PG&E 2007 Annual Report Download - page 131

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129
using agreed upon allocation factors, including the number of employees, operating expenses excluding fuel purchases, total
assets, and other cost allocation methodologies. The Utility’s signifi cant related party transactions and related receivable
(payable) balances were as follows:
Receivable
(Payable) Balance
Outstanding at
Year ended
Year ended December 31, December 31,
(in millions) 2007 2006 2005 2007 2006
Utility revenues from:
Administrative services provided to PG&E Corporation $ 4 $ 5 $ 5 $ 2 $ 2
Utility employee benefi t assets due from PG&E Corporation — — — 27 25
Interest from PG&E Corporation on employee benefi t assets 1 1 — — —
Utility expenses from:
Administrative services received from PG&E Corporation $107 $108 $111 $(28) $(40)
Utility employee benefi t payments provided to PG&E Corporation 4 3 — — —
NOTE 17: COMMITMENTS
AND CONTINGENCIES
PG&E Corporation and the Utility have substantial fi nancial
commitments in connection with agreements entered into
to support the Utility’s operating activities. PG&E Corpora-
tion and the Utility also have signifi cant contingencies
arising from their operations, including contingencies related
to guarantees, regulatory proceedings, nuclear operations,
employee matters, environmental compliance and reme-
diation, and legal matters.
COMMITMENTS
UTILITY
Third-Party Power Purchase Agreements
Qualifying Facility Power Purchase Agreements — Under
the Public Utility Regulatory Policies Act of 1978 (“PURPA”),
electric utilities were required to purchase energy and
capacity from independent power producers that are qualify-
ing co-generation facilities (“QFs”). To implement the pur-
chase requirements of PURPA, the CPUC required California
investor-owned electric utilities to enter into long-term power
purchase agreements with QFs and approved the applicable
terms, conditions, prices, and eligibility requirements.
These agreements require the Utility to pay for energy and
capacity. Energy payments are based on the QF’s actual
electrical output and CPUC-approved energy prices, while
capacity payments are based on the QF’s total available
capacity and contractual capacity commitment. Capacity
payments may be adjusted if the QF exceeds or fails to
meet performance requirements specifi ed in the applicable
power purchase agreement.
The Energy Policy Act of 2005 signifi cantly amended the
purchase requirements of PURPA. As amended, Section 210(m)
of PURPA authorizes the FERC to waive the obligation of
an electric utility under Section 210 of PURPA to purchase
the electricity offered to it by a QF (under a new contract
or obligation) if the FERC fi nds the QF has nondiscrimina-
tory access to one of three defi ned categories of competitive
wholesale electricity markets. The statute permits such
waivers to a particular QF or on a “service territory-wide
basis.” The Utility plans to wait until after the new day-
ahead market structure provided for in the CAISO’s MRTU
initiative to restructure the California electricity market
becomes effective to assess whether it will fi le a request with
the FERC to terminate its obligations under PURPA and
to enter into new QF purchase obligations.