PG&E 2007 Annual Report Download - page 43

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The Utility’s electric operating revenues increased in 2006
by approximately $825 million, or approximately 10%, com-
pared to 2005 mainly due to the following factors:
• Electricity procurement costs, which are passed through
to customers, increased by approximately $490 million.
(See “Cost of Electricity” below.)
• The dedicated rate component (“DRC”) charges related
to the ERBs increased by approximately $175 million.
(See Notes 3 and 6 of the Notes to the Consolidated
Financial Statements.) During 2005, the Utility collected
only the DRC for the fi rst series of ERBs that were issued
on February 10, 2005. During 2006, the Utility collected
the DRC associated with the fi rst series of ERBs and the
DRC related to the second series of ERBs, issued on
November 9, 2005.
• As discussed above, in 2006, the Utility recognized
approximately $136 million following the FERC’s order
allowing the Utility to recover SC costs that the Utility
incurred from April 1998 through December 2005.
No similar amount was recognized in 2005.
• The Utility recognized attrition adjustments to the Utility’s
authorized 2003 base revenue requirements of approxi-
mately $135 million, as authorized in the 2003 GRC.
• The Utility recorded approximately $112 million in revenue
requirements to recover a pension contribution attributable
to the Utility’s electric distribution and generation opera-
tions, but no similar amount was recognized in 2005.
• Transmission revenues increased by approximately $90 mil-
lion primarily due to an increase in revenues, as authorized
by the FERC.
• As discussed above, the Utility recognized approximately
$65 million due to the recovery of net interest costs
related to Disputed Claims for the period between the
effective date of the Utility’s plan of reorganization under
Chapter 11 and the date the fi rst series of ERBs was issued,
and for certain energy supplier refund litigation costs, but
no similar amount was recognized in 2005.
• The Utility recovered approximately $59 million of net
interest costs related to Disputed Claims incurred after the
issuance of the fi rst series of ERBs, as authorized by the
CPUC, but no similar amount was recognized in 2005.
These were partially offset by the following:
• In 2005, the Utility recognized approximately $160 million
due to the resolution of the Utility’s claims for shareholder
incentives related to energy effi ciency and other public
purpose programs, but no similar amount was recognized
in 2006.
• In 2005, the Utility recognized approximately $154 million
related to revenue requirements associated with the settle-
ment regulatory asset provided under the Chapter 11
Settlement Agreement and the recovery of costs on the
deferred tax component of the settlement regulatory asset,
but no similar amounts were recorded in 2006 after the
refi nancing of the settlement regulatory asset through
the issuance of the ERBs.
• The carrying cost credit, including both the debt and
equity components, associated with the issuance of the
second series of ERBs, decreased electric operating revenues
by approximately $123 million in 2006 from 2005. The
second series of ERBs was issued to pre-fund the Utility’s
tax liability that will be due as the Utility collects the DRC
related to the fi rst series from its customers over the term
of the ERBs. Until these taxes are fully paid, the Utility
provides customers a carrying cost credit, computed at
the Utility’s authorized rate of return on rate base to
compensate them for the use of proceeds from the second
series of ERBs as well as the after-tax proceeds of energy
supplier refunds used to reduce the size of the second
series of ERBs.
The Utility’s electric operating revenues for the period
2008 through 2010 are expected to increase, as authorized
by the CPUC in the 2007 GRC and by the FERC in future
TO rate cases. In addition, the Utility expects to continue
to collect revenue requirements related to CPUC-approved
capital expenditures, including the new Utility-owned gen-
eration projects and the SmartMeter™ project. (See “Capital
Expenditures” below.) Revenue requirements associated
with new or expanded public purpose programs, such as
the California Solar Initiative, will result in increased electric
operating revenues. In addition, the Utility may recognize
incentive revenues to the extent it achieves the CPUC’s energy
effi ciency goals. Finally, future electric operating revenues
will be impacted by changes in the cost of electricity.