PG&E 2008 Annual Report Download - page 46

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44
These increases were partially offset by the following
factors:
• Cost reductions of approximately $60 million, refl ecting
reductions in labor, postage, consulting, advertising,
and other costs.
• Costs related to injuries and damages decreased by
approximately $16 million as compared to 2007, when
the Utility increased its reserves for such matters.
• Costs related to software maintenance contracts decreased
by $10 million.
• Costs decreased by approximately $12 million as compared
to 2007 when the CPUC ordered the Utility to make
customer refunds related to billing practices.
• Costs decreased by approximately $13 million as compared
to 2007 when the Utility increased the liability related to
compensation for employees’ missed meals.
During 2007, the Utility’s operating and maintenance
expenses increased by approximately $175 million, or 5%,
compared to 2006, mainly due to the following factors:
• Payments for customer assistance and public purpose
programs, such as the California Solar Initiative program,
increased by approximately $99 million, primarily due to
increased customer participation in these programs.
• The Utility’s distribution expenses increased by approxi-
mately $40 million, primarily due to service costs related
to the creation of new dispatch and scheduling stations
and vegetation management in the Utility’s service territory.
• Billing and collection costs increased by approximately
$33 million.
• Labor costs increased by approximately $33 million,
primarily due to higher employee headcount and increased
base salaries and incentive compensation.
• Costs of outside consulting services and contracts primarily
related to information systems increased by approximately
$22 million.
• Approximately $22 million was accrued for missed meal
payments to certain Utility employees covered under
collective bargaining agreements.
• Workers’ compensation expense increased by approximately
$20 million, due to an increase in the Utility’s accrual
for its workers’ compensation obligation (caused by a
decrease to the applicable discount rate used to calculate
the obligation) and higher than expected workers’ com-
pensation claims.
Operating and Maintenance
Operating and maintenance expenses consist mainly of the
Utility’s costs to operate and maintain its electricity and
natural gas facilities, customer accounts and service expenses,
public purpose program expenses, and administrative and
general expenses.
The Utility’s operating and maintenance expenses
increased by approximately $325 million, or 8%, in 2008
compared to 2007. Expenses increased mainly due to the
following factors:
• Public purpose program and customer energy effi ciency
incentive program expenses increased by approximately
$290 million, primarily due to increased customer participa-
tion and increased marketing of new and existing programs,
including the California Solar Initiative program and
the Self-Generation Incentive Program. Of these changes,
approximately $266 million was recovered in electric oper-
ating revenues and $24 million was recovered in natural
gas operating revenues. Expenses related to public purpose
programs and energy effi ciency programs are generally fully
recoverable and differences between costs and revenues in
a particular period are due to timing differences.
• Employee benefi t costs increased by approximately $59 mil-
lion, primarily refl ecting unrealized losses in the long-term
disability plan trust due to the decline in the market value
of trust investments as fi nancial markets deteriorated in the
second half of 2008.
• Costs increased by approximately $38 million for the
repair and restoration of electric distribution systems and
to respond to customer inquiries following the January 2008
winter storm. Of the approximately $38 million in costs,
the CPUC has authorized the Utility to recover approxi-
mately $8 million from customers. There was no similar
storm in the same period in 2007.
• Labor costs increased by approximately $39 million to
conduct expanded natural gas leak surveys in parts of the
Utility’s service territory and to make related repairs in
an effort to improve operating and maintenance processes
in the Utility’s natural gas system.
• Maintenance costs increased by approximately $10 million,
due to the longer duration of the planned outage of Diablo
Canyon Unit 2 in 2008 compared to the Diablo Canyon
Unit 1 outage in 2007.