PG&E 2007 Annual Report Download - page 119

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117
The Utility and other nuclear power plant owners have
sued the DOE for breach of contract. The Utility seeks to
recover its costs to develop on-site storage at Diablo Canyon
and Humboldt Bay Unit 3. In October 2006, the U.S. Court
of Federal Claims found the DOE had breached its contract
and awarded the Utility approximately $42.8 million of
the $92 million incurred by the Utility through 2004. The
Utility appealed to the U.S. Court of Appeals for the Federal
Circuit seeking to increase the amount of the award and
challenged the U.S. Court of Federal Claims’ fi nding that
the Utility would have incurred some of the costs for the
on-site storage facilities even if the DOE had complied with
the contract. A decision on the appeal is expected by the
end of 2008. The Utility will seek to recover costs incurred
after 2004 in future lawsuits against the DOE. Any amounts
recovered from the DOE will be credited to customers
through rates.
PG&E Corporation and the Utility are unable to predict
the outcome of this appeal or the amount of any additional
awards the Utility may receive. If the U.S. Court of Federal
Claims’ decision is not overturned or modifi ed on appeal,
it is likely that the Utility will be unable to recover all of
its future costs for on-site storage facilities from the DOE.
However, reasonably incurred costs related to the on-site
storage facilities are, in the case of Diablo Canyon, recover-
able through rates and, in the case of Humboldt Bay Unit 3,
recoverable through its decommissioning trust fund.
NOTE 14: EMPLOYEE
COMPENSATION PLANS
PG&E Corporation and its subsidiaries provide non-
contributory defi ned benefi t pension plans for certain
employees and retirees, referred to collectively as pension
benefi ts. PG&E Corporation and the Utility have elected
that certain of the trusts underlying these plans be treated
under the Internal Revenue Code as qualifi ed trusts. If
certain conditions are met, PG&E Corporation and the
Utility can deduct payments made to the qualifi ed trusts,
subject to certain Internal Revenue Code limitations. PG&E
Corporation and its subsidiaries also provide contributory
defi ned benefi t medical plans for certain retired employees
and their eligible dependents, and non-contributory defi ned
benefi t life insurance plans for certain retired employees
(referred to collectively as other benefi ts). The following
schedules aggregate all of PG&E Corporation’s and the
Utility’s plans and are presented based on the sponsor
of each plan. PG&E Corporation and its subsidiaries use
a December 31 measurement date for all of their plans.
Under SFAS No. 71, regulatory adjustments are recorded
in the Consolidated Statements of Income and Consolidated
Balance Sheets of the Utility to refl ect the difference between
Utility pension expense or income for accounting purposes
and Utility pension expense or income for ratemaking,
which is based on a funding approach. Only the portion of
the pension contribution allocated to the gas transmission
and storage business is not recoverable in rates. For 2007,
the reduction in net income as a result of the Utility not
being able to recover this portion in rates was approximately
$3 million, net of tax. A regulatory adjustment is also
recorded for the amounts that would otherwise be charged
to accumulated other comprehensive income under SFAS
No. 158, “Employers’ Accounting for Defi ned Benefi t
Pension and Other Postretirement Plans” (“SFAS No. 158”)
for the pension benefi ts related to the Utility’s qualifi ed
benefi t pension plan. Since 1993, the CPUC has authorized
the Utility to recover the costs associated with its other ben-
efi ts based on the lesser of the expense under SFAS No. 106,
“Employers’ Accounting for Postretirement Benefi ts Other
Than Pensions” (“SFAS No. 106”), or the annual tax deduct-
ible contributions to the appropriate trusts. This recovery
mechanism does not allow the Utility to record a regulatory
asset for the SFAS No. 158 charge to accumulated other com-
prehensive income related to other benefi ts. However, the
Utility is not precluded from recording a regulatory liability
as was done in 2007.