PG&E 2013 Annual Report Download - page 108

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14: COMMITMENTS AND CONTINGENCIES (Continued)
Utility has a separate policy that provides coverage for claims arising from some of these incidents up to a maximum
of $375 million per incident. In addition, the Utility has $53 million of liability insurance for Humboldt Bay Unit 3
and has a $500 million indemnification from the NRC for public liability arising from nuclear incidents, covering
liabilities in excess of the liability insurance.
Commitments
Third-Party Power Purchase Agreements
As part of the ordinary course of business, the Utility enters into various agreements to purchase power and
electric capacity. The price of purchased power may be fixed or variable. Variable pricing is generally based on the
current market price of either natural gas or electricity at the date of delivery. The costs incurred for all power
purchases and electric capacity were as follows:
2013 2012 2011
(in millions)
Qualifying facilities(1) ........................ $ 813 $ 779 $ 1,069
Renewable energy contracts ................... 1,281 815 622
Other power purchase agreements .............. 902 661 690
(1) Costs incurred include $271, $286, and $297 attributable to renewable energy contracts with qualifying facilities at December 31,
2013, 2012, and 2011, respectively.
Qualifying Facility Power Purchase Agreement—The Utility has entered into agreements to purchase energy and
capacity with independent power producers that own generation facilities that meet the definition of a QF under
federal law. As of December 31, 2013, the Utility had agreements with 170 QFs that are in operation, which expire
at various dates between 2014 and 2028.
Renewable Energy Power Purchase Agreements—The Utility is required to gradually increase the amount of
renewable energy that it delivers to its customers in order to comply with California’s renewable portfolio standard
requirement. The Utility has entered into various contracts to purchase renewable energy to help meet the renewable
portfolio standard requirement. The Utility’s obligations under a significant portion of these agreements are
contingent on the third party’s construction of new generation facilities. The Utility’s commitments for energy
payments under these renewable energy agreements are expected to grow significantly.
Other Power Purchase Agreements—The Utility has entered into several power purchase agreements for
conventional generation resources, which include tolling agreements and resource adequacy agreements. The Utility’s
obligation under a portion of these agreements is contingent on the third parties’ development of new generation
facilities to provide capacity and energy products to the Utility. The Utility also has agreements with various
irrigation districts and water agencies to purchase hydroelectric power.
At December 31, 2013, the undiscounted future expected obligations under power purchase agreements that
have been approved by the CPUC and have met specified construction milestones were as follows:
Qualifying Renewable Total
Facility (Other than QFs) Other Payments
(in millions)
2014 ........................... $ 913 $ 1,906 $ 829 $ 3,648
2015 ........................... 707 2,102 770 3,579
2016 ........................... 587 2,109 722 3,418
2017 ........................... 450 2,104 684 3,238
2018 ........................... 406 1,962 640 3,008
Thereafter ....................... 1,614 30,242 2,984 34,840
Total ........................... $ 4,677 $ 40,425 $ 6,629 $ 51,731
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