PG&E 2008 Annual Report Download - page 121

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The Consolidated Balance Sheets of PG&E Corporation
and the Utility contain assets held in trust for the PG&E
Retirement Plan Master Trust, the Postretirement Life
Insurance Trust, and the Postretirement Medical Trusts
presented on a net basis. The assets held in these trusts
are fair valued annually and are included in the scope of
SFAS No. 157, but the pension liabilities are not considered
fair value instruments under SFAS No. 157. As the assets
are presented net of a non-fair value measure in PG&E
Corporation’s and the Utility’s Consolidated Financial
Statements, the fair value hierarchy disclosure in the table
above does not require the inclusion of pension assets.
The pension assets include equities, debt securities, swaps,
commingled funds, futures, cash equivalents, and insurance
policies. The pension assets are presented net of pension
obligations as Noncurrent Liabilities — Other in PG&E
Corporation’s and the Utility’s Consolidated Balance Sheets.
PRICE RISK MANAGEMENT INSTRUMENTS
Price risk management instruments comprise physical and
fi nancial derivative contracts including futures, forwards,
options, and swaps that are both exchange-traded and over-
the-counter (“OTC”) traded contracts. PG&E Corporation
and the Utility consistently apply valuation methodology
among their instruments. SFAS No. 71 allows the Utility to
defer the unrealized gains and losses associated with these
derivatives, as they are expected to be refunded or recovered
in future rates.
All energy options (exchange-traded and OTC) are valued
using the Black’s Option Pricing Model and classifi ed as
Level 3 measurements primarily due to volatility inputs.
MONEY MARKET INVESTMENTS
PG&E Corporation invests in AAA-rated money market
funds that seek to maintain a stable net asset value. These
funds invest in high quality, short-term, diversifi ed money
market instruments, such as treasury bills, federal agency
securities, certifi cates of deposit, and commercial paper with
a maximum weighted average maturity of 60 days or less.
PG&E Corporation’s investments in these money market
funds are generally valued based on observable inputs such
as expected yield and credit quality and are thus classifi ed
as Level 1 instruments. Approximately $164 million held in
money market funds are recorded as Cash and cash equiva-
lents in PG&E Corporation’s Consolidated Balance Sheets.
As of December 31, 2008, PG&E Corporation classifi ed
approximately $12 million invested in one money market
fund as a Level 3 instrument because the fund manager
imposed restrictions on fund participants’ redemption
requests. PG&E Corporation’s investment in this money
market fund, previously recorded as Cash and cash equiva-
lents, is recorded as Prepaid expenses and other in PG&E
Corporation’s Consolidated Balance Sheets.
TRUST ASSETS
The nuclear decommissioning trusts, the rabbi trusts related
to the non-qualifi ed deferred compensation plans, and the
long-term disability trust hold primarily equities, debt securi-
ties, mutual funds, and life insurance policies. These instru-
ments are generally valued based on unadjusted prices in
active markets for identical transactions or unadjusted prices
in active markets for similar transactions. The rabbi trusts
are classifi ed as Current Assets-Prepaid expenses and other
and Other Noncurrent Assets-Other in PG&E Corporation’s
Consolidated Balance Sheets. The long-term disability trust is
classifi ed as Current Liabilities-Other in PG&E Corporation’s
and the Utility’s Consolidated Balance Sheets, representing a
net obligation as the projected obligation exceeds plan assets.