PG&E 2009 Annual Report Download - page 32

increase for 2011 of $1.1 billion, or 6.4%, above the 2010
total revenue forecast. The critical driver of the Utility’s
request in this 2011 GRC will be the need to invest in
energy infrastructure to meet customers’ expectations for
service quality. The Utility estimates that it will need to
spend an average of about $2.7 billion in capital
expenditures annually on these infrastructure
improvements, especially replacement of gas and electric
systems that are reaching the end of their useful lives. The
Utility also needs adequate funds to continue to safely
operate, maintain, and upgrade generation plants to serve
growing demand.
The Utility also has proposed that the CPUC establish
balancing accounts for several categories of costs that are
subject to a high degree of volatility based on economic
conditions and other factors, including new customer
connections, emergency service restoration, uncollectible
accounts, and employee health care costs.
The Utility also has requested that the CPUC establish a
ratemaking mechanism for 2012 and 2013 designed to
increase the Utility’s authorized revenues in years between
GRCs to reflect increases in rate base due to capital
investments in infrastructure and increases in wages and
expenses. The proposed mechanism also would require
revenue requirements to be adjusted to reflect changes in
franchise, payroll, income, or property tax rates, as well as
new taxes or fees imposed by governmental agencies. The
Utility estimates that this mechanism would result in a
revenue requirement increase of $275 million in 2012 and
an additional increase of $343 million in 2013. The Utility
will advise the CPUC of the actual amount of these
proposed increases in October 2011 and October 2012 for
the years 2012 and 2013, respectively.
The Utility requested that the CPUC issue a final
decision by the end of 2010. If the decision is delayed, the
Utility will, consistent with CPUC practice in prior GRCs,
request the CPUC to issue an order directing that the
authorized revenue requirement changes be effective
January 1, 2011, even if the decision is issued subsequent to
that date.
PG&E Corporation and the Utility are unable to predict
what amount of revenue requirements the CPUC will
authorize for the period from 2011 through 2013, when a
final decision in this proceeding will be received, or how
the final decision will impact their financial condition or
results of operations.
2011 GAS TRANSMISSION AND STORAGE RATE
CASE
On September 18, 2009, the Utility filed an application
with the CPUC to initiate the Utility’s 2011 Gas
Transmission and Storage rate case so that the CPUC can
determine the rates and terms and conditions of the
Utility’s gas transmission and storage services beginning
January 1, 2011. The rates and terms and conditions of the
Utility’s gas transmission and storage services for 2008
through 2010 were set by the terms of a CPUC-approved
all-party settlement agreement known as the Gas Accord IV
that was approved by the CPUC in September 2007. The
Utility proposes to continue a majority of the Gas Accord
IV’s terms and conditions of natural gas transportation and
storage services.
The Utility has requested that the CPUC approve a
2011 natural gas transmission and storage revenue
requirement of $529.1 million, an increase of $67.3 million
over the 2010 adopted revenue requirement. The Utility
also seeks attrition increases for 2012, 2013, and 2014 of
$32.4 million, $30.7 million, and $22.6 million,
respectively.
Under the Utility’s proposal, a substantial portion of the
authorized revenue requirements — primarily those costs
allocated to residential and small commercial customers
(called “core” customers) — would continue to be assured
of recovery through balancing account mechanisms and/or
fixed reservation charges. The Utility has proposed to
simplify the current rate structure by, among other
changes, setting rates for core and non-core customers
based on forecast demand. The Utility’s ability to recover
its remaining revenue requirements would continue to
depend on throughput volumes, gas prices, and the extent
to which non-core customers and other shippers contract
for firm transmission services. To reduce the Utility’s
financial risk associated with these factors, the Utility has
proposed to share equally with customers any under-
collection or over-collection of natural gas transmission
and storage revenue requirements. The Utility has
proposed additional cost recovery mechanisms for costs
that are difficult to forecast, such as the cost of electricity
used to operate natural gas compressor stations and costs to
comply with GHG regulations.
The Utility has requested that the CPUC issue a final
decision by the end of 2010. If the CPUC does not issue a
final decision by the end of 2010 to approve new rates
effective January 1, 2011, the September 2007 CPUC
decision approving the Gas Accord IV provides that the
rates and terms and conditions of service in effect as of
December 31, 2010 will remain in effect, with an automatic
2% escalation in rates, for local transmission only, as of
January 1, 2011.
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