PG&E 2009 Annual Report Download - page 114

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payments in each year limited to a maximum of $17.5
million per incident until the Utility has fully paid its share
of the liability. Since Diablo Canyon has two nuclear
reactors, each with a rated capacity of over 100 MW, the
Utility may be assessed up to $235 million per incident,
with payments in each year limited to a maximum of $35
million per incident. Both the maximum assessment per
reactor and the maximum yearly assessment are adjusted
for inflation at least every five years. The next scheduled
adjustment is due on or before October 29, 2013.
In addition, the Utility has $53.3 million of liability
insurance for Humboldt Bay Unit 3 and has a $500 million
indemnification from the NRC for public liability arising
from nuclear incidents, covering liabilities in excess of the
$53.3 million of liability insurance.
ENVIRONMENTAL MATTERS
The Utility may be required to pay for environmental
remediation at sites where it has been, or may be, a
potentially responsible party under environmental
laws. Under federal and California laws, the Utility may be
responsible for remediation of hazardous substances at
various sites including, but not limited to, former
manufactured gas plant (“MGP”) sites, power plant sites,
and sites used by the Utility for the storage, recycling, or
disposal of potentially hazardous materials, even if the
Utility did not deposit those substances on the site.
Given the complexities of the legal and regulatory
environment and the inherent uncertainties involved in the
early stages of a remediation project, the process for
estimating remediation liabilities is subjective and requires
significant judgment. The Utility records an environmental
remediation liability when site assessments indicate that
remediation is probable and it can reasonably estimate the
loss within a range of possible amounts.
The Utility records an environmental remediation
liability based on the lower end of the range of estimated
costs, unless a more objective estimate can be achieved.
Amounts recorded are not discounted to their present
value.
The Utility had an undiscounted and gross
environmental remediation liability of $586 million at
December 31, 2009 and $568 million at December 31,
2008. The following table presents the changes in the
environmental remediation liability from December 31,
2008:
(in millions)
Balance at December 31, 2008 $568
Additional remediation costs accrued:
Transfer to regulatory account for recovery 84
Amounts not recoverable from customers 20
Less: Payments (86)
Balance at December 31, 2009 $586
The $586 million accrued at December 31, 2009 consists
of the following:
• $46 million for remediation at the Utility’s natural gas
compressor site located near Hinkley, California;
• $158 million for remediation at the Utility’s natural gas
compressor site located in Topock, Arizona, near the
California border;
• $86 million related to remediation at divested generation
facilities;
• $113 million related to remediation costs for the Utility’s
generation and other facilities and for third-party disposal
sites;
• $125 million related to investigation and/or remediation
costs at former MGP sites owned by the Utility or third
parties (including those sites that are the subject of
remediation orders by environmental agencies or claims
by the current owners of the former MGP sites); and
• $58 million related to remediation costs for fossil
decommissioning sites.
The Utility recently contacted the owners of property
located on three former MGP sites in urban, residential
areas of San Francisco to offer to test the soil for residues,
and depending on the results of such tests, to take
appropriate remedial action. Until the Utility’s
investigation is complete, the extent of the Utility’s
obligation to remediate is established, and remedial actions
are determined, the Utility is unable to determine the
amounts it may spend in the future to remediate these
sites. As a result, no amounts have been accrued for these
sites (other than investigative costs).
The Utility expects to recover $291 million of the $586
million environmental remediation liability, in accordance
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