PG&E 2007 Annual Report Download - page 42

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The Utility’s rates refl ect the sum of individual revenue
requirement components authorized by the CPUC and the
FERC. Changes in any individual revenue requirement affect
customers’ rates and could affect the Utility’s results of
operations. Pending regulatory proceedings that could result
in rate changes and affect the Utility’s revenues are discussed
below under “Regulatory Matters.” In annual true-up pro-
ceedings, the Utility requests the CPUC to authorize an
adjustment to electric and gas rates to (1) refl ect over- and
under-collections in the Utility’s major electric and gas bal-
ancing accounts, and (2) implement various other electricity
and gas revenue requirement changes authorized by the
CPUC and the FERC. Generally, these rate changes become
effective on the fi rst day of the following year. Balances in
all CPUC-authorized accounts are subject to review, verifi -
cation audit, and adjustment, if necessary, by the CPUC.
The following presents the Utility’s operating results
for 2007, 2006, and 2005.
Electric Operating Revenues
The Utility provides electricity to residential, industrial,
and small and large commercial customers through its
own generation facilities and through contracts with third
parties under power purchase agreements. In addition,
the Utility relies on electricity provided under long-term
contracts entered into by the California Department of
Water Resources (“DWR”) to meet a material portion of the
Utility’s customers’ demand (“load”). The Utility’s electric
operating revenues consist of amounts charged to customers
for electricity generation and procurement and for electric
transmission and distribution services.
The following table provides a summary of the Utility’s
electric operating revenues:
(in millions) 2007 2006 2005
Electric operating revenues $11,710 $10,871 $ 9,626
DWR pass-through revenues(1) (2,229) (2,119) (1,699)
Total electric operating
revenues $ 9,481 $ 8,752 $ 7,927
Total electricity sales
(in Gigawatt hours) 64,986 64,725 61,150
(1) These are revenues collected on behalf of the DWR for electricity
allocated to the Utility’s customers under contracts between the DWR
and power suppliers, and are not included in the Utility’s Consolidated
Statements of Income.
The Utility’s electric operating revenues increased by
approximately $729 million, or approximately 8%, in 2007
compared to 2006 mainly due to the following factors:
• Electricity procurement costs, which are passed through
to customers, increased by approximately $742 million.
(See “Cost of Electricity” below.)
• The 2007 GRC increased 2007 base revenue requirements
by approximately $231 million.
• Revenues from public purpose programs, including
the California Solar Initiative program, increased by
approximately $141 million. (See Note 3 of the Notes
to Consolidated Financial Statements.)
• Electric transmission revenues increased by approximately
$74 million, including an increase in revenues as
authorized in the TO rate case.
These increases were partially offset by the following:
• Transmission revenues decreased by approximately
$200 million primarily due to a decrease in the number of
reliability must run (“RMR”) agreements the Utility has
with the CAISO and the associated costs. During 2006, the
CPUC adopted rules to implement state law requirements
for California investor-owned utilities to meet resource
adequacy requirements, including rules to address local
transmission system reliability issues. As the utilities fulfi ll
their responsibilities to meet these requirements, the num-
ber of RMR agreements with the CAISO and the associated
costs, and the related revenues, will decline. (See “Cost of
Electricity” below.)
• Revenues in 2006 included approximately $136 million
for recovery of SC costs the Utility incurred from April
1998 through December 2005, as ordered by the FERC.
No similar amount was recognized in 2007.
• Revenues in 2006 included approximately $65 million
for recovery of net interest related to Disputed Claims for
the period between the effective date of the Utility’s plan
of reorganization under Chapter 11 in April 2004 and
the fi rst issuance of the Energy Recovery Bonds (“ERBs”)
in February 2005, and for certain energy supplier refund
litigation costs upon completion of the CPUC’s 2005
Annual Electric True-up verifi cation audit. No similar
amount was recognized in 2007.
• Other electric operating revenues, including the recovery of
a pension revenue requirement as authorized by the CPUC,
decreased by approximately $58 million.