PG&E 2007 Annual Report Download - page 130

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The Bankruptcy Court retains jurisdiction over the
Utility’s escrowed funds (in addition, the Bankruptcy Court
retains jurisdiction to hear and determine disputes arising
in connection with the interpretation, implementation, or
enforcement of (1) the Chapter 11 Settlement Agreement,
(2) the Utility’s plan of reorganization under Chapter 11,
and (3) the Bankruptcy Court’s order confi rming the plan
of reorganization).
The Utility has entered into a number of settlements with
various electricity suppliers resolving some of these Disputed
Claims and the Utility’s refund claims against these electric-
ity suppliers. The Bankruptcy Court has approved the release
of $0.8 billion from escrow in connection with these settle-
ments. Through December 31, 2007, the Utility has received
consideration of approximately $1.2 billion under these
settlements through cash proceeds, reductions to the Utility’s
PX liability, and the acquisition of Gateway. These settlement
agreements provide that the amounts payable by the par-
ties are, in some instances, subject to adjustment based on
the outcome of the various refund offset and interest issues
being considered by the FERC.
During 2007, the Utility received approximately $79 mil-
lion (including interest) in cash-equivalent reductions to
the Utility’s PX liability from fi ve settlements approved
by the FERC. The Utility also received two cash distributions
in 2007 related to a prior settlement, totaling approximately
$34 million. These distributions will be refunded to cus-
tomers through rates. On December 21, 2007, the Utility
requested FERC approval of another settlement, under
which, if approved, the Utility would receive $45 million
in cash-equivalent reductions to its PX liability. Additional
settlement discussions with other electricity suppliers are
ongoing. Any net refunds, claim offsets, or other credits that
the Utility receives from energy suppliers through resolution
of the remaining Disputed Claims, either through settlement
or the conclusion of the various FERC and judicial proceed-
ings, will be credited to customers (after deductions for con-
tingencies based on the outcome of the various refund offset
and interest issues being considered by the FERC).
As of December 31, 2007, the amount of the accrual
for remaining net Disputed Claims was approximately
$1.1 billion, consisting of approximately $1.6 billion of
accounts payable Disputed Claims primarily payable to the
CAISO and the PX, offset by an accounts receivable from
the CAISO and the PX of approximately $0.5 billion. The
Utility held $1.2 billion (including interest) in escrow as
of December 31, 2007 for payment of the remaining net
Disputed Claims. The amount held in escrow is classifi ed
as Restricted Cash in the Consolidated Balance Sheets.
As of December 31, 2007, interest on the net Disputed
Claims balance, calculated at the FERC-ordered interest
rate, amounts to approximately $581 million (classifi ed as
Interest Payable in the Consolidated Balance Sheets). The
rate of interest actually earned by the Utility on the escrowed
amounts, however, is less than the FERC-ordered interest
rate. The Utility has been collecting the difference between
the earned amount and the accrued amount from custom-
ers. The amounts that have been collected from customers
to address the difference between FERC-ordered and actual
earned interest rates are not held in escrow. If the amount
of interest accrued at the FERC-ordered rate is greater than
the amount of interest ultimately determined to be owed to
generators, the Utility would refund to customers any excess
net interest collected from customers. The ultimate amount
of any interest that the Utility may be required to pay will
depend on the fi nal amount of refunds determined to be
owed to the Utility.
PG&E Corporation and the Utility are unable to predict
when the FERC or judicial proceedings will ultimately be
resolved, and the amount of any potential refunds that the
Utility may receive or the amount of Disputed Claims,
including interest, the Utility will be required to pay.
NOTE 16: RELATED
PARTY AGREEMENTS
AND TRANSACTIONS
In accordance with various agreements, the Utility and other
subsidiaries provide and receive various services to and from
their parent, PG&E Corporation, and among themselves.
The Utility and PG&E Corporation exchange administrative
and professional services in support of operations. Services
are priced at their fully loaded costs (i.e., direct cost of good
or service plus all applicable indirect charges and overheads).
PG&E Corporation also allocates various corporate adminis-
trative and general costs to the Utility and other subsidiaries