PG&E 2008 Annual Report Download - page 138

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As of December 31, 2008, the Utility’s net disputed
claims liability was approximately $1,750 million, consist-
ing of approximately $1,580 million of remaining disputed
claims (classifi ed on the Consolidated Balance Sheets
as Accounts payable — Disputed claims and customer
refunds) and interest accrued at the FERC-ordered rate
of $664 million (classifi ed on the Consolidated Balance
Sheets as Interest payable) offset by accounts receivable
from the CAISO and PX of approximately $494 million
(classifi ed on the Consolidated Balance Sheets as Accounts
receivable — Customers).
In connection with the Utility’s proceedings under
Chapter 11, the Utility established an escrow account for
the payment of the disputed claims, which is classifi ed on
the Consolidated Balance Sheets as Restricted cash. As of
December 31, 2008, the Utility held $1,212 million in escrow,
including interest earned, for payment of the remaining net
disputed claims.
Interest accrues on the liability for disputed claims at
the FERC-ordered rate, which is higher than the rate earned
by the Utility on the escrow balance. Although the Utility
has been collecting the difference between the accrued inter-
est and the earned interest from customers, this amount is
not held in escrow. If the amount of interest accrued at the
FERC-ordered rate is greater than the amount of interest
ultimately determined to be owed with respect to disputed
claims, the Utility would refund to customers any excess
net interest collected from customers. The amount of any
interest that the Utility may be required to pay will depend
on the fi nal amounts to be paid by the Utility with respect
to the disputed claims.
The Utility and the PX have been negotiating the terms
of a proposed agreement regarding the potential transfer of
$700 million to the PX from the Utility’s escrow account
established for disputed claims to enable the PX to fund
future settlements and pay refund claims, or amounts owed
to CAISO or PX markets, as may be authorized by the
FERC or a court of competent jurisdiction. The proposed
agreement would be subject to approval by the FERC and
by the bankruptcy courts that have jurisdiction of the
Chapter 11 proceedings of the PX and the Utility. Under
the proposed agreement, the Utility’s payment would reduce
its liability for remaining net disputed claims. To protect
the Utility against the imposition of double liability, the
proposed agreement would provide that, to the extent that
both the PX and an individual electricity supplier have fi led
claims relating to the same transaction, such claim would be
paid by the Utility only once, either to the PX or directly to
the electricity supplier, as may be ordered by the FERC or a
court of competent jurisdiction. It is uncertain when a fi nal
agreement will be executed and, if executed, when required
approvals would be obtained.
NOTE 15: RESOLUTION OF
REMAINING CHAPTER 11
DISPUTED CLAIMS
Various electricity suppliers fi led claims in the Utility’s
proceeding under Chapter 11 seeking payment for energy
supplied to the Utility’s customers through the wholesale
electricity markets operated by the CAISO and the California
Power Exchange (“PX”) between May 2000 and June 2001.
These claims, which the Utility disputes, are being addressed
in various FERC and judicial proceedings in which the State
of California, the Utility, and other electricity purchasers
are seeking refunds from electricity suppliers, including
municipal and governmental entities, for overcharges
incurred in the CAISO and the PX wholesale electricity
markets between May 2000 and June 2001.
While the FERC and judicial proceedings have been
pending, the Utility entered into a number of settlements
with various electricity suppliers to resolve some of these
disputed claims and to resolve the Utility’s refund claims
against these electricity suppliers. These settlement agree-
ments provide that the amounts payable by the parties
are, in some instances, subject to adjustment based on the
outcome of the various refund offset and interest issues
being considered by the FERC. The proceeds from these
settlements, after deductions for contingencies based on
the outcome of the various refund offset and interest issues
being considered by the FERC, will continue to be refunded
to customers in rates. Additional settlement discussions
with other electricity suppliers are ongoing. Any net refunds,
claim offsets, or other credits that the Utility receives from
energy suppliers through resolution of the remaining disputed
claims, either through settlement or the conclusion of the
various FERC and judicial proceedings, will also be credited
to customers.
The following table presents the changes in the remain-
ing disputed claims liability and interest accrued from
December 31, 2007:
(in millions)
Balance at December 31, 2007 $ 1,719
Interest accrued 80
Less: Settlements (49)
Balance at December 31, 2008 $1,750