What is pending in the 2007 General Rate Case?

A settlement among the Utility, the Division of Ratepayer Advocates and other parties would set revenue requirements for 2007-2010 with an increase of $212.7 million over 2006 authorized amounts. On February 13, 2007, an administrative law judge issued a proposed decision recommending modifications that would result in an increase of about $170 million, and an alternate proposed decision recommends approval of the settlement. The CPUC could issue a final decision at its March 15, 2007 meeting, though the company cannot predict timing or outcome.

What is the status of the litigation brought by the California Attorney General and San Francisco?

The complaints allege that dividends and stock repurchases from the Utility to PG&E Corporation from 1997 through 2000 violated CPUC holding company conditions, and seek restitution, civil penalties and a total penalty of not less than $500 million. The Ninth Circuit held that the Superior Court has jurisdiction over restitution claims, and the Superior Court ruled on the penalty standard in March 2005. Discovery has resumed, and the company believes the claims have no merit and that the outcome would not have a material adverse effect.

What are the Utility's authorized return and capital structure?

For 2006 and 2007, the Utility's CPUC-authorized capital structure consists of 46% long-term debt, 2% preferred stock and 52% equity. The authorized return on equity is 11.35%, and the overall rate of return on rate base is 8.79%. The Utility is required to file its 2008 cost of capital application by May 8, 2007.

What major investment and financing plans does the company describe for 2007?

The Utility expects capital expenditures of approximately $2.8 billion or greater in 2007, mostly for advanced metering infrastructure, generation facility spending, and distribution and transmission improvements. It anticipates issuing approximately $1.35 billion of long-term debt in 2007 primarily to fund capital expenditures, and its accounts receivable facility is set to expire on March 5, 2007, with the Utility seeking an increase to its bank credit facilities.

PG&E 10-K FY2006 Annual Report — Revenue, Net Income, EPS

Q: How did PG&E Corporation's earnings change in 2006?

Net income increased by $74 million, or 8%, to $991 million from $917 million in 2005. Diluted EPS was $2.76 compared with $2.37. The filing attributes the increase mainly to FERC approval of recovery of scheduling coordinator costs, higher gas transmission revenues, fewer litigation settlements, and tax benefits from prior capital losses, partly offset by a carrying cost credit tied to the second series of energy recovery bonds.

01—Abstract

Summary

Summary of the 10-K filed February 22, 2007. Cited figures are marked; the original filing is the authoritative source.

PG&E Corporation is a holding company whose primary purpose is to hold interests in energy-based businesses, conducting its business principally through Pacific Gas and Electric Company (the Utility), a public utility operating in northern and central California.

The Utility served approximately 5.1 million electricity distribution customers and approximately 4.2 million natural gas distribution customers at December 31, 2006, had approximately $34.4 billion^a of assets, and generated revenues of approximately $12.5 billion in 2006. Net income for PG&E Corporation rose to $991 million in 2006 from $917 million in 2005, and diluted earnings per share were $2.76 compared to $2.37 in 2005. The filing attributes the increase mainly to FERC approval of recovery of scheduling coordinator costs, higher gas transmission revenues, fewer litigation settlements, and a lower share count after the November 2005 repurchase, partly offset by a carrying cost credit on the second series of energy recovery bonds.

Key near-term items for investors include the 2007 General Rate Case, where an administrative law judge's proposed decision recommends modifications to a settlement that would set revenue requirements for 2007-2010, and an alternate proposed decision recommends approving the settlement; the revenue increase is $213 million^b under the settlement versus $170 million under the proposed decision. The Utility also faces a pending FERC transmission rate case, a 2008 cost of capital application due May 8, 2007, and a required March 15, 2007 gas transmission and storage rate filing. The company reports an undiscounted environmental remediation liability of approximately $511 million, a $295 million chromium settlement paid in 2006, and a pending California Attorney General and City and County of San Francisco complaint seeking restitution of about $5 billion and a penalty of not less than $500 million, which the company believes lacks merit.

The Utility's CPUC-authorized capital structure is 52% equity, with an 11.35% return on equity for 2006 and 2007. The Utility expects capital expenditures of approximately $2.8 billion^c or greater in 2007, up from $2.4 billion in 2006, driven by advanced metering infrastructure and new generation projects, and anticipates issuing about $1.35 billion of long-term debt in 2007.

02—Key points

Key Highlights

Net income of PG&E Corporation was $991 million in 2006, up from $917 million in 2005; diluted EPS was $2.76 versus $2.37.
Utility operating revenues were $12.5 billion in 2006, with electric operating revenues of $8.75 billion and natural gas operating revenues of $3.79 billion.
The proposed 2007 GRC settlement would set revenue requirements for 2007-2010 with a total increase of $213 million over 2006 authorized amounts, while the ALJ's proposed decision recommends about $170 million.
Capital expenditures were approximately $2.4 billion in 2006 and are expected to total approximately $2.8 billion or greater in 2007.
Environmental remediation liability was approximately $511 million at December 31, 2006, up from approximately $469 million at December 31, 2005.
The California Attorney General and City and County of San Francisco complaints seek restitution estimated at about $5 billion and penalties of not less than $500 million; the company believes the claims have no merit.
Dividends declared per PG&E Corporation common share were $1.32 in 2006, up from $1.23 in 2005.

03—Questions

Frequently Asked Questions

How did PG&E Corporation's earnings change in 2006?
Net income increased by $74 million, or 8%, to $991 million from $917 million in 2005. Diluted EPS was $2.76 compared with $2.37. The filing attributes the increase mainly to FERC approval of recovery of scheduling coordinator costs, higher gas transmission revenues, fewer litigation settlements, and tax benefits from prior capital losses, partly offset by a carrying cost credit tied to the second series of energy recovery bonds.
What is pending in the 2007 General Rate Case?
A settlement among the Utility, the Division of Ratepayer Advocates and other parties would set revenue requirements for 2007-2010 with an increase of $212.7 million over 2006 authorized amounts. On February 13, 2007, an administrative law judge issued a proposed decision recommending modifications that would result in an increase of about $170 million, and an alternate proposed decision recommends approval of the settlement. The CPUC could issue a final decision at its March 15, 2007 meeting, though the company cannot predict timing or outcome.
What is the status of the litigation brought by the California Attorney General and San Francisco?
The complaints allege that dividends and stock repurchases from the Utility to PG&E Corporation from 1997 through 2000 violated CPUC holding company conditions, and seek restitution, civil penalties and a total penalty of not less than $500 million. The Ninth Circuit held that the Superior Court has jurisdiction over restitution claims, and the Superior Court ruled on the penalty standard in March 2005. Discovery has resumed, and the company believes the claims have no merit and that the outcome would not have a material adverse effect.
What are the Utility's authorized return and capital structure?
For 2006 and 2007, the Utility's CPUC-authorized capital structure consists of 46% long-term debt, 2% preferred stock and 52% equity. The authorized return on equity is 11.35%, and the overall rate of return on rate base is 8.79%. The Utility is required to file its 2008 cost of capital application by May 8, 2007.
What major investment and financing plans does the company describe for 2007?
The Utility expects capital expenditures of approximately $2.8 billion or greater in 2007, mostly for advanced metering infrastructure, generation facility spending, and distribution and transmission improvements. It anticipates issuing approximately $1.35 billion of long-term debt in 2007 primarily to fund capital expenditures, and its accounts receivable facility is set to expire on March 5, 2007, with the Utility seeking an increase to its bank credit facilities.

04—Continue

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