PG&E 2008 Annual Report Download - page 96

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94
Depreciation
The Utility’s composite depreciation rate was 3.38% in 2008,
3.28% in 2007, and 3.09% in 2006.
Estimated Useful Lives
Electricity generating facilities 4 to 37 years
Electricity distribution facilities 16 to 58 years
Electricity transmission 40 to 70 years
Natural gas distribution facilities 24 to 52 years
Natural gas transportation 25 to 45 years
Natural gas storage 25 to 48 years
The useful lives of the Utility’s property, plant, and
equipment are authorized by the CPUC and the FERC,
and depreciation expense is included in rates charged to
customers. Depreciation expense includes a component for
the original cost of assets and a component for estimated
future removal and remediation costs, net of any salvage
value at retirement.
The Utility charges the original cost of retired plant less
salvage value to accumulated depreciation upon retirement
of plant in service in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 71, “Accounting for the
Effects of Certain Types of Regulation” as amended (“SFAS
No. 71”). PG&E Corporation and the Utility expense repair
and maintenance costs as incurred.
Nuclear Fuel
Property, plant, and equipment also include nuclear fuel
inventories. Stored nuclear fuel inventory is stated at
weighted average cost. Nuclear fuel in the reactor is expensed
as used based on the amount of energy output.
Capitalized Software Costs
PG&E Corporation and the Utility account for internal soft-
ware in accordance with the American Institute of Certifi ed
Public Accountants Statement of Position, “Accounting for
the Costs of Computer Software Developed or Obtained for
Internal Use” (“SOP 98-1”).
Under SOP 98-1, PG&E Corporation and the Utility
capitalize costs incurred during the application development
stage of internal use software projects to property, plant,
and equipment. The Utility’s capitalized software costs
totaled $522 million at December 31, 2008 and $533 million
at December 31, 2007, net of accumulated amortization
of approximately $280 million at December 31, 2008 and
$207 million at December 31, 2007. PG&E Corporation’s
capitalized software costs were less than $1 million at
December 31, 2008. PG&E Corporation and the Utility
amortize capitalized software costs ratably over the expected
lives of the software ranging from 3 to 15 years, commencing
upon operational use.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are reported at their original
cost. These original costs include labor and materials, con-
struction overhead, and allowance for funds used during
construction (“AFUDC”).
The Utility’s balances as of December 31, 2008 are
as follows:
Accumulated
Gross Plant Depreciation Net Plant
as of as of as of
December 31, December 31, December 31,
(in millions) 2008 2008 2008
Electricity generating
facilities $ 3,711 $ (1,134) $ 2,577
Electricity distribution
facilities 18,777 (6,722) 12,055
Electricity transmission 5,150 (1,675) 3,475
Natural gas distribution
facilities 6,666 (2,544) 4,122
Natural gas
transportation 3,434 (1,482) 1,952
Natural gas storage 55 — 55
CWIP 2,023 —
2,023
Total $39,816 $(13,557) $26,259
The Utility’s balances as of December 31, 2007 are
as follows:
Accumulated
Gross Plant Depreciation Net Plant
as of as of as of
December 31, December 31, December 31,
(in millions) 2007 2007 2007
Electricity generating
facilities $ 3,004 $ (1,040) $ 1,964
Electricity distribution
facilities 17,712 (6,377) 11,335
Electricity transmission 4,883 (1,633) 3,250
Natural gas distribution
facilities 6,302 (2,429) 3,873
Natural gas
transportation 3,271 (1,434) 1,837
Natural gas storage 47 — 47
CWIP 1,348 — 1,348
Total $36,567 $(12,913) $23,654
AFUDC
AFUDC represents a method used to compensate the
Utility for the estimated cost of debt and equity used to
fi nance regulated plant additions and is recorded as part
of the cost of construction projects. AFUDC is recoverable
from customers through rates over the life of the related
property once the property is placed in service. The Utility
recorded AFUDC of approximately $70 million and
$44 million during 2008, $64 million and $32 million
during 2007, and $47 million and $20 million during
2006, related to equity and debt, respectively.