PG&E 2008 Annual Report Download - page 118

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The dividend participation rights of PG&E Corporation’s
Convertible Subordinated Notes, considered to be derivative
instruments, are recorded at fair value in PG&E Corporation’s
Consolidated Financial Statements in accordance with SFAS
No. 133. The dividend participation rights are not consid-
ered price risk management instruments, and thus are not
included in the tables above. (See Note 4 of the Notes to
the Consolidated Financial Statements for discussion of the
Convertible Subordinated Notes.)
As of December 31, 2008, PG&E Corporation and the
Utility had cash fl ow hedges with expiration dates through
December 2012 for energy contract derivative instruments.
Upon settlement of derivative instruments, including
those derivative instruments for which the normal purchase
and sales exception has been elected and derivative instru-
ments designated as cash fl ow hedges, any gains or losses
are recorded in the cost of electricity and the cost of natural
gas. All costs of electricity and natural gas are passed through
to customers. Cash infl ows and outfl ows associated with
the settlement of price risk management transactions are
recognized in operating cash fl ows on PG&E Corporation’s
and the Utility’s Consolidated Statements of Cash Flows.
In PG&E Corporation’s and the Utility’s Consolidated Balance Sheets, price risk management assets and liabilities
associated with the Utility’s electricity and gas procurement activities are presented on a net basis by counterparty where
the right of offset exists. As PG&E Corporation and the Utility adopted the provisions of FIN 39-1 on January 1, 2008,
the net balances include outstanding cash collateral associated with derivative positions. (See Note 2 of the Notes to the
Consolidated Financial Statements for discussion of the adoption of FIN 39-1.) The table below shows the total price risk
management derivative balances and the portions that are designated as cash fl ow hedges as of December 31, 2008:
Price Risk Management Derivatives Balance at December 31, 2008
Derivatives with Designated as Total Price Risk
No Hedge Cash Flow Cash Management
(in millions) Designation Hedges Collateral Derivatives
Current Assets — Prepaid expenses and other $ 55 $ — $ 55 $110
Other Noncurrent Assets — Other 81 — 67 148
Current Liabilities — Other 132 139 (75) 196
Noncurrent Liabilities — Other 150 211 (69) 292
The table below shows the total price risk management derivative balances and the portions that are designated as cash
fl ow hedges as of December 31, 2007:
Price Risk Management Derivatives Balance at December 31, 2007
Derivatives with Designated as Total Price Risk
No Hedge Cash Flow Cash Management
(in millions) Designation Hedges Collateral(2) Derivatives
Current Assets — Prepaid expenses and other $54 $ (2)(1) $ 3 $ 55
Other Noncurrent Assets — Other 83 42 46 171
Current Liabilities — Other 71 12 (16) 67
Noncurrent Liabilities — Other 17 3 — 20
(1) $2 million of the cash fl ow hedges in a liability position at December 31, 2007 related to counterparties for which the total net derivatives position is
a current asset.
(2) The net cash collateral receivable balance was classifi ed as Current Assets — Prepaid expenses and other in the 2007 Annual Report. Amounts have been
reclassifi ed in accordance with FIN 39-1.