and mechanism of the refunds based on the FERC’s TO18 orders, including the orders on common plant, depreciation, the TCJA, and ROE. On May 18, 2023, the FERC issued an order rejecting a revised compliance filing regarding the TCJA. On June 20, 2023, the Utility filed a further compliance filing and a request for rehearing of the FERC’s order. On July 21, 2023, the FERC issued an order denying rehearing by operation of law. For the TCJA issue, the Utility plans to submit a request for private letter ruling with the Internal Revenue Service to obtain clarification regarding the appropriate disposition of the matter. The outcome of the private letter ruling may impact the outcome of the Utility’s request for rehearing. The Utility expects to issue the refund after the FERC issues a decision on the compliance filing.

Aside from the ultimate outcome of the ROE rehearing request and the common plant allocation, the FERC’s orders in the TO18 proceeding are not expected to result in a material impact on the Utility’s financial condition, results of operations, liquidity, and cash flows. Some of the issues that will be decided in a final and unappealable TO18 decision, including the common plant allocation, will also be incorporated into the Utility’s TO19 and TO20 rate cases. The ROE rehearing request will not impact the TO20 rate case. See “Transmission Owner Rate Case Revenue Subject to Refund” in Note 11 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

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Transmission Owner Rate Case for 2018 (the “TO19” rate case)

On July 27, 2017, the Utility filed its TO19 rate case with the FERC. On December 20, 2018, the FERC issued an order approving an all-party settlement filed by the Utility. As part of the settlement, the TO19 revenue requirement will be set at 98.85% of the revenue requirement for TO18 that will be determined upon the issuance of a final, non-appealable TO18 decision. On March 17, 2022, the Ninth Circuit Court of Appeals upheld the FERC’s order granting the Utility the 50-basis point ROE incentive adder for CAISO participation and eliminating the refund obligation, and so the Utility was not obligated to make a refund to customers based on this matter. See “Transmission Owner Rate Cases for 2015 and 2016” above for a discussion of the incentive adder. As a result of the potential reduction to the TO18 revenue requirement, the Utility increased its regulatory liability for the potential refund for TO19 by $32 million in the first quarter of 2022. On April 18, 2022, the Utility sought rehearing of the FERC’s determination of the base ROE finding.

Transmission Owner Rate Case for 2019 (the “TO20” rate case)

As disclosed in the 2022 Form 10-K, the Utility uses a formula rate for the costs associated with the Utility’s FERC-jurisdictional electric transmission facilities, which the FERC accepted, with May 1, 2019 as the effective date for rate changes. Pursuant to a settlement agreement, which the FERC has approved, the Utility has an all-in ROE of 10.45%; a fixed capital structure of 49.75% common stock, 49.75% debt, and 0.5% preferred stock; and fixed depreciation rates for various categories of transmission facilities (represented by individual FERC accounts). The term of the settlement continues until December 31, 2023, and the Utility will be required to file a replacement rate filing by October 18, 2023 to be effective on January 1, 2024.

Some of the issues that will be decided in a final and unappealable TO18 decision, including the common plant allocation, will also be incorporated into the Utility’s TO20 rate case.

Under its formula rate, the Utility submits an annual update to the FERC each December for rates to go into effect on January 1 of the following year. Parties have protested the Utility’s annual updates, and these protests are pending before the FERC.

Other Regulatory Proceedings

2020-2022 Wildfire Mitigation Plans

On February 25, 2022, the Utility submitted the 2022 WMP. The 2022 WMP addressed the Utility’s wildfire safety programs and initiatives focused on reducing the potential for catastrophic wildfires related to electrical equipment, reducing the potential for fires to spread, and reducing the impact of PSPS events. On November 10, 2022, OEIS approved the Utility’s 2022 WMP. On December 15, 2022, the CPUC ratified OEIS’s approval.

On February 26, 2023, OEIS issued its final Annual Report on Compliance (“ARC”) for the Utility’s 2020 WMP. In the final ARC, OEIS found that the Utility undertook significant efforts to reduce its wildfire risk and, in many instances, achieved its stated objectives and targets but found that the Utility did not substantially comply with the WMP during the 2020 compliance period. On March 24, 2023, the Utility filed a writ in California superior court seeking judicial review of the OEIS ARC on the grounds that OEIS failed to utilize the compliance evaluation criteria adopted by the CPUC. If the court sustains the ARC’s finding that the Utility did not substantially comply with the WMP during the 2020 compliance period, the CPUC is required to issue penalties for the finding of noncompliance. PG&E Corporation and the Utility cannot reasonably estimate whether they will incur a loss in connection with the ARC or the amount of any such loss, as the writ is pending in state court and because any penalty issued by CPUC depends upon various factors.

2023-2025 Wildfire Mitigation Plan

On March 27, 2023, the Utility submitted the 2023-2025 WMP. The 2023-2025 WMP addresses the Utility’s wildfire safety programs and initiatives focused on reducing the potential for catastrophic wildfires related to electrical equipment and reducing the customer impact of EPSS and PSPS events. On June 22, 2023, the OEIS issued a revision notice requiring the Utility to address eight critical issues. The Utility will submit its response to the revision notice by August 7, 2023. The OEIS is scheduled to issue a draft decision on the 2023-2025 WMP by September 29, 2023.

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OIR to Revisit Net Energy Metering Tariffs

On August 17, 2020, the CPUC initiated a rulemaking proceeding to develop a successor to the existing NEM tariffs. The successor tariff is being developed pursuant to the requirements of AB 327. Under AB 327, the successor to the existing NEM tariffs should provide customer-generators with credit or compensation for electricity generated by their renewable facilities based on the value of that generation to all customers and allow customer-sited renewable generation to grow sustainably among different types of customers.

On November 10, 2022, the CPUC withdrew a previously-issued PD and issued a new PD. On December 19, 2022, the CPUC issued a final decision. The final decision will reduce the NEM subsidy by, in large part, reducing the bill credits for exported energy to avoided cost levels for new customers interconnecting under the successor tariff established by the final decision. For new non-CARE customers interconnecting under the successor tariff, the subsidy is reduced by about 60% for standalone solar and about 45% for solar-paired storage. The decision will also reduce the subsidy for new commercial customers interconnecting under the successor tariff by about 35%. The decision declined to adopt a charge to recover grid and infrastructure costs for new or existing customers and, instead, defers to the ongoing Demand Flexibility OIR, which is considering income-based fixed charges for all customers. The decision does, however, clarify that charges adopted in the Demand Flexibility OIR will apply to NEM and successor tariff customers. The final decision does not reform the legacy period for existing NEM customers.

On January 18, 2023, intervenors filed an application for rehearing. On June 30, 2023, the CPUC denied the application.

Application with Pacific Generation LLC for Approval to Transfer Non-Nuclear Generation Assets

On September 28, 2022, the Utility filed an application with the CPUC regarding the separation of the Utility’s non-nuclear generation assets into a newly formed, stand-alone Utility subsidiary, Pacific Generation. The application, which was filed jointly with Pacific Generation, seeks to establish Pacific Generation as a separate, rate-regulated utility subject to regulation by the CPUC and contemplates the potential sale of a minority interest in Pacific Generation to one or more investors to be identified. The application proposes that the negotiated transaction documents would be submitted to the CPUC via an advice letter. On January 20, 2023, the CPUC issued a scoping memo. On March 30, 2023, the ALJ modified the procedural schedule, pursuant to which a proposed decision would be issued by January 2024.

On December 13, 2022, the Utility and Pacific Generation filed an application with a similar request with the FERC and also filed a related application with the FERC requesting the transfer of certain hydro licenses to Pacific Generation. On May 31, 2023, the FERC issued an order approving transfer from the Utility to Pacific Generation of FERC-jurisdictional assets.

Self-Reports to the CPUC

The Utility self-reports potential violations of certain requirements to the CPUC. The Utility could face penalties, enforcement actions, or other adverse legal or regulatory consequences for these potential violations, including under the EOEP. For more information about the EOEP, see “PG&E Corporation and the Utility are subject to the Enhanced Oversight and Enforcement Process” in Item 1A. Risk Factors in the 2022 Form 10-K. The Utility is unable to predict the likelihood and the amount of potential fines or penalties, if any, related to these matters.

Electric Asset Inspections

The Utility has notified the CPUC of various errors relating to inspections and maintenance of its electric assets or implementation of WMP initiatives. These notices include missed inspections or the inability to locate records evidencing performance of inspections required under CPUC GOs 95 and 165 and errors regarding reporting meeting targets set by the Utility’s 2020 WMP. In these notices, the Utility describes the failures and corrective actions the Utility is taking to remediate these issues and to prevent recurrence. Among other corrective measures, the Utility has developed short-term and longer-term systemic corrective actions to address these errors, including performing enhanced inspections for poles with outdated or incomplete GO 165 inspection records and strengthening the Utility’s asset registry, as well as corrective actions regarding reporting on the progress toward WMP targets.

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On October 26, 2022, the Utility notified the CPUC that the Utility’s procedure for wood pole replacements did not comply with CPUC requirements for replacement of poles under certain conditions and, in some instances, the Utility failed to replace wood poles with safety factors below the required minimum. Among other short- and longer-term corrective measures, the Utility is replacing identified poles on a risk prioritized basis and revising its wood pole replacement procedures in alignment with CPUC requirements. On December 22, 2022, the Utility submitted an update to the CPUC explaining the Utility had identified a population of wood poles that had not received intrusive inspections in accordance with GO 165’s deadlines due to legacy issues, which should no longer be an issue due to changes in Utility procedures. In addition to its plan to complete the intrusive tests by September 30, 2023, the Utility is performing an end-to-end assessment of the wood pole test and treat program to proactively identify and address potential issues.

The Utility continues to evaluate whether there are additional failures to comply with GO 95 and 165, beyond those identified in submitted self-reports. The Utility intends to update the CPUC upon completion of its reviews and to address any issues it identifies.

Order Instituting an Investigation into PG&E Corporation’s and the Utility’s Safety Culture

On August 27, 2015, the CPUC began a formal investigation into whether the organizational culture and governance of PG&E Corporation and the Utility prioritize safety and adequately direct resources to promote accountability and achieve safety goals and standards (the “Safety Culture OII”). The CPUC directed the SED to evaluate the Utility’s and PG&E Corporation’s organizational culture, governance, policies, practices, and accountability metrics in relation to the Utility’s record of operations, including its record of safety incidents.

On April 13, 2023, the ALJ issued a proposed decision that would close this proceeding but allow for the continued monitoring of the Utility’s safety culture through an advice letter process. On May 19, 2023, the CPUC issued a final order closing the proceeding and implementing the proposed advice letter process to allow for further monitoring.

Extension of Diablo Canyon Operations

On September 2, 2022, SB 846 became law. SB 846 supports the extension of operations at Diablo Canyon through no later than 2030, with the potential for an earlier retirement date. Under the legislation, the Utility would continue to operate Diablo Canyon on behalf of all CPUC-jurisdictional load serving entities, and all customers of those load serving entities would be responsible for the cost of extended operations.

The key remaining steps to continued operations include NRC license renewal and approvals from California state agencies. If either is not received, the Utility would retire Unit 1 in 2024 and Unit 2 in 2025 as previously approved by the CPUC.

The Utility expects to submit a new application for license renewal with the NRC by the end of 2023. On March 2, 2023, the NRC approved the Utility’s exemption request to allow continued operations at Diablo Canyon past the plant’s current licenses. This exemption will allow the Utility, similar to exemptions granted to other utilities, to continue operating both units at Diablo Canyon while the Utility’s license renewal application is under review.

Consistent with SB 846, the CPUC, the California Energy Resources Conservation and Development Commission, California State Lands Commission, California Coastal Commission, and other state agencies will need to determine that extended operations represent an appropriate path to meet California’s reliability, affordability, and environmental goals.

On February 28, 2023, and in consultation with the CAISO and CPUC, the California Energy Resources Conservation and Development Commission determined that it is prudent to extend the operation of Diablo Canyon to support electric system reliability through 2030.

The Utility leases land from the state for the water intake structure, breakwaters, cooling water discharge channel, and other structures on state land associated with Diablo Canyon. On June 7, 2023, the California State Lands Commission approved an extension of the Utility’s lease at Diablo Canyon through October 31, 2030.


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LEGISLATIVE AND REGULATORY INITIATIVES

Inflation Reduction Act

In 2022, the Inflation Reduction Act became law. The Inflation Reduction Act includes a 15% corporate alternative minimum tax on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period, effective January 1, 2023. The law also extends and modifies existing tax credits and creates new tax credits for qualifying investments on renewable and clean energy sources and energy storage. The U.S. Department of the Treasury and the Internal Revenue Service have broad authority to issue and have issued regulations and guidance to implement its provisions. PG&E Corporation and the Utility continue to evaluate the totality of the law, including its impact, its potential implications, and the regulations issued in connection with it.

The Inflation Reduction Act also added a new Energy Infrastructure Reinvestment (“EIR”) category to the DOE’s Clean Energy Financing Program. The Utility is seeking financing through the EIR to help fund California’s clean energy transition.

Revenue Procedure 2023-15

On April 14, 2023, the Internal Revenue Service issued Revenue Procedure 2023-15, which provides a safe harbor method for determining natural gas repairs deductions for income tax purposes. PG&E Corporation and the Utility are currently evaluating the impact of the law.

ENVIRONMENTAL MATTERS

The Utility’s operations are subject to extensive federal, state, and local laws and permits relating to the protection of the environment and the safety and health of the Utility’s personnel and the public.  These laws and requirements relate to a broad range of the Utility’s activities, including the remediation of hazardous substances; the reporting and reduction of carbon dioxide and other greenhouse gas emissions; the discharge of pollutants into the air, water, and soil; the reporting of safety and reliability measures for natural gas storage facilities; and the transportation, handling, storage, and disposal of spent nuclear fuel. See “Environmental Remediation Contingencies” in Note 11 of the Notes to the Condensed Consolidated Financial Statements in Item 1 of this quarterly report on Form 10-Q, as well as “Item 1A. Risk Factors” and Note 16 of the Notes to the Consolidated Financial Statements in Item 8 of the 2022 Form 10-K.

RISK MANAGEMENT ACTIVITIES

PG&E Corporation, mainly through its ownership of the Utility, and the Utility are exposed to risks associated with adverse changes in commodity prices, interest rates, and counterparty credit.

The Utility actively manages market risk through risk management programs designed to support business objectives, discourage unauthorized risk-taking, reduce commodity cost volatility, and manage cash flows.  The Utility uses derivative instruments only for risk mitigation purposes and not for speculative purposes.  The Utility’s risk management activities include the use of physical and financial instruments such as forward contracts, futures, swaps, options, and other instruments and agreements, most of which are accounted for as derivative instruments.  Some contracts are accounted for as leases.  The Utility manages credit risk associated with its counterparties by assigning credit limits based on evaluations of their financial conditions, net worth, credit ratings, and other credit criteria as deemed appropriate.  Credit limits and credit quality are monitored periodically.  These activities are discussed in detail in the 2022 Form 10-K.  There were no significant developments to the Utility’s and PG&E Corporation’s risk management activities during the six months ended June 30, 2023.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP involves the use of estimates and assumptions that affect the recorded amounts of assets and liabilities as of the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. PG&E Corporation and the Utility consider their accounting policies for regulatory assets and liabilities, loss contingencies associated with environmental remediation liabilities and legal and regulatory matters, AROs, contributions to the Wildfire Fund, and pension and other post-retirement benefit plans to be critical accounting policies. These policies are considered critical accounting estimates due, in part, to their complexity and because their application is relevant and material to the financial position and results of operations of PG&E Corporation and the Utility, and because these policies require the use of material judgments and estimates. Actual results may differ materially from these estimates and assumptions. These accounting estimates and their key characteristics are discussed in detail in the 2022 Form 10-K.
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PG&E CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
(Unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Operating Revenues  
Electric$3,852 $3,690 $7,971 $7,848 
Natural gas1,438 1,428 3,528 3,068 
Total operating revenues
5,290 5,118 11,499 10,916 
Operating Expenses  
Cost of electricity672 780 1,194 1,282 
Cost of natural gas274 359 1,190 920 
Operating and maintenance2,436 2,291 5,113 5,401 
SB 901 securitization charges, net289 40 562 40 
Wildfire-related claims, net of recoveries(1)145 (3)144 
Wildfire Fund expense117 117 234 235 
Depreciation, amortization, and decommissioning997 941 2,074 1,913 
Total operating expenses
4,784 4,673 10,364 9,935 
Operating Income
506 445 1,135 981 
Interest income143 19 255 27 
Interest expense(640)(411)(1,242)(830)
Other income (expense), net66 (21)151 128 
Income Before Income Taxes
75 32 299 306 
Income tax benefit
(335)(328)(683)(532)
Net Income
410 360 982 838 
Preferred stock dividend requirement of subsidiary4 4 7 7 
Income Available for Common Shareholders
$406 $356 $975 $831 
Weighted Average Common Shares Outstanding, Basic2,019 1,987 2,005 1,987 
Weighted Average Common Shares Outstanding, Diluted2,139 2,141 2,137 2,141 
Net Income Per Common Share, Basic
$0.20 $0.18 $0.49 $0.42 
Net Income Per Common Share, Diluted
$0.19 $0.17 $0.46 $0.39 


See accompanying Notes to the Condensed Consolidated Financial Statements.
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PG&E CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
 (Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net Income
$410 $360 $982 $838 
Other Comprehensive Income
Net unrealized gains (losses) on available-for-sale securities (net of taxes of $0, $2, $2 and $2 respectively)
 (5)5 (5)
Total other comprehensive income (loss) (5)5 (5)
Comprehensive Income 410 355 987 833 
Preferred stock dividend requirement of subsidiary4 4 7 7 
Comprehensive Income Attributable to Common Shareholders
$406 $351 $980 $826 

See accompanying Notes to the Condensed Consolidated Financial Statements.

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PG&E CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
 Balance at
 June 30, 2023December 31, 2022
ASSETS  
Current Assets  
Cash and cash equivalents$805 $734 
Restricted cash (includes $255 million and $201 million related to VIEs at respective dates)
257 213 
Accounts receivable
Customers (net of allowance for doubtful accounts of $342 million and $166 million at respective dates)
(includes $1.71 billion and $2.47 billion related to VIEs, net of allowance for doubtful accounts of $342 million and $166 million at respective dates)
2,107 2,645 
Accrued unbilled revenue (includes $698 million and $1.16 billion related to VIEs at respective dates)
810 1,304 
Regulatory balancing accounts5,383 3,264 
Other1,014 1,624 
Regulatory assets309 296 
Inventories
Gas stored underground and fuel oil55 91 
Materials and supplies833 751 
Wildfire Fund asset460 460 
Other648 1,433 
Total current assets12,681 12,815 
Property, Plant, and Equipment  
Electric77,673 74,772 
Gas29,156 28,226 
Construction work in progress4,143 4,137 
Financing lease and other 19 
Total property, plant, and equipment110,972 107,154 
Accumulated depreciation(32,199)(30,946)
Net property, plant, and equipment78,773 76,208 
Other Noncurrent Assets  
Regulatory assets15,963 16,443 
Customer credit trust476 745 
Nuclear decommissioning trusts3,524 3,297 
Operating lease right of use asset1,418 1,311 
Wildfire Fund asset4,617