PG&E 2015 Annual Report Download - page 118

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PART II
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Other Legal and Regulatory Contingencies
PG&E Corporation and the Utility are subject to various
laws and regulations and, in the normal course of business,
are named as parties in a number of claims and lawsuits.
In addition, penalties may be incurred for failure to comply
with federal, state, or local laws and regulations. A provision
for a loss contingency is recorded when it is both probable
that a loss has been incurred and the amount of the loss
can be reasonably estimated. PG&E Corporation and
the Utility evaluate the range of reasonably estimated
losses and record a provision based on the lower end of
the range, unless an amount within the range is a better
estimate than any other amount. The assessment of
whether a loss is probable or reasonably possible, and
whether the loss or a range of loss is estimable, often
involves a series of complex judgments about future
events. Loss contingencies are reviewed quarterly and
estimates are adjusted to reflect the impact of all known
information, such as negotiations, discovery, settlements
and payments, rulings, advice of legal counsel, and other
information and events pertaining to a particular matter.
PG&E Corporation’s and the Utility’s policy is to exclude
anticipated legal costs from the provision for loss and
expense these costs as incurred.
Investigation of the Butte Fire
In September 2015, a wildfire (known as the “Butte fire”)
ignited and spread in Amador and Calaveras Counties in
Northern California. The California Department of Forestry
and Fire Protection (“Cal Fire”) is investigating the source
of the Butte Fire to determine whether a tree contacted
a power line operated by the Utility and was the cause of
the fire. Cal Fire has reported that as a result of the fire
there were two deaths and 965 structures, including 571
houses, were damaged or destroyed. Cal Fire’s investigation
is expected to conclude in 2016.
Approximately 27 complaints have been filed against
the Utility and its vegetation management contractors
in the Superior Court of California in both the County
of Calaveras and the County of San Francisco, involving
more than 600 individual plaintis and their insurance
companies. Plaintis and the Utility filed petitions with
the California Judicial Council to coordinate these cases.
The petitions were assigned to the Calaveras Superior
Court for a recommendation to the Judicial Council. On
January 21, 2016, the Calaveras Superior Court issued
an order recommending to the Judicial Council that the
cases be coordinated in the Superior Court of California,
Sacramento County, for all purposes including trial. Among
other factors, the Court found that coordination requires
a court with a significant number of judges and complex
litigation support personnel, neither of which are present
in Calaveras County.
It is estimated that losses related to structures, contents,
other personal property, and fire suppression costs
associated with the Butte fire, will range from $350million
to $450 million. This range is based on estimates about the
number, size, and type of structures damaged or destroyed,
assumptions about the contents of such structures and
other personal property damage, and information about
the amount of fire suppression costs associated with prior
similar fires. The Utility believes that it is reasonably possible
that it would be liable for some or all of these and other
costs, such as costs associated with tree damage, personal
injury, business interruption losses, and other damages.
The Utility is unable to reasonably estimate these other
costs at this time due to the limited information available.
The Utility has insurance coverage for these types of
claims. If the amount of insurance is insucient to cover
the Utility’s liability resulting from the Butte fire, or if
insurance is otherwise unavailable, PG&E Corporation’s
and the Utility’s financial condition or results of operations
could be materially aected.
Rehearing of CPUC Decisions Approving Energy
Eciency Incentive 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
eciency incentive payments to the California investor-
owned utilities for the 2006-2008 energy eciency
program cycle. Under the ratemaking mechanism applicable
to the 2006-2008 program cycle, the maximum amount
of incentives that the Utility could have earned (or the
maximum amount that the Utility could have been required
to reimburse customers) over the 2006-2008 program
cycle was $180 million. The Utility was awarded a total
of $104 million for the 2006-2008 program cycle. In the
re-opened energy eciency proceeding, the CPUC will
evaluate whether incentives awarded to the California
investor-owned utilities were just and reasonable, and
whether any refunds are due. The parties are required to
submit proposals to resolve the issues in the proceeding
by March 18, 2016. Comments on the proposals are due on
April 8, 2016 and evidentiary hearings, if needed, would
be held in July 2016. It is uncertain when the CPUC will
issue a decision and whether the Utility will be required
to refund amounts or incur other obligations related to
the 2006-2008 program cycle. PG&E Corporation and the
Utility believe it is reasonably possible that the Utility will
be required to refund amounts or incur other obligations
related to this matter, but they are unable to reasonably
estimate the amount of such refunds or other obligations.