PG&E 2008 Annual Report Download - page 127

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125
NOTE 14: EMPLOYEE
COMPENSATION PLANS
PENSION AND OTHER
POSTRETIREMENT BENEFITS
PG&E Corporation and the Utility provide a non-
contributory defi ned benefi t pension plan for certain
employees and retirees, referred to collectively as pension
benefi ts. PG&E Corporation and the Utility also provide
contributory postretirement medical plans for certain
employees and retirees and their eligible dependents,
and non-contributory postretirement life insurance plans
for certain employees and retirees (referred to collectively
as “other benefi ts”). PG&E Corporation and the Utility
have elected that certain of the trusts underlying these
plans be treated under the Code as qualifi ed trusts. If cer-
tain conditions are met, PG&E Corporation and the Utility
can deduct payments made to the qualifi ed trusts, subject
to certain Code limitations. The following schedules aggre-
gate all of PG&E Corporation’s and the Utility’s plans and
are presented based on the sponsor of each plan. PG&E
Corporation and the Utility use a December 31 measurement
date for all plans.
Under SFAS No. 71, regulatory adjustments are recorded
in the Consolidated Statements of Income and Consolidated
Balance Sheets of the Utility to refl ect the difference between
pension expense or income for accounting purposes and
pension expense or income for ratemaking, which is based
on a funding approach. A regulatory adjustment is also
recorded for the amounts that would otherwise be charged
to accumulated other comprehensive income under SFAS
No. 158 for the pension benefi ts related to the Utility’s
qualifi ed benefi t pension plan. Since 1993, the CPUC has
authorized the Utility to recover the costs associated with
its other benefi ts based on the lesser of the expense under
SFAS No. 106, “Employers’ Accounting for Postretirement
Benefi ts Other Than Pensions” (“SFAS No. 106”), or the
annual tax deductible contributions to the appropriate trusts.
The Utility records a regulatory liability for an overfunded
position of other benefi ts. However, this recovery mechanism
does not allow the Utility to record a regulatory asset for
an underfunded position related to other benefi ts. Therefore,
the SFAS No. 158 charge is recorded in accumulated other
comprehensive income (loss) for other benefi ts.
The construction of the dry cask storage facility is
complete and the initial movement of spent nuclear fuel
to dry cask storage is expected to begin in June 2009.
If the Utility is unable to begin loading spent nuclear fuel
by October 2010 for Unit 1 or May 2011 for Unit 2 and
if the Utility is otherwise unable to increase its on-site
storage capacity, the Utility would have to curtail or halt
operations until such time as additional safe storage for
spent fuel is made available.
On August 7, 2008, the U.S. Court of Appeals for the
Federal Circuit issued an appellate order in the litigation
pending against the DOE in which the Utility and other
nuclear power plant owners seek to recover costs they
incurred to build on-site spent nuclear fuel storage facilities
due to the DOE’s delay in constructing a national repository
for nuclear waste. In October 2006, the U.S. Court of Federal
Claims found that the DOE had breached its contract with
the Utility but awarded the Utility approximately $43 mil-
lion of the $92 million incurred by the Utility through 2004.
In ruling on the Utility’s appeal, the U.S. Court of Appeals
for the Federal Circuit reversed the lower court on issues
relating to the calculation of damages and ordered the lower
court to recalculate the award. Although various motions by
the DOE for reconsideration are still pending, the judge in
the lower court conducted a status conference on January 15,
2009 and has scheduled another conference for July 9, 2009.
The Utility expects the fi nal award will be approximately
$91 million for costs incurred through 2004 and that the
Utility will recover all of its costs incurred after 2004 to
build on-site storage facilities. Amounts recovered from the
DOE will be credited to customers through rates.
PG&E Corporation and the Utility are unable to predict
the outcome of any rehearing petition.