PG&E 2009 Annual Report Download - page 92

Utility
Fair Value Measurements at December 31, 2008
(in millions) Level 1 Level 2 Level 3 Total
Assets:
Nuclear decommissioning trusts(1)
Equity securities $ 893 $ — $ 5 $ 898
U.S. government and agency issues 603 86 — 689
Municipal bonds and other 9 203 — 212
Total nuclear decommissioning trusts(1) 1,505 289 5 1,799
Long-term disability trust
Equity securities 99 — 54 153
Corporate debt securities — — 24 24
Total long-term disability trust 99 — 78 177
Total assets $1,604 $289 $ 83 $1,976
Liabilities:
Price risk management instruments(2) (49) 123 156 230
Other —— 2 2
Total liabilities $ (49) $123 $158 $ 232
(1) Excludes taxes on appreciation of investment value.
(2) Balances include the impact of netting adjustments of $159 million to Level 1, $32 million to Level 2, and $76 million to Level 3.
PG&E Corporation’s and the Utility’s fair value
measurements incorporate various factors, such as
nonperformance and credit risk adjustments. At
December 31, 2009, the nonperformance and credit risk
adjustment represented an immaterial amount of the net
price risk management value. PG&E Corporation and the
Utility utilize a mid-market pricing convention (the
midpoint between bid and ask prices) as a practical
expedient in valuing the majority of its derivative assets
and liabilities at fair value.
MONEY MARKET INVESTMENTS
PG&E Corporation invests in AAA-rated money market
funds that seek to maintain a stable net asset value. These
funds invest in high-quality, short-term, diversified money
market instruments, such as treasury bills, federal agency
securities, certificates of deposit, and commercial paper
with a maximum weighted average maturity of 60 days or
less. PG&E Corporation’s investments in these money
market funds are generally valued based on observable
inputs such as expected yield and credit quality and are
thus classified as Level 1 instruments. Approximately $189
million held in money market funds are recorded as Cash
and cash equivalents in PG&E Corporation’s Consolidated
Balance Sheets.
As of December 31, 2009, PG&E Corporation classified
approximately $4 million invested in one money market
fund as a Level 3 instrument because the fund manager
imposed restrictions on fund participants’ redemption
requests. PG&E Corporation’s investment in this money
market fund is recorded as Prepaid expenses and other in
PG&E Corporation’s Consolidated Balance Sheets.
TRUST ASSETS
The nuclear decommissioning trusts, the rabbi trusts
related to the non-qualified deferred compensation plans,
and the long-term disability trust hold primarily equities,
debt securities, mutual funds, and life insurance policies.
These instruments are generally valued based on
unadjusted prices in active markets for identical
transactions or unadjusted prices in active markets for
similar transactions. The rabbi trusts are classified as
Current Assets-Prepaid expenses and other and Other
Noncurrent Assets – Other in PG&E Corporation’s
Consolidated Balance Sheets. The long-term disability trust
is presented as a net obligation as the projected obligation
exceeds plan assets as Noncurrent Liabilities – Other in
PG&E Corporation’s and the Utility’s Consolidated
Balance Sheets.
The Consolidated Balance Sheets of PG&E Corporation
and the Utility contain assets held in trust for the PG&E
Retirement Plan Master Trust, the Postretirement Life
Insurance Trust, and the Postretirement Medical Trusts
presented on a net basis. See Note 13 of the Notes to the
Consolidated Financial Statements for further discussion.
The pension assets are presented net of pension obligations
as Noncurrent Liabilities – Other in PG&E Corporation’s
and the Utility’s Consolidated Balance Sheets.
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