PG&E 2010 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 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

PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are reported at their
original cost. These original costs include labor and
materials, construction overhead, and allowance for funds
used during construction (“AFUDC”).
The Utility’s balances at December 31, 2010 are as
follows:
(in millions)
Gross Plant
as of
December 31,
2010
Accumulated
Depreciation
as of
December 31,
2010
Net Plant
as of
December 31,
2010
Electricity generating
facilities (1) $ 6,012 $ (1,404) $ 4,608
Electricity distribution
facilities 20,991 (7,161) 13,830
Electricity
transmission 6,505 (1,829) 4,676
Natural gas
distribution facilities 7,443 (2,819) 4,624
Natural gas
transportation and
storage 3,939 (1,613) 2,326
Construction work in
progress 1,384 — 1,384
Total $ 46,274 $ (14,826) $ 31,448
(1) Balance includes nuclear fuel inventories. Stored nuclear fuel
inventory is stated at weighted average cost. Nuclear fuel in the reactor
is expensed as it is used based on the amount of energy output. (See
Note 15 below.)
The Utility’s balances at December 31, 2009 are as
follows:
(in millions)
Gross Plant
as of
December 31,
2009
Accumulated
Depreciation
as of
December 31,
2009
Net Plant
as of
December 31,
2009
Electricity generating
facilities (1) $ 4,777 $ (1,279) $ 3,498
Electricity distribution
facilities 19,924 (6,924) 13,000
Electricity transmission 5,780 (1,751) 4,029
Natural gas distribution
facilities 7,069 (2,667) 4,402
Natural gas
transportation and
storage 3,628 (1,554) 2,074
Construction work in
progress 1,888 – 1,888
Total $ 43,066 $ (14,175) $ 28,891
(1) Balance includes nuclear fuel inventories. Stored nuclear fuel
inventory is stated at weighted average cost. Nuclear fuel in the reactor
is expensed as it is used based on the amount of energy output. (See
Note 15 below.)
AFUDC
AFUDC is a method used to compensate the Utility for
the estimated cost of debt (interest) and equity funds used
to finance regulated plant additions, and is capitalized as
part of the cost of construction projects. AFUDC is
recoverable from customers through rates over the life of
the related property once the property is placed in service.
The portion of AFUDC related to the cost of debt is
recorded as a reduction to interest expense. AFUDC related
to the cost of equity is recorded in other income. The
Utility recorded AFUDC of $110 million and $50 million
during 2010, $95 million and $44 million during 2009, $70
million and $44 million during 2008, related to equity and
debt, respectively.
Depreciation
The Utility depreciates property, plant, and equipment on
a straight-line basis over the estimated useful lives. The
composite, or group, method of depreciation is used, in
which a single depreciation rate is applied to the gross
investment in a particular class of property. The Utility’s
composite depreciation rate was 3.38% in 2010, 3.43% in
2009, and 3.38% in 2008.
Estimated Useful Lives
Electricity generating facilities 4 to 37 years
Electricity distribution facilities 16 to 58 years
Electricity transmission 40 to 70 years
Natural gas distribution facilities 24 to 52 years
Natural gas transportation and storage 25 to 48 years
The useful lives of the Utility’s property, plant, and
equipment are authorized by the CPUC and the FERC,
and the depreciation expense is recovered through rates
charged to customers. Depreciation expense includes a
component for the original cost of assets and a component
for estimated cost of future removal, net of any salvage
value at retirement. Upon retirement, the original cost of
the retired assets, net of salvage value, is charged to
accumulated depreciation. The cost of repairs and
maintenance, including planned major maintenance
activities and minor replacements of property, is charged to
operating and maintenance expense as incurred.
Capitalized Software Costs
PG&E Corporation and the Utility capitalize costs incurred
during the application development stage of internal use
software projects to property, plant, and equipment. PG&E
Corporation and the Utility amortize capitalized software
costs ratably over the expected lives of the software,
ranging from 3 to 15 years and commencing upon
operational use. Capitalized software costs totaled $580
million at December 31, 2010 and $562 million at
December 31, 2009, net of accumulated amortization of
66