PG&E 2011 Annual Report Download - page 20

The differences between the Utility’s income taxes and amounts calculated by applying the federal statutory rate
to income before income tax expense for continuing operations for 2011, 2010, and 2009 were as follows:
2011 2010 2009
Federal statutory income tax rate ................................ 35.0% 35.0% 35.0%
Increase (decrease) in income tax rate resulting from:
State income tax (net of federal benefit) ......................... 1.6 1.0 1.4
Effect of regulatory treatment of fixed asset differences .............. (4.2) (3.0) (2.6)
Tax credits ............................................... (0.5) (0.4) (0.5)
IRS audit settlements ....................................... —(0.2) (4.2)
Benefit of loss carryback ..................................... (2.1) ——
Non deductible penalties ..................................... 6.3 0.2 —
Other, net ............................................... 0.1 1.3 (1.3)
Effective tax rate ............................................ 36.2% 33.9% 27.8%
PG&E Corporation, Eliminations, and Other
PG&E Corporation’s revenues consist mainly of billings to its affiliates for services rendered, all of which are
eliminated in consolidation. PG&E Corporation’s operating expenses consist mainly of employee compensation and
payments to third parties for goods and services. Generally, PG&E Corporation’s operating expenses are allocated to
affiliates. These allocations are made without mark-up and are eliminated in consolidation. PG&E Corporation’s
interest expense relates to PG&E Corporation’s outstanding debt on outstanding Senior Notes, and is not allocated
to affiliates.
There were no material changes to PG&E Corporation’s operating results in 2011 compared to 2010 and 2010
compared to 2009.
LIQUIDITY AND FINANCIAL RESOURCES
Overview
The Utility’s ability to fund operations and make distributions to PG&E Corporation depends on the levels of
its operating cash flows and access to the capital and credit markets. The levels of the Utility’s operating cash and
short-term debt fluctuate as a result of seasonal load, volatility in energy commodity costs, collateral requirements
related to price risk management activity, the timing and amount of tax payments or refunds, and the timing and
effect of regulatory decisions and financings, among other factors. The Utility generally utilizes equity contributions
from PG&E Corporation and long-term senior unsecured debt issuances to maintain its CPUC-authorized capital
structure. The Utility relies on short-term debt, including commercial paper, to fund temporary financing needs. The
CPUC authorizes the aggregate amount of long-term debt and short-term debt that the Utility may issue and
authorizes the Utility to recover its related debt financing costs. The Utility has short-term borrowing authority of
$4.0 billion, including $500 million that is restricted to certain contingencies.
PG&E Corporation’s ability to fund operations, make scheduled principal and interest payments, fund Utility
equity contributions as needed for the Utility to maintain its CPUC-authorized capital structure, fund tax equity
investments, and pay dividends primarily depends on the level of cash distributions received from the Utility and
PG&E Corporation’s access to the capital and credit markets.
The following table summarizes PG&E Corporation’s and the Utility’s cash positions:
December 31,
2011 2010
(in millions)
PG&E Corporation .............................................. $209 $240
Utility ........................................................ 304 51
Total consolidated cash and cash equivalents ............................ $513 $291
Restricted cash primarily consists of cash held in escrow pending the resolution of the remaining disputed claims
filed in the Utility’s reorganization proceeding under Chapter 11. PG&E Corporation and the Utility maintain
separate bank accounts and primarily invest their cash in money market funds.
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