PG&E 2009 Annual Report Download - page 112

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Nuclear Fuel Agreements
The Utility has entered into several purchase agreements
for nuclear fuel. These agreements have terms ranging from
1 to 16 years and are intended to ensure long-term fuel
supply. The contracts for uranium and for conversion and
enrichment services provide for 100% coverage of reactor
requirements through 2014, while contracts for fuel
fabrication services provide for 100% coverage of reactor
requirements through 2011. The Utility relies on a number
of international producers of nuclear fuel in order to
diversify its sources and provide security of supply. Pricing
terms are also diversified, ranging from market-based prices
to base prices that are escalated 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, 2009, the undiscounted obligations
under nuclear fuel agreements were as follows:
(in millions)
2010 $ 134
2011 100
2012 78
2013 118
2014 131
Thereafter 1,096
Total $1,657
Payments for nuclear fuel amounted to $141 million in
2009, $157 million in 2008, and $102 million in 2007.
Other Commitments and Operating Leases
The Utility has other commitments relating to operating
leases and SmartMeterTM deployment contracts. At
December 31, 2009, the future minimum payments related
to other commitments were as follows:
(in millions)
2010 $ 40
2011 20
2012 19
2013 18
2014 14
Thereafter 26
Total $137
Payments for other commitments and operating leases
amounted to $22 million in 2009, $41 million in 2008, and
$38 million in 2007. PG&E had operating leases on office
facilities expiring at various dates from 2010 to 2018.
Certain leases on office facilities contain escalation clauses
requiring annual increases in rent ranging from 1% to 11%.
The rentals payable under these leases may increase by a
fixed amount each year, a percentage of a base year, or the
consumer price index. Most leases contain extension
options ranging between one and five years.
Underground Electric Facilities
At December 31, 2009, the Utility was committed to
spending approximately $237 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 $80 million each year in
connection with these projects. Consistent with past
practice, the Utility expects that these capital expenditures
will be included in rate base as each individual project is
completed and recoverable in rates charged to customers.
CONTINGENCIES
PG&E CORPORATION
PG&E Corporation retains a guarantee related to certain
obligations of its former subsidiary, NEGT, that were
issued to the purchaser of an NEGT subsidiary company in
2000. PG&E Corporation’s primary remaining exposure
relates to any potential environmental obligations that were
known to NEGT at the time of the sale but not disclosed
to the purchaser, 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 that its potential
exposure under this guarantee would not have a material
impact on its financial condition or results of operations.
UTILITY
Energy Efficiency Programs and Incentive Ratemaking
The CPUC has established a ratemaking mechanism to
provide incentives to the California investor-owned utilities
to meet the CPUC’s energy savings goals through
implementation of the utilities’ energy efficiency programs.
In accordance with this mechanism, the CPUC has
awarded the Utility incentive revenues totaling $75 million
through December 31, 2009 based on the energy savings
achieved through implementation of the Utility’s energy
efficiency programs during the 2006 through 2008 program
cycle.
Consistent with the incentive award process previously
adopted by the CPUC, the CPUC held back an additional
$40.3 million of incentive revenues, subject to the true-up
process to be completed in 2010. The Utility has not
recognized any portion of the $40.3 million held back in
108