PG&E 2010 Annual Report Download - page 112

Natural Gas Supply, Transportation,and Storage
Commitments
The Utility purchases natural gas directly from producers
and marketers in both Canada and the United States to
serve its core customers. The contract lengths and
quantities of the Utility’s portfolio of natural gas
procurement contracts can fluctuate based on market
conditions. The Utility also contracts for natural gas
transportation from the points at which the Utility takes
delivery (typically in Canada and the southwestern United
States) to the points at which the Utility’s natural gas
transportation system begins. In addition, the Utility has
contracted for gas storage services in northern California in
order to better meet core customers’ winter peak loads. At
December 31, 2010, the Utility’s undiscounted obligations
for natural gas purchases, natural gas transportation
services, and natural gas storage were as follows:
(in millions)
2011 $ 710
2012 273
2013 191
2014 170
2015 161
Thereafter 1,128
Total (1) $ 2,633
(1) Amounts above include firm transportation contracts for the Ruby
Pipeline (a 1.5 billion cubic feet per day (“bcf/d”) pipeline that is
currently under construction and expected to become operational in
the summer of 2011; and the Utility has contracted for a capacity of
approximately 0.4 bcf/d).
Payments for natural gas purchases, natural gas
transportation services, and natural gas storage amounted
to $1.6 billion in 2010, $1.4 billion in 2009, and $2.7
billion in 2008.
NuclearFuel Agreements
The Utility has entered into several purchase agreements
for nuclear fuel. These agreements have terms ranging from
1 to 14 years and are intended to ensure long-term fuel
supply. The contracts for uranium and for conversion and
enrichment services provide for 100% coverage of reactor
requirements through 2016, while contracts for fuel
fabrication services provide for 100% coverage of reactor
requirements through 2017. The Utility relies on a number
of international producers of nuclear fuel in order to
diversify its sources and provide security of supply. Pricing
terms are also diversified, ranging from market-based prices
to base prices that are escalated using published indices.
New agreements are primarily based on forward market
pricing. Price increases in the uranium and enrichment
service markets are providing upward pressure on nuclear
fuel costs starting in 2011.
At December 31, 2010, the undiscounted obligations
under nuclear fuel agreements were as follows:
(in millions)
2011 $ 84
2012 69
2013 105
2014 132
2015 191
Thereafter 1,057
Total $ 1,638
Payments for nuclear fuel amounted to $144 million in
2010, $141 million in 2009, and $157 million in 2008.
OtherCommitments and Operating Leases
The Utility has other commitments relating to operating
leases. At December 31, 2010, the future minimum
payments related to other commitments were as follows:
(in millions)
2011 $ 25
2012 22
2013 19
2014 14
2015 11
Thereafter 73
Total $ 164
Payments for other commitments and operating leases
amounted to $25 million in 2010, $22 million in 2009, and
$41 million in 2008. PG&E Corporation and the Utility
had operating leases on office facilities expiring at various
dates from 2011 to 2020. Certain leases on office facilities
contain escalation clauses requiring annual increases in rent
ranging from 1% to 4%. The rentals payable under these
leases may increase by a fixed amount each year, a
percentage of a base year, or the consumer price index.
Most leases contain extension options ranging between one
and five years.
Underground Electric Facilities
At December 31, 2010, the Utility was committed to
spending approximately $236 million for the conversion of
existing overhead electric facilities to underground electric
facilities. These funds are conditionally committed
depending on the timing of the work, including the
schedules of the respective cities, counties, and
communications utilities involved. The Utility expects to
spend approximately $42 million to $60 million each year
in connection with these projects. Consistent with past
practice, the Utility expects that these capital expenditures
will be included in rate base as each individual project is
completed and recoverable in rates charged to customers.
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