PG&E 2015 Annual Report Download

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2015 Joint Annual
Report to Shareholders
PG&E Corporation
Pacific Gas and Electric Company

Table of contents

  • Page 1
    PG&E Corporation Pacific Gas and Electric Company 2015 Joint Annual Report to Shareholders

  • Page 2

  • Page 3
    ... (this "Annual Report") includes PG&E Corporation and Pacific Gas and Electric Company's joint Annual Report on Form 10-K for the year ended December 31, 2015 that was filed with the Securities and Exchange Commission on February 18, 2016 (the "Form 10-K"), reformatted to make the information more...

  • Page 4
    ..., in 2015, customers experienced the fewest number of outages in the century-long history of the company. Along with the conscientious work of our teams, PG&E's performance was aided by the opening of two state-of-theart electric distribution control centers, completing our plan for a total of three...

  • Page 5
    ...connecting and optimizing all of the new energy technologies emerging on the customer side of the meter. In negotiations with our regulators, we continue to pursue reforms that will make our electric rates more equitable across the full spectrum of customers. In July, the California Public Utilities...

  • Page 6
    ... Utility's natural gas system, as well as legal and other costs related to natural gas matters. Natural gas matters also included charges related to fines, third-party liability claims, and insurance recoveries in 2014. (9) In 2014, the Utility reduced its accrual related to the Hinkley whole house...

  • Page 7
    ... Dow Jones Utilities Index 2014 S&P 500 Index 2015 (1) Assumes $100 invested on December 31, 2010 in PG&E Corporation common stock, the Standard & Poor's 500 Stock Index, and the Dow Jones Utilities Index, and assumes quarterly reinvestment of dividends. The total shareholder returns shown are...

  • Page 8
    Intentionally left blank

  • Page 9
    ...&E CORPORATION PACIFIC GAS AND ELECTRIC COMPANY State or Other Jurisdiction of Incorporation or Organization California California IRS Employer Identification Number 94-3234914 94-0742640 77 Beale Street, P.O. Box 770000 San Francisco, California 94177 (Address of principal executive offices) (Zip...

  • Page 10
    ... Gas and Electric Company: $23,628 million Wholly owned by PG&E Corporation 492,830,471 shares 264,374,809 shares (wholly owned by PG&E Corporation) DOCUMENTS INCORPORATED BY REFERENCE Portions of the documents listed below have been incorporated by reference into the indicated parts of this report...

  • Page 11
    Intentionally left blank

  • Page 12
    ...10 Electric Utility Operations...13 Natural Gas Utility Operations ...17 Competition...18 Environmental Regulation ...19 ITEM 1A. Risk Factors ...23 ITEM 1B. Unresolved Sta Comments ...32 ITEM 2. Properties ...32 ITEM 3. Legal Proceedings...32 ITEM 4. Mine Safety Disclosures ...35 Executive Officers...

  • Page 13
    ...120 ITEM 9B. Other Information...120 PART III ITEM 10. ITEM 11. ITEM 12. ITEM 13. ITEM 14. 121 Directors, Executive Officers and Corporate Governance ...121 Executive Compensation ...122 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...122 Certain...

  • Page 14
    ... (kW) 1 Kilowatt-Hour (kWh) 1 Megawatt (MW) 1 Megawatt-Hour (MWh) 1 Gigawatt (GW) 1 Gigawatt-Hour (GWh) 1 Kilovolt (kV) 1 MVA 1 Mcf 1 MMcf 1 Bcf 1 MDth One thousand watts One kilowatt continuously for one hour One thousand kilowatts One megawatt continuously for one hour One million kilowatts One...

  • Page 15
    ... greenhouse gas general rate case gas transmission and storage Internal Revenue Service long term incentive plan Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Part II, Item 7, of this Form 10-K Nuclear Electric Insurance Limited Nuclear Regulatory...

  • Page 16
    ... Utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers. PG&E Corporation's and the Utility's operating revenues, income, and total assets can be found below in Item 6. Selected Financial Data. The principal executive offices of PG&E Corporation...

  • Page 17
    ...revenue requirements and rates, the licensing of substantially all of the Utility's hydroelectric generation facilities, and the interstate sale and transportation of natural gas. The FERC regulates the interconnections of the Utility's transmission systems with other electric systems and generation...

  • Page 18
    ...residential electric rates to more closely reï¬,ect the utilities' actual costs of service, reduce cross-subsidization among customer rate classes, implement new rules and rates for net energy metering (which currently allow certain self-generating customers to receive bill credits for surplus power...

  • Page 19
    ... that the Utility is authorized to collect from customers to recover the Utility's anticipated costs, including return on rate base, related to its electricity distribution, natural gas distribution, and Utility owned electricity generation operations. The CPUC generally conducts a GRC every...

  • Page 20
    ... a discount rate for low-income customers, known as California Alternate Rates for Energy ("CARE"), which is subsidized by the Utility's other customers. Natural Gas Procurement and Transportation Costs The Utility sets the natural gas procurement rate for small commercial and residential customers...

  • Page 21
    ...from self-generation resources, such as rooftop solar installations. As required by California law, on July 1, 2015, the Utility filed its proposed electric distribution resources plan for approval by the CPUC. The Utility's plan identifies optimal locations on its electric distribution system for...

  • Page 22
    ... its remaining 6.5 MW customer-connected target by funding energy storage under the CPUC-mandated Self Generation Incentive Program. On January 1, 2016, the Utility reported its compliance with its 2014-2015 obligations to the CPUC. The Utility must file its 2016-2017 plan for procuring 120 MW of...

  • Page 23
    ... generation facilities, all located in California, listed by energy source and further described below: Generation Type Nuclear : (1) County Location San Luis Obispo 16 counties in northern and central California Fresno Colusa Contra Costa Humboldt Number of Units 2 104 3 1 1 10 Net Operating...

  • Page 24
    ...): Subtotal Regulatory balancing accounts(3) Total operating revenues Selected Statistics: Average annual residential usage (kWh) Average billed revenues per kWh: Residential Commercial Industrial Agricultural Net plant investment per customer (1) These amounts include electricity provided to...

  • Page 25
    ... storage operators are interconnected to the Utility's northern California transmission system. During 2015, the Utility conducted an annual systemwide review of its transmission pipeline class location designations. The Utility also continued work to install 217 automatic and remote control shut...

  • Page 26
    ... Bundled gas revenues Transportation service only revenue Subtotal Regulatory balancing accounts Total operating revenues Selected Statistics: Average annual residential usage (Mcf) Average billed bundled gas sales revenues per Mcf: Residential Commercial Net plant investment per customer $ $ 12...

  • Page 27
    ...of customer net energy metering, which allows self-generating customers to receive bill credits at the full retail rate, are increasing. The Utility also competes for the opportunity to develop and construct certain types of electric transmission facilities within, or interconnected to, its service...

  • Page 28
    ... legislative action, the EPA has used its existing authority under the Clean Air Act to address GHG emissions. In August 2015, the EPA published final regulations under section 111(b) of the Clean Air Act to control CO2 emissions from new fossil fuel-fired power plants. While these regulations do...

  • Page 29
    ...additional GHG emissions data in their annual Corporate Responsibility and Sustainability Report. Amount (metric tonnes CO2 equivalent) 2,407,734 348,155 750,223 41,616,935 Natural Gas Compressor Stations and Storage Facilities(2) Distribution Fugitive Natural Gas Emissions Customer Natural Gas Use...

  • Page 30
    ... Board and the Utility regarding the status of the 2003 settlement agreement. (See "Diablo Canyon Power Plant" in Item 3. Legal Proceedings below.) Nuclear Fuel Disposal Under the Nuclear Waste Policy Act of 1982, the DOE and electric utilities with commercial nuclear power plants were authorized...

  • Page 31
    ... procurement and non-procurement contracts and programs. If the Utility incurred material fines or costs following a conviction, PG&E Corporation may need to issue common stock to raise funds to contribute to the Utility to maintain the required equity component of the Utility's authorized capital...

  • Page 32
    ... gas transmission pipeline rights-of-way. Actual costs to perform this work could exceed forecasts. PG&E Corporation's and the Utility's financial results primarily depend on the outcomes of regulatory and ratemaking proceedings and the Utility's ability to manage its operating expenses and capital...

  • Page 33
    ... agreements, and purchases on the wholesale electricity market. The Utility must manage these sources using the commercial and CPUC regulatory principles of "least cost dispatch" and prudent administration of power purchase agreements in compliance with its CPUC-approved long-term procurement plan...

  • Page 34
    ...customers of the Utility later in 2016. New NEM customers will be required to pay an interconnection fee, will go on time of use rates, and will be required to pay some non-bypassable charges to help fund some of the costs of low income, energy efficiency, and other programs that other customers pay...

  • Page 35
    ... in their respective credit agreements that require each company to maintain a ratio of consolidated total debt to consolidated capitalization of at most 65%. Risks Related to Operations and Information Technology The Utility's electricity and natural gas operations are inherently hazardous...

  • Page 36
    ... of the Utility's extensive electricity and natural gas systems relies on evolving and increasingly complex operational and information technology systems and network infrastructures that are interconnected with the systems and network infrastructure owned by third parties. The Utility's business is...

  • Page 37
    ...Item 8.) The CPUC authorizes the Utility to recover its estimated costs to decommission its nuclear facilities through nuclear decommissioning charges that are collected from customers and held in nuclear decommissioning trusts to be used for the eventual decommissioning of each nuclear unit. If the...

  • Page 38
    ..., relating to air quality, water quality and usage, remediation of hazardous wastes, and the protection and conservation of natural resources and wildlife. The Utility incurs significant capital, operating, and other costs associated with compliance with these environmental statutes, rules, and...

  • Page 39
    ...the rate of return on plan assets, employee demographics, discount rates used in determining future benefit obligations, rates of increase in health care costs, future government regulation, and prior contributions to the plans. Similarly, funding requirements for the nuclear decommissioning trusts...

  • Page 40
    ... General Fund, (2) a one-time $400 million bill credit to the Utility's natural gas customers, (3) 32 $850 million to fund future pipeline safety projects and programs, and (4) remedial measures that the CPUC estimates will cost the Utility at least $50 million. In August 2015, the Utility paid...

  • Page 41
    ...'s 2015 GT&S rate case in 2016 to identify safety-related projects and programs that will be subject to the disallowance. It is uncertain how much of the Utility's costs to perform the safety-related projects and programs the CPUC will identify as counting toward the $850 million shareholder-funded...

  • Page 42
    ...'s ex parte communication rules. In addition, fines may be imposed, or other regulatory or governmental enforcement action could be taken, with respect to the Utility's self-reports of noncompliance with natural gas safety regulations, investigations that were commenced after a pipeline explosion...

  • Page 43
    ... Officer, and President, PG&E Corporation Executive Chairman of the Board, DTE Energy Company President, Gas President, Gas Operations Executive Vice President, Gas Operations Executive Vice President and Chief Operating Officer, U.S. Gas Distribution, National Grid President, Electric...

  • Page 44
    ... Project Nuclear Operating Company Senior Vice President, Finance, PG&E Corporation Senior Vice President and Chief Financial Officer, PG&E Corporation Senior Vice President, Financial Services Senior Vice President and Chief Ethics and Compliance Officer Vice President, General Counsel...

  • Page 45
    ...Senior Vice President, Electric Distribution Operations Vice President, Electric Distribution Operations Vice President, SmartMeter Operations Senior Vice President, Regulatory Affairs Vice President, Customer Energy Solutions Vice President, Integrated Demand Side Management Senior Vice...

  • Page 46
    ..., PG&E Corporation recently discovered, based on a review of new accounts opened under its Dividend Reinvestment and Stock Purchase Plan ("DRSPP") since 2013, that it issued and sold shares of common stock under the optional cash purchase feature of its DRSPP more than three years after the related...

  • Page 47
    ...fic Gas and Electric Company, a public utility operating in northern and central California. The Utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers. The Utility's base revenue requirements are set by the CPUC in its GRC and GT&S rate case and...

  • Page 48
    ... Shareholders - 2014 Natural gas matters (1) Environmental-related costs(2) Earnings from Operations - 2014 Growth in rate base earnings Timing of 2015 GT&S cost recovery(4) Regulatory and legal matters (5) (6) (3) $ 1,648 Gain on disposition of SolarCity stock Increase in shares outstanding...

  • Page 49
    ...Utility filed its 2017 GRC application to request that the CPUC authorize revenue requirements for the Utility's electric generation business and its electric and natural gas distribution business for 2017 through 2019. (See "Regulatory Matters âˆ' 2017 General Rate Case" below for more information...

  • Page 50
    ... did not impact earnings. In general, expenses the Utility is authorized to pass through directly to customers (such as costs to purchase electricity and natural gas, as well as costs to fund public purpose programs) and the corresponding amount of revenues collected to recover those pass-through...

  • Page 51
    ... PSEP-related revenues, and revenues authorized by the FERC in the TO rate case, as well as revenues authorized by the CPUC for 43 recovery of nuclear decommissioning costs. The Utility also collected higher gas transmission revenues driven by increased demand for gas-fired generation. Operating...

  • Page 52
    ...-related costs for federal tax purposes. PG&E Corporation and the Utility's effective tax rates for 2015 are lower as compared to 2014 and for 2014 as compared to 2013 and are expected to remain lower than the statutory rate in 2016 due to these temporary differences. The Utility's income tax...

  • Page 53
    ... generation power plant and hydroelectric plants), and the cost-effectiveness of each source of electricity. Cost of Natural Gas The Utility's cost of natural gas includes the costs of procurement, storage, transportation of natural gas, costs to comply with California's cap-and-trade program...

  • Page 54
    ... Utility, and pay dividends, primarily depends on the level of cash distributions received from the Utility and PG&E Corporation's access to the capital and credit markets. PG&E Corporation has material stand-alone cash ï¬,ows related to the issuance of equity and long-term debt, dividend payments...

  • Page 55
    ... and the Utility expect to continue to issue long-term and short-term debt for general corporate purposes and to maintain the CPUC-authorized capital structure during 2016. Revolving Credit Facilities and Commercial Paper Programs At December 31, 2015, PG&E Corporation and the Utility had $300...

  • Page 56
    ... of cash. During 2015, net cash provided by operating activities increased by $101 million compared to 2014. This increase was primarily due to higher base revenue collections authorized in the 2014 GRC and lower purchased power costs (see "Cost of Electricity" under "Results of Operations - Utility...

  • Page 57
    ... 47,820 1,427 725 2,328 392 70 375 Power purchase agreements: Natural gas supply, transportation, and storage Nuclear fuel agreements Pension and other benefits(3) Operating leases(2) Preferred dividends PG&E Corporation Long-term debt : (1) (4) 3,453 421 113 388 40 14...

  • Page 58
    ... rate of return. (The Utility's revenue requirements for other portions of its operations, such as electric transmission, natural gas transmission and storage services, and electricity and natural gas purchases, are authorized in other regulatory proceedings overseen by the CPUC or the FERC...

  • Page 59
    ...income taxes Total revenue requirements 5,016 $ 7,916 In its application, the Utility stated that over the 20172019 GRC period the Utility plans to make average annual capital investments of approximately $4 billion in electric distribution, natural gas distribution and electric generation...

  • Page 60
    ...The Utility also has proposed changes to the revenue sharing mechanism authorized in the last GT&S rate case (covering 2011-2014) that subjected a portion of the Utility's transportation and storage revenue requirement to market risk. The Utility proposed full balancing account treatment that allows...

  • Page 61
    ... reform electric rates to more closely reï¬,ect the utilities' actual costs of service, reduce cross-subsidization among customer rate classes, implement new rules and rates for net energy metering (which currently allow certain self-generating customers to receive bill credits for surplus power at...

  • Page 62
    ...2016. New NEM customers will be required to pay an interconnection fee, will go on time of use rates, and will be required to pay non-bypassable charges to help fund some of the costs of low income, energy efficiency, and other programs that other customers pay. Electric Vehicle (EV) Infrastructure...

  • Page 63
    ... service to non-core customers is not balancing account protected. The Utility recovers these costs through fixed reservation charges and volumetric charges from long-term contracts, resulting in price and volumetric risk. (See "2015 Gas Transmission and Storage Rate Case" above.) The Utility uses...

  • Page 64
    ... with counterparties mainly in the energy industry, including the CAISO market, other California investor-owned electric utilities, municipal utilities, energy trading companies, financial institutions, electricity generation companies, and oil and natural gas production companies located in the...

  • Page 65
    ... in third-party contracts, historical cost experience for similar projects, permitting requirements, environmental compliance standards, and a variety of other factors. The Utility recorded charges of $407 million in 2015 for estimated capital spending that is probable of disallowance related to the...

  • Page 66
    ... and other benefit obligations include the discount rate, the average rate of future compensation increases, the health care cost trend rate and the expected return on plan assets. PG&E Corporation and the Utility review these assumptions on an annual basis and adjust them as necessary. While...

  • Page 67
    ... of the employee benefit trusts, resulting in a weighted average rate of return on plan assets. Fixed-income returns were projected based on real maturity and credit spreads added to a long-term inï¬,ation rate. Equity returns were projected based on estimates of dividend yield and real earnings...

  • Page 68
    ... recover its investments through rates and earn its authorized return on equity, and whether the Utility's business strategy to address the impact of growing distributed and renewable generation resources and changing customer demand for natural gas and electric services is successful; Ä' the supply...

  • Page 69
    ...collateral in connection with price risk management activities; and whether the Utility is able to recover timely its electric generation and energy commodity costs through rates, including its renewable energy procurement costs; Ä' whether the Utility's information technology, operating systems and...

  • Page 70
    ... of electricity Cost of natural gas Operating and maintenance Depreciation, amortization, and decommissioning Total operating expenses Operating Income Interest income Interest expense Other income, net Income Before Income Taxes Income tax (benefit) provision Net Income Preferred stock dividend...

  • Page 71
    PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PG&E Corporation CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year ended December 31, 2015 Net Income Other Comprehensive Income Pension and other postretirement benefit plans obligations (net of taxes of $0, $10, and $...

  • Page 72
    ...revenue Regulatory balancing accounts Other Regulatory assets Inventories Gas stored underground and fuel oil Materials and supplies Income taxes receivable Other Total current assets Property, Plant, and Equipment Electric Gas Construction work in progress Other Total property, plant, and equipment...

  • Page 73
    ... Long-term debt Regulatory liabilities Pension and other postretirement benefits Asset retirement obligations Deferred income taxes Other Total noncurrent liabilities Commitments and Contingencies (Note 13) Equity Shareholders' Equity Common stock, no par value, authorized 800,000,000 shares...

  • Page 74
    ...31, 2015 Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and decommissioning Allowance for equity funds used during construction Deferred income taxes and tax credits, net Disallowed capital...

  • Page 75
    PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PG&E Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year ended December 31, 2015 Supplemental disclosures of cash ï¬,ow information Cash received (paid) for: Interest, net of amounts capitalized Income taxes, net ...

  • Page 76
    ...Non controlling Interest Preferred Stock of Subsidiary Common Stock Shares Balance at December 31, 2012 Net income Other comprehensive income Common stock issued, net Stock-based compensation amortization Common stock dividends declared Tax expense from employee stock plans Preferred stock dividend...

  • Page 77
    ... of electricity Cost of natural gas Operating and maintenance Depreciation, amortization, and decommissioning Total operating expenses Operating Income Interest income Interest expense Other income, net Income Before Income Taxes Income tax (benefit) provision Net Income Preferred stock dividend...

  • Page 78
    ... DATA Pacific Gas and Electric Company CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year ended December 31, 2015 Net Income Other Comprehensive Income Pension and other postretirement benefit plans obligations (net of taxes of $1, $6, and $75, at respective dates) Total other...

  • Page 79
    ... and Electric Company CONSOLIDATED BALANCE SHEETS (in millions) Balance at December 31, 2015 ASSETS Current Assets Cash and cash equivalents Restricted cash Accounts receivable Customers (net of allowance for doubtful accounts of $54 and $66 at respective dates) Accrued unbilled revenue Regulatory...

  • Page 80
    ... Liabilities Long-term debt Regulatory liabilities Pension and other postretirement benefits Asset retirement obligations Deferred income taxes Other Total noncurrent liabilities Commitments and Contingencies (Note 13) Shareholders' Equity Preferred stock Common stock, $5 par value, authorized 800...

  • Page 81
    ...31, 2015 Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and decommissioning Allowance for equity funds used during construction Deferred income taxes and tax credits, net Disallowed capital...

  • Page 82
    ... AND SUPPLEMENTARY DATA Pacific Gas and Electric Company CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year ended December 31, 2015 Supplemental disclosures of cash ï¬,ow information Cash received (paid) for: Interest, net of amounts capitalized Income taxes, net Supplemental disclosures of...

  • Page 83
    ... Balance at December 31, 2014 Net income Other comprehensive loss Equity contribution Tax expense from employee stock plans Common stock dividend Preferred stock dividend Balance at December 31, 2015 $ 258 $ 258 $ 258 $ 258 Common Stock $ 1,322 $ 1,322 $ 1,322 $ 1,322 Additional Paid-in Capital...

  • Page 84
    ...&E Corporation is a holding company whose primary operating subsidiary is Pacific Gas and Electric Company, a public utility operating in northern and central California. The Utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers. The Utility is...

  • Page 85
    ...to purchase electricity and natural gas; and to fund public purpose, demand response, and customer energy efficiency programs. In general, the revenue recognition criteria for pass-through costs billed to customers are met at the time the costs are incurred. The FERC authorizes the Utility's revenue...

  • Page 86
    ... 3.80% in 2015, 3.77% in 2014, and 3.51% in 2013. The useful lives of the Utility's property, plant, and equipment are authorized by the CPUC and the FERC, and the depreciation expense is recovered through rates charged to customers. Depreciation expense includes a component for the original cost of...

  • Page 87
    PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 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 ...

  • Page 88
    ... the Utility on January 1, 2016. This standard will be adopted for related disclosures in the first quarter of 2016 and will not have an impact on the consolidated financial statements. Balance Sheet Classification of Deferred Taxes In November 2015, the FASB issued ASU No. 2015-17, Income Taxes...

  • Page 89
    ... years 11 years Various Pension benefits(1) Deferred income taxes(1) Utility retained generation Price risk management (1) 411 748 138 (1) Environmental compliance costs Electromechanical meters(3) Unamortized loss, net of gain, on reacquired debt Other Total long-term regulatory assets 94 170...

  • Page 90
    ... following: Receivable Balance at December 31, (in millions) 2015 $ 380 122 493 262 155 348 $ 1,760 2014 $ 344 261 566 608 109 378 $ 2,266 Electric distribution Utility generation Gas distribution Energy procurement Public purpose programs Other Total regulatory balancing accounts receivable 82

  • Page 91
    ... millions) 2015 $ 112 244 359 $ 715 $ 2014 188 154 748 $ 1,090 Energy procurement Public purpose programs Other Total regulatory balancing accounts payable The electric distribution, utility generation, and gas distribution balancing accounts track the collection of revenue requirements approved...

  • Page 92
    ... 550 800 250 400 350 375 500 675 500 (43) 13,432 614 345 309 1,268 14,700 $ 15,050 Series 2009 A-D, variable rates , due 2016 and 2026 Less: current portion Total pollution control bonds Total Utility long-term debt, net of current portion Total consolidated long-term debt, net of current portion

  • Page 93
    ... units of the Geysers geothermal power plant to Geysers Power Company, LLC pursuant to purchase and sale agreements stating that Geysers Power Company, LLC will use the bond-financed facilities solely as pollution control facilities for so long as any tax-exempt pollution control bonds issued...

  • Page 94
    ... common stock in an underwritten public offering for cash proceeds of $352 million, net of fees. 86 Dividends The Board of Directors of PG&E Corporation and the Utility declare dividends quarterly. Under the Utility's Articles of Incorporation, the Utility cannot pay common stock dividends unless...

  • Page 95
    ... Restricted stock units Performance shares Total compensation expense (pre-tax) Total compensation expense (after-tax) The amount of share-based compensation costs capitalized during 2015, 2014, and 2013 was immaterial. There was no material difference between PG&E Corporation and the Utility for...

  • Page 96
    ...ed for the class and series. The Utility paid $14 million of dividends on preferred stock in each of 2015, 2014, and 2013. PG&E Corporation has authorized 80 million shares of no par value preferred stock and 5 million shares of $100 par value preferred stock, which may be issued as redeemable or...

  • Page 97
    ...income tax liabilities: PG&E Corporation Year Ended December 31, (in millions) Utility 2015 2014 2015 2014 Deferred income tax assets: Customer advances for construction Environmental reserve Compensation and benefits Tax carryforwards Greenhouse gas allowances Other Total deferred income tax...

  • Page 98
    ... Increase (decrease) in income tax rate resulting from: State income tax (net of federal benefit)(1) Effect of regulatory treatment of fixed asset differences(2) Tax credits Benefit of loss carryback Non deductible penalties Other, net Effective tax rate (3) Utility 2014 35.0% 2013 35.0% 2015...

  • Page 99
    ... recognized as of December 31, 2015 for these tax attributes. As of December 31, 2015, PG&E Corporation had approximately $29 million of federal net operating loss carryforwards related to the tax benefit on employee stock plans that would be recorded in additional paid-in capital when used. 91

  • Page 100
    ... accounting. Use of Derivative Instruments The Utility is exposed to commodity price risk as a result of its electricity and natural gas procurement activities. Procurement costs are recovered through customer rates. The Utility uses both derivative and non-derivative contracts to manage volatility...

  • Page 101
    ... - cost of electricity(2) Realized loss - cost of natural gas Total commodity risk (2) (1) Unrealized gains and losses on commodity risk-related derivative instruments are recorded to regulatory liabilities or assets, respectively, rather than being recorded to the Consolidated Statements of Income...

  • Page 102
    ... Global equity securities Fixed-income securities Total nuclear decommissioning trusts Price risk management instruments (Note 9) Electricity Gas Total price risk management instruments Rabbi trusts Fixed-income securities Life insurance contracts Total rabbi trusts Long-term disability trust Money...

  • Page 103
    ... Global equity securities Fixed-income securities Total nuclear decommissioning trusts Price risk management instruments (Note 9) Electricity Gas Total price risk management instruments Rabbi trusts Fixed-income securities Life insurance contracts Total rabbi trusts Long-term disability trust Money...

  • Page 104
    ...in the valuation model generally include benchmark yield curves and issuer spreads. The external credit ratings, coupon rate, and maturity of each security are considered in the valuation model, as applicable. Long-dated power purchase agreements that are valued using significant unobservable data...

  • Page 105
    ... restricted cash, net accounts receivable, short-term borrowings, accounts payable, customer deposits, ï¬,oating rate senior notes, and the Utility's variable rate pollution control bond loan agreements approximate their carrying values at December 31, 2015 and 2014, as they are short-term in nature...

  • Page 106
    PART II ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (in millions) Amortized Cost Total Unrealized Gains Total Unrealized Losses Total Fair Value As of December 31, 2014 Nuclear decommissioning trusts Money market investments Global equity securities Fixed-income securities Total ...

  • Page 107
    ..., and the plans' aggregate funded status for pension benefits and other benefits for PG&E Corporation during 2015 and 2014: Pension Plan (in millions) 2015 2014 Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Company contributions Benefits...

  • Page 108
    ... to a regulatory account as they are probable of recovery from customers in future rates. Postretirement Benefits Other than Pensions (in millions) 2015 $ 55 71 (112) 19 4 $ 37 $ $ 2014 45 76 (103) 23 2 43 2013 $ 53 74 (79) 23 6 $ 77 Service cost Interest cost Expected return on plan assets...

  • Page 109
    .... The following weighted average year-end assumptions were used in determining the plans' projected benefit obligations and net benefit cost. Pension Plan December 31, 2015 Discount rate Rate of future compensation increases Expected return on plan assets 4.37 % 4.00 % 6.10 % 2014 4.00 % 4.00...

  • Page 110
    ... of trust assets for pension and other benefit plans are as follows: Pension Plan 2016 Global equity Absolute return Real assets Fixed income TOTAL 25 % 5 % 10 % 60 % 100 % 2015 25 % 5 % 10 % 60 % 100 % 2014 25 % 5 % 10 % 60 % 100 % 2016 32 % 3 % 7 % 58 % 100 % PBOP Plans 2015 31...

  • Page 111
    ... Plans: Short-term investments Global equity Absolute return Real assets Fixed-income Total TOTAL PLAN ASSETS AT FAIR VALUE In addition to the total plan assets disclosed at fair value in the table above, the trusts had other net assets of $13 million and $24 million at December 31, 2015 and 2014...

  • Page 112
    ... listed infrastructure equities, and private real estate funds. The commodity futures, global REITS, and global listed infrastructure equities are actively traded on a public exchange and are therefore considered Level 1 assets. Private real estate funds are valued using a net asset value per share...

  • Page 113
    ...at the reporting date Relating to assets sold during the period Purchases, issuances, sales, and settlements: Purchases Settlements Balance at end of year There were no material transfers out of Level 3 in 2015 and 2014. Cash Flow Information Employer Contributions PG&E Corporation and the Utility...

  • Page 114
    ... 12: Related Party Agreements and Transactions priced at the lower of fully loaded cost or fair market value, depending on the nature and value of the services. PG&E Corporation also allocates various corporate administrative and general costs to the Utility and other subsidiaries using agreed-upon...

  • Page 115
    ... also cites the ex parte violations alleged in the City of San Bruno's July 2014 motion, which it filed in the CPUC investigations related to the Utility's natural gas transmission pipeline operations and practices. A prehearing conference in the OII has been scheduled for March 1, 2016. The CPUC...

  • Page 116
    ...number of factors that can be considered in determining penalties. Potential Safety Citations The SED periodically audits utility operating practices and conducts investigations of potential violations of laws and regulations applicable to the safety of the California utilities' electric and natural...

  • Page 117
    ... Safety Enhancement Plan At December 31, 2015, approximately $664 million of PSEP-related capital costs is recorded in property, plant, and equipment on the Consolidated Balance Sheets. The Utility would be required to record charges to the statement of income in future periods to the extent total...

  • Page 118
    ...Awards On September 17, 2015, the CPUC issued an order granting TURN's and the ORA's long-standing applications for rehearing of the CPUC decisions that awarded energy efficiency incentive payments to the California investorowned utilities for the 2006-2008 energy efficiency program cycle. Under the...

  • Page 119
    ...: Balance at (in millions) December 31, 2015 (1) December 31, 2014 $ 291 158 257 Topock natural gas compressor station Hinkley natural gas compressor station $ 300 140 271 (1) Former manufactured gas plant sites owned by the Utility or third parties Utility-owned generation facilities...

  • Page 120
    ... Bankruptcy Code seeking payment for energy supplied to the Utility's customers between May 2000 and June 2001. These claims, which the Utility disputes, are being addressed in various FERC and judicial proceedings in which the State of California, the Utility, and other electricity purchasers are...

  • Page 121
    ... current market price of either natural gas or electricity at the date of delivery. Renewable Energy Power Purchase Agreements In order to comply with California's RPS requirements, the Utility is required to deliver renewable energy to its customers at a gradually increasing rate. The Utility has...

  • Page 122
    ... all power purchases and electric capacity amounted to $3.5 billion in 2015, $3.6 billion in 2014, and $3.0 billion in 2013. delivery (typically in Canada, the US Rocky Mountain supply area, and the southwestern United States) to the points at which the Utility's natural gas transportation system...

  • Page 123
    ... share, diluted Common stock price per share: High Low UTILITY Operating revenues Operating income Income tax (benefit) provision(1) Net income(2) Income available for common stock Comprehensive income 2014 PG&E CORPORATION Operating revenues(3) Operating income Income tax provision Net income...

  • Page 124
    ... in Item 8.) (3) In the third quarter of 2014, the Utility recorded an increase to base revenues as authorized by the CPUC in the 2014 GRC decision. (4) The Utility recorded charges to net income of $116 million in the fourth quarter of 2014 for PSEP capital costs that are forecasted to exceed the...

  • Page 125
    ..., management has concluded that PG&E Corporation and the Utility maintained effective internal control over financial reporting as of December 31, 2015. Deloitte & Touche LLP, an independent registered public accounting firm, has audited PG&E Corporation's and the Utility's internal control over...

  • Page 126
    ... Public Accounting Firm To the Board of Directors and Shareholders of PG&E Corporation and Pacific Gas and Electric Company San Francisco, California We have audited the internal control over financial reporting of PG&E Corporation and subsidiaries (the "Company") and of Pacific Gas and Electric...

  • Page 127
    ... Gas and Electric Company San Francisco, California We have audited the accompanying consolidated balance sheets of PG&E Corporation and subsidiaries (the "Company") and of Pacific Gas and Electric Company and subsidiaries (the "Utility") as of December 31, 2015 and 2014, and the Company's related...

  • Page 128
    ...'s and the Utility's respective principal executive officers and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management's Annual Report on Internal Control over Financial Reporting Management of PG...

  • Page 129
    ...under "Executive Officers of the Registrants" at the end of Part I of this report. Other information regarding directors is set forth under the heading "Nominees for Directors of PG&E Corporation and Pacific Gas and Electric Company" in the Joint Proxy Statement relating to the 2016 Annual Website...

  • Page 130
    ...Potential Payments Upon Resignation, Retirement, Termination, Change in Control, Death, or Disability" and "Compensation of Non-Employee Directors - 2015 Director Compensation" in the Joint Proxy Statement relating to the 2016 Annual Meetings of Shareholders, which information is incorporated herein...

  • Page 131
    ...the Utility, is set forth under the heading "Information Regarding the Independent Registered Public Accounting Firm for PG&E Corporation and Pacific Gas and Electric Company" in the Joint Proxy Statement relating to the 2016 Annual Meetings of Shareholders, which information is incorporated herein...

  • Page 132
    ...statements, supplemental information and report of independent registered public accounting firm are filed as part of this report in Item 8: Ä' Consolidated Statements of Income for the Years Ended December 31, 2015, 2014, and 2013 for each of PG&E Corporation and Pacific Gas and Electric Company...

  • Page 133
    ... of New York Trust Company, N.A. (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 10-Q for the quarter ended March 31, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 4.1) First Supplemental Indenture dated as of March 13, 2007 relating to the Utility...

  • Page 134
    ... of Pacific Gas and Electric Company's 4.30% Senior Notes due March 15, 2045 (incorporated by reference to Pacific Gas and Electric Company's Form 8-K dated November 6, 2014 (File No. 1-2348), Exhibit 4.1) Twenty-Fifth Supplemental Indenture, dated as of June 12, 2015, relating to the issuance...

  • Page 135
    ... Exhibit 99) Transmission Control Agreement among the California Independent System Operator (CAISO) and the Participating Transmission Owners, including Pacific Gas and Electric Company, effective as of March 31, 1998, as amended (CAISO, FERC Electric Tariff No. 7) (incorporated by reference to PG...

  • Page 136
    ... and PG&E Corporation dated May 29, 2015 for 2015 grant under the PG&E Corporation 2014 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation's Form 10-Q for the quarter ended June 30, 2015 (File No. 1-2348), Exhibit 10.5) Non-Annual Restricted Stock Unit Agreement between Julie...

  • Page 137
    ...1-2348), Exhibit 10.7) PG&E Corporation Non-Employee Director Stock Incentive Plan (a component of the PG&E Corporation Long-Term Incentive Program) as amended effective as of July 1, 2004 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year...

  • Page 138
    PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Exhibit Number 10.45 * Exhibit Description Form of Restricted Stock Unit Agreement for 2015 grants to directors under the PG&E Corporation 2014 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation's Form 10-Q for the ...

  • Page 139
    ... Corporation Officer Grantor Trust Agreement dated October 1, 2015 (incorporated by reference to PG&E Corporation's Form 10-Q for the quarter ended September 30, 2015 (File No. 1-12609), Exhibit 10.2) PG&E Corporation and Pacific Gas and Electric Company Executive Incentive Compensation Recoupment...

  • Page 140
    ...authorized. PG&E CORPORATION PACIFIC GAS AND ELECTRIC COMPANY (Registrant) ANTHONY F. EARLEY, JR. (Registrant) NICKOLAS STAVROPOULOS Anthony F. Earley, Jr. By: Chairman of the Board, Chief Executive Officer, and President Nickolas Stavropoulos By: President, Gas Date: February 18, 2016...

  • Page 141
    ... PARK, Attorney-in-Fact Title Director Director Director Director Director Director Director Director Director Director (Pacific Gas and Electric Company only) Director (Pacific Gas and Electric Company only) Director Date February 18, 2016 February 18, 2016 February 18, 2016 February 18, 2016...

  • Page 142
    ... IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of PG&E Corporation and Pacific Gas and Electric Company San Francisco, California We have audited the consolidated financial statements of...

  • Page 143
    ...Administrative service revenue Operating expenses Interest income Interest expense Other income (expense) Equity in earnings of subsidiaries Income before income taxes Income tax benefit Net income Other Comprehensive Income Pension and other postretirement benefit plans obligations (net of taxes...

  • Page 144
    ... STATEMENT SCHEDULES PG&E CORPORATION SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF PARENT - (Continued) CONDENSED BALANCE SHEETS Balance at December 31, (in millions) 2015 2014 ASSETS Current Assets Cash and cash equivalents Advances to affiliates Income taxes receivable Other Total current...

  • Page 145
    ... credit facilities Proceeds from issuance of long-term debt, net of discount and issuance costs of $3 million Repayments of long-term debt Common stock issued Common stock dividends paid(2) Other Net cash provided by (used in) financing activities Net change in cash and cash equivalents Cash...

  • Page 146
    PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES PG&E Corporation SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2015, 2014, and 2013 (in millions) Additions Balance at Beginning of Period Charged to Costs and Expenses Charged to Other ...

  • Page 147
    PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Pacific Gas and Electric Company SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2015, 2014, and 2013 (in millions) Additions Balance at Beginning of Period Charged to Costs and Expenses ...

  • Page 148
    ... and the independent non-executive Chairman of the Board of Pacific Gas and Electric Company. PG&E Corporation Officers ANTHONY F. EARLEY, JR. Chairman of the Board, Chief Executive Officer, and President JOHN R. SIMON Executive Vice President, Corporate Services and Human Resources HELEN A. BURT...

  • Page 149
    ..., Human Resources Vice President, Chief Financial Officer, and Controller(1) JESUS SOTO, JR. Senior Vice President, Gas Operations FONG WAN Senior Vice President, Energy Policy and Procurement DEBORAH T. AFFONSA Vice President, Customer Service BARRY D. ANDERSON Vice President, Electric Distribution...

  • Page 150
    ... Corporation common stock account or Pacific Gas and Electric Company preferred stock account, please contact our transfer agent, American Stock Transfer and Trust Company, LLC ("AST"). American Stock Transfer and Trust Company, LLC 6201 15th Avenue Brooklyn, NY 11219 Toll-free telephone services...

  • Page 151
    ...&E Corporation Pacific Gas and Electric Company P. O. Box 770000 San Francisco, CA 94177 415-973-8200 Fax: 415-973-8719 Email: [email protected] Securities analysts, portfolio managers, or other representatives of the investment community should contact the Investor Relations Office. Vice...

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