UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C., 20549 |
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(Mark One) |
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[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
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For the quarterly period ended September 30,2015 |
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[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
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For the transition period from ___________ to __________ |
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Exact Name of |
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1-12609 |
PG&E Corporation |
California |
94-3234914 |
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1-2348 |
Pacific Gas and Electric Company |
California |
94-0742640 |
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PG&E Corporation |
Pacific Gas and Electric Company ______________________________________ |
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Address of principal executive offices, including zip code |
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PG&E Corporation |
Pacific Gas and Electric Company |
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Registrant's telephone number, including area code |
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Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. [X] Yes [ ] No |
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). |
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PG&E Corporation: |
[X] Yes [ ] No |
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Pacific Gas and Electric Company: |
[X] Yes [ ] No |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. |
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PG&E Corporation: |
[X] Large accelerated filer |
[ ] Accelerated filer |
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[ ] Non-accelerated filer |
[ ] Smaller reporting company |
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Pacific Gas and Electric Company: |
[ ] Large accelerated filer |
[ ] Accelerated filer |
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[X] Non-accelerated filer |
[ ] Smaller reporting company |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |
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PG&E Corporation: |
[ ] Yes [X] No |
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Pacific Gas and Electric Company: |
[ ] Yes [X] No |
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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. |
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Common stock outstanding as of October 20,2015: |
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PG&E Corporation: |
490,453,856 |
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Pacific Gas and Electric Company: |
264,374,809 |
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PG&E CORPORATION AND
PACIFIC GAS AND ELECTRIC COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDEDSEPTEMBER 30,2015
TABLE OF CONTENTS
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
NOTE 3: REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS
NOTE 8: FAIR VALUE MEASUREMENTS
NOTE 9: CONTINGENCIES AND COMMITMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
LIQUIDITY AND FINANCIAL RESOURCES
ENFORCEMENT AND LITIGATION MATTERS
LEGISLATIVE AND REGULATORY INITIATIVES
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
PG&E Corporation's and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2014 |
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AFUDC |
allowance for funds used during construction |
ASU |
Accounting Standards Update issued by the FASB (see below) |
CPUC |
California Public Utilities Commission |
CRRs |
congestion revenue rights |
DTSC |
California Department of Toxic Substances Control |
EPS |
earnings per common share |
EV |
electric vehicle |
FASB |
Financial Accounting Standards Board |
FERC |
Federal Energy Regulatory Commission |
GAAP |
U.S. Generally Accepted Accounting Principles |
GRC |
general rate case |
GT&S |
gas transmission and storage |
IRS |
Internal Revenue Service |
NRC |
Nuclear Regulatory Commission |
NTSB |
National Transportation Safety Board |
ORA |
Office of Ratepayer Advocates |
PSEP |
pipeline safety enhancement plan |
Regional Board |
California Regional Water Control Board, Lahontan Region |
SEC |
U.S. Securities and Exchange Commission |
SED |
Safety and Enforcement Division of the CPUC, formerly known as the Consumer Protection and Safety Division or the CPSD |
SB |
State Senate Bill |
TO |
transmission owner |
TURN |
The Utility Reform Network |
Utility |
Pacific Gas and Electric Company |
VIE(s) |
variable interest entity(ies) |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) |
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(in millions, except per share amounts) |
2015 |
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2014 |
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2015 |
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2014 |
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Operating Revenues |
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Electric |
$ |
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$ |
$ |
$ |
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Natural gas |
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Total operating revenues |
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Operating Expenses |
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Cost of electricity |
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Cost of natural gas |
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Operating and maintenance |
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Depreciation, amortization, and decommissioning |
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Total operating expenses |
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Operating Income |
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Interest income |
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Interest expense |
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Other income, net |
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Income Before Income Taxes |
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Income tax provision |
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Net Income |
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Preferred stock dividend requirement of subsidiary |
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Income Available for Common Shareholders |
$ |
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$ |
$ |
$ |
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Weighted Average Common Shares Outstanding, Basic |
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Weighted Average Common Shares Outstanding, Diluted |
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Net Earnings Per Common Share, Basic |
$ |
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$ |
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$ |
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$ |
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Net Earnings Per Common Share, Diluted |
$ |
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$ |
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$ |
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$ |
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Dividends Declared Per Common Share |
$ |
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$ |
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$ |
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$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements. |
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) |
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(in millions) |
2015 |
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2014 |
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2015 |
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2014 |
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Net Income |
$ |
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$ |
$ |
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$ |
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Other Comprehensive Income |
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Pension and other postretirement benefit plans obligations |
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(net of taxes of $0, $0, $0 and $0, at respective dates) |
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Net change in investments |
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(net of taxes of $0, $13, $12 and $16, at respective dates) |
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Total other comprehensive income (loss) |
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Comprehensive Income |
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Preferred stock dividend requirement of subsidiary |
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Comprehensive Income Attributable to |
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Common Shareholders |
$ |
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$ |
$ |
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$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements. |
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) |
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Balance At |
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September 30, |
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December 31, |
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(in millions) |
2015 |
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2014 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
$ |
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$ |
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Restricted cash |
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Accounts receivable: |
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Customers (net of allowance for doubtful accounts of $57 and $66 |
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at respective dates) |
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Accrued unbilled revenue |
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Regulatory balancing accounts |
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Other |
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Regulatory assets |
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Inventories: |
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Gas stored underground and fuel oil |
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Materials and supplies |
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Income taxes receivable |
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Other |
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Total current assets |
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Property, Plant, and Equipment |
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Electric |
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Gas |
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Construction work in progress |
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Other |
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Total property, plant, and equipment |
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Accumulated depreciation |
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Net property, plant, and equipment |
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Other Noncurrent Assets |
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Regulatory assets |
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Nuclear decommissioning trusts |
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Income taxes receivable |
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Other |
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Total other noncurrent assets |
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TOTAL ASSETS |
$ |
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$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements. |
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) |
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Balance At |
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September 30, |
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December 31, |
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(in millions, except share amounts) |
2015 |
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2014 |
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LIABILITIES AND EQUITY |
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Current Liabilities |
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Short-term borrowings |
$ |
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$ |
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Accounts payable: |
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Trade creditors |
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Regulatory balancing accounts |
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Other |
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Disputed claims and customer refunds |
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Interest payable |
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Other |
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Total current liabilities |
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Noncurrent Liabilities |
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Long-term debt |
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Regulatory liabilities |
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Pension and other postretirement benefits |
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Asset retirement obligations |
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Deferred income taxes |
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Other |
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Total noncurrent liabilities |
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Commitments and Contingencies (Note 9) |
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Equity |
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Shareholders' Equity |
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Common stock, no par value, authorized 800,000,000 shares; |
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490,177,833 and 475,913,404 shares outstanding at respective dates |
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Reinvested earnings |
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Accumulated other comprehensive income (loss) |
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Total shareholders' equity |
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Noncontrolling Interest - Preferred Stock of Subsidiary |
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Total equity |
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TOTAL LIABILITIES AND EQUITY |
$ |
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$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements. |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) |
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Nine Months Ended September 30, |
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(in millions) |
2015 |
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2014 |
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Cash Flows from Operating Activities |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by |
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operating activities: |
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Depreciation, amortization, and decommissioning |
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Allowance for equity funds used during construction |
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Deferred income taxes and tax credits, net |
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Disallowed capital expenditures |
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Other |
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Effect of changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Accounts payable |
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Income taxes receivable/payable |
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Other current assets and liabilities |
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Regulatory assets, liabilities, and balancing accounts, net |
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Other noncurrent assets and liabilities |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities |
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Capital expenditures |
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Decrease in restricted cash |
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Proceeds from sales and maturities of nuclear decommissioning |
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trust investments |
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Purchases of nuclear decommissioning trust investments |
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Other |
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Net cash used in investing activities |
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Cash Flows from Financing Activities |
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Repayments under revolving credit facilities |
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Net issuances (repayments) of commercial paper, net of discount of $2 |
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and $1 at respective dates |
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Proceeds from issuance of short-term debt, net of issuance costs |
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Short-term debt matured |
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Proceeds from issuance of long-term debt, net of premium, discount, |
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and issuance costs of $14 and $6 at respective dates |
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Repayments of long-term debt |
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Common stock issued |
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Common stock dividends paid |
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Other |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Cash and cash equivalents at January 1 |
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Cash and cash equivalents at September 30 |
$ |
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$ |
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Cash received (paid) for: |
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Interest, net of amounts capitalized |
$ |
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$ |
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Income taxes, net |
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Supplemental disclosures of noncash investing and financing activities |
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Common stock dividends declared but not yet paid |
$ |
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$ |
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Capital expenditures financed through accounts payable |
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Noncash common stock issuances |
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Terminated capital leases |
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See accompanying Notes to the Condensed Consolidated Financial Statements. |
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PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) |
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(in millions) |
2015 |
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2014 |
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2015 |
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2014 |
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Operating Revenues |
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Electric |
$ |
$ |
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$ |
$ |
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Natural gas |
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Total operating revenues |
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Operating Expenses |
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Cost of electricity |
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Cost of natural gas |
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Operating and maintenance |
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Depreciation, amortization, and decommissioning |
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Total operating expenses |
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Operating Income |
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Interest income |
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Interest expense |
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Other income, net |
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Income Before Income Taxes |
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Income tax provision |
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Net Income |
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Preferred stock dividend requirement |
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Income Available for Common Stock |
$ |
$ |
$ |
$ |
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See accompanying Notes to the Condensed Consolidated Financial Statements. |
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PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) |
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(in millions) |
2015 |
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2014 |
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2015 |
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2014 |
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Net Income |
$ |
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$ |
$ |
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$ |
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Other Comprehensive Income |
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Pension and other postretirement benefit plans obligations |
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(net of taxes of $0, $0, $0 and $0, at respective dates ) |
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Total other comprehensive income (loss) |
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Comprehensive Income |
$ |
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$ |
$ |
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$ |
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See accompanying Notes to the Consolidated Financial Statements. |
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PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) |
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Balance At |
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September 30, |
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December 31, |
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(in millions) |
2015 |
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2014 |
||
ASSETS |
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Current Assets |
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Cash and cash equivalents |
$ |
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$ |
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Restricted cash |
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||
Accounts receivable: |
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Customers (net of allowance for doubtful accounts of $57 and $66 |
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at respective dates) |
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Accrued unbilled revenue |
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Regulatory balancing accounts |
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Other |
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Regulatory assets |
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Inventories: |
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Gas stored underground and fuel oil |
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Materials and supplies |
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Income taxes receivable |
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Other |
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Total current assets |
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Property, Plant, and Equipment |
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Electric |
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Gas |
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Construction work in progress |
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Total property, plant, and equipment |
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Accumulated depreciation |
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||
Net property, plant, and equipment |
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Other Noncurrent Assets |
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||
Regulatory assets |
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||
Nuclear decommissioning trusts |
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Income taxes receivable |
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Other |
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||
Total other noncurrent assets |
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||
TOTAL ASSETS |
$ |
|
$ |
||
|
|
|
|
|
|
See accompanying Notes to the Condensed Consolidated Financial Statements. |
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PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) |
|||||
|
Balance At |
||||
|
September 30, |
|
December 31, |
||
(in millions, except share amounts) |
2015 |
|
2014 |
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
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|
||
Current Liabilities |
|
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|
||
Short-term borrowings |
$ |
|
$ |
||
Accounts payable: |
|
|
|
||
Trade creditors |
|
|
|
||
Regulatory balancing accounts |
|
|
|
||
Other |
|
|
|
||
Disputed claims and customer refunds |
|
|
|
||
Interest payable |
|
|
|
||
Other |
|
|
|
||
Total current liabilities |
|
|
|
||
Noncurrent Liabilities |
|
|
|
||
Long-term debt |
|
|
|
||
Regulatory liabilities |
|
|
|
||
Pension and other postretirement benefits |
|
|
|
||
Asset retirement obligations |
|
|
|
||
Deferred income taxes |
|
|
|
||
Other |
|
|
|
||
Total noncurrent liabilities |
|
|
|
||
Commitments and Contingencies (Note 9) |
|
|
|
||
Shareholders' Equity |
|
|
|
||
Preferred stock |
|
|
|
||
Common stock, $5 par value, authorized 800,000,000 shares; |
|
|
|
||
264,374,809 shares outstanding at respective dates |
|
|
|
||
Additional paid-in capital |
|
|
|
||
Reinvested earnings |
|
|
|
||
Accumulated other comprehensive income |
|
|
|
||
Total shareholders' equity |
|
|
|
||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
|
$ |
||
|
|
|
|
||
See accompanying Notes to the Condensed Consolidated Financial Statements. |
|||||
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) |
|||||
|
Nine Months Ended September 30, |
||||
(in millions) |
2015 |
|
2014 |
||
Cash Flows from Operating Activities |
|
|
|
||
Net income |
$ |
|
$ |
||
Adjustments to reconcile net income to net cash provided by |
|
|
|
||
operating activities: |
|
|
|
||
Depreciation, amortization, and decommissioning |
|
|
|
||
Allowance for equity funds used during construction |
|
|
|
||
Deferred income taxes and tax credits, net |
|
|
|
||
Disallowed capital expenditures |
|
|
|
||
Other |
|
|
|
||
Effect of changes in operating assets and liabilities: |
|
|
|
||
Accounts receivable |
|
|
|
||
Inventories |
|
|
|
||
Accounts payable |
|
|
|
||
Income taxes receivable/payable |
|
|
|
||
Other current assets and liabilities |
|
|
|
||
Regulatory assets, liabilities, and balancing accounts, net |
|
|
|
||
Other noncurrent assets and liabilities |
|
|
|
||
Net cash provided by operating activities |
|
|
|
||
Cash Flows from Investing Activities |
|
|
|
||
Capital expenditures |
|
|
|
||
Decrease in restricted cash |
|
|
|
||
Proceeds from sales and maturities of nuclear decommissioning |
|
|
|
||
trust investments |
|
|
|
||
Purchases of nuclear decommissioning trust investments |
|
|
|
||
Other |
|
|
|
||
Net cash used in investing activities |
|
|
|
||
Cash Flows from Financing Activities |
|
|
|
||
Net issuances (repayments) of commercial paper, net of discount of $2 and $1 |
|
|
|
||
at respective dates |
|
|
|
||
Proceeds from issuance of short-term debt, net of issuance costs |
|
|
|
||
Short-term debt matured |
|
|
|
||
Proceeds from issuance of long-term debt, net of premium, discount, |
|
|
|
||
and issuance costs of $14 and $3 at respective dates |
|
|
|
||
Repayments of long-term debt |
|
|
|
||
Preferred stock dividends paid |
|
|
|
||
Common stock dividends paid |
|
|
|
||
Equity contribution from PG&E Corporation |
|
|
|
||
Other |
|
|
|
||
Net cash provided by financing activities |
|
|
|
||
Net change in cash and cash equivalents |
|
|
|
||
Cash and cash equivalents at January 1 |
|
|
|
||
Cash and cash equivalents at September 30 |
$ |
|
$ |
||
|
|
|
|||
Cash received (paid) for: |
|
|
|
||
Interest, net of amounts capitalized |
$ |
|
$ |
||
Income taxes, net |
|
|
|
||
Supplemental disclosures of noncash investing and financing activities |
|
|
|
||
Capital expenditures financed through accounts payable |
$ |
|
$ |
||
Terminated capital leases |
|
|
|
||
|
|
|
|
|
|
See accompanying Notes to the Condensed Consolidated Financial Statements. |
|||||
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
PG&E Corporation is a holding company whose primary operating subsidiary is Pacific Gas and Electric Company, a public utility operating in northern and central California. The Utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers. The Utility is primarily regulated by the CPUC and the FERC. In addition, the NRC oversees the licensing, construction, operation, and decommissioning of the Utility’s nuclear generation facilities.
On April 9, 2015, the CPUC approved final decisions in the three investigations that had been brought against the Utility relating to (1) the Utility’s safety record-keeping for its natural gas transmission system, (2) the Utility’s operation of its natural gas transmission pipeline system in or near locations of higher population density, and (3) the Utility’s pipeline installation, integrity management, record-keeping and other operational practices, and other events or courses of conduct, that could have led to or contributed to the natural gas explosion that occurred in the City of San Bruno, California on September 9, 2010. A decision was issued in each investigative proceeding to determine the violations that the Utility committed. The CPUC also approved a fourth decision (the “Penalty Decision”) which imposes penalties on the Utility totaling $1.6 billion comprised of: (1) a $300 million fine paid to the State General Fund, (2) a one-time $400 million bill credit to the Utility’s natural gas customers, (3) $850 million to fund future pipeline safety projects and programs, and (4) remedial measures that the CPUC estimates will cost the Utility at least $50 million. The Penalty Decision requires that at least $689 million of the $850 million be allocated to capital expenditures and that the Utility be precluded from including these capital costs in rate base. The remainder will be allocated to safety-related expenses. (See Note 9 below.)
This quarterly report on Form 10-Q is a combined report of PG&E Corporation and the Utility. PG&E Corporation’s Condensed Consolidated Financial Statements include the accounts of PG&E Corporation, the Utility, and other wholly owned and controlled subsidiaries. The Utility’s Condensed Consolidated Financial Statements include the accounts of the Utility and its wholly owned and controlled subsidiaries. All intercompany transactions have been eliminated in consolidation. The Notes to the Condensed Consolidated Financial Statements apply to both PG&E Corporation and the Utility. PG&E Corporation and the Utility operate in one segment.
The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with GAAP and in accordance with the interim period reporting requirements of Form 10-Q and reflect all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair presentation of PG&E Corporation and the Utility’s financial condition, results of operations, and cash flows for the periods presented. The information at December 31, 2014 in the Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets in the 2014 Form 10-K. This quarterly report should be read in conjunction with the 2014 Form 10-K.
The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Some of the more significant estimates and assumptions relate to the Utility’s regulatory assets and liabilities, legal and regulatory contingencies, environmental remediation liabilities, asset retirement obligations, and pension and other postretirement benefit plans obligations. Management believes that its estimates and assumptions reflected in the Condensed Consolidated Financial Statements are appropriate and reasonable. Actual results could differ materially from those estimates.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used by PG&E Corporation and the Utility are discussed in Note 2 of the Notes to the Consolidated Financial Statements in the 2014 Form 10-K.
Variable Interest Entities
A VIE is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, or whose equity investors lack any characteristics of a controlling financial interest. An enterprise that has a controlling financial interest in a VIE is a primary beneficiary and is required to consolidate the VIE.
Some of the counterparties to the Utility’s power purchase agreements are considered VIEs. Each of these VIEs was designed to own a power plant that would generate electricity for sale to the Utility. To determine whether the Utility was the primary beneficiary of any of these VIEs at September 30, 2015, it assessed whether it absorbs any of the VIE’s expected losses or receives any portion of the VIE’s expected residual returns under the terms of the power purchase agreement, analyzed the variability in the VIE’s gross margin, and considered whether it had any decision-making rights associated with the activities that are most significant to the VIE’s performance, such as dispatch rights and operating and maintenance activities. The Utility’s financial obligation is limited to the amount the Utility pays for delivered electricity and capacity. The Utility did not have any decision-making rights associated with any of the activities that are most significant to the economic performance of any of these VIEs. Since the Utility was not the primary beneficiary of any of these VIEs at September 30, 2015, it did not consolidate any of them.
Pension and Other Postretirement Benefits
PG&E Corporation and the Utility sponsor a non-contributory defined benefit pension plan and cash balance plan. Both plans are included in “Pension Benefits” below. Post-retirement medical and life insurance plans are included in “Other Benefits” below.
The net periodic benefit costs reflected in PG&E Corporation’s Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2015 and 2014 were as follows:
Pension Benefits |
|
Other Benefits |
|||||||||
|
Three Months Ended September 30, |
||||||||||
(in millions) |
2015 |
|
2014 |
|
2015 |
|
2014 |
||||
Service cost for benefits earned |
$ |
||||||||||
Interest cost |
|||||||||||
Expected return on plan assets |
|||||||||||
Amortization of prior service cost |
|||||||||||
Amortization of net actuarial loss |
|||||||||||
Net periodic benefit cost |
|||||||||||
Regulatory account transfer (1) |
|||||||||||
Total |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Utility recorded these amounts to a regulatory account since they are probable of recovery from, or refund to, customers in future rates.
Pension Benefits |
|
Other Benefits |
|||||||||
|
Nine Months Ended September 30, |
||||||||||
(in millions) |
2015 |
|
2014 |
|
2015 |
|
2014 |
||||
Service cost for benefits earned |
$ |
||||||||||
Interest cost |
|||||||||||
Expected return on plan assets |
|||||||||||
Amortization of prior service cost |
|||||||||||
Amortization of net actuarial loss |
|||||||||||
Net periodic benefit cost |
|||||||||||
Regulatory account transfer (1) |
|||||||||||
Total |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Utility recorded these amounts to a regulatory account since they are probable of recovery from, or refund to, customers in future rates.
There was no material difference between PG&E Corporation and the Utility for the information disclosed above.
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income
The changes, net of income tax, in PG&E Corporation’s accumulated other comprehensive income (loss) are summarized below:
Pension |
|
Other |
|
|
|
|||
|
Benefits |
|
Benefits |
|
Total |
|||
(in millions, net of income tax) |
Three Months Ended September 30, 2015 |
|||||||
Beginning balance |
$ |
$ |
|
$ |
||||
Amounts reclassified from other comprehensive income: (1) |
|
|
||||||
Amortization of prior service cost |
|
|
||||||
(net of taxes of $1 and $2, respectively) |
|
|
||||||
Amortization of net actuarial loss |
|
|
|
|||||
(net of taxes of $0 and $0, respectively) |
|
|
||||||
Regulatory account transfer |
|
|
||||||
(net of taxes of $3 and $3, respectively) |
|
|
||||||
Net current period other comprehensive loss |
|
|||||||
Ending balance |
||||||||
|
|
|
|
|
|
|
|
|
(1) These components are included in the computation of net periodic pension and other postretirement benefit costs. (See the “Pension and Other Postretirement Benefits” table above for additional details.)
Pension |
|
Other |
|
Other |
|
|
|
||||
|
Benefits |
|
Benefits |
|
Investments |
|
Total |
||||
(in millions, net of income tax) |
Three Months Ended September 30, 2014 |
||||||||||
Beginning balance |
$ |
$ |
|
$ |
$ |
||||||
Other comprehensive income before reclassifications: |
|
|
|||||||||
Change in investments |
|
|
|||||||||
(net of taxes of $0, $0, and $3, respectively) |
|
|
|||||||||
Amounts reclassified from other comprehensive income: |
|
|
|||||||||
Amortization of prior service cost |
|
|
|||||||||
(net of taxes of $2, $3, and $0, respectively) (1) |
|
|
|||||||||
Regulatory account transfer |
|
|
|||||||||
(net of taxes of $3, $4, and $0, respectively) (1) |
|
|
|||||||||
Change in investments |
|
|
|||||||||
(net of taxes of $0, $0, and $10, respectively) |
|
|
|||||||||
Net current period other comprehensive loss |
|||||||||||
Ending balance |
$ |
||||||||||
|
|||||||||||
(1) These components are included in the computation of net periodic pension and other postretirement benefit costs. (See the “Pension and Other Postretirement Benefits” table above for additional details.)
Pension |
|
Other |
|
Other |
|
|
|
||||
|
Benefits |
|
Benefits |
|
Investments |
|
Total |
||||
(in millions, net of income tax) |
Nine Months Ended September 30, 2015 |
||||||||||
Beginning balance |
$ |
|
$ |
$ |
|||||||
Amounts reclassified from other comprehensive income: |
|
|
|||||||||
Amortization of prior service cost |
|
|
|||||||||
(net of taxes of $4, $6, and $0, respectively) (1) |
|
|
|||||||||
Amortization of net actuarial loss |
|
|
|||||||||
(net of taxes of $3, $1, and $0, respectively) (1) |
|
|
|||||||||
Regulatory account transfer |
|
|
|||||||||
(net of taxes of $7, $7, and $0, respectively) (1) |
|
|
|||||||||
Change in investments |
|
|
|||||||||
(net of taxes of $0, $0, and $12, respectively) |
|
|
|||||||||
Net current period other comprehensive loss |
|
|
|||||||||
Ending balance |
$ |
$ |
|
$ |
$ |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) These components are included in the computation of net periodic pension and other postretirement benefit costs. (See the “Pension and Other Postretirement Benefits” table above for additional details.)
Pension |
|
Other |
|
Other |
|
|
|
||||
|
Benefits |
|
Benefits |
|
Investments |
|
Total |
||||
(in millions, net of income tax) |
Nine Months Ended September 30, 2014 |
||||||||||
Beginning balance |
$ |
$ |
|
$ |
$ |
||||||
Other comprehensive income before reclassifications: |
|
|
|||||||||
Change in investments |
|
|
|||||||||
(net of taxes of $0, $0, and $4, respectively) |
|
|
|||||||||
Amounts reclassified from other comprehensive income: |
|
|
|||||||||
Amortization of prior service cost |
|
|
|||||||||
(net of taxes of $6, $7, and $0, respectively) (1) |
|
|
|||||||||
Amortization of net actuarial loss |
|
|
|||||||||
(net of taxes of $1, $1, and $0, respectively) (1) |
|
|
|||||||||
Regulatory account transfer |
|
|
|||||||||
(net of taxes of $7, $8, and $0, respectively) (1) |
|
|
|||||||||
Change in investments |
|
|
|||||||||
(net of taxes of $0, $0, and $20, respectively) |
|
|
|||||||||
Net current period other comprehensive loss |
|
|
|
|
|
||||||
Ending balance |
$ |
$ |
|
$ |
$ |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) These components are included in the computation of net periodic pension and other postretirement benefit costs. (See the “Pension and Other Postretirement Benefits” table above for additional details.)
There was no material difference between PG&E Corporation and the Utility for the information disclosed above, with the exception of other investments which are held by PG&E Corporation.
Accounting Standards Issued But Not Yet Adopted
Fair Value Measurement
In May 2015, the FASB issued ASU No. 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which standardizes reporting practices related to the fair value hierarchy for all investments for which fair value is measured using the net asset value per share. The ASU will be effective for fiscal years beginning after December 15, 2015. PG&E Corporation and the Utility are currently evaluating the impact the guidance will have on their disclosures and will adopt this standard starting in the first quarter of 2016.
Accounting for Fees Paid in a Cloud Computing Arrangement
In April 2015, the FASB issued ASU No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which adds guidance to help entities evaluate the accounting treatment for cloud computing arrangements. The ASU will be effective on January 1, 2016. PG&E Corporation and the Utility are currently evaluating the impact the guidance will have on their consolidated financial statements and related disclosures and will adopt this standard starting in the first quarter of 2016.
Presentation of Debt Issuance Costs
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which amends existing presentation of debt issuance costs. PG&E Corporation and the Utility currently disclose debt issuance costs in current assets – other and noncurrent assets – other. The amendments in this ASU, effective on January 1, 2016, require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. PG&E Corporation and the Utility do not expect this reclassification to have a material impact on their consolidated financial statements. PG&E Corporation and the Utility will adopt this standard starting in the first quarter of 2016.
Revenue Recognition Standard
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which amends existing revenue recognition guidance. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, deferring the effective date of this amendment for public companies by one year to January 1, 2018, with early adoption permitted as of the original effective date of January 1, 2017. PG&E Corporation and the Utility are currently evaluating the impact the guidance will have on their consolidated financial statements and related disclosures.
NOTE 3: REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS
Regulatory Assets
Long-term regulatory assets are composed of the following:
Balance at |
|||||
|
September 30, |
|
December 31, |
||
(in millions) |
2015 |
|
2014 |
||
Pension benefits |
$ |
|
$ |
||
Deferred income taxes |
|
||||
Environmental compliance costs |
|
||||
Utility retained generation |
|
||||
Price risk management |
|
||||
Unamortized loss, net of gain, on reacquired debt |
|
||||
Electromechanical meters |
|
||||
Other |
|
||||
Total long-term regulatory assets |
$ |
|
$ |
||
Long-term regulatory liabilities are composed of the following:
Balance at |
|||||
|
September 30, |
|
December 31, |
||
(in millions) |
2015 |
|
2014 |
||
Cost of removal obligations |
$ |
|
$ |
||
Recoveries in excess of asset retirement obligations |
|
|
|
||
Public purpose programs |
|
|
|
||
Other |
|
|
|
||
Total long-term regulatory liabilities |
$ |
|
$ |
||
Regulatory Balancing Accounts
The Utility’s recovery of revenue requirements and costs is generally decoupled from the volume of sales. The Utility tracks (1) differences between the Utility’s authorized revenue requirement and customer billings, and (2) differences between incurred costs and customer billings. To the extent these differences are probable of recovery or refund over the next 12 months, the Utility records a current regulatory balancing account receivable or payable. Regulatory balancing accounts that the Utility expects to collect or refund over a period exceeding 12 months are recorded as other noncurrent assets – regulatory assets or noncurrent liabilities – regulatory liabilities, respectively, in the Condensed Consolidated Balance Sheets. Balancing accounts will fluctuate during the year based on seasonal electric and gas usage and the timing of when costs are incurred and customer revenues are collected.
Current regulatory balancing accounts receivable and payable are composed of the following:
Receivable |
|||||
|
Balance at |
||||
|
September 30, |
|
December 31, |
||
(in millions) |
2015 |
|
2014 |
||
Electric distribution |
$ |
|
$ |
||
Utility generation |
|
|
|
||
Gas distribution |
|
|
|
||
Energy procurement |
|
|
|
||
Public purpose programs |
|
|
|
||
Other |
|
|
|
||
Total regulatory balancing accounts receivable |
$ |
|
$ |
||
Payable |
|||||
|
Balance at |
||||
|
September 30, |
|
December 31, |
||
(in millions) |
2015 |
|
2014 |
||
Energy procurement |
$ |
|
$ |
||
Public purpose programs |
|
|
|
||
Other |
|
|
|
||
Total regulatory balancing accounts payable |
$ |
|
$ |
||
|
|
|
|
|
|
Revolving Credit Facilities and Commercial Paper Program
The following table summarizes PG&E Corporation’s and the Utility’s outstanding borrowings under their revolving credit facilities and commercial paper programs at September 30, 2015:
|
|
|
|
Letters of |
|
|
|
|
|||||
|
Termination |
|
Facility |
|
Credit |
|
Commercial |
|
Facility |
||||
(in millions) |
Date |
|
Limit |
|
Outstanding |
|
Paper |
|
Availability |
||||
PG&E Corporation |
April 2020 |
|
$ |
(1) |
$ |
$ |
$ |
||||||
Utility |
April 2020 |
|
(2) |
||||||||||
Total revolving |
|
|
|
|
|
|
|
|
|
|
|
|
|
credit facilities |
|
|
$ |
$ |
$ |
$ |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Includes a $50 million sublimit for letters of credit and a $100 million commitment for “swingline” loans defined as loans that are made available on a same-day basis and are repayable in full within 7 days.
(2) Includes a $500 million sublimit for letters of credit and a $75 million commitment for swingline loans.