PG&E 2012 Annual Report Download - page 10

Utility’s capital expenditures, operating expenses, and collateral requirements associated with price risk
management activities. The Utility forecasts that capital spending will total approximately $5.1 billion in 2013,
including capital projects related to its pipeline safety enhancement plan. PG&E Corporation’s and the
Utility’s ability to access the capital markets and the terms and rates of future financings could be affected by
changes in their respective credit ratings, the outcome of natural gas matters, general economic and market
conditions, and other factors. (See ‘‘Liquidity and Financial Resources’’ below.)
•The Timing and Outcome of Ratemaking Proceedings. The Utility’s financial results are affected by the timing
and outcome of ratemaking proceedings. The CPUC issued decisions in 2011 that determined the majority of
the Utility’s base revenue requirements through 2013. In November 2012, the Utility filed its 2014 GRC
application with the CPUC to request that the CPUC determine the amount of revenue requirements the
Utility is authorized to collect through rates for its electric generation operations and electric and natural gas
distribution from 2014 through 2016. The Utility has requested that the CPUC increase the Utility’s base
revenues for 2014 by $1.28 billion over the comparable revenues for 2013 that were previously authorized.
(See ‘‘2014 General Rate Case’’ below.) The FERC is expected to determine in the pending TO rate case the
amount of electric transmission revenues the Utility can recover beginning in May 2013. (See ‘‘FERC
Transmission Owner Rate Case’’ below.) In addition, in late 2013, the Utility expects to file an application
with the CPUC to initiate the Utility’s 2015 GT&S rate case in which the CPUC will determine the rates, and
terms and conditions of the Utility’s gas transmission and storage services beginning January 1, 2015. The
outcome of these ratemaking proceedings can be affected by many factors, including general economic
conditions, the level of customer rates, regulatory policies, and political considerations.
•The Ability of the Utility to Control Operating Costs and Capital Expenditures. Rates are primarily set based on
forecasts and assumptions about the amount of operating costs and capital expenditures the Utility will incur
in future periods. PG&E Corporation’s and the Utility’s net income is negatively affected when the revenues
provided by rates are not sufficient for the Utility to recover the costs it actually incurs. In 2012, in addition to
the non-recoverable costs related to the Utility’s natural gas system described above, the Utility incurred costs
of $255 million to improve the safety and reliability of its electric and natural gas operations that it will not
recover through rates. The Utility forecasts that it will incur approximately $250 million to make additional
incremental improvements in 2013 that it will not recover through rates. (See ‘‘Operating and Maintenance’’
below.) In addition, 2013 net income will be negatively affected by costs related to capital expenditures that
the Utility forecasts will exceed authorized levels. Any future increase in the Utility’s environmental-related
liabilities that are not recoverable through rates, such as costs associated with its natural gas compressor
station located in Hinkley, California, also will negatively affect PG&E Corporation’s and the Utility’s net
income. For 2012, the Utility recorded total charges to net income of $127 million for environmental
remediation related to the Hinkley site. (See ‘‘Environmental Matters’’ below.) Other differences between the
amount or timing of the Utility’s actual costs and forecasted or authorized amounts may also affect the
Utility’s ability to earn its authorized ROE.
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