PG&E 2009 Annual Report Download - page 31

market power demonstrated by the utility to be held by
others, (2) to support a use of preferred resources (such as
renewable energy sources), (3) to take advantage of a
unique and fleeting opportunity (such as a bankruptcy
settlement), and (4) to meet unique reliability needs.
On September 30, 2009, the Utility requested that the
CPUC approve several agreements executed by the Utility
following the completion of its April 1, 2008 RFOs of new
long-term generation resources to meet customer demand
as forecasted in the Utility’s 2007–2016 long-term
electricity procurement plan previously approved by the
CPUC. One of the agreements submitted to the CPUC
proposes that a 586 MW natural gas-fired facility be
developed and constructed by a third party and then
transferred to the Utility after commercial operation
begins. The proposed facility would be operationally
flexible, enabling the Utility to increase its use of renewable
power by balancing the fluctuating output of wind and
solar resources. The facility is proposed to be built in
Oakley, California and completed in 2014. (The remaining
agreements submitted to the CPUC are power purchase
agreements.)
PROPOSED RENEWABLE ENERGY
DEVELOPMENT
In February 2009, the Utility applied to the CPUC for
approval of the Utility’s proposed five-year program to
develop up to 500 MW of renewable generation resources
based on solar photovoltaic (“PV”) technology. The
program would include the development of 250 MW of
utility-owned PV facilities at an estimated capital cost of
approximately $1.5 billion. The Utility also proposed to
enter into power purchase agreements for the remaining
250 MW of PV generation to be developed by independent
power producers. On January 26, 2010, a proposed
decision was issued recommending that the Utility be
authorized to build up to 50 MW of PV facilities per year
for each of the five years of the program and that the
Utility be allowed to recover project costs based on the
weighted average price of the winning bids received in
response to the Utility’s RFO for power purchase
agreements under the program, subject to an overall price
cap. If adopted by the CPUC, the Utility would be unable
to include the new utility-owned PV facilities in rate base.
Instead of earning an ROE, the Utility’s revenue
requirement for recovery of the cost of developing any
utility-owned facilities would depend on the amount of
power produced by the utility-owned PV facilities and the
applicable weighted average price of winning bids received
in response to annual program RFOs. The Utility would
not be required to build any of the authorized utility-
owned capacity under the proposed decision, but rather
would elect annually whether to build utility-owned
facilities after the applicable weighted average winning bid
price had been determined. An alternate proposed decision
that also was issued on January 26, 2010 contains similar
recommendations. The Utility continues to believe that
traditional rate-base treatment would be appropriate. The
CPUC is expected to issue a final decision during the first
quarter of 2010.
Additionally, on December 3, 2009, the Utility filed an
application with the CPUC requesting approval to acquire
and operate a wind project to be developed and
constructed by Iberdrola Renewables, Inc. in Southern
California. The proposed project would have a capacity of
up to 246 MW with a guaranteed minimum capacity of
189 MW. The final size of the project would depend upon
permitting requirements, completion of land rights
acquisition, and turbine supply. Assuming the project is
built to its full capacity of 246 MW, the Utility estimates it
would incur capital costs of approximately $900 million.
The project is targeted to become operational as early as
December 2011. A CPUC decision is expected by the end
of 2010.
OFF-BALANCE SHEET
ARRANGEMENTS
PG&E Corporation and the Utility do not have any
off-balance sheet arrangements that have had, or are
reasonably likely to have, a current or future material effect
on their financial condition, changes in financial
condition, revenues or expenses, results of operations,
liquidity, capital expenditures, or capital resources.
REGULATORY MATTERS
The Utility is subject to substantial regulation. Set forth
below are matters pending before the CPUC, FERC, and
the NRC. The resolutions of these and other proceedings
may affect PG&E Corporation’s and the Utility’s results of
operations or financial condition.
2011 GENERAL RATE CASE APPLICATION
In the Utility’s last GRC, the CPUC authorized the
Utility’s revenue requirements for 2007 through 2010 for
its basic business and operational costs related to its electric
and natural gas distribution and electric generation
operations. On December 21, 2009, the Utility filed its
2011 GRC application. The Utility is requesting that the
CPUC authorize the amount of base revenues that the
Utility may collect from customers to recover its costs for
electric and natural gas distribution operations and electric
generation operations for a three-year period (2011 through
2013). The Utility’s request represents a proposed revenue
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