PG&E 2010 Annual Report Download - page 33

REGULATORY MATTERS
The Utility is subject to substantial regulation. Set forth
below are matters pending before the CPUC, FERC, and
the NRC. The resolutions of these and other proceedings
may affect PG&E Corporation’s and the Utility’s results of
operations or financial condition.
2011 GENERAL RATE CASE APPLICATION
On October 15, 2010, the Utility, together with the CPUC’s
Division of Ratepayer Advocates (“DRA”), The Utility
Reform Network (“TURN”), Aglet Consumer Alliance, and
nearly all other intervening parties, filed a motion with the
CPUC seeking approval of a settlement agreement to resolve
almost all of the issues raised by the parties in the Utility’s
2011 GRC. Although the CPUC has not yet issued a final
decision in the GRC proceeding, on November 19, 2010, the
CPUC authorized the revenues to be approved in the
CPUC’s final decision to become effective as of January 1,
2011. PG&E Corporation and the Utility are unable to predict
whether the CPUC will approve the settlement agreement.
Revenue Requirements
The settlement agreement proposes that the Utility’s total
2011 revenue requirements be increased by $395 million,
including $103 million related to depreciation rate changes.
In addition, the settlement agreement proposes to
(1) establish a new balancing account for meter reading
costs outside of the GRC that offsets $113 million
requested in the GRC application and (2) remove $30
million of requested revenue requirements from the GRC
for consideration in other ratemaking proceedings.
Furthermore, approximately $44 million of the revenue
requirement the Utility requested in the GRC application
remains subject to litigation in the GRC.
The following table shows the differences, based on cost
category, between the revenue requirements requested in
the GRC application and the amount proposed in the
settlement agreement:
(in millions)
Amounts
Requested
in the GRC
Application
Amounts
Proposed
in the
Settlement
Agreement Difference
Operations and maintenance $ 1,437 $ 1,308 $ (129)
Customer services 498 329 (169)
Administrative and general 857 768 (89)
Less: Revenue credits (151) (149) 2
Franchise fees and uncollectible
customer accounts, taxes
(other than income taxes),
and other adjustments 188 120 (68)
Depreciation, return, and
income taxes 3,817 3,601 (216)
Total Revenue
Requirements $ 6,646 $ 5,977 $ (669)
The following paragraphs describe the revenue
requirement reductions proposed in the settlement
agreement compared to the amounts requested in the GRC
application:
• The $129 million reduction in revenue requirements for
operations and maintenance costs reflects a lower forecast
of costs for, among other items, customer assistance
services related to new customer connections, vegetation
management, and development of utility-owned
renewable generation.
• The $169 million reduction in revenue requirements for
customer services costs reflects the reduction of costs
related to such items as customer retention and economic
development efforts, dynamic pricing, and meter reading.
While the Utility’s GRC application requested recovery
of $113 million for meter reading costs in 2011, the
settlement agreement proposes that these costs will
instead be recovered via a new balancing account. The
balancing account would track and recover incurred
meter reading costs, subject to a cap of $76 million, and
the Utility also would retain the cost savings attributable
to decreased meter reading costs due to the installation of
SmartMeter™devices. The total of the balancing account
recovery plus retained cost savings is estimated to
approximate the $113 million originally requested.
• The $89 million reduction in administrative and general
costs reflects lower funding for various PG&E
Corporation and Utility corporate service functions and
lower funding for employee incentive compensation. The
Utility also agreed to seek recovery of $5 million of costs
incurred in connection with the sale of property in
another proceeding rather than the GRC.
• The $68 million reduction in revenue requirements
relating to franchise fees and uncollectible customer
accounts, taxes (other than income), and other
adjustments includes $44 million related to return and
income taxes on the Utility’s unrecovered investment in
conventional electric meters that have been replaced by
SmartMeter™devices. The parties have agreed that this
part of the Utility’s request will be litigated as part of the
GRC proceeding. If the Utility is successful, the $44
million will be added back to the Utility’s 2011 electric
distribution revenue requirement. The settlement
agreement also would adopt a higher uncollectible
revenue factor that would be used in another CPUC
proceeding to determine the amount of revenue the
Utility can collect to offset uncollectible customer
accounts. This is expected to result in additional revenues
of approximately $4 million.
• The $216 million reduction in revenue requirements for
depreciation, return, and income taxes consists of a
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