01—Abstract
Summary
Summary of the 10-K filed February 19, 2010. Cited figures are marked; the original filing is the authoritative source.
PG&E Corporation, a holding company incorporated in California in 1995, conducts its business principally through Pacific Gas and Electric Company (the Utility), a public utility operating in northern and central California.
At December 31, 2009 the Utility served approximately 5.1 million electricity distribution customers and 4.3 million natural gas distribution customers, had approximately $42.7 billiona in assets, and generated revenues of $13.4 billion in 2009. PG&E Corporation reported diluted earnings per common share of $3.20 for 2009, compared with $3.63 for 2008, and income available for common shareholders of $1,220 million. The filing attributes the decline mainly to $257 million of 2008 tax-audit settlement income and $59 million after tax of costs for accelerated natural gas leak surveys, partly offset by a $91 million after-tax increase from the Utility's return on equity and a $66 million tax benefit.
The Utility is regulated primarily by the California Public Utilities Commission and the Federal Energy Regulatory Commission, with the Nuclear Regulatory Commission overseeing its Diablo Canyon nuclear units. Key pending matters include the 2011 General Rate Case application, filed December 21, 2009, which requests a proposed 2011 revenue increase of $1.1 billionb (6.4%) above the 2010 forecast, a 2011 Gas Transmission and Storage rate case, and the Diablo Canyon license renewal application filed in November 2009. Capital expenditures were $3.9 billion in 2009, with more than $4.0 billion expected in 2010, and the Utility's weighted average rate base was $19.8 billion in 2009.
The filing also highlights significant environmental and regulatory exposures, including estimated climate-related compliance costs of approximately $1 billionc per year beginning in 2012 under the proposed California cap-and-trade program, an environmental remediation liability of $586 million, and uncertainty about cooling-water regulation at Diablo Canyon. Holders of record numbered 81,642 as of February 16, 2010.
02—Key points
Key Highlights
- Diluted EPS was $3.20 in 2009, down from $3.63 in 2008, with income available for common shareholders of $1,220 million.
- The Utility had approximately $42.7 billion in assets and generated $13.4 billion of revenues in 2009, serving about 5.1 million electric and 4.3 million gas distribution customers.
- The Utility filed its 2011 GRC application on December 21, 2009, requesting a proposed 2011 revenue increase of $1.1 billion, or 6.4%, above the 2010 total revenue forecast.
- Capital expenditures were $3.9 billion in 2009 and are expected to total approximately $4.0 billion or more in 2010; weighted average rate base was $19.8 billion in 2009.
- Estimated additional compliance costs of approximately $1 billion per year beginning in 2012 could result from the proposed California cap-and-trade program, assuming a $30 per metric tonne allowance price.
- Total long-term debt (excluding current portion) was $10,381 million at year-end 2009, and the Utility issued $1.6 billion of senior notes during 2009.
- Environmental remediation accruals totaled $586 million at December 31, 2009, of which $291 million is expected to be recovered under a CPUC-approved ratemaking mechanism.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 19, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $13.40B$14.63B | −8.4% |
| Operating Income | $2.30B$2.26B | +1.7% |
| Interest Expense | $705.00M$728.00M | −3.2% |
| Net Income | $1.22B$1.34B | −8.8% |
| EPS (Basic) | $3.25$3.64 | −10.7% |
| EPS (Diluted) | $3.20$3.63 | −11.8% |
| Shares Outstanding (Basic) | 368.00M357.00M | +3.1% |
| Shares Outstanding (Diluted) | 386.00M358.00M | +7.8% |
05—Questions
Frequently Asked Questions
What drove the decline in PG&E Corporation's 2009 earnings per share?
Diluted EPS fell to $3.20 from $3.63 mainly because 2008 included $257 million of after-tax income from settling federal tax audits for 2001 through 2004, and 2009 included $59 million after tax of costs for accelerated natural gas leak surveys and remedial work. These were partly offset by a $91 million after-tax increase from the Utility's return on equity on higher authorized capital investment and a $66 million tax benefit from settling refund claims for the 1998 and 1999 tax years.
What is the status of the Utility's next general rate case?
On December 21, 2009, the Utility filed its 2011 General Rate Case application to set base revenues for 2011 through 2013. It requests a proposed 2011 revenue increase of $1.1 billion, or 6.4%, above the 2010 total revenue forecast, and asks the CPUC to issue a final decision by the end of 2010. The filing states the company cannot predict the amount the CPUC will authorize or when a final decision will be received.
What regulatory and environmental risks could affect future costs?
The Utility estimates that compliance with a proposed California cap-and-trade program could cost approximately $1 billion per year beginning in 2012, and the CARB is scheduled to issue final regulations in October 2010. The Utility also faces uncertainty over cooling-water regulation at Diablo Canyon, which could require cooling towers and may force operations to cease if installation is not technically or economically feasible. Its undiscounted environmental remediation costs could rise to as much as $1 billion beyond the $586 million accrued.
What is the status of the Diablo Canyon nuclear plant?
Diablo Canyon has two nuclear units with total net generation capacity of approximately 2,240 MW, and achieved an average overall capacity factor of approximately 83% for 2009. In November 2009 the Utility applied to the NRC to renew the operating licenses for 20 years, as the current licenses expire in November 2024 for Unit 1 and August 2025 for Unit 2. The renewal process is expected to take several years.
How is PG&E Corporation funding the Utility's capital needs?
PG&E Corporation contributed $718 million of cash equity to the Utility in 2009 to maintain the CPUC-authorized 52% common equity ratio, funded by common stock issuances of $219 million, a $350 million 5.75% senior note issue in March 2009, and other funds. The Utility issued $1.6 billion of senior notes in 2009, and the filing states the Utility believes its operating cash flow, existing liquidity, and future financings will provide adequate resources, assuming market access on reasonable terms.
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