PG&E 2008 Annual Report Download - page 142

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CONTINGENCIES
PG&E CORPORATION
PG&E Corporation retains a guarantee related to certain
indemnity obligations of its former subsidiary, NEGT, that
were issued to the purchaser of an NEGT subsidiary company.
PG&E Corporation’s sole remaining exposure relates to any
potential environmental obligations that were known to
NEGT at the time of the sale but not disclosed to the pur-
chaser, and is limited to $150 million. PG&E Corporation
has not received any claims nor does it consider it probable
that any claims will be made under the guarantee. PG&E
Corporation believes its potential exposure under this guar-
antee would not have a material impact on its fi nancial
condition or results of operations.
UTILITY
Application to Recover Hydroelectric
Facility Divestiture Costs
On April 14, 2008, the Utility fi led an application with the
CPUC requesting authorization to recover approximately
$47 million, including $12.2 million of interest, of the
costs it incurred in connection with the Utility’s efforts to
determine the market value of its hydroelectric generation
facilities in 2000 and 2001. These efforts were undertaken at
the direction of the CPUC in preparation for the proposed
divestiture of the facilities to further the development of
a competitive generation market in California. The Utility
continues to own its hydroelectric generation assets. On
February 18, 2009, a proposed decision was issued by the
administrative law judge, which if adopted by the CPUC,
would allow the Utility to recover these costs. It is expected
that the CPUC will issue a fi nal decision in 2009.
California Department of Water Resources Contracts
Electricity purchased under the DWR-allocated power
purchase contracts with various generators provided
approximately 15.1% of the electricity delivered to the
Utility’s customers for the year ended December 31, 2008.
The DWR remains legally and fi nancially responsible for
its power purchase contracts. The Utility acts as a billing
and collection agent of the DWR’s revenue requirements
from the Utility’s customers.
provide security of supply. Pricing terms also are diversifi ed,
ranging from market-based prices to base prices that are esca-
lated using published indices. New agreements are primarily
based on forward market pricing and will begin to impact
nuclear fuel costs starting in 2010.
At December 31, 2008, the undiscounted obligations
under nuclear fuel agreements were as follows:
(in millions)
2009 $ 95
2010 108
2011 92
2012 79
2013 81
Thereafter 495
Total $950
Payments for nuclear fuel amounted to approximately
$157 million in 2008, $102 million in 2007, and $106 mil-
lion in 2006.
Other Commitments and Operating Leases
The Utility has other commitments relating to operating
leases, vehicle leasing, and telecommunication and infor-
mation system contracts. At December 31, 2008, the future
minimum payments related to other commitments were
as follows:
(in millions)
2009 $ 45
2010 18
2011 17
2012 17
2013 16
Thereafter 34
Total $147
Payments for other commitments and operating leases
amounted to approximately $41 million in 2008, $38 million
in 2007, and $100 million in 2006.
Underground Electric Facilities
At December 31, 2008, the Utility was committed to spending
approximately $228 million for the conversion of existing
overhead electric facilities to underground electric facilities.
These funds are conditionally committed depending on the
timing of the work, including the schedules of the respective
cities, counties, and telephone utilities involved. The Utility
expects to spend approximately $40 million to $60 million
each year in connection with these projects. Consistent with
past practice, the Utility expects that these capital expendi-
tures will be included in rate base as each individual project
is completed and recoverable in rates charged to customers.