PG&E 2014 Annual Report Download - page 127

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and to require the Utility to pay $473 million to the State General Fund. These parties also argue that the record in the investigative
proceedings would support an even larger penalty than stated in the decision. The City of San Bruno appealed the rejection of its
proposals for the appointment of an independent monitor to oversee the Utility’s natural gas operations and for the establishment of
a pipeline safety trust. It is uncertain when the final outcome of the investigations will be determined.
While the various appeals and requests for review of the presiding officer decisions are unresolved there continues to
be significant uncertainty about the ultimate forms and amounts of penalties (including fines) that will be imposed on the Utility.
At December 31, 2014, the Consolidated Balance Sheets included an accrual of $200 million in other current liabilities for
the minimum amount of fines deemed probable. The impact on PG&E Corporation’s and the Utility’s Consolidated Financial
Statements will depend on the amounts and forms of penalties that are ultimately adopted by the CPUC. Fines payable to the
State General Fund or refunds of revenues would be charged to net income when it is probable that such fines or refunds will be
imposed and the amounts can be reasonably estimated. A disallowance of previously authorized and incurred capital costs would
be charged to net income when the disallowance is probable and the amount can be reasonably estimated. Penalties in the form of
future disallowed costs would be charged to net income in the period during which the actual costs are incurred. Although PG&E
Corporation and the Utility believe it is probable that the CPUC will impose total penalties materially in excess of the $200 million
previously accrued, they are unable to make a better estimate due to the variety of potential combinations of amounts and forms
of penalties that could ultimately be imposed on the Utility and uncertainty about the timing of recognition. PG&E Corporation
and the Utility believe the final outcome of the investigations will have a material impact on their financial condition, results of
operations, and cash flows.
Federal Criminal Indictment
On July 29, 2014, a federal grand jury in the Northern District of California returned a 28-count superseding criminal
indictment against the Utility in federal district court replacing the indictment that had been returned on April 1, 2014. The
superseding indictment charges 27 felony counts (increased from 12 counts charged in the original indictment) alleging that the
Utility knowingly and willfully violated minimum safety standards under the Natural Gas Pipeline Safety Act relating to record
keeping, pipeline integrity management, and identification of pipeline threats. The superseding indictment also includes one
felony count charging that the Utility illegally obstructed the NTSB’s investigation into the cause of the San Bruno accident. The
maximum statutory fine for each felony count is $500,000, for total fines of $14 million. The superseding indictment also alleges
an alternative fine under the Alternative Fines Act which states, in part: “If any person derives pecuniary gain from the offense, or
if the offense results in pecuniary loss to a person other than the defendant, the defendant may be fined not more than the greater of
twice the gross gain or twice the gross loss.” Based on the superseding indictment’s allegations that the Utility derived gross gains
of approximately $281 million and that the victims suffered losses of approximately $565 million, the maximum alternate fine
would be approximately $1.13 billion.
The Utility entered a plea of not guilty. The Utility believes that criminal charges and the alternate fine allegations are not
merited and that it did not knowingly and willfully violate minimum safety standards under the Natural Gas Pipeline Safety Act or
obstruct the NTSB’s investigation, as alleged in the superseding indictment. A status conference is scheduled to be held in court on
March 9, 2015. PG&E Corporation and the Utility have not accrued any charges for criminal fines in their consolidated financial
statements as such amounts are not considered to be probable.