PG&E 2014 Annual Report Download - page 91

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The following table summarizes the changes in ARO liability during 2014 and 2013:
(in millions)2014 2013
ARO liability at beginning of year $ 3,538 $ 2,919
Revision in estimated cash ows (16) 596
Accretion 163 130
Liabilities settled (110) (107)
ARO liability at end of year $ 3,575 $ 3,538
The Utility has not recorded a liability related to certain ARO’s for assets that are expected to operate in perpetuity. As
the Utility cannot estimate a settlement date or range of potential settlement dates for these assets, reasonable estimates of fair
value cannot be made. As such, ARO liabilities are not recorded for retirement activities associated with substations and certain
hydroelectric facilities; removal of lead-based paint in some facilities and certain communications equipment from leased property;
and restoration or land to the conditions under certain agreements.
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. The Utility recorded charges of $116 million, $196 million and $353 million in 2014, 2013, and 2012,
respectively, for PSEP capital costs that are expected to exceed the CPUC’s authorized levels or that are specifically disallowed.
(See “Enforcement and Litigation Matters” in Note 14 below.)
Nuclear Decommissioning Trusts
The Utility’s nuclear generation facilities consist of two units at Diablo Canyon and one retired facility at Humboldt Bay.
Nuclear decommissioning requires the safe removal of a nuclear generation facility from service and the reduction of residual
radioactivity to a level that permits termination of the NRC license and release of the property for unrestricted use. The Utility’s
nuclear decommissioning costs are recovered from customers through rates and are held in trusts until authorized for release by the
CPUC.
The Utility classifies its investments held in the nuclear decommissioning trusts as “available-for-sale.” Since the Utility’s
nuclear decommissioning trust assets are managed by external investment managers, the Utility does not have the ability to sell
its investments at its discretion. Therefore, all unrealized losses are considered other-than-temporary impairments. Gains or losses
on the nuclear decommissioning trust investments are refundable or recoverable, respectively, from customers through rates.
Therefore, trust earnings are deferred and included in the regulatory liability for recoveries in excess of the ARO. There is no
impact on the Utility’s earnings or accumulated other comprehensive income. The cost of debt and equity securities sold by the
trust is determined by specific identification.
Gains and Losses on Debt Extinguishments
Deferred gains and losses on debt extinguishments are recorded to regulatory assets in current assets and regulatory
assets in other noncurrent assets on 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 $135 million, $157 million, and
$163 million at December 31, 2014, 2013, and 2012, respectively. The amortization expense related to this loss was $22 million in
2014 and $23 million in both 2013 and 2012.