PG&E 2007 Annual Report Download - page 83

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The Utility also must comply with the terms of various
permits, authorizations, and licenses. These permits, authori-
zations, and licenses may be revoked or modifi ed by the
agencies that granted them if facts develop that differ sig-
nifi cantly from the facts assumed when they were issued. In
addition, discharge permits and other approvals and licenses
often have a term that is less than the expected life of the
associated facility. Licenses and permits may require periodic
renewal, which may result in additional requirements being
imposed by the granting agency. In connection with a license
renewal, the FERC may impose new license conditions that
could, among other things, require increased expenditures
or result in reduced electricity output and/or capacity at
the facility.
If the Utility cannot obtain, renew, or comply with neces-
sary governmental permits, authorizations, or licenses, or if
the Utility cannot recover any increased costs of complying
with additional license requirements or any other associated
costs in its rates in a timely manner, PG&E Corporation’s
and the Utility’s fi nancial condition and results of opera-
tions could be materially adversely affected.
PG&E Corporation’s and the Utility’s fi nancial statements
refl ect various estimates and assumptions, including
assumptions about the value of assets held in trust, that
could prove to be different.
As described in Note 1 of the Notes to the Consolidated
Financial Statements, PG&E Corporation’s and the Utility’s
fi nancial statements refl ect management’s estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the disclosure of con-
tingencies. In particular, the fi nancial statements refl ect
the values of the assets held in trust to satisfy the Utility’s
obligations to decommission its nuclear generation facilities
and under pension and other post-retirement benefi t plans.
The value of these assets is subject to market fl uctuations.
Also, certain assets held in these trusts do not have readily
determinable market values. Changes in the estimates and
assumptions inherent in the value of these assets could affect
the value of the trusts. If the value of the assets held by the
trusts declines by a material amount, the Utility’s funding
obligation to the trusts would materially increase.
The outcome of pending and future litigation and legal
proceedings, the application of and changes in accounting
standards or guidance, tax laws, labor laws, rates or policies,
may also adversely affect the Utility’s fi nancial condition,
results of operations, or cash fl ows.
In the normal course of business, the Utility is named as a
party in a number of claims and lawsuits. The Utility may
also be the subject of investigative or enforcement proceed-
ings conducted by administrative or regulatory agencies. In
accordance with applicable accounting standards, the Utility
makes provisions for liabilities when it is both probable
that a liability has been incurred and the amount of the loss
can be reasonably estimated. If the Utility incurs losses in
connection with litigation or other legal, administrative, or
regulatory proceedings that materially exceeded the provision
it made for liabilities, PG&E Corporation’s and the Utility’s
fi nancial condition, results of operations, and cash fl ow
would be materially adversely affected.
In addition, there is a risk that changes in accounting or
tax rules, standards, guidance, policies, or interpretations,
or that changes in management’s estimates and assumptions
underlying reported amounts of revenues, expenses, assets
and liabilities, may result in write-offs, impairments, or other
charges that could have a material adverse affect on PG&E
Corporation’s and the Utility’s fi nancial condition, results
of operations, and cash fl ow.