PG&E 2013 Annual Report Download - page 65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A reconciliation of the changes in the ARO liability is as follows:
(in millions)
ARO liability at December 31, 2011 ................................... $ 1,609
Revision in estimated cash flows ...................................... 1,301
Accretion ...................................................... 101
Liabilities settled ................................................. (92)
ARO liability at December 31, 2012 ................................... 2,919
Revision in estimated cash flows ...................................... 596
Accretion ...................................................... 130
Liabilities settled ................................................. (107)
ARO liability at December 31, 2013 ................................... $ 3,538
The Utility has identified the following AROs for which a reasonable estimate of fair value could not be made.
As a result, the Utility has not recorded a liability related to these AROs:
•Restoration of land to its pre-use condition under the terms of certain land rights agreements. Land rights will be
maintained for the foreseeable future, and therefore, the Utility cannot reasonably estimate the settlement
date(s) or range of settlement dates for the obligations associated with these assets;
•Removal and proper disposal of lead-based paint contained in some Utility facilities. The Utility does not have
information available that specifies which facilities contain lead-based paint and, therefore, cannot reasonably
estimate the settlement date(s) associated with the obligations; and
•Removal of certain communications equipment from leased property, and retirement activities associated with
substation and certain hydroelectric facilities. The Utility will maintain and continue to operate its hydroelectric
facilities until the operation of a facility becomes uneconomical. The operation of the majority of the Utility’s
hydroelectric facilities is currently, and for the foreseeable future, expected to be economically beneficial.
Therefore, the settlement date(s) cannot be reasonably estimated at this time.
Disallowance of Plant Costs
PG&E Corporation and the Utility record a charge when it is both probable that costs incurred or projected to
be incurred for recently completed plant will not be recoverable through rates charged to customers and the amount
of disallowance can be reasonably estimated. During 2013 and 2012, the Utility recorded charges of $196 million and
$353 million, respectively, for PSEP capital costs that are expected to exceed the CPUC’s authorized levels or that
are specifically disallowed. (See ‘‘Natural Gas Matters’’ in Note 14 below). No material disallowance losses were
recorded in 2011.
Gains and Losses on Debt Extinguishments
Deferred gains and losses on debt extinguishments are recorded to current assets—regulatory assets and other
noncurrent assets—regulatory assets in the Consolidated Balance Sheets. Gains and losses on debt extinguishments
associated with regulated operations are deferred and amortized over a period consistent with the recovery of costs
through regulated rates. PG&E Corporation and the Utility recorded unamortized loss on debt extinguishments, net
of gain, of $157 million, $163 million, and $186 million at December 31, 2013, 2012, and 2011, respectively. The
amortization expense related to this loss was $23 million in both 2013 and 2012, and $18 million in 2011.
Revenue Recognition
The Utility recognizes revenues as electricity and natural gas services are delivered, and includes amounts for
services rendered but not yet billed at the end of the period.
The CPUC authorizes most of the Utility’s revenues in the Utility’s GRC and its GT&S rate cases, which
generally occur every three years. In general, the Utility’s ability to recover revenue requirements authorized by the
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