PG&E 2012 Annual Report Download - page 76

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3: REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS
Regulatory Assets
Current Regulatory Assets
At December 31, 2012 and 2011, the Utility had current regulatory assets of $564 million and $1,090 million,
respectively. At December 31, 2012, current regulatory assets consisted primarily of $230 million of the current
portion of the price risk management regulatory asset, $62 million of the current portion of the Utility’s retained
generation regulatory assets, and $54 million of the current portion of the electromechanical meters regulatory asset,
each of which is expected to be recovered over the next year. (See ‘‘Long-Term Regulatory Assets’’ below.)
Long-Term Regulatory Assets
Long-term regulatory assets are composed of the following:
Balance at
December 31,
2012 2011
(in millions)
Pension benefits ...................................... $ 3,275 $ 2,899
Deferred income taxes .................................. 1,627 1,444
Utility retained generation ............................... 552 613
Environmental compliance costs ........................... 604 520
Price risk management .................................. 210 339
Electromechanical meters ............................... 194 247
Unamortized loss, net of gain, on reacquired debt .............. 141 163
Other .............................................. 206 281
Total long-term regulatory assets .......................... $ 6,809 $ 6,506
The regulatory asset for pension benefits represents the cumulative differences between amounts recognized for
ratemaking purposes and amounts recognized in accordance with GAAP and 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 the regulatory asset over the average plant depreciation lives of one 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 12 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.)
The regulatory asset for price risk management represents the unrealized losses related to price risk
management derivative instruments expected to be recovered as they are realized over the next 10 years as part of
the Utility’s energy procurement costs. (See Note 10 below.)
The regulatory asset for electromechanical meters represents the expected future recovery of the net book value
of electromechanical meters that were replaced with SmartMeter devices. The Utility expects to recover the
regulatory asset over the next four 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
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