PG&E 2011 Annual Report Download - page 72

NOTE 3: REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS
Regulatory Assets
Current Regulatory Assets
At December 31, 2011 and 2010, the Utility had current regulatory assets of $1,090 million and $599 million,
respectively, consisting primarily of ERBs, price risk management regulatory assets, the Utility’s retained generation
regulatory assets, and the electromechanical meters regulatory asset. The regulatory asset for ERBs of $336 million
represents the refinancing of the regulatory asset provided for in the Chapter 11 Settlement Agreement. The Utility
expects to fully recover this asset by the end of 2012 when the ERBs mature. (See Note 5 below.) The current
portion of price risk management regulatory assets of $450 million represents the expected future recovery of
unrealized losses related to price risk management derivative instruments over the next year. (See Note 10 below.)
The Utility expects to recover these losses, as part of its energy procurement costs, as they are realized over the next
year. The current portion of the Utility’s retained generation regulatory assets of $62 million represents the
amortization of underlying generation facilities expected to be recovered within the next 12 months. (See ‘‘Long-Term
Regulatory Assets’’ below.) The current portion of the Utility’s regulatory asset that represents the net book value of
electromechanical meters of $49 million is expected to be recovered within the next 12 months.
Long-Term Regulatory Assets
Long-term regulatory assets are composed of the following:
Balance at
December 31,
2011 2010
(in millions)
Pension benefits ................... $2,899 $1,759
Deferred income taxes ............... 1,444 1,250
Utility retained generation ............ 613 666
Environmental compliance costs ........ 520 450
Price risk management ............... 339 424
Electromechanical meters ............. 247 —
Unamortized loss, net of gain, on
reacquired debt .................. 163 181
Energy recovery bonds ............... — 735
Other ........................... 281 381
Total long-term regulatory assets ....... $6,506 $5,846
The regulatory asset for pension benefits represents the cumulative differences between amounts recognized for
ratemaking purposes and amounts recognized in accordance with GAAP, which also includes amounts that otherwise
would be recorded to accumulated other comprehensive loss in the Consolidated Balance Sheets. (See Note 12
below.)
The regulatory asset for deferred income taxes represents deferred income tax benefits previously passed
through to customers. The CPUC requires the Utility to pass through certain tax benefits to customers by reducing
rates, thereby ignoring the effect of deferred taxes. Based on current regulatory ratemaking and income tax laws, the
Utility expects to recover these regulatory assets over average plant depreciation lives of 1 to 45 years.
In connection with the Chapter 11 Settlement Agreement, the CPUC authorized the Utility to recover
$1.2 billion of costs related to the Utility’s retained generation assets. The individual components of these regulatory
assets are being amortized over the respective lives of the underlying generation facilities, consistent with the period
over which the related revenues are recognized. The weighted average remaining life of the assets is 13 years.
The regulatory asset for environmental compliance costs represents the cumulative differences between amounts
recognized for ratemaking purposes and amounts recognized in accordance with GAAP. The Utility expects to
recover these costs over the next 32 years, as the environmental compliance work is performed. (See Note 15 below.)
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