PG&E 2008 Annual Report Download - page 57

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PROPOSED ELECTRIC
TRANSMISSION PROJECTS
The Utility has been exploring the feasibility of obtain-
ing regulatory approval for a potential investment in an
electric transmission project that would traverse the Pacifi c
Northwest. On April 17, 2008, the FERC granted part of the
Utility’s request for a declaratory order to collect transmis-
sion rates designed to provide an incentive to the Utility to
continue leading the development of the proposed 1,000-
mile, 500 kilovolt (“kV”) transmission line to run from
British Columbia, Canada to Northern California that
would provide access to potential new renewable generation
resources, improve regional transmission reliability, and
provide opportunities for other market participants to use
the new facilities. The FERC’s order allows the Utility to
recover all prudently incurred pre-commercial costs, such as
costs for feasibility studies and surveys, and all prudently
incurred development and construction costs if the proposed
project is abandoned or cancelled for reasons beyond the
Utility’s control. On December 1, 2008, the Western Electric
Coordinating Council (“WECC”) formally completed the
Regional Planning Project Review process for the project.
On December 19, 2008, the Utility submitted to WECC a
plan-service and technical studies showing that the desired
line rating of 3,000 megawatts north to south is achievable;
the south to north rating study is underway. The target
operating date for the project is December 2015. The devel-
opment and construction of this proposed transmission
project remains subject to signifi cant business, fi nancial,
regulatory, environmental, and political risks and challenges.
The Utility also has been exploring the development
of a new 500-kV electric transmission project, the Central
California Clean Energy Transmission line, to increase trans-
mission capacity between northern and southern California,
improve access to new renewable generation resources and
meet reliability requirements in the Fresno area. The CAISO
has been conducting stakeholder meetings to review the
Utility’s proposal and the Utility has been conducting
various studies to ensure that the project is designed and
located to avoid or minimize potential impacts. Depending
on the results of these stakeholder meetings and studies,
the Utility will decide whether to request CPUC approval
to construct the line.
The Utility cannot predict whether the many conditions
and challenges to the development of these proposed electric
transmission projects will be met.
CAPITAL EXPENDITURES
The Utility’s investment in property, plant, and equipment
totaled $3.7 billion in 2008, $2.8 billion in 2007, and
$2.4 billion in 2006. The Utility expects that capital expen-
ditures will total approximately $3.6 billion in 2009 and
forecasts that capital expenditures will average approximately
$3.5 to $4.0 billion per year over the next three years. The
Utility’s weighted average rate base in 2008 was $18.2 billion.
Based on the estimated capital expenditures for 2009, the
Utility projects a weighted average rate base of approximately
$20.1 billion for 2009. Depending on conditions in the
capital markets, the Utility forecasts that it will make various
capital investments in its electric and gas transmission and
distribution infrastructure to maintain and improve system
reliability, safety, and customer service; to extend the life
of or replace existing infrastructure; and to add new infra-
structure to meet already authorized growth. Most of the
Utility’s revenue requirements to recover forecasted capital
expenditures are authorized in the GRC and TO rate cases.
In addition, from time to time, the Utility requests authori-
zation to collect additional revenue requirements to recover
capital expenditures related to specifi c projects, such as new
power plants, gas or electric transmission projects, and the
SmartMeter™ advanced metering infrastructure.
PROPOSED ELECTRIC DISTRIBUTION
RELIABILITY PROGRAM (CORNERSTONE
IMPROVEMENT PROGRAM)
On December 19, 2008, the CPUC ruled that it will con-
sider the Utility’s request for approval of a proposed six-year
electric distribution reliability improvement program. The
CPUC found that it is preferable to begin the scrutiny and
detailed analyses to determine whether major capital expendi-
tures are necessary to maintain or improve distribution reli-
ability and, if necessary, to determine the extent and timing
of such expenditures sooner rather than later. The proposed
program includes initiatives that are designed to decrease
the frequency and duration of electricity outages in order
to bring the Utility’s reliability performance closer to that
of other investor-owned electric utilities. The Utility expects
that the work performed in the six-year program also would
provide additional reliability benefi ts. The Utility forecasts
that it would incur capital expenditures totaling approxi-
mately $2.3 billion and operating and maintenance expenses
totaling approximately $43 million over the six-year period.
In its December 19, 2008 decision, the CPUC ruled that
program costs incurred in 2009 and 2010, if any, would not
be recoverable from customers. The Utility does not expect
to incur signifi cant costs in 2009 or 2010 before the CPUC
issues a fi nal decision on the Utility’s request.
PG&E Corporation and the Utility cannot predict
whether the CPUC will approve the Utility’s request.