| UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C., 20549 | |||||||||||||||||||||||||||||||||||||||||
| FORM | 10-Q | ||||||||||||||||||||||||||||||||||||||||
| (Mark One) | |||||||||||||||||||||||||||||||||||||||||
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||||||||||||||||||||||||||||||||||
| For the quarterly period ended | September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||
| OR | |||||||||||||||||||||||||||||||||||||||||
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||||||||||||||||||||||||||||||||||
| For the transition period from ___________ to __________ | |||||||||||||||||||||||||||||||||||||||||
| Commission File Number | Exact Name of Registrant as Specified in its Charter | State or Other Jurisdiction of Incorporation | IRS Employer Identification Number | ||||||||||||||||||||||||||||||||||||||
| 1-12609 | PG&E Corporation | California | 94-3234914 | ||||||||||||||||||||||||||||||||||||||
| 1-2348 | Pacific Gas and Electric Company | California | 94-0742640 | ||||||||||||||||||||||||||||||||||||||
| PG&E Corporation | Pacific Gas and Electric Company | ||||||||||||||||||||||||||||||||||||||||
| 77 Beale Street | 77 Beale Street | ||||||||||||||||||||||||||||||||||||||||
| P.O. Box 770000 | P.O. Box 770000 | ||||||||||||||||||||||||||||||||||||||||
| San Francisco, | California | 94177 | San Francisco, | California | 94177 | ||||||||||||||||||||||||||||||||||||
| Address of principal executive offices, including zip code | |||||||||||||||||||||||||||||||||||||||||
| PG&E Corporation | Pacific Gas and Electric Company | ||||||||||||||||||||||||||||||||||||||||
| 415 | 973-1000 | 415 | 973-7000 | ||||||||||||||||||||||||||||||||||||||
| Registrant’s telephone number, including area code | |||||||||||||||||||||||||||||||||||||||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common stock, no par value | PCG | The New York Stock Exchange | ||||||
| Equity Units | PCGU | The New York Stock Exchange | ||||||
| First preferred stock, cumulative, par value $25 per share, 5% series A redeemable | PCG-PE | NYSE American LLC | ||||||
| First preferred stock, cumulative, par value $25 per share, 5% redeemable | PCG-PD | NYSE American LLC | ||||||
| First preferred stock, cumulative, par value $25 per share, 4.80% redeemable | PCG-PG | NYSE American LLC | ||||||
| First preferred stock, cumulative, par value $25 per share, 4.50% redeemable | PCG-PH | NYSE American LLC | ||||||
| First preferred stock, cumulative, par value $25 per share, 4.36% series A redeemable | PCG-PI | NYSE American LLC | ||||||
| First preferred stock, cumulative, par value $25 per share, 6% nonredeemable | PCG-PA | NYSE American LLC | ||||||
| First preferred stock, cumulative, par value $25 per share, 5.50% nonredeemable | PCG-PB | NYSE American LLC | ||||||
| First preferred stock, cumulative, par value $25 per share, 5% nonredeemable | PCG-PC | NYSE American LLC | ||||||
1
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | |||||||||||||||||||||||||||||||||||
| PG&E Corporation: | ☒ | Yes | ☐ | No | |||||||||||||||||||||||||||||||
| Pacific Gas and Electric Company: | ☒ | Yes | ☐ | No | |||||||||||||||||||||||||||||||
| Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | |||||||||||||||||||||||||||||||||||
| PG&E Corporation: | ☒ | Yes | ☐ | No | |||||||||||||||||||||||||||||||
| Pacific Gas and Electric Company: | ☒ | Yes | ☐ | No | |||||||||||||||||||||||||||||||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | ||||||||||||||||||||||||||||||||
| PG&E Corporation: | ☒ | Large accelerated filer | ☐ | Accelerated filer | ||||||||||||||||||||||||||||
☐ | Non-accelerated filer | |||||||||||||||||||||||||||||||
| ☐ | Smaller reporting company | ☐ | Emerging growth company | |||||||||||||||||||||||||||||
| Pacific Gas and Electric Company: | ☐ | Large accelerated filer | ☐ | Accelerated filer | ||||||||||||||||||||||||||||
☒ | Non-accelerated filer | |||||||||||||||||||||||||||||||
| ☐ | Smaller reporting company | ☐ | Emerging growth company | |||||||||||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ||||||||||||||||||||||||||||||||
| PG&E Corporation: | ☐ | |||||||||||||||||||||||||||||||
| Pacific Gas and Electric Company: | ☐ | |||||||||||||||||||||||||||||||
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | ||||||||||||||||||||||||||||||||
| PG&E Corporation: | ☐ | Yes | ☒ | No | ||||||||||||||||||||||||||||
| Pacific Gas and Electric Company: | ☐ | Yes | ☒ | No | ||||||||||||||||||||||||||||
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. | ||||||||||||||||||||||||||||||||
| PG&E Corporation: | ☒ | Yes | ☐ | No | ||||||||||||||||||||||||||||
| Pacific Gas and Electric Company: | ☒ | Yes | ☐ | No | ||||||||||||||||||||||||||||
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. | ||||||||||||||||||||||||||
| Common stock outstanding as of October 27, 2021: | ||||||||||||||||||||||||||
| PG&E Corporation: | 2,463,112,791* | |||||||||||||||||||||||||
Pacific Gas and Electric Company: | 264,374,809 | |||||||||||||||||||||||||
*Includes 477,743,590 shares of common stock held by PG&E ShareCo LLC, a wholly owned subsidiary of PG&E Corporation. | ||||||||||||||||||||||||||
2
PG&E CORPORATION AND
PACIFIC GAS AND ELECTRIC COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
3
GLOSSARY
The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
| 2020 Form 10-K | PG&E Corporation and Pacific Gas and Electric Company’s combined Annual Report on Form 10-K for the year ended December 31, 2020 | ||||
| AB | Assembly bill | ||||
| ALJ | Administrative Law Judge | ||||
| ARO | asset retirement obligation | ||||
| ASU | accounting standard update issued by the FASB | ||||
| Backstop Commitment Letters | the Chapter 11 Plan Backstop Commitment Letters entered into by PG&E Corporation and the Backstop Parties dated as of March 6, 2020, as amended | ||||
| Backstop Party (Parties) | a third-party investor party to a Backstop Commitment Letter | ||||
| Bankruptcy Code | the United States Bankruptcy Code | ||||
| Bankruptcy Court | the U.S. Bankruptcy Court for the Northern District of California | ||||
| CAISO | California Independent System Operator | ||||
| Cal Fire | California Department of Forestry and Fire Protection | ||||
| CCA | Community Choice Aggregator | ||||
| CEMA | Catastrophic Event Memorandum Account | ||||
| Chapter 11 | chapter 11 of title 11 of the U.S. Code | ||||
| Chapter 11 Cases | the voluntary cases commenced by each of PG&E Corporation and the Utility under Chapter 11 on January 29, 2019 | ||||
| CHT | customer harm threshold | ||||
| Confirmation Order | the order confirming PG&E Corporation’s and the Utility’s and the Shareholder Proponents’ Joint Chapter 11 Plan of Reorganization, dated as of June 20, 2020 with the Bankruptcy Court | ||||
| CPE | Central Procurement Entity | ||||
| CPPMA | COVID-19 Pandemic Protections Memorandum Account | ||||
| CPUC | California Public Utilities Commission | ||||
| CRRs | congestion revenue rights | ||||
| Diablo Canyon | Diablo Canyon nuclear power plant | ||||
| DTSC | Department of Toxic Substances Control | ||||
| Effective Date | July 1, 2020, the effective date of the Plan in the Chapter 11 Cases | ||||
| EIR | electric incident report | ||||
EMANI | European Mutual Association for Nuclear Insurance | ||||
| EO | executive order | ||||
| EOEP | Enhanced Oversight and Enforcement Process | ||||
| EPS | earnings per common share | ||||
| Exchange Act | Securities Exchange Act of 1934, as amended | ||||
| FASB | Financial Accounting Standards Board | ||||
| FERC | Federal Energy Regulatory Commission | ||||
| FHPMA | Fire Hazard Prevention Memorandum Account | ||||
| Fire Victim Trust | trust established pursuant to the Plan for the benefit of holders of the Fire Victim Claims into which the Aggregate Fire Victim Consideration (as defined in the Plan) has been, and will continue to be funded | ||||
| FRMMA | Fire Risk Mitigation Memorandum Account | ||||
| GAAP | U.S. Generally Accepted Accounting Principles | ||||
| GO | General Order | ||||
| GRC | general rate case | ||||
| GT&S | gas transmission and storage | ||||
| HSM | Hazardous Substance Memorandum Account | ||||
4
| IOU(s) | investor-owned utility(ies) | ||||
| IRS | Internal Revenue Service | ||||
| Lakeside Building | 300 Lakeside Drive, Oakland, California 94612 | ||||
| LSE | load serving entity | ||||
| MW | 1 Megawatt (MW) = One thousand kilowatts | ||||
| MWh | 1 Megawatt-Hour (MWh) = One megawatt continuously for one hour | ||||
| MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of this Form 10-Q | ||||
| MGP(s) | manufactured gas plants | ||||
| Monitor | third-party monitor retained as part of its compliance with the sentencing terms of the Utility’s January 27, 2017 federal criminal conviction | ||||
| NAV | net asset value | ||||
| NBC | non-bypassable charge | ||||
| NDCTP | Nuclear Decommissioning Cost Triennial Proceeding | ||||
| NEIL | Nuclear Electric Insurance Limited | ||||
| NEM | net energy metering | ||||
| NRC | Nuclear Regulatory Commission | ||||
| OEIS | On July 1, 2021, the Wildfire Safety Division became the Office of Energy Infrastructure Safety. For consistency, this Quarterly Report on Form 10-Q uses “OEIS” to refer to both. | ||||
| OII | order instituting investigation | ||||
| OIR | order instituting rulemaking | ||||
| PERA | Public Employees Retirement Association of New Mexico | ||||
| POD | Presiding Officer’s Decision | ||||
| PD | proposed decision | ||||
| Petition Date | January 29, 2019 | ||||
| the Plan | Debtors’ and Shareholder Proponents’ Joint Chapter 11 Plan of Reorganization, dated June 19, 2020 | ||||
| PSPS | Public Safety Power Shutoff | ||||
| RA | resource adequacy | ||||
| ROE | return on equity | ||||
| RTBA | Risk Transfer Balancing Account | ||||
| RUBA | Residential Uncollectibles Balancing Account | ||||
| SB | Senate Bill | ||||
| SEC | U.S. Securities and Exchange Commission | ||||
| Securities Act | The Securities Act of 1933, as amended | ||||
| SED | Safety and Enforcement Division of the CPUC | ||||
| SFGO | office space generally located at 25 Beale Street, 45 Beale Street, 77 Beale Street, 50 Main Street, 215 Market Street, and 245 Market Street, San Francisco, California 94105, and associated properties owned by the Utility | ||||
| ShareCo | PG&E ShareCo LLC, a limited liability company whose sole member is PG&E Corporation | ||||
| SPV | PG&E AR Facility, LLC | ||||
| Subrogation Wildfire Trust | the trust funded by PG&E Corporation and the Utility for the benefit of certain holders of wildfire insurance subrogation claims | ||||
| Tax Act | Tax Cuts and Jobs Act of 2017 | ||||
| TCC | Official Committee of Tort Claimants | ||||
| TCC RSA | Restructuring Support Agreement dated December 6, 2019 with the TCC and attorneys and other advisors and agents for certain holders of Fire Victim Claims (as defined therein), as amended | ||||
| this Form 10-Q | PG&E Corporation and Pacific Gas and Electric Company’s combined Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 | ||||
| TO | transmission owner | ||||
| TURN | The Utility Reform Network | ||||
| Utility | Pacific Gas and Electric Company | ||||
| VIE(s) | variable interest entity(ies) | ||||
| VMBA | Vegetation Management Balancing Account | ||||
5
| WEMA | Wildfire Expense Memorandum Account | ||||
| Wildfire Fund | statewide fund established by AB 1054 that will be available for eligible electric utility companies to pay eligible claims for liabilities arising from wildfires occurring after July 12, 2019 that are caused by the applicable electric utility company’s equipment | ||||
| Wildfires OII | Order Instituting Investigation into the 2017 Northern California wildfires and the 2018 Camp fire | ||||
| WMBA | Wildfire Mitigation Balancing Account | ||||
| WMCE | Wildfire Mitigation and Catastrophic Events | ||||
| WMP | Wildfire Mitigation Plan | ||||
| WMPMA | Wildfire Mitigation Plan Memorandum Account | ||||
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are necessarily subject to various risks and uncertainties. These statements reflect management’s judgment and opinions that are based on current estimates, expectations, and projections about future events and assumptions regarding these events and management’s knowledge of facts as of the date of this report. These forward-looking statements relate to, among other matters, estimated losses, including penalties and fines, associated with various investigations and proceedings; forecasts of capital expenditures; estimates and assumptions used in critical accounting policies, including those relating to insurance receivables, regulatory assets and liabilities, environmental remediation, litigation, third-party claims, the Wildfire Fund, and other liabilities; and the level of future equity or debt issuances. These statements are also identified by words such as “assume,” “expect,” “intend,” “forecast,” “plan,” “project,” “believe,” “estimate,” “predict,” “anticipate,” “may,” “should,” “would,” “could,” “potential” and similar expressions. PG&E Corporation and the Utility are not able to predict all the factors that may affect future results. Some of the factors that could cause future results to differ materially from those expressed or implied by the forward-looking statements, or from historical results, include, but are not limited to:
•PG&E Corporation’s and the Utility’s historical financial information not being indicative of future financial performance as a result of the Chapter 11 Cases and the financial and other restructuring recently undergone by PG&E Corporation and the Utility in connection with their emergence from Chapter 11;
•the risks and uncertainties associated with wildfires that have occurred, are occurring or may occur in the Utility’s service territory, including the wildfire that began on October 23, 2019 northeast of Geyserville in Sonoma County, California (the “2019 Kincade fire”), the wildfire that began on September 27, 2020 in the area of Zogg Mine Road and Jenny Bird Lane, north of Igo in Shasta County, California (the “2020 Zogg fire”), the wildfire that began on July 13, 2021 near the Feather River Canyon in Plumas County (the “2021 Dixie fire”), and any other wildfires for which the cause has yet to be determined, the damage caused by such wildfires; the extent of the Utility’s liability in connection with such wildfires (including the risk that the Utility may be found liable for damages regardless of fault); investigations into such wildfires, including those being conducted by the CPUC and the District Attorneys’ offices of Sonoma, Shasta, Butte, and Plumas Counties; the outcome of the criminal proceedings initiated against the Utility by the Sonoma County District Attorney in connection with the 2019 Kincade fire; the outcome of the criminal proceedings initiated against the Utility by the Shasta County District Attorney in connection with the 2020 Zogg fire and three other fires; potential liabilities in connection with fines or penalties that could be imposed on the Utility if the CPUC or any other enforcement agency were to bring an enforcement action in respect of any such fire; the risk that the Utility is not able to recover costs from insurance, from the Wildfire Fund or through rates; and the effect on PG&E Corporation’s and the Utility’s reputations of such wildfires, investigations and proceedings;
•the Utility’s ability to reduce wildfire threats and improve safety, including the Utility’s ability to comply with the targets and metrics set forth in its WMP; to maintain a valid safety certification; to retain or contract for the workforce necessary to execute its WMP; the effectiveness of its system hardening, including undergrounding; and the cost of the program and the timing and outcome of any proceeding to recover such costs through rates;
6
•the impact of wildfires, droughts, floods, high winds, lightning, extreme heat events (including recent extreme heat events during the 2021 wildfire season) or other weather-related conditions or events, climate change, natural disasters, acts of terrorism, war, vandalism (including cyber-attacks), downed power lines, and other events, that can cause unplanned outages, reduce generating output, disrupt the Utility’s service to customers, or damage or disrupt the facilities, operations, or information technology and systems owned by the Utility, its customers, or third parties on which the Utility relies, and the effectiveness of the Utility’s efforts to prevent or respond to such conditions or events; and the reparation and other costs that the Utility may incur in connection with such conditions or events; the impact of the adequacy of the Utility’s emergency preparedness; whether the Utility incurs liability to third parties for property damage or personal injury caused by such events; whether the Utility is able to procure replacement power; and whether the Utility is subject to civil, criminal, or regulatory penalties in connection with such events;
•the breakdown or failure of equipment that can cause damages, including fires, and unplanned outages; and whether the Utility will be subject to investigations, penalties, and other costs in connection with such events;
•the risks and uncertainties associated with the Utility’s ability to access the Wildfire Fund, including whether the Wildfire Fund has sufficient remaining funds;
•the impact of the Utility’s implementation of its PSPS program, and whether any fines, penalties or civil liability for damages will be imposed on the Utility as a result; the costs in connection with PSPS events, the timing and outcome of any proceeding to recover such costs through rates, and the effects on PG&E Corporation’s and the Utility’s reputations caused by implementation of the PSPS program;
•the risks and uncertainties associated with the timing and outcomes of PG&E Corporation’s and the Utility’s ongoing litigation, including appeals of the Confirmation Order; certain indemnity obligations to current and former officers and directors, as well as potential indemnity obligations to underwriters for certain of the Utility’s note offerings; three purported class actions that have been consolidated and denominated In re PG&E Corporation Securities Litigation, U.S. District Court for the Northern District of California, Case No. 18-035509; the appeal of the FERC’s order denying rehearing on March 17, 2020 granting the Utility a 50-basis point ROE incentive adder for continued participation in the CAISO; the debarment proceeding; the purported PSPS class action filed in December 2019; and other third-party claims, including the extent to which related costs can be recovered through insurance, rates, or from other third parties;
•the outcome of the probation and the Monitorship imposed by the federal court after the Utility’s conviction in the federal criminal trial in 2017, remedial costs that the Utility may incur in connection with the probation including the costs of complying with any additional conditions of probation imposed in connection with the Utility’s federal criminal proceeding, such as expenses associated with any material expansion of the Utility’s vegetation management program;
•the timing and outcomes of the Utility’s pending and future ratemaking and regulatory proceedings, including the extent to which PG&E Corporation and the Utility are able to recover their costs through rates as recorded in memorandum accounts or balancing accounts, or as otherwise requested;
•the outcome of current and future self-reports, investigations or other enforcement actions, or notices of violation that could be issued related to the Utility’s compliance with laws, rules, regulations, or orders applicable to its gas and electric operations; the construction, expansion, or replacement of its electric and gas facilities; electric grid reliability; audit, inspection and maintenance practices; customer billing and privacy; physical and cybersecurity protections; environmental laws and regulations; or otherwise, such as fines, penalties, remediation obligations, the transfer of ownership of the Utility’s assets to municipalities or other public entities, or the implementation of corporate governance, operational or in connection with the EOEP or other changes;
•the ability of the Utility to meet the conditions in its corrective action plan and exit the EOEP;
•the ability of PG&E Corporation and the Utility to securitize (i) up to $1.19 billion of fire risk mitigation capital expenditures that were or will be incurred by the Utility in 2020 and 2021 and (ii) $7.5 billion of costs related to the multiple wildfires that began on October 8, 2017 and spread through Northern California, including Napa, Sonoma, Butte, Humboldt, Mendocino, Lake, Nevada and Yuba Counties, as well as in the area surrounding Yuba City (the “2017 Northern California wildfires”) in a financing transaction that is designed to be rate neutral to customers;
7
•the severity, extent and duration of the global COVID-19 pandemic and its impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity and cash flows, as well as on energy demand in the Utility’s service territory, the ability of the Utility to collect on customer receivables, the ability of the Utility to mitigate these effects, including with spending reductions, and the ability of the Utility to recover any losses incurred in connection with the COVID-19 pandemic, and the impact of workforce disruptions caused either by illness of workers and their family members or workforce attrition related to potential new workplace regulations such as vaccine mandates;
•the availability, cost, coverage, and terms of the Utility’s insurance, including insurance for wildfire, nuclear, and other liabilities, the timing of any insurance recoveries, and recovery of the costs of such insurance or, in the event liabilities exceed insured amounts, the ability to recover uninsured losses through rates or from other third parties;
•increased employee attrition as a result of the challenging political and operating environment facing PG&E Corporation and the Utility;
•whether the Utility can control its operating costs within the authorized levels of spending, and timely recover its costs through rates; whether the Utility can continue implementing a streamlined organizational structure and achieve project savings, the extent to which the Utility incurs unrecoverable costs that are higher than the forecasts of such costs; and changes in cost forecasts or the scope and timing of planned work resulting from changes in customer demand for electricity and natural gas or other reasons;
•cyber or physical attacks on the Utility or its third-party vendors, contractors, or customers (or others with whom they have shared data), which could result in operational disruption; the misappropriation or loss of confidential or proprietary assets, information or data, including customer, employee, financial, or operating system information, or intellectual property; corruption of data; or potential costs, lost revenues, or reputational harm;
•the ultimate amount of unrecoverable environmental costs the Utility incurs associated with the Utility’s natural gas compressor station site located near Hinkley, California and the Utility’s fossil fuel-fired generation sites;
•the impact that reductions in Utility customer demand for electricity and natural gas, driven by customer departures to CCAs and direct access providers and legislative mandates to replace gas-fuel technologies, have on the Utility’s ability to make and recover its investments through rates and earn its authorized return on equity, and whether the Utility is successful in addressing the impact of growing distributed and renewable generation resources, and changing customer demand for its natural gas and electric services;
•the supply and price of electricity, natural gas, and nuclear fuel; the extent to which the Utility can manage and respond to the volatility of energy commodity prices; the ability of the Utility and its counterparties to post or return collateral in connection with price risk management activities; and whether the Utility is able to recover timely its electric generation and energy commodity costs through rates, including its renewable energy procurement costs;
•the risks and uncertainties associated with any future substantial sales of shares of common stock of PG&E Corporation by existing shareholders, including the Fire Victim Trust;
•the ability of PG&E Corporation and the Utility to access capital markets and other sources of debt and equity financing in a timely manner on acceptable terms;
•the timing and outcome of future regulation and federal, state or local legislation, their implementation, and their interpretation, the cost to comply with such regulation and legislation, and the extent to which the Utility recovers its associated compliance and investment costs, including those regarding:
◦wildfires, including inverse condemnation reform, wildfire insurance, and additional wildfire mitigation measures or other reforms targeted at the Utility or its industry;
◦the environment, including the costs incurred to discharge the Utility’s remediation obligations or the costs to comply with standards for greenhouse gas emissions, renewable energy targets, energy efficiency standards, distributed energy resources, and electric vehicles;
8
◦the nuclear industry, including operations, seismic design, security, safety, relicensing, the storage of spent nuclear fuel, decommissioning, and cooling water intake, and the Utility’s ability to continue operating Diablo Canyon until its planned retirement;
◦the regulation of utilities and their holding companies, including the conditions imposed on PG&E Corporation when it became the Utility’s holding company and whether the Utility can make distributions to PG&E Corporation; and
◦taxes and tax audits;
•actions by credit rating agencies to downgrade PG&E Corporation’s or the Utility’s credit ratings or to place those ratings on negative outlook;
•whether PG&E Corporation’s and the Utility’s counterparties are available and able to meet their financial and performance obligations with respect to contracts, credit agreements, and financial instruments, which could be affected by disruptions in the global supply chain caused by the COVID-19 pandemic or otherwise;
•whether PG&E Corporation or the Utility undergoes an “ownership change” within the meaning of section 382 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), as a result of which tax attributes could be limited; and
•the impact of changes in GAAP, standards, rules, or policies, including those related to regulatory accounting, and the impact of changes in their interpretation or application.
For more information about the significant risks that could affect the outcome of the forward-looking statements and PG&E Corporation’s and the Utility’s future financial condition, results of operations, liquidity, and cash flows, see Item 1A. Risk Factors below and a detailed discussion of these matters contained in Item 2. MD&A. PG&E Corporation and the Utility do not undertake any obligation to update forward-looking statements, whether in response to new information, future events, or otherwise.
PG&E Corporation and the Utility routinely provide links to the Utility’s principal regulatory proceedings before the CPUC and the FERC at http://investor.pgecorp.com, under the “Regulatory Filings” tab, so that such filings are available to investors upon filing with the relevant agency. PG&E Corporation and the Utility also routinely post or provide direct links to presentations, documents, and other information that may be of interest to investors at http://investor.pgecorp.com, under the “Chapter 11,” “Wildfire and Safety Updates” and “News & Events: Events & Presentations” tabs, respectively, in order to publicly disseminate such information. Specifically, within two hours during business hours or four hours outside of business hours of the determination that an incident is attributable or allegedly attributable to the Utility’s electric facilities and has resulted in property damage estimated to exceed $50,000, a fatality or injuries requiring overnight in-patient hospitalization, or significant public or media attention, the Utility is required to submit an EIR including information about such incident. The information included in an EIR is limited and may not include important information about the facts and circumstances about the incident due to the limited scope of the reporting requirements and timing of the report and is necessarily limited to information to which the Utility has access at the time of the report. Ignitions are also reportable under CPUC Decision 14-02-015 when they involve self-propagating fire of material other than electrical or communication facilities; the fire traveled greater than one linear meter from the ignition point; and the Utility has knowledge that the fire occurred. It is possible that any of these filings or information included therein could be deemed to be material information. The information contained on such website is not part of this or any other report that PG&E Corporation or the Utility files with, or furnishes to, the SEC. PG&E Corporation and the Utility are providing the address to this website solely for the information of investors and do not intend the address to be an active link.
9
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PG&E CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions, except per share amounts) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||
| Electric | $ | 4,181 | $ | 3,810 | $ | 11,527 | $ | 10,285 | |||||||||||||||
| Natural gas | 1,284 | 1,072 | 3,869 | 3,436 | |||||||||||||||||||
| Total operating revenues | 5,465 | 4,882 | 15,396 | 13,721 | |||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Cost of electricity | 1,133 | 1,114 | 2,570 | 2,418 | |||||||||||||||||||
| Cost of natural gas | 176 | 90 | 670 | 508 | |||||||||||||||||||
| Operating and maintenance | 2,795 | 2,290 | 7,714 | 6,398 | |||||||||||||||||||
| Wildfire-related claims, net of recoveries | 94 | 25 | 261 | 195 | |||||||||||||||||||
| Wildfire Fund expense | 162 | 120 | 399 | 293 | |||||||||||||||||||
| Depreciation, amortization, and decommissioning | 801 | 845 | 2,540 | 2,574 | |||||||||||||||||||
| Total operating expenses | 5,161 | 4,484 | 14,154 | 12,386 | |||||||||||||||||||
| Operating Income | 304 | 398 | 1,242 | 1,335 | |||||||||||||||||||
| Interest income | — | 5 | 17 | 33 | |||||||||||||||||||
| Interest expense | (399) | (391) | (1,205) | (844) | |||||||||||||||||||
| Other income, net | 132 | 102 | 387 | 299 | |||||||||||||||||||
| Reorganization items, net | — | (137) | (11) | (1,937) | |||||||||||||||||||
| Income (Loss) Before Income Taxes | 37 | (23) | 430 | (1,114) | |||||||||||||||||||
| Income tax provision (benefit) | 1,125 | (109) | 994 | 394 | |||||||||||||||||||
| Net Income (Loss) | (1,088) | 86 | (564) | (1,508) | |||||||||||||||||||
| Preferred stock dividend requirement of subsidiary | 3 | 3 | 10 | 10 | |||||||||||||||||||
| Income (Loss) Attributable to Common Shareholders | $ | (1,091) | $ | 83 | $ | (574) | $ | (1,518) | |||||||||||||||
| Weighted Average Common Shares Outstanding, Basic | 1,985 | 1,967 | 1,985 | 1,012 | |||||||||||||||||||
| Weighted Average Common Shares Outstanding, Diluted | 1,985 | 2,140 | 1,985 | 1,012 | |||||||||||||||||||
| Net Income (Loss) Per Common Share, Basic | $ | (0.55) | $ | 0.04 | $ | (0.29) | $ | (1.50) | |||||||||||||||
| Net Income (Loss) Per Common Share, Diluted | $ | (0.55) | $ | 0.04 | $ | (0.29) | $ | (1.50) | |||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||||||||||||||
10
PG&E CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net Income (Loss) | $ | (1,088) | $ | 86 | $ | (564) | $ | (1,508) | |||||||||||||||
| Other Comprehensive Income | |||||||||||||||||||||||
Pension and other post-retirement benefit plans obligations (net of taxes of $0, $0, $0, and $0, respectively) | 1 | — | 2 | — | |||||||||||||||||||
| Total other comprehensive income | 1 | — | 2 | — | |||||||||||||||||||
| Comprehensive Income (Loss) | (1,087) | 86 | (562) | (1,508) | |||||||||||||||||||
| Preferred stock dividend requirement of subsidiary | 3 | 3 | 10 | 10 | |||||||||||||||||||
Comprehensive Income (Loss) Attributable to Common Shareholders | $ | (1,090) | $ | 83 | $ | (572) | $ | (1,518) | |||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||||||||||||||
11
PG&E CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| (Unaudited) | |||||||||||
| Balance At | |||||||||||
| (in millions) | September 30, 2021 | December 31, 2020 | |||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 420 | $ | 484 | |||||||
| Restricted cash | 11 | 143 | |||||||||
| Accounts receivable: | |||||||||||
Customers (net of allowance for doubtful accounts of $306 million and $146 million at respective dates) (includes $1.59 billion and $1.63 billion related to VIEs, net of allowance for doubtful accounts of $306 million and $143 million at respective dates) | 1,817 | 1,883 | |||||||||
Accrued unbilled revenue (includes $1.03 billion and $959 million related to VIEs at respective dates) | 1,140 | 1,083 | |||||||||
| Regulatory balancing accounts | 2,905 | 2,001 | |||||||||
| Other | 2,022 | 1,172 | |||||||||
| Regulatory assets | 724 | 410 | |||||||||
| Inventories: | |||||||||||
| Gas stored underground and fuel oil | 47 | 95 | |||||||||
| Materials and supplies | 522 | 533 | |||||||||
| Wildfire Fund asset | 461 | 464 | |||||||||
| Other | 1,458 | 1,334 | |||||||||
| Total current assets | 11,527 | 9,602 | |||||||||
| Property, Plant, and Equipment | |||||||||||
| Electric | 69,570 | 66,982 | |||||||||
| Gas | 25,306 | 24,135 | |||||||||
| Construction work in progress | 3,186 | 2,757 | |||||||||
| Other | 20 | 20 | |||||||||
| Total property, plant, and equipment | 98,082 | 93,894 | |||||||||
| Accumulated depreciation | (28,691) | (27,758) | |||||||||
| Net property, plant, and equipment | 69,391 | 66,136 | |||||||||
| Other Noncurrent Assets | |||||||||||
| Regulatory assets | 9,479 | 8,978 | |||||||||
| Nuclear decommissioning trusts | 3,670 | 3,538 | |||||||||
| Operating lease right of use asset | 1,316 | 1,741 | |||||||||
| Wildfire Fund asset | 5,428 | 5,816 | |||||||||
| Income taxes receivable | 68 | 67 | |||||||||
Other (includes net noncurrent accounts receivable of $271 million and $0 related to VIEs, net of noncurrent allowance for doubtful accounts of $51 million and $0 at respective dates) | 2,682 | 1,978 | |||||||||
| Total other noncurrent assets | 22,643 | 22,118 | |||||||||
| TOTAL ASSETS | $ | 103,561 | $ | 97,856 | |||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||
12
PG&E CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| | (Unaudited) | ||||||||||
| Balance At | |||||||||||
| (in millions, except share amounts) | September 30, 2021 | December 31, 2020 | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
Current Liabilities | |||||||||||
| Short-term borrowings | $ | 2,470 | $ | 3,547 | |||||||
| Long-term debt, classified as current | 4,518 | 28 | |||||||||
| Accounts payable: | |||||||||||
| Trade creditors | 2,697 | 2,402 | |||||||||
| Regulatory balancing accounts | 1,139 | 1,245 | |||||||||
| Other | 655 | 580 | |||||||||
| Operating lease liabilities | 461 | 533 | |||||||||
| Interest payable | 305 | 498 | |||||||||
| Disputed claims and customer refunds | — | 242 | |||||||||
| Wildfire-related claims | 2,758 | 2,250 | |||||||||
| Other | 2,781 | 2,256 | |||||||||
| Total current liabilities | 17,784 | 13,581 | |||||||||
| Noncurrent Liabilities | |||||||||||
Long-term debt (includes $1.0 billion related to VIEs at respective dates) | 35,959 | 37,288 | |||||||||
| Regulatory liabilities | 11,661 | 10,424 | |||||||||
| Pension and other post-retirement benefits | 2,329 | 2,444 | |||||||||
| Asset retirement obligations | 6,620 | 6,412 | |||||||||
| Deferred income taxes | 2,997 | 1,398 | |||||||||
| Operating lease liabilities | 878 | 1,208 | |||||||||
| Other | 4,606 | 3,848 | |||||||||
| Total noncurrent liabilities | 65,050 | 63,022 | |||||||||
| Equity | |||||||||||
| Shareholders’ Equity | |||||||||||
Common stock, no par value, authorized 3,600,000,000 shares at respective dates; 1,985,369,201 and 1,984,678,673 shares outstanding at respective dates | 35,114 | 30,224 | |||||||||
Treasury stock, at cost; 477,743,590 and 0 shares at respective dates | (4,854) | — | |||||||||
| Reinvested earnings | (9,760) | (9,196) | |||||||||
| Accumulated other comprehensive loss | (25) | (27) | |||||||||
Total shareholders’ equity | 20,475 | 21,001 | |||||||||
| Noncontrolling Interest - Preferred Stock of Subsidiary | 252 | 252 | |||||||||
| Total equity | 20,727 | 21,253 | |||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 103,561 | $ | 97,856 | |||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||
13
PG&E CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| (Unaudited) | |||||||||||
| Nine Months Ended September 30, | |||||||||||
| (in millions) | 2021 | 2020 | |||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net loss | $ | (564) | $ | (1,508) | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation, amortization, and decommissioning | 2,540 | 2,574 | |||||||||
| Bad debt expense | 280 | 96 | |||||||||
| Allowance for equity funds used during construction | (96) | (43) | |||||||||
| Deferred income taxes and tax credits, net | 1,607 | 923 | |||||||||
| Reorganization items, net (Note 2) | (71) | 1,597 | |||||||||
| Wildfire Fund expense | 399 | 293 | |||||||||
| Disallowed capital expenditures | — | 16 | |||||||||
| Other | 232 | 164 | |||||||||
| Effect of changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (158) | (1,012) | |||||||||
| Wildfire-related receivables | (790) | 1,657 | |||||||||
| Inventories | (5) | (12) | |||||||||
| Accounts payable | 242 | 465 | |||||||||
| Wildfire-related claims | 508 | (16,800) | |||||||||
| Other current assets and liabilities | (254) | (1,557) | |||||||||
| Regulatory assets, liabilities, and balancing accounts, net | (1,174) | (1,393) | |||||||||
| Liabilities subject to compromise | — | 413 | |||||||||
| Contributions to Wildfire Fund | — | (5,008) | |||||||||
| Other noncurrent assets and liabilities | (643) | (84) | |||||||||
| Net cash provided by (used in) operating activities | 2,053 | (19,219) | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Capital expenditures | (5,468) | (5,475) | |||||||||
| Proceeds from sale of SFGO | 749 | — | |||||||||
| Proceeds from sales and maturities of nuclear decommissioning trust investments | 1,176 | 1,144 | |||||||||
| Purchases of nuclear decommissioning trust investments | (1,187) | (1,203) | |||||||||
| Other | 52 | 10 | |||||||||
Net cash used in investing activities | (4,678) | (5,524) | |||||||||
| Cash Flows from Financing Activities | |||||||||||
Proceeds from debtor-in-possession credit facility | — | 500 | |||||||||
| Repayments of debtor-in-possession credit facility | — | (2,000) | |||||||||
Debtor-in-possession credit facility debt issuance costs | — | (3) | |||||||||
| Bridge facility financing fees | — | (73) | |||||||||
| Pre-petition long-term debt repaid | — | (750) | |||||||||
| Borrowings under credit facilities | 6,687 | 2,420 | |||||||||
| Repayments under credit facilities | (7,772) | (1,480) | |||||||||
| Borrowings under term loan credit facilities | — | 3,000 | |||||||||
| Credit facilities financing fees | — | (22) | |||||||||
Proceeds from issuance of long-term debt, net of discount and issuance costs of $47 and $178 at respective dates | 3,171 | 13,497 | |||||||||
14
| Repayment of long-term debt | (21) | (7) | |||||||||
| Proceeds from sale of future revenue from transmission tower license sales, net of fees | 370 | — | |||||||||
| Exchanged debt financing fees | — | (103) | |||||||||
| Common stock issued, net of issuance costs | — | 7,582 | |||||||||
| Equity Units issued | — | 1,304 | |||||||||
| Other | (6) | (20) | |||||||||
| Net cash provided by financing activities | 2,429 | 23,845 | |||||||||
| Net change in cash, cash equivalents, and restricted cash | (196) | (898) | |||||||||
| Cash, cash equivalents, and restricted cash at January 1 | 627 | 1,577 | |||||||||
| Cash, cash equivalents, and restricted cash at September 30 | $ | 431 | $ | 679 | |||||||
| Less: Restricted cash and restricted cash equivalents | (11) | (215) | |||||||||
| Cash and cash equivalents at September 30 | $ | 420 | $ | 464 | |||||||
| Supplemental disclosures of cash flow information | |||||||||||
| Cash received (paid) for: | |||||||||||
| Interest, net of amounts capitalized | $ | (1,229) | $ | (1,372) | |||||||
| Income taxes, net | 12 | — | |||||||||
Supplemental disclosures of noncash investing and financing activities | |||||||||||
| Capital expenditures financed through accounts payable | $ | 963 | $ | 404 | |||||||
| Operating lease liabilities arising from obtaining right-of-use assets | 47 | 13 | |||||||||
| Common stock issued in satisfaction of liabilities | — | 8,276 | |||||||||
| Increase to PG&E Corporation common stock and treasury stock in connection with the PG&E Fire Victim Trust Share Exchange and Tax Matters Agreement | 4,854 | — | |||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||
15
PG&E CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
| Common Stock | Treasury Stock | Reinvested Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | Non- controlling Interest - Preferred Stock of Subsidiary | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except share amounts) | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 1,984,678,673 | $ | 30,224 | — | $ | — | $ | (9,196) | $ | (27) | $ | 21,001 | $ | 252 | $ | 21,253 | |||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 123 | — | 123 | — | 123 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 1 | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued, net | 427,030 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation amortization | — | 2 | — | — | — | — | 2 | — | 2 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | 1,985,105,703 | $ | 30,226 | — | $ | — | $ | (9,073) | $ | (26) | $ | 21,127 | $ | 252 | $ | 21,379 | |||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 401 | — | 401 | — | 401 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued, net | 167,345 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation amortization | — | 19 | — | — | — | — | 19 | — | 19 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 1,985,273,048 | $ | 30,245 | — | $ | — | $ | (8,672) | $ | (26) | $ | 21,547 | $ | 252 | $ | 21,799 | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (1,088) | — | (1,088) | — | (1,088) | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 1 | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued, net | 96,153 | 4,854 | — | — | — | — | 4,854 | — | 4,854 | ||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock acquired | — | — | 477,743,590 | (4,854) | — | — | (4,854) | — | (4,854) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation amortization | — | 15 | — | — | — | — | 15 | — | 15 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | 1,985,369,201 | $ | 35,114 | 477,743,590 | $ | (4,854) | $ | (9,760) | $ | (25) | $ | 20,475 | $ | 252 | $ | 20,727 | |||||||||||||||||||||||||||||||||||||
| (in millions, except share amounts) | Common Stock Shares | Common Stock Amount | Reinvested Earnings | Accumulated Other Comprehensive (Loss) | Total Shareholders’ Equity | Non- controlling Interest - Preferred Stock of Subsidiary | Total Equity | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | 529,236,741 | $ | 13,038 | $ | (7,892) | $ | (10) | $ | 5,136 | $ | 252 | $ | 5,388 | ||||||||||||||||||||||||||||
| Net income | — | — | 374 | — | 374 | — | 374 | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Common stock issued, net | 549,155 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Stock-based compensation amortization | — | (3) | — | — | (3) | — | (3) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2020 | 529,785,896 | $ | 13,035 | $ | (7,518) | $ | (10) | $ | 5,507 | $ | 252 | $ | 5,759 | ||||||||||||||||||||||||||||
| Net loss | — | — | (1,968) | — | (1,968) | — | (1,968) | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Common stock issued, net | 7,459 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Stock-based compensation amortization | — | 10 | — | — | 10 | — | 10 | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | 529,793,355 | $ | 13,045 | $ | (9,486) | $ | (10) | $ | 3,549 | $ | 252 | $ | 3,801 | ||||||||||||||||||||||||||||
| Net income | — | — | 86 | — | 86 | — | 86 | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Common stock issued, net | 1,454,768,680 | 15,855 | — | — | 15,855 | — | 15,855 | ||||||||||||||||||||||||||||||||||
| Equity units issued | — | 1,304 | — | — | 1,304 | — | 1,304 | ||||||||||||||||||||||||||||||||||
| Stock-based compensation amortization | — | 18 | — | — | 18 | — | 18 | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | 1,984,562,035 | $ | 30,222 | $ | (9,400) | $ | (10) | $ | 20,812 | $ | 252 | $ | 21,064 | ||||||||||||||||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | ||
16
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||
| Electric | $ | 4,181 | $ | 3,810 | $ | 11,527 | $ | 10,285 | |||||||||||||||
| Natural gas | 1,284 | 1,072 | 3,869 | 3,436 | |||||||||||||||||||
| Total operating revenues | 5,465 | 4,882 | 15,396 | 13,721 | |||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Cost of electricity | 1,133 | 1,114 | 2,570 | 2,418 | |||||||||||||||||||
| Cost of natural gas | 176 | 90 | 670 | 508 | |||||||||||||||||||
| Operating and maintenance | 2,793 | 2,311 | 7,705 | 6,421 | |||||||||||||||||||
| Wildfire-related claims, net of recoveries | 94 | 25 | 261 | 195 | |||||||||||||||||||
| Wildfire Fund expense | 162 | 120 | 399 | 293 | |||||||||||||||||||
| Depreciation, amortization, and decommissioning | 801 | 845 | 2,540 | 2,574 | |||||||||||||||||||
| Total operating expenses | 5,159 | 4,505 | 14,145 | 12,409 | |||||||||||||||||||
| Operating Income | 306 | 377 | 1,251 | 1,312 | |||||||||||||||||||
| Interest income | — | 5 | 17 | 33 | |||||||||||||||||||
| Interest expense | (342) | (323) | (1,032) | (764) | |||||||||||||||||||
| Other income, net | 133 | 101 | 390 | 287 | |||||||||||||||||||
Reorganization items, net | — | (82) | (12) | (286) | |||||||||||||||||||
| Income Before Income Taxes | 97 | 78 | 614 | 582 | |||||||||||||||||||
| Income tax provision (benefit) | 1,139 | (92) | 1,039 | 434 | |||||||||||||||||||
| Net Income (Loss) | (1,042) | 170 | (425) | 148 | |||||||||||||||||||
| Preferred stock dividend requirement | 3 | 3 | 10 | 10 | |||||||||||||||||||
| Income (Loss) Attributable to Common Stock | $ | (1,045) | $ | 167 | $ | (435) | $ | 138 | |||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||||||||||||||
17
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net Income (Loss) | $ | (1,042) | $ | 170 | $ | (425) | $ | 148 | |||||||||||||||
| Other Comprehensive Income | |||||||||||||||||||||||
Pension and other post-retirement benefit plans obligations (net of taxes of $0, $0, $0, and $0, respectively) | — | 1 | — | 1 | |||||||||||||||||||
| Total other comprehensive income | — | 1 | — | 1 | |||||||||||||||||||
| Comprehensive Income (Loss) | $ | (1,042) | $ | 171 | $ | (425) | $ | 149 | |||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||||||||||||||
18
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
| (Unaudited) | |||||||||||
| Balance At | |||||||||||
| (in millions) | September 30, 2021 | December 31, 2020 | |||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 269 | $ | 261 | |||||||
| Restricted cash | 11 | 143 | |||||||||
| Accounts receivable: | |||||||||||
Customers (net of allowance for doubtful accounts of $306 million and $146 million at respective dates) (includes $1.59 billion and $1.63 billion related to VIEs, net of allowance for doubtful accounts of $306 million and $143 million at respective dates) | 1,817 | 1,883 | |||||||||
Accrued unbilled revenue (includes $1.03 billion and $959 million related to VIEs at respective dates) | 1,140 | 1,083 | |||||||||
| Regulatory balancing accounts | 2,905 | 2,001 | |||||||||
| Other | 2,171 | 1,180 | |||||||||
| Regulatory assets | 724 | 410 | |||||||||
| Inventories: | |||||||||||
| Gas stored underground and fuel oil | 47 | 95 | |||||||||
| Materials and supplies | 522 | 533 | |||||||||
| Wildfire Fund asset | 461 | 464 | |||||||||
| Other | 1,445 | 1,321 | |||||||||
| Total current assets | 11,512 | 9,374 | |||||||||
| Property, Plant, and Equipment | |||||||||||
| Electric | 69,570 | 66,982 | |||||||||
| Gas | 25,306 | 24,135 | |||||||||
| Construction work in progress | 3,186 | 2,757 | |||||||||
| Other | 18 | 18 | |||||||||
| Total property, plant, and equipment | 98,080 | 93,892 | |||||||||
| Accumulated depreciation | (28,689) | (27,756) | |||||||||
| Net property, plant, and equipment | 69,391 | 66,136 | |||||||||
| Other Noncurrent Assets | |||||||||||
| Regulatory assets | 9,479 | 8,978 | |||||||||
| Nuclear decommissioning trusts | 3,670 | 3,538 | |||||||||
| Operating lease right of use asset | 1,313 | 1,736 | |||||||||
| Wildfire Fund asset | 5,428 | 5,816 | |||||||||
| Income taxes receivable | 67 | 66 | |||||||||
Other (includes net noncurrent accounts receivable of $271 million and $0 related to VIEs, net of noncurrent allowance for doubtful accounts of $51 million and $0 at respective dates) | 2,524 | 1,818 | |||||||||
| Total other noncurrent assets | 22,481 | 21,952 | |||||||||
| TOTAL ASSETS | $ | 103,384 | $ | 97,462 | |||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||
19
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
| (Unaudited) | |||||||||||
| Balance At | |||||||||||
| (in millions. except share amounts) | September 30, 2021 | December 31, 2020 | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Short-term borrowings | $ | 2,470 | $ | 3,547 | |||||||
| Long-term debt, classified as current | 4,491 | — | |||||||||
| Accounts payable: | |||||||||||
| Trade creditors | 2,695 | 2,366 | |||||||||
| Regulatory balancing accounts | 1,139 | 1,245 | |||||||||
| Other | 661 | 624 | |||||||||
| Operating lease liabilities | 459 | 530 | |||||||||
| Interest payable | 279 | 444 | |||||||||
| Disputed claims and customer refunds | — | 242 | |||||||||
| Wildfire-related claims | 2,758 | 2,250 | |||||||||
| Other | 2,778 | 2,248 | |||||||||
| Total current liabilities | 17,730 | 13,496 | |||||||||
| Noncurrent Liabilities | |||||||||||
Long-term debt (includes $1.0 billion related to VIEs at respective dates) | 31,366 | 32,664 | |||||||||
| Regulatory liabilities | 11,661 | 10,424 | |||||||||
| Pension and other post-retirement benefits | 2,219 | 2,328 | |||||||||
| Asset retirement obligations | 6,620 | 6,412 | |||||||||
| Deferred income taxes | 3,214 | 1,570 | |||||||||
| Operating lease liabilities | 877 | 1,206 | |||||||||
| Other | 4,646 | 3,886 | |||||||||
| Total noncurrent liabilities | 60,603 | 58,490 | |||||||||
| Shareholders’ Equity | |||||||||||
| Preferred stock | 258 | 258 | |||||||||
Common stock, $5 par value, authorized 800,000,000 shares; 264,374,809 shares outstanding at respective dates | 1,322 | 1,322 | |||||||||
| Additional paid-in capital | 28,286 | 28,286 | |||||||||
| Reinvested earnings | (4,810) | (4,385) | |||||||||
| Accumulated other comprehensive loss | (5) | (5) | |||||||||
| Total shareholders’ equity | 25,051 | 25,476 | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 103,384 | $ | 97,462 | |||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||
20
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| (Unaudited) | |||||||||||
| Nine Months Ended September 30, | |||||||||||
| (in millions) | 2021 | 2020 | |||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net income (loss) | $ | (425) | $ | 148 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation, amortization, and decommissioning | 2,540 | 2,574 | |||||||||
| Bad debt expense | 280 | 96 | |||||||||
| Allowance for equity funds used during construction | (96) | (43) | |||||||||
| Deferred income taxes and tax credits, net | 1,651 | 961 | |||||||||
| Reorganization items, net (Note 2) | (38) | 3 | |||||||||
| Wildfire Fund expense | 399 | 293 | |||||||||
| Disallowed capital expenditures | — | 16 | |||||||||
| Other | 180 | 141 | |||||||||
| Effect of changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (154) | (987) | |||||||||
| Wildfire-related receivables | (790) | 1,657 | |||||||||
| Inventories | (5) | (12) | |||||||||
| Accounts payable | 206 | 423 | |||||||||
| Wildfire-related claims | 508 | (16,800) | |||||||||
| Other current assets and liabilities | (220) | (1,594) | |||||||||
| Regulatory assets, liabilities, and balancing accounts, net | (1,174) | (1,393) | |||||||||
| Liabilities subject to compromise | — | 401 | |||||||||
| Contributions to Wildfire Fund | — | (5,008) | |||||||||
| Other noncurrent assets and liabilities | (642) | (46) | |||||||||
| Net cash provided by (used in) operating activities | 2,220 | (19,170) | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Capital expenditures | (5,468) | (5,475) | |||||||||
Proceeds from sale of SFGO | 749 | — | |||||||||
| Proceeds from sales and maturities of nuclear decommissioning trust investments | 1,176 | 1,144 | |||||||||
| Purchases of nuclear decommissioning trust investments | (1,187) | (1,203) | |||||||||
| Intercompany note to PG&E Corporation | (145) | — | |||||||||
| Other | 52 | 10 | |||||||||
Net cash used in investing activities | (4,823) | (5,524) | |||||||||
| Cash Flows from Financing Activities | |||||||||||
Proceeds from debtor-in-possession credit facility | — | 500 | |||||||||
| Repayments of debtor-in-possession credit facility | — | (2,000) | |||||||||
Debtor-in-possession credit facility debt issuance costs | — | (3) | |||||||||
| Bridge facility financing fees | — | (33) | |||||||||
| Pre-petition long-term debt repaid | — | (100) | |||||||||
| Borrowings under credit facilities | 6,687 | 2,420 | |||||||||
| Repayments under credit facilities | (7,772) | (1,480) | |||||||||
21
| Borrowings under term loan credit facilities | — | 3,000 | |||||||||
| Credit facilities financing fees | — | (22) | |||||||||
Proceeds from issuance of long-term debt, net of discount and issuance costs of $47 and $88 at respective dates | 3,171 | 8,837 | |||||||||
| Proceeds from sale of future revenue from transmission tower license sales, net of fees | 370 | — | |||||||||
| Exchanged debt financing fees | — | (103) | |||||||||
| Equity contribution from PG&E Corporation | — | 12,986 | |||||||||
| Other | 23 | (20) | |||||||||
| Net cash provided by financing activities | 2,479 | 23,982 | |||||||||
| Net change in cash, cash equivalents, and restricted cash | (124) | (712) | |||||||||
| Cash, cash equivalents, and restricted cash at January 1 | 404 | 1,129 | |||||||||
| Cash, cash equivalents, and restricted cash at September 30 | $ | 280 | $ | 417 | |||||||
| Less: Restricted cash and restricted cash equivalents | (11) | (215) | |||||||||
| Cash and cash equivalents at September 30 | $ | 269 | $ | 202 | |||||||
| Supplemental disclosures of cash flow information | |||||||||||
| Cash received (paid) for: | |||||||||||
| Interest, net of amounts capitalized | $ | (1,046) | $ | (1,305) | |||||||
| Income taxes, net | 12 | — | |||||||||
| Supplemental disclosures of noncash investing and financing activities | |||||||||||
| Capital expenditures financed through accounts payable | $ | 963 | $ | 404 | |||||||
| Operating lease liabilities arising from obtaining right-of-use assets | 47 | 13 | |||||||||
| Common stock equity infusion from PG&E Corporation used to satisfy liabilities | — | 6,750 | |||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | |||||||||||
22
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| (in millions) | Preferred Stock | Common Stock Amount | Additional Paid-in Capital | Reinvested Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | 258 | $ | 1,322 | $ | 28,286 | $ | (4,385) | $ | (5) | $ | 25,476 | |||||||||||||||||||||||
| Net income | — | — | — | 177 | — | 177 | |||||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | 258 | $ | 1,322 | $ | 28,286 | $ | (4,208) | $ | (5) | $ | 25,653 | |||||||||||||||||||||||
| Net income | — | — | — | 440 | — | 440 | |||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | 258 | $ | 1,322 | $ | 28,286 | $ | (3,768) | $ | (5) | $ | 26,093 | |||||||||||||||||||||||
| Net loss | — | — | — | (1,042) | — | (1,042) | |||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | 258 | $ | 1,322 | $ | 28,286 | $ | (4,810) | $ | (5) | $ | 25,051 | |||||||||||||||||||||||
| (in millions) | Preferred Stock | Common Stock Amount | Additional Paid-in Capital | Reinvested Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||
| Balance at December 31, 2019 | $ | 258 | $ | 1,322 | $ | 8,550 | $ | (4,796) | $ | 1 | $ | 5,335 | |||||||||||||||||||||||
| Net income | — | — | — | 451 | — | 451 | |||||||||||||||||||||||||||||
| Balance at March 31, 2020 | $ | 258 | $ | 1,322 | $ | 8,550 | $ | (4,345) | $ | 1 | $ | 5,786 | |||||||||||||||||||||||
| Net loss | — | — | — | (473) | — | (473) | |||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | 258 | $ | 1,322 | $ | 8,550 | $ | (4,818) | $ | 1 | $ | 5,313 | |||||||||||||||||||||||
| Net income | — | — | — | 170 | — | 170 | |||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | 1 | 1 | |||||||||||||||||||||||||||||
| Equity contribution | — | — | 19,736 | — | — | 19,736 | |||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | 258 | $ | 1,322 | $ | 28,286 | $ | (4,648) | $ | 2 | $ | 25,220 | |||||||||||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. | ||
23
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Organization and Basis of Presentation
PG&E Corporation is a holding company whose primary operating subsidiary is Pacific Gas and Electric Company, a public utility serving northern and central California. The Utility generates revenues mainly through the sale and delivery 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 quarterly report on Form 10-Q is a combined report of PG&E Corporation and the Utility. PG&E Corporation’s Condensed Consolidated Financial Statements include the accounts of PG&E Corporation, the Utility, and other wholly owned and controlled subsidiaries. The Utility’s Condensed Consolidated Financial Statements include the accounts of the Utility and its wholly owned and controlled subsidiaries. All intercompany transactions have been eliminated in consolidation. The Notes to the Condensed Consolidated Financial Statements apply to both PG&E Corporation and the Utility. PG&E Corporation and the Utility assess financial performance and allocate resources on a consolidated basis (i.e., the companies operate in one segment).
The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with GAAP and in accordance with the interim period reporting requirements of Form 10-Q and reflect all adjustments that management believes are necessary for the fair presentation of PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash flows for the periods presented. The information at December 31, 2020 in the Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets in Item 8 of the 2020 Form 10-K. This quarterly report should be read in conjunction with the 2020 Form 10-K.
The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Some of the more significant estimates and assumptions relate to the Utility’s regulatory assets and liabilities, wildfire-related liabilities, legal and regulatory contingencies, the Wildfire Fund, environmental remediation liabilities, AROs, wildfire-related receivables, and pension and other post-retirement benefit plan obligations. Management believes that its estimates and assumptions reflected in the Condensed Consolidated Financial Statements are appropriate and reasonable. A change in management’s estimates or assumptions could result in an adjustment that would have a material impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows during the period in which such change occurred.
NOTE 2: BANKRUPTCY FILING
Chapter 11 Proceedings
On the Petition Date, PG&E Corporation and the Utility commenced the Chapter 11 Cases with the Bankruptcy Court. Prior to the Effective Date, PG&E Corporation and the Utility continued to operate their business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On June 20, 2020, the Bankruptcy Court entered the Confirmation Order confirming the Plan filed on June 19, 2020. PG&E Corporation and the Utility emerged from Chapter 11 on the Effective Date of July 1, 2020.
Except as otherwise set forth in the Plan, the Confirmation Order or another order of the Bankruptcy Court, substantially all pre-petition liabilities were discharged under the Plan.
24
Unresolved Chapter 11 Claims
PG&E Corporation and the Utility have received over 100,000 proofs of claim since the Petition Date, of which approximately 80,000 were channeled to the Subrogation Wildfire Trust and Fire Victim Trust. The claims channeled to the Subrogation Wildfire Trust and Fire Victim Trust will be resolved by such trusts, and PG&E Corporation and the Utility have no further liability in connection with such claims. PG&E Corporation and the Utility continue their review and analysis of certain remaining claims, including asserted litigation claims, trade creditor claims, along with other tax and regulatory claims, and therefore the ultimate liability of PG&E Corporation or the Utility for such claims may differ from the amounts asserted in such claims. Allowed claims are paid in accordance with the Plan and the Confirmation Order. Amounts expected to be allowed are reflected as current or noncurrent liabilities in the Condensed Consolidated Balance Sheets.
The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation, other than as provided in the Plan or the Confirmation Order.
However, holders of certain claims may assert that they are entitled under the Plan or the Bankruptcy Code to pursue, or continue to pursue, their claims against PG&E Corporation and the Utility on or after the Effective Date, including claims arising from or relating to indemnification or contribution claims, including with respect to the wildfire that began on November 8, 2018 near the city of Paradise, Butte County, California (the “2018 Camp fire”), the 2017 Northern California wildfires, and the wildfire that began September 9, 2015 in Amador and Calaveras counties in Northern California (the “2015 Butte fire”).
In addition, Subordinated Debt Claims and HoldCo Rescission or Damage Claims continue to be pursued against PG&E Corporation and the Utility in the claims reconciliation process in the Bankruptcy Court, and claims against certain former directors and current and former officers, as well as certain underwriters, are being pursued in the purported securities class action that is further described in Note 10 under the heading “Securities Class Action Litigation.”
In addition to filing objections in the Bankruptcy Court to claims with respect to which PG&E Corporation and the Utility do not believe they have liability, PG&E Corporation and the Utility are working to resolve certain disputed general unsecured claims before a panel of mediators. On April 5, 2021, the Bankruptcy Court entered an order extending the deadline for PG&E Corporation and the Utility to object to claims to December 23, 2021, except for some claims filed by the United States and by Cal Fire, for which the Bankruptcy Court has approved stipulations extending the objection deadline to November or December 2021, depending on the claim. On October 19, 2021, PG&E Corporation and the Utility filed a motion for entry of an order further extending the deadline for PG&E Corporation and the Utility to object to claims through and including June 21, 2022, which motion is pending before the Bankruptcy Court.
Various electricity suppliers filed claims in the Utility’s 2001 prior proceeding filed under Chapter 11 of the Bankruptcy Code seeking payment for energy supplied to the Utility’s customers between May 2000 and June 2001. While the FERC and judicial proceedings were pending, the Utility pursued settlements with electricity suppliers and entered into a number of settlement agreements with various electricity suppliers to resolve some of these disputed claims and to resolve the Utility’s refund claims against these electricity suppliers. On May 20, 2021, the FERC approved an uncontested filing that would result in a final market clearing and funds distribution associated with the issues relating to short-term electric energy sales in California between May 2000 and June 2001 that have been litigated at the FERC and in other forums. In August 2021, both the Utility’s and the California Power Exchange’s bankruptcy courts approved the final market clearing. As a result, the Utility expects to receive $143 million from the California Power Exchange and various escrows that were established as part of the disputed claims settlements, reflected in Accounts receivable – other on the Condensed Consolidated Balance Sheets. As such, as of September 30, 2021, the Condensed Consolidated Balance Sheets reflected $0 in net claims within Disputed claims and customer refunds compared to $242 million as of December 31, 2020. The Utility expects to refund current regulatory liabilities of $419 million, reflected in Current liabilities – other on the Condensed Consolidated Balance Sheets, $143 million of which would be funded from the California Power Exchange and various escrows discussed above.
25
Reorganization Items, Net
Reorganization items, net, represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of professional fees and financing costs, net of interest income and other. Cash paid for reorganization items, net was $0 and $9 million for PG&E Corporation and the Utility, respectively, during the three months ended September 30, 2021 as compared to $6 million and $93 million for PG&E Corporation and the Utility, respectively, during same period in 2020. Cash paid for reorganization items, net was $31 million and $50 million for PG&E Corporation and the Utility, respectively, during the nine months ended September 30, 2021 as compared to $96 million and $300 million for PG&E Corporation and the Utility, respectively, during the same period in 2020. There were no amounts recorded to reorganization items during the three months ended September 30, 2021. Reorganization items, net for the nine months ended September 30, 2021 and three and nine months ended September 30, 2020 include the following:
| Three Months Ended September 30, 2020 | |||||||||||||||||
(in millions) | Utility | PG&E Corporation (1) | PG&E Corporation Consolidated | ||||||||||||||
| Debtor-in-possession financing costs | $ | — | $ | — | $ | — | |||||||||||
| Legal and other | 90 | 55 | 145 | ||||||||||||||
| Interest income | (8) | — | (8) | ||||||||||||||
| Total reorganization items, net | $ | 82 | $ | 55 | $ | 137 | |||||||||||
(1) PG&E Corporation amounts reflected under the column “PG&E Corporation” exclude the accounts of the Utility.
| Nine Months Ended September 30, 2021 | |||||||||||||||||
| (in millions) | Utility | PG&E Corporation (1) | PG&E Corporation Consolidated | ||||||||||||||
| Debtor-in-possession financing costs | $ | — | $ | — | $ | — | |||||||||||
| Legal and other | 21 | (1) | 20 | ||||||||||||||
| Other | (9) | — | (9) | ||||||||||||||
| Total reorganization items, net | $ | 12 | $ | (1) | $ | 11 | |||||||||||
(1) PG&E Corporation amounts reflected under the column “PG&E Corporation” exclude the accounts of the Utility.
| Nine Months Ended September 30, 2020 | |||||||||||||||||
(in millions) | Utility | PG&E Corporation (1) | PG&E Corporation Consolidated | ||||||||||||||
| Debtor-in-possession financing costs | $ | 3 | $ | — | $ | 3 | |||||||||||
Legal and other (2) | 296 | 1,653 | 1,949 | ||||||||||||||
| Interest income | (13) | (2) | (15) | ||||||||||||||
| Total reorganization items, net | $ | 286 | $ | 1,651 | $ | 1,937 | |||||||||||
(1) PG&E Corporation amounts reflected under the column “PG&E Corporation” exclude the accounts of the Utility.
(2) Amount includes $1.5 billion in equity backstop premium expense, bridge loan facility fees, and trustee fees.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
For a summary of the significant accounting policies used by PG&E Corporation and the Utility, see Note 3 of the Notes to the Consolidated Financial Statements in Item 8 of the 2020 Form 10-K.
Variable Interest Entities
A VIE is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, or whose equity investors lack any characteristics of a controlling financial interest. An enterprise that has a controlling financial interest in a VIE is a primary beneficiary and is required to consolidate the VIE.
26
Consolidated VIE
The SPV created in connection with the Receivables Securitization Program (as defined below in Note 5) in October 2020 is a bankruptcy remote limited liability company wholly owned by the Utility, and its assets are not available to creditors of PG&E Corporation or the Utility. Pursuant to the Receivables Securitization Program, the Utility sells certain of its receivables and certain related rights to payment and obligations of the Utility with respect to such receivables, and certain other related rights to the SPV, which, in turn, obtains loans secured by the receivables from financial institutions (the “Lenders”). Amounts received from the Lenders, the pledged receivables and the corresponding debt are included in Accounts receivable, Other noncurrent assets and Long-term debt, respectively, on the Condensed Consolidated Balance Sheets. As of September 30, 2021, the aggregate principal amount of the loans made by the Lenders cannot exceed $1.0 billion outstanding at any time. On September 15, 2021, the Receivables Securitization Program was amended and extended to September 15, 2023.
The SPV is considered a VIE because its equity capitalization is insufficient to finance its activities. The most significant activities that impact the economic performance of the SPV are decisions made to manage receivables. The Utility is considered the primary beneficiary and consolidates the SPV as it makes these decisions. No additional financial support was provided to the SPV during the period ended September 30, 2021 or is expected to be provided in the future that was not previously contractually required. As of September 30, 2021 and December 31, 2020, the SPV had net accounts receivable of $2.9 billion and $2.6 billion, respectively, and outstanding borrowings of $1.0 billion and $1.0 billion, respectively, under the Receivables Securitization Program.
Non-Consolidated VIEs
Some of the counterparties to the Utility’s power purchase agreements are considered VIEs. Each of these VIEs was designed to own a power plant that would generate electricity for sale to the Utility. To determine whether the Utility was the primary beneficiary of any of these VIEs at September 30, 2021, it assessed whether it absorbs any of the VIE’s expected losses or receives any portion of the VIE’s expected residual returns under the terms of the power purchase agreement, analyzed the variability in the VIE’s gross margin, and considered whether it had any decision-making rights associated with the activities that are most significant to the VIE’s performance, such as dispatch rights and operating and maintenance activities. The Utility’s financial obligation is limited to the amount the Utility pays for delivered electricity and capacity. The Utility did not have any decision-making rights associated with any of the activities that are most significant to the economic performance of any of these VIEs. Since the Utility was not the primary beneficiary of any of these VIEs at September 30, 2021, it did not consolidate any of them.
Pension and Other Post-Retirement Benefits
PG&E Corporation and the Utility sponsor a non-contributory defined benefit pension plan and cash balance plan. Both plans are included in “Pension Benefits” below. Post-retirement medical and life insurance plans are included in “Other Benefits” below.
The net periodic benefit costs reflected in PG&E Corporation’s Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2021 and 2020 were as follows:
| Pension Benefits | Other Benefits | ||||||||||||||||||||||
| Three Months Ended September 30, | |||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Service cost for benefits earned (1) | $ | 147 | $ | 133 | $ | 15 | $ | 15 | |||||||||||||||
| Interest cost | 161 | 178 | 13 | 16 | |||||||||||||||||||
| Expected return on plan assets | (261) | (261) | (33) | (34) | |||||||||||||||||||
| Amortization of prior service cost | (1) | (1) | 3 | 3 | |||||||||||||||||||
| Amortization of net actuarial loss | 1 | 1 | (8) | (5) | |||||||||||||||||||
| Net periodic benefit cost | 47 | 50 | (10) | (5) | |||||||||||||||||||
Regulatory account transfer (2) | 37 | 34 | — | — | |||||||||||||||||||
| Total | $ | 84 | $ | 84 | $ | (10) | $ | (5) | |||||||||||||||
(1) A portion of service costs are capitalized pursuant to GAAP.
(2) The Utility recorded these amounts to a regulatory account since they are probable of recovery from, or refund to, customers in future rates.
27
| Pension Benefits | Other Benefits | ||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Service cost for benefits earned (1) | $ | 440 | $ | 397 | $ | 47 | $ | 46 | |||||||||||||||
| Interest cost | 484 | 535 | 39 | 47 | |||||||||||||||||||
| Expected return on plan assets | (784) | (783) | (103) | (103) | |||||||||||||||||||
| Amortization of prior service cost | (4) | (4) | 10 | 10 | |||||||||||||||||||
| Amortization of net actuarial loss | 4 | 3 | (24) | (15) | |||||||||||||||||||
| Net periodic benefit cost | 140 | 148 | (31) | (15) | |||||||||||||||||||
Regulatory account transfer (2) | 111 | 102 | — | — | |||||||||||||||||||
| Total | $ | 251 | $ | 250 | $ | (31) | $ | (15) | |||||||||||||||
(1) A portion of service costs are capitalized pursuant to GAAP.
(2) The Utility recorded these amounts to a regulatory account since they are probable of recovery from, or refund to, customers in future rates.
Non-service costs are reflected in Other income, net on the Condensed Consolidated Statements of Income. Service costs are reflected in Operating and maintenance on the Condensed Consolidated Statements of Income.
There was no material difference between PG&E Corporation and the Utility for the information disclosed above.
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (Loss)
The changes, net of income tax, in PG&E Corporation’s accumulated other comprehensive income (loss) consisted of the following:
| Pension Benefits | Other Benefits | Total | |||||||||||||||
| (in millions, net of income tax) | Three Months Ended September 30, 2021 | ||||||||||||||||
| Beginning balance | $ | (38) | $ | 17 | $ | (21) | |||||||||||
Amounts reclassified from other comprehensive income: (1) | |||||||||||||||||
Amortization of prior service cost (net of taxes of $0 and $1, respectively) | (1) | 2 | 1 | ||||||||||||||
Amortization of net actuarial loss (net of taxes of $0 and $3, respectively) | 1 | (5) | (4) | ||||||||||||||
Regulatory account transfer (net of taxes of $1 and $2, respectively) | 1 | 3 | 4 | ||||||||||||||
| Net current period other comprehensive gain (loss) | 1 | — | 1 | ||||||||||||||
| Ending balance | $ | (37) | $ | 17 | $ | (20) | |||||||||||
(1) These components are included in the computation of net periodic pension and other post-retirement benefit costs. (See the “Pension and Other Post-Retirement Benefits” table above for additional details.)
28
| Pension Benefits | Other Benefits | Total | |||||||||||||||
| (in millions, net of income tax) | Three Months Ended September 30, 2020 | ||||||||||||||||
| Beginning balance | $ | (22) | $ | 17 | $ | (5) | |||||||||||
Amounts reclassified from other comprehensive income: (1) | |||||||||||||||||
Amortization of prior service cost (net of taxes of $0 and $1, respectively) | (1) | 2 | 1 | ||||||||||||||
Amortization of net actuarial loss (net of taxes of $0 and $1, respectively) | 1 | (4) | (3) | ||||||||||||||
Regulatory account transfer (net of taxes of $1 and $0, respectively) | — | 2 | 2 | ||||||||||||||
| Net current period other comprehensive gain (loss) | — | ||||||||||||||||