PSE&G 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 PSE&G annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 164

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164

PG&E Corporation and Pacific Gas and Electric Company
2014 Joint Annual Report to Shareholders

Table of contents

  • Page 1
    PG&E Corporation and Pacific Gas and Electric Company 2014 Joint Annual Report to Shareholders

  • Page 2

  • Page 3
    ... Comparison of Five-Year Cumulative Total Shareholder Return iv Form 10-K Cover Page 1 Form 10-K Table of Contents PG&E Corporation and Pacific Gas and Electric Company Boards of Directors Officers of PG&E Corporation and Pacific Gas and Electric Company Shareholder Information 3 152 153 154

  • Page 4
    (This page intentionally left blank.)

  • Page 5
    ... vision for increasing the state's use of renewable energy, improving energy efficiency and reducing gasoline consumption. Realizing these goals will require that we continue working to create a 21st-century electric grid. From renewables and energy storage to electric vehicles and smart homes and...

  • Page 6
    ...service affordable. Average monthly bills for PG&E customers are among the nation's lowest. But meeting our long-term goal to keep prices in line with inflation will require us to continue managing costs responsibly and operating as efficiently as possible. We also know it is important to make rates...

  • Page 7
    ... natural gas matters (after-tax) $ $ $ 347 116 12 (7) (112) 356 216 $ $ $ 2013 387 196 22 110 (70) 645 392 (5) PG&E Corporation's earnings from operations for 2014 and 2013 also exclude whole house water replacement program costs associated with the Utility's natural gas compressor station located...

  • Page 8
    PG&E Corporation common stock is traded on the New York Stock Exchange under the symbol "PCG." COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN (1) This graph compares the cumulative total return on PG&E Corporation common stock (equal to dividends plus stock price appreciation) during ...

  • Page 9
    ...Address of principal executive offices) (Zip Code) (415) 973-7000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class PG&E Corporation: Common Stock, no par value Pacific Gas and Electric Company: First Preferred Stock...

  • Page 10
    ... market value of voting and non-voting common equity held by non-affiliates of the registrants as of June 30, 2014, the last business day of the most recently completed second fiscal quarter: PG&E Corporation common stock Pacific Gas and Electric Company common stock Common Stock outstanding as...

  • Page 11
    ... Electric Utility Operations...12 Natural Gas Utility Operations ...16 Competition ...18 Environmental Regulation...19 ITEM 1A. RISK FACTORS ...23 ITEM 1B. UNRESOLVED STAFF COMMENTS...32 ITEM 2. PROPERTIES...32 ITEM 3. LEGAL PROCEEDINGS ...32 ITEM 4. MINE SAFETY DISCLOSURES ...34 EXECUTIVE OFFICERS...

  • Page 12
    ... AND PROCEDURES...132 ITEM 9B. OTHER INFORMATION ...132 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ...132 ITEM 11. EXECUTIVE COMPENSATION ...133 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ...134 ITEM 13...

  • Page 13
    ...) 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 gigawatt continuously for one hour One thousand volts One megavolt ampere One thousand cubic feet One...

  • Page 14
    ... Board Community Choice Aggregator Central Coast Regional Water Quality Control Board California Public Utilities Commission congestion revenue rights Department of Energy Environmental Protection Agency earnings per common share electric vehicle Federal Energy Regulatory Commission U.S. Generally...

  • Page 15
    ... operating in northern and central California. The Utility was incorporated in California in 1905. PG&E Corporation became the holding company of the Utility and its subsidiaries in 1997. The Utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers...

  • Page 16
    ... of the siting of facilities used in providing electric and natural gas utility service. The California Legislature also directs the CPUC to implement state laws and policies, such as the laws relating to increasing renewable energy resources, the development and widespread deployment of distributed...

  • Page 17
    ... to develop a new structure for net energy metering by December 31, 2015, that must be implemented no later than July 1, 2017. California's net energy metering program currently allows customers installing renewable distributed generation to receive bill credits for power delivered to the grid at...

  • Page 18
    ... to collect from customers to recover the Utility's anticipated costs, including return on rate base, related to its electricity and natural gas distribution and Utility owned electricity generation operations. The CPUC generally conducts a GRC every three years. The CPUC approves the annual revenue...

  • Page 19
    ... as a cost of electricity that is recovered annually through retail electricity rates. The CPIM protects the Utility against after-the-fact reasonableness reviews of these gas procurement costs. Under the CPIM, the Utility's natural gas purchase costs for a fixed 12-month period are compared to an...

  • Page 20
    ... electricity, transmission and distribution services) to most customers in its service territory. Customers also can obtain electricity from alternative providers such as municipalities or CCAs, as well as from self-generation resources, such as rooftop solar installations. During 2014, the Utility...

  • Page 21
    ... electricity provided to direct access customers and CCAs who procure their own supplies of electricity. Mainly comprised of net CAISO open market purchases. (3) Non-renewable sources, including nuclear, large hydroelectric, and fossil fuel-fired are offset by transmission and distribution related...

  • Page 22
    ... the Guernsey solar station, which is located in Kings County. Generation Resources from Third Parties. The Utility has entered into various agreements to purchase power and electric capacity, including agreements for renewable energy resources, in accordance with its CPUC-approved procurement plan...

  • Page 23
    ... three new electric distribution control centers. This 24,000-square foot, state-of-the-art facility, located in Fresno, California, will enhance electric reliability and resiliency for the Utility's customers throughout the Central Valley and will utilize current and future Smart Grid technologies...

  • Page 24
    ... be billed. The 2014 activity represents an increase to balancing account receivable primarily related to the adoption of the 2014 GRC. Natural Gas Utility Operations The Utility provides natural gas transportation services to "core" customers (i.e., small commercial and residential customers) and...

  • Page 25
    ...wide replacement of 847 miles of cast iron natural gas distribution pipeline with plastic pipe. Additionally, the Utility conducted an annual system-wide review of its transmission pipeline class location designations. As part of its distribution integrity management program, during 2014 the Utility...

  • Page 26
    ... Average billed bundled gas sales revenues per Mcf: Residential Commercial Net plant investment per customer Competition Competition in the Electricity Industry California law allows qualifying non-residential customers of investor-owned electric utilities to purchase electricity from energy service...

  • Page 27
    ... rates, access to competitively priced supplies of natural gas, and the quality and reliability of transportation services. The Utility also competes for storage services with other third-party storage providers, primarily in northern California. Environmental Regulation The Utility's operations...

  • Page 28
    ... RPS program that requires the utilities to gradually increase the amount of renewable energy delivered to their customers is also expected to help reduce GHG emissions in California. Climate Change Mitigation and Adaptation Strategies. During 2014, the Utility continued its programs to develop...

  • Page 29
    ..., the Utility continues to replace a substantial portion of its older cast iron, steel and plastic distribution pipelines and steel gas transmission mains with new pipe, which reduces leakage. Emissions Data PG&E Corporation and the Utility track and report their annual environmental performance...

  • Page 30
    ...delivered electricity in 2013. PG&E Corporation and the Utility also publish air emissions data in their annual Corporate Responsibility and Sustainability Report. 2013 Total NOx Emissions (tons) NOx Emissions Rate (pounds/MWh) Total SO2 Emissions (tons) SO2 Emissions Rate (pounds/MWh) Water Quality...

  • Page 31
    ... laws, regulations or orders that could result in additional fines, penalties or customer refunds, including those regarding renewable energy and resource adequacy requirements; customer billing; customer service; affiliate transactions; vegetation management; design, construction, operating and...

  • Page 32
    ..., rate pressures increase when the costs are borne by a smaller sales base. Changes in commodity prices also may have an adverse effect on the Utility's ability to timely recover its operating costs and earn its authorized ROE. Although the Utility generally recovers its electricity and natural gas...

  • Page 33
    ... who become direct access customers of alternative generation providers. (See "Competition in the Electric Industry" in Item 1.) As the number of bundled customers (i.e., those primarily residential customers who receive electricity and distribution service from the Utility) declines, the rates for...

  • Page 34
    ... to reflect the impact of changing loads, the wide deployment of distributed generation, and the development of new electricity generation and energy storage technologies. Risks Related to Liquidity and Capital Requirements PG&E Corporation's and the Utility's financial results will be affected by...

  • Page 35
    Risks Related to Operations and Information Technology The operations of the Utility's electricity and natural gas generation, transmission, and distribution facilities is inherently dangerous and involves significant risks which, if they materialize, can adversely affect PG&E Corporation's and the ...

  • Page 36
    ... deliver gas and electric services. The Utility's ability to serve its customers requires the continued operation of complex information technology systems and network infrastructure that are interconnected with the systems and infrastructure owned by third parties. The Utility's business is highly...

  • Page 37
    ... affect PG&E Corporation's and the Utility's financial results. The Utility's operations are subject to extensive federal, state, and local environmental laws, regulations, orders, relating to air quality, water quality and usage, remediation of hazardous wastes, and the protection and conservation...

  • Page 38
    ..., and the electric transmission assets that are located on levees throughout the Utility's service territory. The Utility could incur substantial costs to repair or replace facilities, restore service, compensate customers and other third parties for damages or injuries. The Utility anticipates that...

  • Page 39
    ... new field service personnel, the Utility may be faced with a shortage of experienced and qualified personnel. The majority of the Utility's employees are covered by collective bargaining agreements with three unions. Labor disruptions could occur depending on the outcome of negotiations to renew...

  • Page 40
    ... by the general public; sustainable forestry; agricultural uses; and historic values. The Pacific Forest Watershed Lands Stewardship Council oversees the implementation of a land conservation plan that articulates the long-term management objectives for these watershed lands. The Utility's goal is...

  • Page 41
    ... these costs through rates charged to customers. The final requirements of the federal and state cooling water policies (discussed above in Item 1. Business under "Environmental Regulation - Water Quality") could affect future negotiations between the Central Coast Board and the Utility regarding...

  • Page 42
    ... Services Senior Vice President and Chief Financial Officer, PG&E Corporation Executive Vice President, Gas Operations Executive Vice President and Chief Operating Officer, U.S. Gas Distribution, National Grid Executive Vice President, Electric Operations Senior Vice President, Energy Delivery Time...

  • Page 43
    ... and Chief Nuclear Officer President, Chief Executive Officer and Chief Nuclear Officer, South Texas Project Nuclear Operating Company Senior Vice President and Chief Financial Officer, PG&E Corporation Senior Vice President, Financial Services Senior Vice President, Electric Distribution Operations...

  • Page 44
    ..., Gas Transmission Operations Vice President, Operations Services, El Paso Pipeline Group Senior Vice President, Energy Procurement Vice President, Chief Financial Officer, and Controller Vice President and Controller, PG&E Corporation Vice President and Controller Vice President and Chief Risk and...

  • Page 45
    ..., RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of January 27, 2015, there were 61,989 holders of record of PG&E Corporation common stock. PG&E Corporation common stock is listed on the New York Stock Exchange. The high and low sales prices of PG&E Corporation common stock...

  • Page 46
    ...common share At Year-End Common stock price per share Total assets Long-term debt (excluding current portion) Capital lease obligations (excluding current portion) (3) Energy recovery bonds (excluding current portion) (4) Pacific­Gas­and­Electric­Company For the Year Operating revenues Operating...

  • Page 47
    ... OPERATIONS OVERVIEW Pacific Gas and Electric Company generates revenues mainly through the sale and delivery of electricity and natural gas to customers. PG&E Corporation is the parent holding company of the Utility. The authorized revenue requirements set by the CPUC in the GRC and GT&S rate cases...

  • Page 48
    ... increase in rate base as authorized in various rate cases, including the 2014 GRC, during 2014 as compared to 2013. (5) Includes customer energy efficiency incentive awards. (6) Represents the impact of a higher number of weighted average shares of common stock outstanding during 2014 as compared...

  • Page 49
    ... parte communications relating to the 2015 GT&S rate case, the CPUC issued a decision to disallow some GT&S incremental revenues that may otherwise be authorized in the final decision which is scheduled to be issued in August 2015. The Utility and other parties have filed applications requesting the...

  • Page 50
    ... 2014, 2013 and 2012. The table separately identifies the revenues and costs that impacted earnings from those that 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...

  • Page 51
    ... PSEP-related costs and revenues authorized by the FERC in the TO rate case. The Utility also collected higher gas transmission revenues driven by increased demand for gas-fired generation. The Utility's electric and natural gas operating revenues increased $55 million or 1% in 2013 compared to 2012...

  • Page 52
    ... to City of San Bruno Total natural gas matters (1) 2014 $ 347 116 12 (7) (112) $ 356 2013 $ 387 196 22 110 (70) $ 645 2012 $ 477 353 17 80 (185) 70 $ 812 In 2014, the Utility incurred $149 million of PSEP-related expenses, $155 million of other gas safety-related work, and $43 million of legal...

  • Page 53
    ... energy as the Utility increases the amount of its renewable energy deliveries to comply with California law. (in millions) Cost of purchased power Fuel used in own generation facilities Total cost of electricity Average cost of purchased power per kWh Total purchased power (in millions of kWh) 2014...

  • Page 54
    ... gas sold Total cost of natural gas Average cost per Mcf of natural gas sold Total natural gas sold (in millions of Mcf) (1) (1) 2014 $ $ $ 813 141 954 4.37 186 $ $ $ 2013 807 161 968 3.54 228 $ $ $ 2012 676 185 861 2.91 232 One thousand cubic feet Operating and Maintenance Expenses The Utility...

  • Page 55
    ... equity distribution agreement. There were no sales during the fourth quarter of 2014. In addition, during 2014, PG&E Corporation sold 8 million shares of common stock under its 401(k) plan, the Dividend Reinvestment and Stock Purchase Plan, and share-based compensation plans for total cash proceeds...

  • Page 56
    ... of cash conservation. The Board of Directors of PG&E Corporation declared and paid common stock dividends of $0.455 per share for each of the quarters in 2014, 2013, and 2012, for annual dividends of $1.82 per share. The Utility's Board of Directors declared and paid common stock dividends in the...

  • Page 57
    ...Operations - Utility Revenues and Costs that did not Impact Earnings" above) and various fluctuations in other cash flows. During 2013, net cash provided by operating activities decreased by $1.5 billion as compared to 2012 when the Utility collected $460 million from customers related to the energy...

  • Page 58
    ... primarily consist of construction of new and replacement facilities necessary to deliver safe and reliable electricity and natural gas services to its customers. The amount and timing of the Utility's capital expenditures is affected by many factors such as the approvals of the CPUC, FERC, and...

  • Page 59
    ... Long-term debt (1): Purchase obligations (2): Power purchase agreements: Natural gas supply, transportation, and storage Nuclear fuel agreements Pension and other benefits (3) Operating leases (2) Preferred dividends (4) PG&E Corporation Long-term debt (1): Total Contractual Commitments (1) Less...

  • Page 60
    ..." above. Pending CPUC Investigations On September 2, 2014, the assigned CPUC ALJs issued their presiding officer decisions in the three investigative enforcement proceedings pending against the Utility related to the Utility's natural gas transmission operations and practices and the San Bruno...

  • Page 61
    If the presiding officer joint decision becomes final, the Utility estimates that its total pre-tax unrecovered costs and fines related to natural gas transmission operations would be about $4.85 billion based on current forecasts, allocated as follows: Description of Component: Fine payable to the ...

  • Page 62
    ... that relate to the safety of natural gas facilities and operating practices. (As required by state law, a similar program for electric safety became effective on an interim basis on January 1, 2015. For more information, see "Regulatory Environment" in Item 1.) The California gas corporations are...

  • Page 63
    ... applicable laws pertaining to record-keeping practices for its natural gas distribution service and facilities. The order also requires the Utility to show cause why (1) the CPUC should not find that the Utility violated provisions of the California Public Utilities Code, CPUC general orders...

  • Page 64
    ... Case Utility's GT&S Request In its December 2013 GT&S rate case application, the Utility requested that the CPUC authorize a 2015 revenue requirement of $1.29 billion to recover anticipated costs of providing natural gas transmission and storage services, an increase of $555 million over currently...

  • Page 65
    ...intermittent renewable energy on the state's electric power grid. The Utility estimates that it would incur capital costs of $551 million and operating costs of $103 million over the proposed project timeline. The Utility has requested that the CPUC authorize the Utility to collect an average annual...

  • Page 66
    ... requirement for natural gas transportation and storage 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. The Utility uses value...

  • Page 67
    ... fails to perform on its contractual obligation to deliver electricity or gas, then the Utility may find it necessary to procure electricity or gas at current market prices, which may be higher than the contract prices. The Utility manages credit risk associated with its counterparties by assigning...

  • Page 68
    ... to be made to customers or has required that a gain or other reduction of net allowable costs be given to customers over future periods. At December 31, 2014, PG&E Corporation and the Utility reported regulatory assets (including current regulatory balancing accounts receivable) of $9.0 billion and...

  • Page 69
    ...policy is to exclude anticipated legal costs. (See "Enforcement and Litigation Matters" and "Legal and Regulatory Contingencies" in Note 14 of the Notes to the Consolidated Financial Statements in Item 8.) Asset Retirement Obligations PG&E Corporation and the Utility account for an ARO at fair value...

  • Page 70
    ... 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 PG&E Corporation and the Utility believe that the assumptions used...

  • Page 71
    ...the remediation costs associated with the Utility's natural gas compressor station site located near Hinkley, California; the impact of new legislation or NRC regulations, recommendations, policies, decisions, or orders relating to the nuclear industry, including operations, seismic design, security...

  • Page 72
    ...the cost of renewable energy procurement; the impact that reductions in customer demand for electricity and natural gas have on the Utility's ability to make and recover its investments through rates and earn its authorized ROE; the supply and price of electricity, natural gas, and nuclear fuel; the...

  • Page 73
    ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information responding to Item 7A is set forth under the heading "Risk Management Activities," in MD&A in Item 7 and in Note 9: Derivatives and Note 10: Fair Value Measurements of the Notes to the Consolidated Financial Statements ...

  • Page 74
    ...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 provision Net Income Preferred stock dividend requirement of...

  • Page 75
    ... Corporation CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year ended December 31, 2014 2013 2012 $ 1,450 $ 828 $ 830 (in millions) Net Income Other Comprehensive Income Pension and other postretirement benefit plans obligations (net of taxes of $10, $80, and $72, at respective dates) Net change...

  • Page 76
    ... 31, 2014 and 2013, respectively) Accrued unbilled 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...

  • Page 77
    ... benefits Asset retirement obligations Deferred income taxes Other Total noncurrent liabilities Commitments and Contingencies (Note 14) Equity Shareholders' Equity Common stock, no par value, authorized 800,000,000 shares; 475,913,404 shares outstanding at December 31, 2014 and 456,670,424 shares...

  • Page 78
    ...December 31, 2014 2013 2012 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...

  • Page 79
    ...flow­information Cash received (paid) for: Interest, net of amounts capitalized Income taxes, net Supplemental­disclosures­of­noncash­investing­and­financing activities Common stock dividends declared but not yet paid Capital expenditures financed through accounts payable Noncash common stock...

  • Page 80
    ...Common Stock Shares Balance at December 31, 2011 Net income Other comprehensive income Common stock issued, net Stock-based compensation amortization Common stock dividends declared Tax benefit from employee stock plans Preferred stock dividend requirement of subsidiary Balance at December 31, 2012...

  • Page 81
    ... ended December 31, 2014 2013 2012 Operating Revenues Electric Natural gas Total operating revenues Operating Expenses Cost of electricity Cost of natural gas Operating and maintenance Depreciation, amortization, and decommissioning Total operating expenses Operating Income Interest income Interest...

  • Page 82
    ...­Electric­Company CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year ended December 31, 2014 2013 2012 $ 1,433 $ 866 $ 811 (in millions) Net Income Other Comprehensive Income Pension and other postretirement benefit plans obligations (net of taxes of $6, $75, and $73, at respective dates) Total...

  • Page 83
    ... 31, 2014 and 2013, respectively) Accrued unbilled 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...

  • Page 84
    ... benefits Asset retirement obligations Deferred income taxes Other Total noncurrent liabilities Commitments and Contingencies (Note 14) Shareholders' Equity Preferred stock Common stock, $5 par value, authorized 800,000,000 shares, 264,374,809 shares outstanding at December 31, 2014 and 2013...

  • Page 85
    ..., and issuance costs of $14, $18, and $13 at respective dates Short-term debt matured Long-term debt matured or repurchased Energy recovery bonds matured Preferred stock dividends paid Common stock dividends paid Equity contribution from PG&E Corporation Other Net­cash­provided­by­(used­in...

  • Page 86
    Supplemental­disclosures­of­cash­flow­information­ Cash received (paid) for: Interest, net of amounts capitalized Income taxes, net Supplemental­disclosures­of­noncash­investing­and­financing activities Capital expenditures financed through accounts payable Terminated capital leases $ ...

  • Page 87
    ... Tax benefit from employee stock plans Common stock dividend Preferred stock dividend Balance at December 31, 2012 Net income Other comprehensive income Equity contribution Tax expense from employee stock plans Common stock dividend Preferred stock dividend Balance at December 31, 2013 Net...

  • Page 88
    ...of electricity and natural gas to customers. The Utility is primarily regulated by the CPUC and the FERC. In addition, the NRC oversees the licensing, construction, operation, and decommissioning of the Utility's nuclear generation facilities. This is a combined annual report of PG&E Corporation and...

  • Page 89
    ... the Utility to collect additional revenue requirements to recover costs that the Utility has been authorized to pass on to customers, including costs to purchase electricity and natural gas; and to fund public purpose, demand response, and customer energy efficiency programs. In general, the...

  • Page 90
    ... facilities Electricity transmission facilities Natural gas distribution facilities Natural gas transportation and storage facilities Construction work in progress Total property, plant, and equipment Accumulated depreciation Net property, plant, and equipment (1) $ Balance includes nuclear fuel...

  • Page 91
    ... 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...

  • Page 92
    .... Since the Utility was not the primary beneficiary of any of these VIEs at December 31, 2014, it did not consolidate any of them. PG&E Corporation affiliates previously entered into four tax equity agreements to fund residential and commercial retail solar energy installations with four separate...

  • Page 93
    ... Income The changes, net of income tax, in PG&E Corporation's accumulated other comprehensive income (loss) for the year ended December 31, 2014 consisted of the following: Pension Benefits $ (7) Other Benefits $ 15 Other Investments $ 42 (in millions, net of income tax) Beginning balance Other...

  • Page 94
    ... service cost (net of taxes of $8, $10, and $0, respectively) Amortization of net actuarial loss (net of taxes of $45, $3, and $0, respectively) Transfer to regulatory account (net of taxes of $54, $0, and $0, respectively) Net current period other comprehensive income Ending balance (1) $ Total...

  • Page 95
    ... Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which amends existing revenue recognition guidance. The accounting standards update will be effective on January 1, 2017. PG&E Corporation and the Utility are currently evaluating...

  • Page 96
    ... public purpose programs, primarily related to customer energy efficiency programs. The balancing accounts associated with these items will fluctuate during the year based on seasonal electric and gas usage and the timing of when costs are incurred and customer revenues are collected. Current...

  • Page 97
    ... 31, (in millions) Energy procurement Public purpose programs Other (1) Total regulatory balancing accounts payable (1) 2014 $ 188 154 748 $ 1,090 $ $ 2013 298 171 539 1,008 At December 31, 2014, Other regulatory balancing accounts payable mostly includes energy supplier settlements. (See Note 12...

  • Page 98
    ...series of these bonds is supported by a separate letter of credit. In April 2014, the letters of credit were extended to April 1, 2019. Although the stated maturity date is 2026, each series will remain outstanding only if the Utility extends or replaces the letter of credit related to the series or...

  • Page 99
    ... commercial paper program established in January 2014. For the year ended December 31, 2014, PG&E Corporation's average outstanding commercial paper balance was $118 million and the maximum outstanding balance during the period was $260 million. For 2014, the Utility's average outstanding commercial...

  • Page 100
    ... credit facility agreement also requires that PG&E Corporation own, directly or indirectly, at least 80% of the common stock and at least 70% of the voting capital stock of the Utility. Commercial Paper Programs For 2014, the average yield on outstanding PG&E Corporation and Utility commercial...

  • Page 101
    ...,404 shares of common stock outstanding at December 31, 2014. PG&E Corporation held all of the Utility's outstanding common stock at December 31, 2014. In February 2014, PG&E Corporation entered into a new equity distribution agreement providing for the sale of PG&E Corporation common stock having...

  • Page 102
    The amount of share-based compensation costs capitalized during 2014, 2013, and 2012 was immaterial. There was no material difference between PG&E Corporation and the Utility for the information disclosed above. Restricted Stock Units Prior to 2014, restricted stock units generally vested over four ...

  • Page 103
    .... The Utility paid $14 million of dividends on preferred stock in each of 2014, 2013, and 2012. NOTE 7: EARNINGS PER SHARE PG&E Corporation's basic EPS is calculated by dividing the income available for common shareholders by the weighted average number of common shares outstanding. PG&E Corporation...

  • Page 104
    ... its ownership is 80% or more. PG&E Corporation files a combined state income tax return in California. PG&E Corporation and the Utility are parties to a tax-sharing agreement under which the Utility determines its income tax provision (benefit) on a stand-alone basis. The significant components of...

  • Page 105
    ...tax rate 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 (1) (2) Utility 2013 35.0% 2012 35...

  • Page 106
    ... in the 2011, 2012, and 2013 tax returns. The most significant relates to a 2011 accounting method change to adopt guidance issued by the IRS in determining which repair costs are deductible for the electric transmission and distribution businesses. PG&E Corporation and the Utility expect that the...

  • Page 107
    ... the Utility's reasonable costs of providing services, including the costs related to price risk management activities. Price risk management activities that meet the definition of derivatives are recorded at fair value on the Consolidated Balance Sheets. As long as the current ratemaking mechanism...

  • Page 108
    ..., the volumes of the Utility's outstanding derivatives were as follows: Contract Volume 2014 2013 308,130,101 331,840,788 164,418,002 260,262,916 5,346,787 8,089,269 224,124,341 250,922,591 Underlying Product Natural Gas (1) (MMBtus (2)) Electricity (Megawatt-hours) Instruments Forwards and Swaps...

  • Page 109
    ... 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...

  • Page 110
    ... PG&E Corporation and not the Utility): Fair Value Measurements At December 31, 2014 (in millions) Assets: Money market investments Nuclear decommissioning trusts Money market investments Global equity securities Fixed-income securities Total nuclear decommissioning trusts (2) Price risk management...

  • Page 111
    ... U.S. government and agency securities Municipal securities Other fixed-income securities Total nuclear decommissioning trusts (2) Price risk management instruments (Note 9) Electricity Gas Total price risk management instruments Rabbi trusts Fixed-income securities Life insurance contracts Total...

  • Page 112
    .... The external credit ratings, coupon rate, and maturity of each security are considered in the valuation model, as applicable. Price Risk Management Instruments Price risk management instruments include physical and financial derivative contracts, such as power purchase agreements, forwards, swaps...

  • Page 113
    ... Sensitivity Analysis The Utility's market and credit risk management function, which reports to the Chief Risk Officer of the Utility, is responsible for determining the fair value of the Utility's price risk management derivatives. The Utility's finance and risk management functions collaborate to...

  • Page 114
    ... are short-term in nature or have interest rates that reset daily. The fair values of the Utility's fixed-rate senior notes and fixed-rate pollution control bonds and PG&E Corporation's fixed-rate senior notes were based on quoted market prices at December 31, 2014 and 2013. The carrying amount and...

  • Page 115
    ... Money market investments Equity securities U.S. Non-U.S. Debt securities U.S. government and agency securities Municipal securities Other fixed-income securities Total nuclear decommissioning trusts (1) Other investments Total (1) (1) Amortized Cost Total Fair Value $ $ 17 520 1,059 1,596...

  • Page 116
    ... amounts, consistent with applicable regulatory decisions and federal minimum funding requirements. Based upon current assumptions and available information, the Utility's minimum funding requirements related to its pension plans is zero. PG&E Corporation and the Utility also sponsor contributory...

  • Page 117
    ... Plan participant contribution Benefits and expenses paid Fair value of plan assets at end of year Change­in­benefit­obligation: Benefit­obligation­at­beginning­of­year Service cost for benefits earned Interest cost Actuarial (gain) loss Benefits paid Federal subsidy on benefits paid Plan...

  • Page 118
    ... of prior service cost Amortization of net actuarial loss Net­periodic­benefit­cost $ 2014 45 76 (103) 23 2 43 $ 2013 53 74 (79) 23 6 77 $ 2012 49 83 (77) 24 25 6 110 $ $ $ There was no material difference between PG&E Corporation and the Utility for the information disclosed above...

  • Page 119
    ... mortality assumptions used for measuring retirement plan obligations. This new mortality table and improvement scale extends the assumed life expectancy of plan participants, resulting in an increase in PG&E Corporation's and the Utility's accrued benefit cost as of December 31, 2014. Total pension...

  • Page 120
    ... values change differently from liability values and can result in fluctuations in costs in financial reporting, as well as the amount of minimum contributions required under the Employee Retirement Income Security Act of 1974, as amended. PG&E Corporation's and the Utility's investment policies...

  • Page 121
    ... the fair value of plan assets for pension and other benefits plans by major asset category at December 31, 2014 and 2013. Fair Value Measurements At December 31, 2014 (in millions) Pension Plan: Short-term investments Global equity Absolute return Real assets Fixed-income Total PBOP Plans: Short...

  • Page 122
    ...of primarily observable information or broker quotes in non-active markets. The fair value of corporate bonds is determined using recently executed transactions, market price quotations (where observable), bond spreads or credit default swap spreads obtained from independent external parties such as...

  • Page 123
    ... 54 78 (1) 675 $ Total 1,723 101 4 79 (17) 1,890 $ $ $ $ (in millions) For the year ended December 31, 2013 Balance at beginning of year Actual return on plan assets: Relating to assets still held at the reporting date Relating to assets sold during the period Purchases, issuances, sales, and...

  • Page 124
    ...and received by the Utility for the years presented above. Retirement Savings Plan PG&E Corporation sponsors a retirement savings plan, which qualifies as a 401(k) defined contribution benefit plan under the Internal Revenue Code 1986, as amended. This plan permits eligible employees to make pre-tax...

  • Page 125
    ... in support of operations. Services provided directly to PG&E Corporation by the Utility are priced at the higher of fully loaded cost (i.e., direct cost of good or service and allocation of overhead costs) or fair market value, depending on the nature of the services. Services provided directly to...

  • Page 126
    ...2013 2012 5 54 70 $ $ 7 45 57 $ $ 7 50 51 (in millions) Utility revenues from: Administrative services provided to PG&E Corporation Utility expenses from: Administrative services received from PG&E Corporation Utility employee benefit due to PG&E Corporation $ $ 2014 At December 31, 2014 and 2013...

  • Page 127
    ... 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...

  • Page 128
    ... the resolution of the GT&S rate case or one year from the effective date of the decision, whichever is later. The Utility and other parties have requested that the CPUC reconsider its decision. The ORA, TURN, and the City of San Bruno argue that the applicable law supports the imposition of a fine...

  • Page 129
    ... applicable laws pertaining to record-keeping practices for its natural gas distribution service and facilities. The order also requires the Utility to show cause why (1) the CPUC should not find that the Utility violated provisions of the California Public Utilities Code, CPUC general orders...

  • Page 130
    ...remove encroachments. Pipeline Safety Enhancement Plan On November 20, 2014, the CPUC approved the settlement agreement (submitted in July 2014) among the Utility, ORA, and TURN to resolve the Utility's PSEP Update application. The CPUC decision approved total PSEP-related revenue requirements (2012...

  • Page 131
    ... third parties Utility-owned generation facilities (other than fossil fuel-fired), other facilities, and third-party disposal sites Fossil fuel-fired generation facilities and sites Total environmental remediation liability (1) See "Natural Gas Compressor Station Sites" below. At December 31, 2014...

  • Page 132
    ... standard for remediation, the required time period by which those standards must be met, and the nature and extent of the chromium contamination. As the comment process continues and the final order and permits are issued, the Utility expects to obtain additional information about the total costs...

  • Page 133
    ... to $13.6 billion. The Utility purchased the maximum available public liability insurance of $375 million for Diablo Canyon. The balance of the $13.6 billion of liability protection is provided under a loss-sharing program among utilities owning nuclear reactors. The Utility may be assessed up to...

  • Page 134
    ... the 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...

  • Page 135
    ... prices that are escalated using published indices. Payments for nuclear fuel amounted to $105 million in 2014, $162 million in 2013, and $118 million in 2012. Other Commitments PG&E Corporation and the Utility have other commitments related to operating leases (primarily office facilities and land...

  • Page 136
    ... per common share, diluted Common stock price per share: High Low UTILITY Operating revenues (1) Operating income Income tax provision Net income (2) Income available for common stock Comprehensive income 2013 PG&E CORPORATION Operating revenues Operating income Income tax (benefit) provision...

  • Page 137
    ..., an independent registered public accounting firm, has audited PG&E Corporation's and the Utility's internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations...

  • Page 138
    ... over financial reporting of PG&E Corporation and subsidiaries (the "Company") and of Pacific Gas and Electric Company and subsidiaries (the "Utility") as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring...

  • Page 139
    ... 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, 2014 and 2013, and the Company's related consolidated statements of income, comprehensive...

  • Page 140
    ... the Utility applicable to their respective directors and employees, including their respective Chief Executive Officers, Chief Financial Officers, Controllers and other executive officers, (2) PG&E Corporation's and the Utility's corporate governance guidelines, and (3) key Board Committee charters...

  • Page 141
    ... 2014 Annual Meetings of Shareholders by which security holders may recommend nominees to PG&E Corporation's or Pacific Gas and Electric Company's Boards of Directors. Audit Committees and Audit Committee Financial Expert Information regarding the Audit Committees of PG&E Corporation and the Utility...

  • Page 142
    ... Joint Proxy Statement relating to the 2015 Annual Meetings of Shareholders, which information is incorporated herein by reference. Equity Compensation Plan Information The following table provides information as of December 31, 2014 concerning shares of PG&E Corporation common stock authorized for...

  • Page 143
    ..., supplemental information and report of independent registered public accounting firm are filed as part of this report in Item 8: Consolidated Statements of Income for the Years Ended December 31, 2014, 2013, and 2012 for each of PG&E Corporation and Pacific Gas and Electric Company. Consolidated...

  • Page 144
    ... 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 145
    ...Gas and Electric Company's Form 8-K dated August 16, 2012 (File No. 1-2348), Exhibit 4.1) Nineteenth Supplemental Indenture dated as of June 14, 2013 relating... 2044 (incorporated by reference to Pacific Gas and Electric Company's Form 8-K dated February 21, 2014 (File No. 12348), Exhibit 4.1) 4.10 ...

  • Page 146
    ... (incorporated by reference to Pacific Gas and Electric Company's Form 10-Q for the quarter ended March 31, 2013 (File No. 1-2348), Exhibit 10.2) Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric Company and PG&E Corporation, dated as of December 19...

  • Page 147
    ... to PG&E Corporation's Form 10-K for the year ended December 31, 2012 (File No. 1-12609), Exhibit 10.18) Letter regarding Compensation Agreement between Pacific Gas and Electric Company and Jesus Soto, Jr. dated * April 4, 2012 (incorporated by reference to Pacific Gas and Electric Company's Form...

  • Page 148
    ... * dated February 22, 2012 (incorporated by reference to Pacific Gas and Electric Company's Form 10-Q for the quarter ended September 30, 2014 (File No. 1-2348), Exhibit 10.3) Amended and Restated Restricted Stock Unit Agreement between C. Lee Cox and PG&E Corporation for * 2013 grant under the PG...

  • Page 149
    ...Company Board of Directors dated September 19, 2012, adopting * director compensation arrangement effective January 1, 2013 (incorporated by reference to Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2012) (File No. 1-12609), Exhibit 10.37) * PG&E Corporation 2014 Long...

  • Page 150
    ... Stock Option Agreement under the PG&E Corporation Long-Term Incentive Program * (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 99.1) Form of Performance Share Agreement for 2014...

  • Page 151
    ...) Powers of Attorney Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 302 of the Sarbanes-Oxley Act of 2002 Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required...

  • Page 152
    ...ended December 31, 2014 to be signed on their behalf by the undersigned, thereunto duly authorized. PG&E CORPORATION (Registrant) PACIFIC GAS AND ELECTRIC COMPANY (Registrant) ANTHONY F. EARLEY, JR. Anthony F. Earley, Jr. By: Chairman of the Board, Chief Executive Officer, and President February 10...

  • Page 153
    ... WILLIAMS Barry Lawson Williams *By: HYUN PARK HYUN PARK, Attorney-in-Fact Director February 10, 2015 Director February 10, 2015 Director February 10, 2015 Director February 10, 2015 Director (Pacific Gas and Electric Company only) February 10, 2015 Director February 10, 2015 Director...

  • Page 154
    ... enforcement proceedings pending with the California Public Utilities Commission that may result in material amounts of penalties); such reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedules of the Company and Utility listed...

  • Page 155
    ... benefit plans obligations (net of taxes of $10, $80, and $72, at respective dates) Net change in investments (net of taxes of $17, $26, and $3, at respective dates) Total other comprehensive income (loss) Comprehensive Income Weighted Average Common Shares Outstanding, Basic Weighted Average Common...

  • Page 156
    PG&E CORPORATION SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF PARENT - (Continued) CONDENSED BALANCE SHEETS Balance at December 31, 2014 2013 (in millions) ASSETS Current Assets Cash and cash equivalents Advances to affiliates Income taxes receivable Other Total current assets Noncurrent Assets ...

  • Page 157
    ...&E CORPORATION SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF PARENT - (Continued) CONDENSED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2013 1,436 $ 814 $ 2014 Cash Flows from Operating Activities: Net income Adjustments to reconcile net income to net cash provided by operating...

  • Page 158
    PG&E Corporation SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2014, 2013, and 2012 (in millions) Balance at Beginning of Period Additions Charged to Charged to Costs and Other Expenses Accounts Description Valuation and qualifying accounts deducted ...

  • Page 159
    ... Gas and Electric Company SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2014, 2013, and 2012 (in millions) Balance at Beginning of Period Additions Charged to Charged to Costs and Other Expenses Accounts Description Valuation and qualifying accounts...

  • Page 160
    ...Chief Executive Officer, and President of PG&E Corporation FRED J. FOWLER Retired Chairman of the Board of Spectra Energy Partners, LP MARYELLEN C. HERRINGER Retired Executive Vice President, General Counsel, and Secretary of APL Limited CHRISTOPHER P. JOHNS (1) President of Pacific Gas and Electric...

  • Page 161
    ... Power Plant KENT M. HARVEY Senior Vice President, Financial Services ANDREW K. WILLIAMS EZRA C. GARRETT Vice President, Safety, Health, and Environment Vice President, Community Relations and Chief Sustainability Officer GREGORY K. KIRALY Senior Vice President, Electric Distribution Operations...

  • Page 162
    ... issued and outstanding shares of Pacific Gas and Electric Company common stock. If you have questions about your PG&E 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...

  • Page 163
    ... community should contact the Investor Relations Office. Vice President, Investor Relations Janet C. Loduca PG&E Corporation P. O. Box 770000 San Francisco, CA 94177 415-972-7080 Email: [email protected] PG&E Corporation General Information 415-973-1000 Pacific Gas and Electric Company General...

  • Page 164