PSE&G 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
    ... Gas and Electric Company Boards of Directors ...140 Officers of PG&E Corporation and Pacific Gas and Electric Company ...141 Shareholder Information ...142 Important notice: This 2015 Joint Annual Report to Shareholders (this "Annual Report") includes PG&E Corporation and Pacific Gas and Electric...

  • Page 4
    ... 2017-2019 General Rate Case, which proposes to support infrastructure improvements through an average bill increase of less than 3 percent for an average customer. These additional revenues would be used for investments in technologies to integrate even higher volumes of renewable energy, emergency...

  • Page 5
    ...make our electric rates more equitable across the full spectrum of customers. In July, the California Public Utilities Commission took modest steps in this direction. But one area that remains to be addressed is the badly outdated rate structure for rooftop solar. Proposals put forward in 2015 by PG...

  • Page 6
    ...General Fund, a $400 million charge for a bill credit for natural gas customers, and $407 million in estimated charges for capital costs incurred during the twelve months ended December 31, 2015 that the Utility believes are probable of disallowance in the 2015 Gas Transmission and Storage rate case...

  • Page 7
    ...2011 PG&E Corporation 2012 2013 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...

  • Page 8
    Intentionally left blank

  • Page 9
    ... 94177 (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...

  • Page 10
    ... as of June 30, 2015, 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 of February 12, 2016: PG&E Corporation: Pacific Gas and Electric Company: $23,628 million...

  • 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
    ..., and Balancing Accounts ...81 NOTE 4: Debt...84 NOTE 5: Common Stock and Share-Based Compensation...86 NOTE 6: Preferred Stock ...88 NOTE 7: Earnings Per Share ...88 NOTE 8: Income Taxes ...89 NOTE 9: Derivatives ...92 NOTE 10: Fair Value Measurements ...93 NOTE 11: Employee Benefit Plans ...98...

  • Page 14
    ... 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 million cubic feet...

  • Page 15
    ... TO TURN Utility VIE(s) Water Board PG&E Corporation's and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2015 Assembly Bill allowance for funds used during construction administrative law judge asset retirement obligation accounting standard...

  • Page 16
    ... 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 and the Utility are located at 77 Beale...

  • Page 17
    ...Utility's electricity and natural gas retail customers, rates of return, rates of depreciation, oversight of nuclear decommissioning, and aspects of the siting of facilities used in providing electric and natural gas utility service. The CPUC enforces state laws and regulations that set forth safety...

  • 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
    ...'s authorized revenue requirements and rates for its natural gas transmission and storage services in the GT&S rate case. In its 2015 GT&S rate case, the Utility has requested that the CPUC approve a total annual revenue requirement of $1.263 billion for the Utility's anticipated costs of providing...

  • Page 20
    ... forecasted natural gas purchase costs in several natural gas balancing accounts, with under-collections and over-collections taken into account in subsequent monthly rate changes. The Utility recovers the cost of gas used in generation facilities as a cost of electricity that is recovered annually...

  • Page 21
    ... 1. BUSINESS Electric Utility Operations The Utility generates electricity and provides electricity transmission and distribution services throughout its service territory in northern and central California to residential, commercial, industrial, and agricultural customers. The Utility provides...

  • Page 22
    ...of the renewable energy delivered to the Utility's customers was purchased from non-QF third parties. Additional renewable resources were provided by QFs (3.0%), the Utility's small hydroelectric facilities (0.7%), and the Utility's solar facilities (0.4%). The total 2015 renewable deliveries shown...

  • Page 23
    ... 2013, the Utility, MidAmerican Transmission, LLC, and Citizens Energy Corporation were selected by the CAISO to jointly develop a new 230-kV transmission line to address the growing power demand in Fresno, Madera and Kings counties area. The 70-mile line will connect the Utilityowned and -operated...

  • Page 24
    ... 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 direct access customers...

  • Page 25
    ... the annual core market demand, receive bundled natural gas service from the Utility. The Utility does not provide procurement service to noncore customers, who must purchase their gas supplies from third-party suppliers. The Utility offers backbone gas transmission, gas delivery (local transmission...

  • 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
    ... 1. BUSINESS metering, and billing services that it provides, the Utility is able to collect charges to recover the generation-related costs that the Utility incurred on behalf of direct access and CCA customers while they were the Utility's customers. The Utility remains the electricity provider...

  • 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 2015, the Utility continued its programs to develop...

  • Page 29
    ... reported value less the fuel that is delivered to covered entities, as calculated by the CARB. The following table shows the Utility's third-party-verified CO2 emissions rate associated with the electricity delivered to customers in 2014 as compared to the national average for electric utilities...

  • Page 30
    ... of the spent fuel. The Utility and other nuclear power plant owners sued the DOE to recover the costs that they incurred to construct interim storage facilities for spent nuclear fuel. In September 2012, the U.S. Department of Justice and the Utility executed a settlement agreement that awarded the...

  • Page 31
    ...recover costs that the parties allege are somehow related to the criminal charges. In addition, the Utility's conviction could result in increased regulatory or legislative pressure to require the separation of the Utility's electric and natural gas businesses, restructure the corporate relationship...

  • Page 32
    ... regulatory requirements and initiatives, such as those relating to the development of a state-wide electric vehicle charging infrastructure, the deployment of distributed energy resources, implementation of demand response and customer energy efficiency programs, energy storage and renewable energy...

  • Page 33
    ... plan. Further, the contractual prices for electricity under the Utility's current or future power purchase agreements could become uneconomic in the future for a variety of reasons, including developments in alternative energy technology, increased self-generation by customers, an increase...

  • 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
    ... could interrupt fuel supplies; affect demand for electricity or natural gas; cause unplanned outages or reduce generating output; damage the Utility's assets or operations; damage the assets or operations of third parties on which the Utility relies; damage property owned by customers or others...

  • Page 37
    ...cant Accounting Policies - Asset Retirement Obligations of the Notes to the Consolidated Financial Statement in 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...

  • Page 38
    ...canals, and the electric transmission and distribution assets. 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 the increased costs would be recovered through...

  • Page 39
    ...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 are affected by the rates of return on trust assets, changes in the laws...

  • Page 40
    ... 1. Business, under "Electric Utility Operations" and "Natural Gas Utility Operations." The Utility occupies or uses real property that it does not own primarily through various leases, easements, rights-of-way, permits, or licenses from private landowners or governmental authorities. In total, the...

  • Page 41
    ... 2, 2016, the court issued an order holding that if the government's allegations about the Utility's gross gains are considered, they would be considered in a second trial phase that would take place after the trial on the criminal charges. The trial on the criminal charges currently is scheduled to...

  • Page 42
    ...to the Consolidated Financial Statements in Item 8. Other Enforcement Matters The Utility also could be required to pay fines, or incur other unrecoverable costs, associated with the CPUC's pending investigations of the Utility's natural gas distribution facilities record-keeping practices and the...

  • Page 43
    ... and/or the Utility, as of February 18, 2016. Except as otherwise noted, all positions have been held at Pacific Gas and Electric Company. Name Age Positions Held Over Last Five Years Chairman of the Board, Chief Executive Officer, and President, PG&E Corporation Executive Chairman of the...

  • Page 44
    ..., Power Generation and September 8, 2015 to present Chief Nuclear Officer Senior Vice President and Chief Nuclear Officer April 2, 2012 to September 8, 2015 President, Chief Executive Officer and Chief December 2009 to March 2012 Nuclear Officer, South Texas Project Nuclear Operating...

  • Page 45
    ..., Customer Energy Solutions Vice President, Integrated Demand Side Management Senior Vice President and General Counsel, PG&E Corporation Senior Vice President, Gas Operations Senior Vice President, Engineering, Construction and Operations Senior Vice President, Gas Transmission Operations...

  • Page 46
    ... of 1933, as amended. However, 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...

  • 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
    ... for Common 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...

  • Page 49
    ... âˆ' 2015 Gas Transmission and Storage Rate Case" below for more information.) In September 2015, the 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...

  • 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
    ... the CPUC authorized the Utility to collect for recovery of certain PSEP-related costs during the same period in 2014. The Utility's electric and natural gas operating revenues that impacted earnings increased $890 million or 11% in 2014 compared to 2013. This amount included an increase to base...

  • Page 52
    ... recognition of repair costs and certain other property-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...

  • Page 53
    ... parties (including renewable energy resources), transmission, fuel used in its own generation facilities, fuel supplied to other facilities under power purchase agreements, costs to comply with California's cap-and-trade program, and realized gains and losses on price risk management activities...

  • Page 54
    ...operations, make scheduled principal and interest payments, fund equity contributions to the 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...

  • Page 55
    ... and Stock Purchase Plan, and share-based compensation plans for total cash proceeds of $354 million. The proceeds from equity issuances were used for general corporate purposes, including the contribution of equity into the Utility. For the year ended December 31, 2015, PG&E Corporation made...

  • Page 56
    ... do not require the use 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...

  • Page 57
    ...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 8 Total Contractual...

  • Page 58
    ... the annual amount of base revenues (or "revenue requirements") that the Utility will be authorized to collect from customers from 2017 through 2019 to recover its anticipated costs for electric distribution, natural gas distribution, and electric generation operations and to provide the Utility an...

  • Page 59
    ... Increase Compared to Currently Authorized Amounts $ 164 85 208 $ 457 $ 169 48 (9) (33) 148 134 $ 457 Line of Business: Electric distribution Gas distribution Electric generation Total revenue requirements Cost Category: Operations and maintenance Customer services...

  • Page 60
    ... months of the date of the ruling, or by December 2016. FERC TO Rate Cases On September 30, 2015, the FERC approved a settlement that sets the Utility's 2015 retail electric transmission revenue requirement at $1.201 billion, a $161 million increase over the currently authorized revenue requirement...

  • Page 61
    ... law requirements to 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...

  • Page 62
    ... 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 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...

  • 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
    ... 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 65
    ... in proportion to other responsible parties, and the extent to which such costs are recoverable from third parties. When possible, the Utility estimates costs using site-specific information, but also considers historical experience for costs incurred at similar sites depending on the level...

  • Page 66
    ... 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 67
    ...high inï¬,ation in health care costs and given the design of PG&E Corporation's plans, the assumed health care cost trend rate for 2015 is 7.2%, gradually decreasing to the ultimate trend rate of 4% in 2024 and beyond. Expected rates of return on plan assets were developed by estimating future stock...

  • Page 68
    ...'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 and price of electricity, natural gas, and nuclear fuel; the extent to which the Utility can manage and...

  • Page 69
    ...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 networks, including the advanced metering system infrastructure, customer billing, financial, records management...

  • Page 70
    ... 470 $ $ 3.07 3.06 $ $ $ 2013 $12,494 3,104 15,598 5,016 968 5,775 2,077 13,836 1,762 9 (715) 40 1,096 268 828 14 814 444 445 1.83 1.83 Operating Revenues Electric Natural gas Total operating revenues Operating Expenses Cost of electricity Cost of natural gas Operating and maintenance Depreciation...

  • Page 71
    ... $80, at respective dates) Net change in investments (net of taxes of $12, $17, and $26 at respective dates) Total other comprehensive income (loss) Comprehensive Income Preferred stock dividend requirement of subsidiary Comprehensive Income Attributable to Common Shareholders (1) (17) (18) 870 14...

  • 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
    ..., except share amounts) Balance at December 31, 2015 LIABILITIES AND EQUITY Current Liabilities Short-term borrowings Long-term debt, classified as current Accounts payable Trade creditors Regulatory balancing accounts Other Disputed claims and customer refunds Interest payable Other Total current...

  • Page 74
    ... and tax credits, net Disallowed capital expenditures Other Effect of changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Income taxes receivable/payable Other current assets and liabilities Regulatory assets, liabilities, and balancing accounts, net Other...

  • Page 75
    ... (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 noncash investing and financing activities Common stock dividends declared but not yet paid...

  • Page 76
    ... 2014 Net income Other comprehensive loss Common stock issued, net Stock-based compensation amortization Common stock dividends declared Tax expense from employee stock plans Preferred stock dividend requirement of subsidiary Balance at December 31, 2015 See accompanying Notes to the Consolidated...

  • Page 77
    ...) Year ended December 31, 2015 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 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
    ... 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 Total property, plant, and equipment...

  • Page 80
    ... share amounts) Balance at December 31, 2015 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term borrowings Long-term debt, classified as current Accounts payable Trade creditors Regulatory balancing accounts Other Disputed claims and customer refunds Interest payable Other Total...

  • Page 81
    ... and tax credits, net Disallowed capital expenditures Other Effect of changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Income taxes receivable/payable Other current assets and liabilities Regulatory assets, liabilities, and balancing accounts, net Other...

  • Page 82
    ...Gas and Electric Company CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year ended December 31, 2015 Supplemental disclosures of cash ï¬,ow information... through accounts payable Terminated capital leases $ 440 See accompanying Notes to the Consolidated Financial Statements. 2014 2013 $ ...

  • Page 83
    ... employee stock plans Common stock dividend Preferred stock dividend 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...

  • Page 84
    ... balancing account asset or liability for differences between customer billings and authorized revenue requirements that are probable of recovery or refund. In addition, the Utility records a Revenue Recognition The Utility recognizes revenues when electricity and natural gas services are delivered...

  • Page 85
    ..., 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 requirements in periodic (often annual) TO rate cases. The Utility...

  • Page 86
    ...'s nuclear power plants was $3.5 billion at December 31, 2015 and 2014 (or $6.1 billion in future dollars). These estimates are based on the 2012 decommissioning cost studies, prepared in accordance with CPUC requirements. Disallowance of Plant Costs PG&E Corporation and the Utility record a charge...

  • Page 87
    ... requires the safe removal of a nuclear generation facility from service and the reduction of residual radioactivity to a level that permits termination of the NRC license and release of the property for unrestricted use. The Utility's nuclear decommissioning costs are recovered from customers...

  • Page 88
    ... was no material difference between PG&E Corporation and the Utility for the information disclosed above. New Accounting Pronouncements Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic...

  • Page 89
    ... meters that were replaced with SmartMeterâ„¢ devices. As of December 31, 2015, the remaining balance of $70 million is included in current regulatory assets on the Consolidated Balance Sheets. (4) Payments into the pension and other benefits plans are based on annual contribution requirements...

  • Page 90
    ... beyond the next 12 months, primarily related to energy efficiency programs. Regulatory Balancing Accounts The Utility tracks (1) differences between the Utility's authorized revenue requirement and customer billings, and (2) differences between incurred costs and customer billings. To the extent...

  • Page 91
    ... $ 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 in the GRC. Energy procurement balancing accounts track...

  • Page 92
    ... Long-Term Debt The following table summarizes PG&E Corporation's and the Utility's long-term debt: December 31, (in millions) 2015 $ 350 350 $ 2014 350 350 PG&E Corporation Senior notes, 2.40%, due 2019 Total PG&E Corporation long-term debt Utility Senior notes: 5.625% due 2017 8.25% due 2018...

  • Page 93
    ... plant or at the Utility's Diablo Canyon nuclear power plant. In 1999, the Utility sold all bondfinanced facilities at the non-retired 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...

  • Page 94
    ...,443 shares of common stock outstanding at December 31, 2015. PG&E Corporation held all of the Utility's outstanding common stock at December 31, 2015. In February 2015, PG&E Corporation entered into a new equity distribution agreement providing for the sale of PG&E Corporation common stock having...

  • Page 95
    ... 40% vesting on the first business day of March in year four. Restricted stock units granted in 2014 and 2015 generally vest equally over three years. Vested restricted stock units are settled in shares of PG&E Corporation common stock accompanied by cash payments to settle any dividend equivalents...

  • 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
    ... 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. PG&E Corporation and the Utility use the liability method of accounting for income taxes. The income tax provision includes current and deferred...

  • Page 98
    ... treatment. In 2015, amounts include an agreement with the IRS on a 2011 audit related to electric transmission and distribution repairs deductions. (2) Includes the effect of federal flow-through ratemaking treatment for certain property-related costs in 2015 and 2014 as authorized by the 2014...

  • Page 99
    ... costs are deductible for the natural gas transmission and distribution businesses. Tax years after 2004 remain subject to examination by the state of California. Carryforwards The following table describes PG&E Corporation's operating loss and tax credit carryforward balances: December 31, 2015...

  • 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
    ... December 31, (in millions) 2015 $ (6) (14) (10) $ (30) 2014 $ 124 (83) (8) $ 33 $ 2013 $ 238 (178) (22) 38 Unrealized gain/(loss) - regulatory assets and liabilities(1) Realized loss - cost of electricity(2) Realized loss - cost of natural gas Total commodity risk (2) (1) Unrealized gains and...

  • Page 102
    ... 2015 (in millions) Level 1 Level 2 Level 3 Netting(1) Total Assets: Money market investments Nuclear decommissioning trusts Money market investments Global equity securities Fixed-income securities Total nuclear decommissioning trusts Price risk management instruments (Note 9) Electricity Gas...

  • Page 103
    ...Money market investments 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...

  • Page 104
    ... Analysis The Utility's market and credit risk management function, which reports to the Chief Risk and Audit 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...

  • Page 105
    ... gains: Included in regulatory assets and liabilities or balancing accounts(1) Asset (liability) balance as of December 31 (1) The costs related to price risk management activities are recoverable through customer rates, therefore, balancing account revenue is recorded for amounts settled and...

  • Page 106
    ... 11: Employee Benefit Plans PG&E Corporation's and the Utility's funding policy is to contribute tax-deductible amounts, consistent with applicable regulatory decisions and federal minimum funding requirements. Based upon current assumptions and available information, the Utility's minimum funding...

  • Page 107
    ... show the reconciliation of changes in plan assets, benefit obligations, 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...

  • 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
    ... on service and interest cost Expected rates of return on plan assets were developed by determining projected stock and bond returns and then applying these returns to the target asset allocations of the employee benefit plan trusts, resulting in a weighted average rate of return on plan assets...

  • Page 110
    ... to increase the ratio of trust assets to plan liabilities at an acceptable level of funded status volatility. The trusts' asset allocations are meant to manage volatility, reduce costs, and diversify its holdings. Interest rate, credit, and equity risk are the key determinants of PG&E Corporation...

  • Page 111
    ... of commingled funds across government, credit, and asset-backed sectors. These securities are categorized as Level 1 and Level 2 assets. generally valued based on unadjusted prices in active markets for identical securities. Equity-index futures are valued based on unadjusted prices in active...

  • Page 112
    ... 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 derived using appraisals, pricing models, and valuation inputs that are...

  • Page 113
    ... in 2015. The Utility's pension benefits met all the funding requirements under ERISA. PG&E Corporation and the Utility expect to make total contributions of approximately $327 million and $61 million to the pension plan and other postretirement benefit plans, respectively, for 2016. 105

  • Page 114
    ... 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 the...

  • Page 115
    ... applicable laws pertaining to record-keeping practices with respect to maintaining safe operation of 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...

  • Page 116
    ... violations of laws and regulations applicable to the safety of the California utilities' electric and natural gas facilities and operations. In addition, the California utilities are required to inform the SED of self-identified or self-corrected violations. The CPUC has delegated authority to the...

  • Page 117
    ... would be required to record charges to the statement of income in future periods to the extent total forecasted PSEP-related capital costs are higher than currently expected. million bill credit to the Utility's natural gas customers, (3) $850 million to fund future pipeline safety projects and...

  • Page 118
    ..., 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 ratemaking mechanism...

  • Page 119
    ...-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. 164 94 $ 969 150 98 $ 954 At December 31, 2015 the Utility expected to recover $695 million...

  • Page 120
    ...-certified terrorist acts occurring within a 12-month period against one or more commercial nuclear power plants insured by NEIL as one event and the owners of the affected plants would share the $3.5 billion policy limit amount. Under the Price-Anderson Act, public liability claims that arise from...

  • 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
    ... customers' loads. Costs incurred for natural gas purchases, natural gas transportation services, and natural gas storage, which include contracts with terms of less than 1 year, amounted to $0.9 billion in 2015, $1.4 billion in 2014, and $1.6 billion in 2013. Nuclear Fuel Agreements The Utility...

  • Page 123
    ... common share, basic Net earnings per common 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...

  • Page 124
    ... quarter of 2015, the Utility recorded total charges of $553...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 authorized...

  • Page 125
    ... those criteria, 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...

  • Page 126
    ... responsibility is to express an opinion on the Company's and the Utility's internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan...

  • Page 127
    ...SUPPLEMENTARY DATA 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 accompanying consolidated balance sheets of PG&E Corporation and subsidiaries...

  • Page 128
    ...December 31, 2015, PG&E Corporation's and the Utility's respective principal executive officers and principal financial officers have concluded that such controls and procedures are effective to ensure that information required to be disclosed by PG&E Corporation and the Utility in reports that the...

  • 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
    ... the Utility is set forth under the headings "Share Ownership Information - Security Ownership of Management" and "Share Ownership Equity Compensation Plan Information The following table provides information as of December 31, 2015 concerning shares of PG&E Corporation common stock authorized for...

  • Page 131
    ..., for each of PG&E Corporation and 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...

  • 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
    ... 3.75% Senior Notes due August 15, 2042 (incorporated by reference to Pacific 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 to the issuance of $375,000,000 aggregate principal amount of...

  • Page 135
    ..., New York Branch, and Sumitomo Mitsui Banking Corporation (incorporated by reference to Pacific Gas and Electric Company's Form 10-Q for the quarter ended March 31, 2015 (File No. 1-2348), Exhibit 10.2) Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric...

  • Page 136
    ... Plan (incorporated by reference to PG&E Corporation's Form 10-Q for the quarter ended June 30, 2015 (File No. 1-2348), Exhibit 10.8) Letter regarding Compensation Agreement between Pacific Gas and Electric Company and Jesus Soto, Jr. dated April 4, 2012 (incorporated by reference to Pacific Gas...

  • Page 137
    ... Executive Supplemental Retirement Plan, as amended effective September 17, 2013 (incorporated by reference to PG&E Corporation's Form 10-Q for the quarter ended September 30, 2013 (File No. 1-12609), Exhibit 10.2) Pacific Gas and Electric Company Relocation Assistance Program for Officers...

  • Page 138
    ... 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 quarter...

  • Page 139
    ... for Pacific Gas and Electric Company Computation of Ratios of Earnings to Fixed Charges for PG&E Corporation Subsidiaries of the Registrant Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) Powers of Attorney Certifications of the Chief Executive Officer and the...

  • 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
    ...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 February 18, 2016...

  • Page 142
    PART 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 ...

  • Page 143
    ... plans obligations (net of taxes of $0, $10, and $80, at respective dates) Net change in investments (net of taxes of $12, $17, and $26, at respective dates) Total other comprehensive income (loss) Comprehensive Income Weighted Average Common Shares Outstanding, Basic Weighted Average Common Shares...

  • 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
    ... PG&E CORPORATION SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF PARENT - (Continued) CONDENSED STATEMENTS OF CASH FLOWS Year ended December 31, (in millions) 2015 2014 2013 Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating...

  • Page 146
    ... 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 Accounts Balance at End of...

  • Page 147
    ... 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 Charged to Other Accounts Balance at...

  • Page 148
    ... 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 Senior Vice President, External Affairs and Public...

  • Page 149
    ..., Corporate Relations and Chief Communications Officer DEANN HAPNER Vice President, FERC and ISO Relations SANFORD L. HARTMAN Vice President and Managing Director, Law JOHN C. HIGGINS Vice President, Gas Transmission and Distribution Operations AARON J. JOHNSON Vice President, Customer Energy...

  • 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
    ...-7080 Email: [email protected] PG&E Corporation General Information 415-973-1000 Pacific Gas and Electric Company General Information 415-973-7000 PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY ANNUAL MEETINGS OF SHAREHOLDERS Date: May 23, 2016 Time: 10:00 a.m. Location: PG&E Corporation...

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