PG&E 2011 Annual Report Download - page 73

NOTE 3: REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS (Continued)
The regulatory asset for price risk management represents the expected future recovery of unrealized losses
related to price risk management derivative instruments beyond one year. The Utility expects to recover these losses
as they are realized over the next 11 years. (See Note 10 below.)
The regulatory asset for electromechanical meters represents the expected future recovery of the net book value
of electromechanical meters that have been replaced with SmartMeter devices. The Utility expects to recover this
regulatory asset over the next five years.
The regulatory asset for unamortized loss, net of gain, on reacquired debt represents the expected future
recovery of costs related to debt reacquired or redeemed prior to maturity with associated discount and debt issuance
costs. These costs are expected to be recovered over the next 15 years, which is the remaining amortization period of
the reacquired debt. The Utility expects to fully recover these costs by 2026.
The regulatory asset related to ERBs is classified as current as of December 31, 2011, as the ERBs will mature
December 31, 2012. (See ‘‘Current Regulatory Assets’’ above).
At December 31, 2011 and 2010, ‘‘other’’ primarily consisted of regulatory assets relating to ARO expenses for
decommissioning of the Utility’s fossil fuel-fired generation facilities that are probable of future recovery through the
ratemaking process; costs that the Utility incurred in terminating a 30-year power purchase agreement which are
being amortized and collected in rates through September 2014; and costs incurred in relation to the Utility’s plan of
reorganization under Chapter 11 that became effective in April 2004 and are being amortized and collected in rates
through April 2034.
In general, the Utility does not earn a return on regulatory assets if the related costs do not accrue interest.
Accordingly, the Utility earns a return only on its retained generation regulatory assets, regulatory assets for
electromechanical meters, and regulatory assets for unamortized loss, net of gain, on reacquired debt.
Regulatory Liabilities
Current Regulatory Liabilities
At December 31, 2011 and 2010, the Utility had current regulatory liabilities of $161 million and $81 million,
respectively, primarily consisting of amounts that the Utility expects to refund to customers for over-collected electric
transmission rates and amounts that the Utility expects to refund to electric transmission customers for their portion
of settlements the Utility entered into with various electricity suppliers to resolve certain remaining Chapter 11
disputed claims. (See Note 13 below.) Current regulatory liabilities are included within current liabilities—other in
the Consolidated Balance Sheets.
Long-Term Regulatory Liabilities
Long-term regulatory liabilities are composed of the following:
Balance at
December 31,
2011 2010
(in millions)
Cost of removal obligation ....................................... $3,460 $3,229
Recoveries in excess of ARO ..................................... 611 600
Public purpose programs ........................................ 499 573
Other ...................................................... 163 123
Total long-term regulatory liabilities ............................... $4,733 $4,525
The regulatory liability for the Utility’s cost of removal obligations represents differences between asset removal
costs recorded and amounts collected in rates for those costs.
The regulatory liability for recoveries in excess of ARO represents differences between ARO expenses and
amounts collected in rates for the decommissioning of the Utility’s nuclear power facilities. Decommissioning costs
recovered in rates are placed in nuclear decommissioning trusts. The regulatory liability for recoveries in excess of
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