PG&E 2013 Annual Report Download - page 83

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9: DERIVATIVES (Continued)
The majority of the Utility’s derivatives contain collateral posting provisions tied to the Utility’s credit rating
from each of the major credit rating agencies. At December 31, 2013, the Utility’s credit rating was investment grade.
If the Utility’s credit rating were to fall below investment grade, the Utility would be required to post additional cash
immediately to fully collateralize some of its net liability derivative positions.
The additional cash collateral that the Utility would be required to post if the credit risk-related contingency
features were triggered was as follows:
Balance at December 31,
2013 2012
(in millions)
Derivatives in a liability position with credit risk-related
contingencies that are not fully collateralized ................ $ (79) $ (266)
Related derivatives in an asset position ...................... 4 59
Collateral posting in the normal course of business related to these
derivatives ......................................... 65 103
Net position of derivative contracts/additional collateral posting
requirements(1) ..................................... $ (10) $ (104)
(1) This calculation excludes the impact of closed but unpaid positions, as their settlement is not impacted by any of the Utility’s
credit risk-related contingencies.
NOTE 10: FAIR VALUE MEASUREMENTS
PG&E Corporation and the Utility measure their cash equivalents, trust assets, price risk management
instruments, and other investments at fair value. A three-tier fair value hierarchy is established that prioritizes the
inputs to valuation methodologies used to measure fair value:
•Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active
markets.
•Level 2—Other inputs that are directly or indirectly observable in the marketplace.
•Level 3—Unobservable inputs which are supported by little or no market activities.
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
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