PG&E 2009 Annual Report Download - page 16

operational efficiencies and improve reliability while
creating future sustainable cost savings to offset these
higher anticipated expenses. (See “Results of Operations”
below.)
•Capital Structure and Financing. The CPUC has authorized
a capital structure for the Utility’s electric and natural gas
distribution and electric generation rate base that consists
of 52% common equity and 48% debt and preferred
stock. This authorized capital structure will remain in
effect through 2012. The CPUC also has authorized the
Utility to earn a rate of return on each component of its
capital structure, including an ROE of 11.35%. These
rates will remain in effect through 2010. The rates for
2011 and 2012 are subject to an annual adjustment
mechanism that will be triggered if the 12-month
October-through-September average yield for the
applicable Moody’s Investors Service (“Moody’s”) utility
bond index increases or decreases by more than 1% as
compared to the applicable benchmark. The amount of
the Utility’s authorized equity earnings is determined by
the 52% equity component, the 11.35% ROE, and the
aggregate amount of rate base authorized by the CPUC.
The rate of return that the Utility earns on its FERC-
jurisdictional rate base is not specifically authorized, but
rates are designed to allow the Utility to earn a reasonable
rate of return. The Utility’s actual equity earnings could
be more or less based on a number of factors, including
the timing and amount of operating costs and capital
expenditures. The CPUC periodically authorizes the
aggregate amount of long-term debt and short-term debt
that the Utility may issue and authorizes the Utility to
recover its related debt financing costs. The timing and
amount of the Utility’s future financing will depend on
various factors, as discussed in “Liquidity and Financial
Resources” below. PG&E Corporation regularly
contributes equity to the Utility to maintain the Utility’s
CPUC-authorized capital structure. PG&E Corporation
may issue debt or equity in the future to fund these
equity contributions.
FORWARD-LOOKING STATEMENTS
This combined annual report and the letter to shareholders
that accompanies it contain forward-looking statements
that are necessarily subject to various risks and
uncertainties. These statements are based on current
estimates, expectations, and projections about future events
and assumptions regarding these events and management’s
knowledge of facts as of the date of this report. These
forward-looking statements relate to, among other matters,
estimated capital expenditures, estimated environmental
remediation liabilities, estimated tax liabilities, the
anticipated outcome of various regulatory and legal
proceedings, estimated future cash flows, and the level of
future equity or debt issuances, and are also identified by
words such as “assume,” “expect,” “intend,” “plan,”
“project,” “believe,” “estimate,” “target,” “predict,”
“anticipate,” “aim,” “may,” “might,” “should,” “would,”
“could,” “goal,” “potential,” and similar expressions. PG&E
Corporation and the Utility are not able to predict all the
factors that may affect future results. Some of the factors
that could cause future results to differ materially from
those expressed or implied by the forward-looking
statements, or from historical results, include, but are not
limited to:
• the Utility’s ability to manage capital expenditures and its
operating and maintenance expenses within authorized
levels;
• the outcome of pending and future regulatory
proceedings and whether the Utility is able to timely
recover its costs through rates;
• the adequacy and price of electricity and natural gas
supplies, and the ability of the Utility to manage and
respond to the volatility of the electricity and natural gas
markets, including the ability of the Utility and its
counterparties to post or return collateral;
• explosions, fires, accidents, mechanical breakdowns, the
disruption of information technology and systems, and
similar events that may occur while operating and
maintaining an electric and natural gas system in a large
service territory with varying geographic conditions that
can cause unplanned outages, reduce generating output,
damage the Utility’s assets or operations, subject the
Utility to third-party claims for property damage or
personal injury, or result in the imposition of civil,
criminal, or regulatory fines or penalties on the Utility;
• the impact of storms, earthquakes, floods, drought,
wildfires, disease, and similar natural disasters, or acts of
terrorism or vandalism, that affect customer demand or
that damage or disrupt the facilities, operations, or
information technology and systems owned by the
Utility, its customers, or third parties on which the Utility
relies;
• the potential impacts of climate change on the Utility’s
electricity and natural gas businesses;
• changes in customer demand for electricity and natural
gas resulting from unanticipated population growth or
decline, general economic and financial market
conditions, changes in technology that include the
development of alternative technologies that enable
customers to increase their reliance on self-generation, or
other reasons;
• the occurrence of unplanned outages at the Utility’s two
nuclear generating units at the Diablo Canyon Power
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