PG&E 2007 Annual Report Download - page 105

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103
REGULATORY BALANCING ACCOUNTS
The Utility uses regulatory balancing accounts as a mechanism
to recover amounts incurred for certain costs, primarily
commodity costs. Sales balancing accounts accumulate
differences between revenues and the Utility’s authorized
revenue requirements. Cost balancing accounts accumulate
differences between incurred costs and authorized revenue
requirements. The Utility also obtained CPUC approval for
balancing account treatment of variances between forecasted
and actual commodity costs and volumes. This approval
eliminates the earnings impact from any revenue variances
from adopted forecast levels. Under-collections that are
probable of recovery through regulated rates are recorded
as regulatory balancing account assets. Over-collections that
are probable of being credited to customers are recorded as
regulatory balancing account liabilities.
The Utility’s current regulatory balancing accounts accu-
mulate balances until they are refunded to or received from
the Utility’s customers through authorized rate adjustments
within the next 12 months. Regulatory balancing accounts
that the Utility does not expect to collect or refund in the
next 12 months are included in Other Noncurrent Assets
— Regulatory Assets and Noncurrent Liabilities — Regulatory
Liabilities. The CPUC does not allow the Utility to offset
regulatory balancing account assets against balancing
account liabilities.
Regulatory Balancing Account Assets
Balance at December 31,
(in millions) 2007 2006
Electricity revenue and cost balancing accounts $678 $501
Natural gas revenue and cost balancing accounts 93 106
Total $771 $607
Regulatory Balancing Account Liabilities
Balance at December 31,
(in millions) 2007 2006
Electricity revenue and cost balancing accounts $618 $ 951
Natural gas revenue and cost balancing accounts 55 79
Total $673 $1,030
During 2007, the under-collection in the Utility’s electricity
revenue and cost balancing account assets increased from
2006 mainly due to higher procurement costs associated
with replacement power, as a result of lower hydroelectric
production. The under-collection was further increased due
to CPUC authorized rate reductions intended to reduce over-
collections in the electric revenue and cost balancing account
liabilities from 2006.
NOTE 4: DEBT
LONG-TERM DEBT
The following table summarizes PG&E Corporation’s and
the Utility’s long-term debt:
December 31,
(in millions) 2007 2006
PG&E Corporation
Convertible subordinated notes,
9.50%, due 2010 $ 280 $ 280
Less: current portion — (280)
280 —
Utility
Senior notes:
3.60% to 6.05% bonds, due 2009–2037 6,300 5,100
Unamortized discount (22) (16)
Total senior notes 6,278 5,084
Pollution control bond loan agreements,
variable rates(1), due 2026(2) 614 614
Pollution control bond loan agreement,
5.35%, due 2016 200 200
Pollution control bond loan agreements,
4.75%, due 2023 345 345
Pollution control bond loan agreements,
variable rates(3), due 2016–2026 454 454
Other — 1
Less: current portion — (1)
Long-term debt, net of current portion 7,891 6,697
Total consolidated long-term debt,
net of current portion $8,171 $6,697
(1) At December 31, 2007, interest rates on these loans ranged from 3.45%
to 3.73%.
(2) These bonds are supported by $620 million of letters of credit which
expire on February 24, 2012. Although the stated maturity date is 2026,
the bonds will remain outstanding only if the Utility extends or
replaces the letters of credit.
(3) At December 31, 2007, interest rates on these loans ranged from 3.75%
to 5.75%.
PG&E CORPORATION
Convertible Subordinated Notes
At December 31, 2007, PG&E Corporation had outstanding
approximately $280 million of 9.50% Convertible Subordi-
nated Notes that are scheduled to mature on June 30, 2010.
Interest is payable semi-annually in arrears on June 30 and
December 31. These Convertible Subordinated Notes may
be converted (at the option of the holder) at any time prior
to maturity into 18,558,059 shares of PG&E Corporation
common stock, at a conversion price of $15.09 per share.
The conversion price is subject to adjustment for signifi -
cant changes in the number of outstanding shares of PG&E
Corporation’s common stock. In addition, holders of the