PG&E 2010 Annual Report Download - page 16

Download and view the complete annual report

Please find page 16 of the 2010 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 128

  • 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
  • 125
  • 126
  • 127
  • 128

Differences in the amount or timing of forecasted or
authorized costs and actual costs can affect the Utility’s
ability to earn its authorized rate of return and the
amount of PG&E Corporation’s income available for
common shareholders. (See “Capital Expenditures”
below.) To the extent the Utility is unable to conclude
that costs are probable of recovery through rates, the
Utility will incur a charge to income. (See “Critical
Accounting Policies” below.)
•Authorized Capital Structure, Rate of Return,andFinancing.
The Utility’s CPUC-authorized capital structure for its
electric and natural gas distribution and electric
generation rate base, consisting of 52% common equity
and 48% debt and preferred stock, will remain in effect
through 2012. The Utility’s CPUC-authorized ROE of
11.35% will remain in effect through 2011 but is subject
to change based on an annual adjustment mechanism
described below under “Liquidity and Financial
Resources.” The timing and amount of the Utility’s future
debt financing will depend on the timing and amount of
capital expenditures and other factors. PG&E Corporation
contributes equity to the Utility as needed by the Utility
to maintain its CPUC-authorized capital structure. PG&E
Corporation may issue debt or equity to fund these
equity contributions. (See “Liquidity and Financial
Resources” below.)
SUMMARY OF CHANGES IN EARNINGS PER
COMMON SHARE AND INCOME AVAILABLE FOR
COMMON SHAREHOLDERS FOR 2010
PG&E Corporation’s income available for common
shareholders decreased by $121 million, or 10%, from
$1,220 million in 2009 to $1,099 million in 2010. The
following table is a summary reconciliation of the key
changes in income available for common shareholders
and earnings per common share for the year ended
December 31, 2010:
Earnings
Earnings Per
Common Share
(Diluted)
Income Available for Common
Shareholders – 2009 $ 1,220 $ 3.20
San Bruno accident (1) (168) (0.43)
Tax refund (2) (66) (0.18)
Statewide ballot initiative (3) (45) (0.12)
Recovery of hydroelectric
generation-related costs (4) (28) (0.07)
Federal health care law (5) (19) (0.05)
Rate base earnings (6) 88 0.23
Accelerated work on gas system (7) 59 0.16
Severance costs (8) 38 0.10
Other (9) 20 0.05
Increase in shares outstanding (10) – (0.07)
Income Available for Common
Shareholders – 2010 $ 1,099 $ 2.82
(1) During 2010, the Utility recorded charges of $168 million, after-tax,
for the San Bruno accident. These charges primarily included a
provision for estimated third-party claims for personal injury and
property damage claims, and other damage claims, as well as costs
incurred to provide immediate support to the San Bruno
community, re-inspect the Utility’s natural gas transmission lines,
and perform other activities following the accident.
(2) During 2009, PG&E Corporation recognized $66 million for the
interest benefit associated with a federal tax refund.
(3) During 2010, the Utility contributed $45 million to support
Proposition 16 – The Taxpayers Right to Vote Act.
(4) During 2009, the Utility recognized income of $28 million, after-tax,
for the recovery of costs previously incurred in connection with its
hydroelectric generation facilities.
(5) During 2010, the Utility recorded a charge of $19 million triggered
by the elimination of the tax deductibility of Medicare Part D federal
subsidies.
(6) During 2010, the Utility recognized earnings of $88 million, after-tax,
attributable to the ROE on higher authorized capital investments.
(7) During 2009, the Utility incurred $59 million, after-tax, for costs to
perform accelerated system-wide natural gas integrity surveys and
associated remedial work.
(8) During 2009, the Utility accrued $38 million, after-tax, of severance
costs related to the elimination of approximately 2% of its workforce.
(9) During 2010, the Utility incurred lower expenses for nuclear refueling
outages, uncollectible customer accounts and disability costs,
partially offset by a charge for SmartMeter™related capital costs and
higher storm and outage expenses.
(10) Represents the impact of a lower number of shares outstanding in
2009 compared to 2010; this has no dollar impact on earnings.
12