PG&E 2007 Annual Report Download - page 109

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Letters of credit issued under the working capital facility
are used primarily to provide credit enhancements to counter-
parties for natural gas and energy procurement trans actions.
At December 31, 2007, there were approximately $165 mil-
lion of letters of credit and $250 million of borrowings
outstanding under the working capital facility. In addition,
the Utility treats the amount of its outstanding commercial
paper as a reduction to the amount available under its
working capital facility to provide liquidity support for
outstanding commercial paper, as discussed below.
Accounts Receivable Facility
On February 26, 2007, in connection with the amendment
of the working capital facility described above, the Utility
terminated its $650 million accounts receivable facility that
was scheduled to expire on March 5, 2007. There were no
loans outstanding under the Utility’s accounts receivable
facility at the time of termination.
Commercial Paper Program
On June 28, 2007, the Utility increased its borrowing
capacity under the commercial paper program from $1.0 bil-
lion to $1.75 billion. Commercial paper borrowings are used
primarily to cover fl uctuations in cash fl ow requirements.
Liquidity support for these borrowings is provided by avail-
able capacity under the working capital facility, as described
above. The commercial paper may have maturities up to
365 days and ranks equally with the Utility’s other unsubor-
dinated and unsecured indebtedness. At December 31, 2007,
the Utility had $270 million of commercial paper outstand-
ing, including amortization of a $1 million discount, at
an average yield of approximately 5.6%. Commercial paper
notes are sold at an interest rate dictated by the market at
the time of issuance.
NOTE 5: RATE
REDUCTION BONDS
In December 1997, PG&E Funding LLC, a limited liability
corporation wholly owned by and consolidated with the
Utility, issued $2.9 billion of RRBs. The proceeds of the
RRBs were used by PG&E Funding LLC to purchase from
the Utility the right, known as “transition property,” to
be paid a specifi ed amount from a non-bypassable charge
levied on residential and small commercial customers. At
December 31, 2006, the total amount of RRB principal out-
standing was $290 million. The RRBs were paid in full when
they matured on December 26, 2007 and there are no future
principal or interest payments.
NOTE 6: ENERGY
RECOVERY BONDS
In furtherance of the Chapter 11 Settlement Agreement,
PERF, a wholly owned consolidated subsidiary of the Utility,
issued two separate series of ERBs in the aggregate amount
of $2.7 billion in 2005 supported by a dedicated rate compo-
nent (“DRC”). The proceeds of the ERBs were used by PERF
to purchase from the Utility the right, known as “recovery
property,” to be paid a specifi ed amount from a DRC. DRC
charges are authorized by the CPUC under state legislation
and will be paid by the Utility’s electricity customers until
the ERBs are fully retired. Under the terms of a recovery
property servicing agreement, DRC charges are collected by
the Utility and remitted to PERF for payment of the bond
principal, interest, and miscellaneous expenses associated
with the bonds.
The fi rst series of ERBs issued on February 10, 2005
included fi ve classes aggregating approximately $1.9 billion
principal amount with scheduled maturities ranging from
September 25, 2006 to December 25, 2012. Interest rates on
the remaining four outstanding classes range from 3.87% for
the earliest maturing class to 4.47% for the latest maturing
class. The proceeds of the fi rst series of ERBs were paid by
PERF to the Utility and were used by the Utility to refi nance
the remaining unamortized after-tax balance of the settle-
ment regulatory asset. The second series of ERBs, issued
on November 9, 2005, included three classes aggregating
approximately $844 million principal amount, with sched-
uled maturities ranging from June 25, 2009 to December 25,
2012. Interest rates on the three classes range from 4.85% for
the earliest maturing class to 5.12% for the latest maturing
class. The proceeds of the second series of ERBs were paid
by PERF to the Utility to pre-fund the Utility’s tax liability
that will be due as the Utility collects the DRC related to
the fi rst series of ERBs.