PG&E 2008 Annual Report Download - page 106

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NOTE 4: DEBT
LONG-TERM DEBT
The following table summarizes PG&E Corporation’s and
the Utility’s long-term debt:
Balance at December 31,
(in millions) 2008 2007
PG&E Corporation
Convertible subordinated notes,
9.50%, due 2010 $ 280 $ 280
Utility
Senior notes:
3.60% due 2009 600 600
4.20% due 201
1 500 500
6.25% due 2013 400 —
4.80% due 2014 1,000 1,000
5.625% due 2017 700 500
8.25% due 2018 800 —
6.05% due 2034 3,000 3,000
5.80% due 2037 700 700
6.35% due 2038 400 —
Less: current portion (600) —
Unamortized discount, net of premium (22) (22)
Total senior notes 7,478 6,278
Pollution control bonds:
Series 1996 C, E, F, 1997 B, variable rates(1),
due 2026(2) 614 614
Series 1996 A, 5.35%, due 2016 200 200
Series 2004 A-D, 4.75%, due 2023 345 345
Series 2005 A-G, variable rates,
due 2016 and 2026(3) — 454
Series 2008 A-D, variable rates(4),
due 2016 and 2026(5) 309 —
Series 2008 F and G, 3.75%(6),
due 2018 and 2026 95 —
Total pollution control bonds 1,563 1,613
Total Utility long-term debt,
net of current portion 9,041 7,891
Total consolidated long-term debt,
net of current portion $9,321 $8,171
(1) At December 31, 2008, interest rates on these bonds and the related
loans ranged from 0.75% to 1.20%.
(2) Each series of these bonds is supported by a separate letter of credit, which
expires on February 24, 2012. Although the stated maturity date is 2026,
each series will remain outstanding only if the Utility extends or replaces
the letter of credit related to the series or otherwise obtains a consent
from the issuer to the continuation of the series without a credit facility.
(3) During 2008, the credit rating of the insurer of these bonds was
downgraded or put on review for possible downgrade by several credit
agencies, resulting in increased interest rates. To reduce interest expense,
the Utility repurchased $300 million of the 2005 bonds in March
2008 and the remaining $154 million in April 2008. In September and
October 2008, all of these series, except for the Series 2005 E bonds,
were refunded through the issuance of the Series 2008 A-D and F and
G bonds. See footnotes 4 and 5.
(4) At December 31, 2008, interest rates on these bonds and the related
loans ranged from 0.57% to 0.85%.
(5) Each series of these bonds is supported by a separate direct-pay letter
of credit, which expires on October 29, 2011. The Utility may choose to
provide a substitute letter of credit for any series of these bonds, subject
to a rating requirement.
(6) These bonds bear interest at 3.75% per year through September 19, 2010,
are subject to mandatory tender on September 10, 2010, and may be
remarketed in a fi xed or variable rate mode.
The utility generation balancing account is used to record
and recover the authorized revenue requirements associated
with the Utility-owned electric generation, including capital
and related non-fuel operating and maintenance expenses.
The balancing account for energy recovery bonds records
certain benefi ts and costs associated with ERBs that are
provided to, or received from, customers. In addition, this
account ensures that customers receive the benefi ts of the net
amount of energy supplier refunds, claim offsets, and other
credits received by the Utility after the second series of ERBs
were issued.
The balancing account for public purpose program
revenues tracks the recovery of authorized public purpose
program revenue requirement and the actual cost of such
programs. The public purpose programs primarily consist
of the electric energy effi ciency programs; low-income energy
effi ciency programs; research, development, and demon-
stration programs; and renewable energy programs. The
increase in the current balancing account liability balance
at December 31, 2008 compared to the December 31, 2007
is due to a refund of approximately $230 million the Utility
received from the California Energy Commission (“CEC”).
The refund amount represents unspent renewables program
funding collected in previous periods. The program was can-
celled in the beginning of 2008 and the CEC was instructed
to return any unspent program funds to utilities to allow for
customer refund. The refund will be returned to customers
in 2009 through lower rates.
The balancing account for reliability services is a FERC-
mandated balancing account to ensure that the Participating
Transmission Owner neither under-recovers nor over-recovers
from customers the Reliability Services costs it is assessed by
the California Independent System Operator (“CAISO”).
At December 31, 2008, “Other” included the customer
energy effi ciency (“CEE”) incentive account, which records
any incentive awards earned by the Utility for implement-
ing CEE programs, and to refl ect these earnings in rates.
In December 2008, the Utility’s shareholders were awarded
$41.5 million for the fi rst interim award relating to 2006
and 2007 of the 2006-2008 energy effi ciency programs,
which will be collected in 2009 rates. At December 31, 2007,
“Other” mainly consisted of the distribution revenue adjust-
ment mechanism account, which records and recovers the
authorized distribution revenue requirements and certain
other distribution-related authorized costs.