PG&E 2009 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2009 PG&E annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

NOTE 11: FAIR VALUE
MEASUREMENTS
PG&E Corporation and the Utility determine the fair value
of certain assets and liabilities based on assumptions that
market participants would use in pricing the assets or
liabilities. PG&E Corporation and the Utility utilize a fair
value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value and give precedence
to observable inputs in determining fair value. An
instrument’s level within the hierarchy is based on the
lowest level of any significant input to the fair value
measurement. The following levels were established for
each input:
•Level 1: “Inputs that are quoted prices (unadjusted) in
active markets for identical assets or liabilities that the
reporting entity has the ability to access at the
measurement date.” Active markets are those in which
transactions for the asset or liability occur with sufficient
frequency and volume to provide pricing information on
an ongoing basis. Instruments classified as Level 1 consist
of financial instruments such as exchange-traded
derivatives (other than options), listed equities, and U.S.
government treasury securities.
•Level 2: “Inputs other than quoted prices included in
Level 1 that are observable for the asset or liability, either
directly or indirectly.” Instruments classified as Level 2
consist of financial instruments such as non-exchange-
traded derivatives (other than options) valued using
exchange inputs and exchange-traded derivatives (other
than options) for which the market is not active.
•Level 3: “Unobservable inputs for the asset or liability.”
These are inputs for which there is no market data
available or observable inputs that are adjusted using
Level 3 assumptions. Instruments classified as Level 3
consist primarily of financial and physical instruments
such as options, non-exchange-traded derivatives valued
using broker quotes, and new and/or complex
instruments that have immature or limited markets.
The following table sets forth the fair value hierarchy by level of PG&E Corporation’s and the Utility’s recurring fair
value financial instruments as of December 31, 2009 and 2008. The instruments are classified based on the lowest level of
input that is significant to the fair value measurement. PG&E Corporation’s and the Utility’s assessment of the
significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair
value assets and liabilities and their placement within the fair value hierarchy levels.
PG&E Corporation
Fair Value Measurements at December 31, 2009
(in millions) Level 1 Level 2 Level 3 Total
Assets:
Money market investments (held by PG&E Corporation) $ 189 $ — $ 4 $ 193
Nuclear decommissioning trusts
Equity securities 1,106 6 — 1,112
U.S. government and agency issues 653 51 — 704
Municipal bonds and other 1 197 — 198
Total nuclear decommissioning trusts(1) 1,760 254 — 2,014
Rabbi trusts-equity securities 81 — — 81
Long-term disability trust
Equity securities 52 23 — 75
Corporate debt securities — 113 — 113
Total long-term disability trust 52 136 — 188
Total assets $2,082 $390 $ 4 $2,476
Liabilities:
Dividend participation rights $—$—$12$12
Price risk management instruments(2) 3 73 217 293
Other —— 3 3
Total liabilities $ 3 $ 73 $232 $ 308
(1) Excludes deferred taxes on appreciation of investment value.
(2) Balances include the impact of netting adjustments of $108 million to Level 1, $48 million to Level 2, and $32 million to Level 3.
86