PG&E 2008 Annual Report Download - page 139

Download and view the complete annual report

Please find page 139 of the 2008 PG&E annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

137
At December 31, 2008 and December 31, 2007, the Utility
had a receivable of approximately $29 million from PG&E
Corporation included in Accounts receivable — Related
parties and Other Noncurrent Assets — Related parties
receivable on the Utility’s Consolidated Balance Sheets and
a payable of approximately $25 million and $28 million,
respectively, to PG&E Corporation included in Accounts
payable — Related parties on the Utility’s Consolidated
Balance Sheets.
NOTE 17: COMMITMENTS
AND CONTINGENCIES
PG&E Corporation and the Utility have substantial fi nancial
commitments in connection with agreements entered into to
support the Utility’s operating activities. PG&E Corporation
and the Utility also have signifi cant contingencies arising from
their operations, including contingencies related to guarantees,
regulatory proceedings, nuclear operations, employee matters,
environmental compliance and remediation, tax matters,
and legal matters.
COMMITMENTS
UTILITY
Third-Party Power Purchase Agreements
As part of the ordinary course of business, the Utility
enters into various agreements to purchase electric energy
and capacity and makes payments under existing power
purchase agreements. The price of purchased power may
be fi xed or variable. Variable pricing is generally based on
either the current market price of gas or electricity at the
date of purchase.
Qualifying Facility Power Purchase Agreements — Under
the Public Utility Regulatory Policies Act of 1978 (“PURPA”),
electric utilities were required to purchase energy and capacity
from independent power producers that are qualifying
co-generation facilities and qualifying small power production
facilities (“QFs”). To implement the purchase requirements
of PURPA, the CPUC required California investor-owned
electric utilities to enter into long-term power purchase agree-
ments with QFs and approved the applicable terms, condi-
tions, prices, and eligibility requirements. These agreements
require the Utility to pay for energy and capacity. Energy
payments are based on the QF’s actual electrical output and
CPUC-approved energy prices, while capacity payments are
based on the QF’s total available capacity and contractual
capacity commitment. Capacity payments may be adjusted
if the QF exceeds or fails to meet performance requirements
specifi ed in the applicable power purchase agreement.
PG&E Corporation and the Utility are unable to predict
when the FERC or judicial proceedings will be resolved, and
the amount of any potential refunds that the Utility may
receive or the amount of disputed claims, including interest,
the Utility will be required to pay.
NOTE 16: RELATED
PARTY AGREEMENTS
AND TRANSACTIONS
In accordance with various agreements, the Utility and other
subsidiaries provide and receive various services to and from
their parent, PG&E Corporation, and among themselves.
The Utility and PG&E Corporation exchange administrative
and professional services in support of operations. Services
provided directly to PG&E Corporation by the Utility are
priced at the higher of fully loaded cost (i.e., direct cost of
good or service and allocation of overhead costs) or fair mar-
ket value, depending on the nature of the services. Services
provided directly to the Utility by PG&E Corporation are
priced at the lower of fully loaded cost or fair market value,
depending on the nature and value of the services. PG&E
Corporation also allocates various corporate administrative
and general costs to the Utility and other subsidiaries using
agreed-upon allocation factors, including the number of
employees, operating expenses excluding fuel purchases, total
assets, and other cost allocation methodologies. Management
believes that the methods used to allocate expenses are rea-
sonable and meet the reporting and accounting requirements
of its regulatory agencies.
The Utility’s signifi cant related party transactions were
as follows:
Year ended December 31,
(in millions) 2008 2007 2006
Utility revenues from:
Administrative services provided
to PG&E Corporation $ 4 $ 4 $ 5
Interest from PG&E Corporation
on employee benefi t assets — 1 1
Utility expenses from:
Administrative services received
from PG&E Corporation $122 $107 $108
Utility employee benefi t payments
provided to PG&E Corporation 2 4 3