New And Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

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.

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 March 31, 2016, 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 March 31, 2016, it did not consolidate any of them.

Asset Retirement Obligations

Detailed studies of the cost to decommission the Utility’s nuclear generation facilities are conducted every three years in conjunction with the Nuclear Decommissioning Cost Triennial Proceedings. On March 1, 2016, the Utility submitted its updated decommissioning cost estimate with the CPUC. The estimated undiscounted cost to decommission the Utility’s nuclear power plants increased by approximately $1.4 billion, for a total estimated cost of $4.8 billion, due to increased estimated costs related to spent fuel storage, staffing, and out-of-state waste disposal. Actual decommissioning costs may vary from these estimates as a result of changes in assumptions such as decommissioning dates; regulatory requirements; technology; and costs of labor, materials, and equipment. The Utility recovers its revenue requirements for decommissioning costs from customers through a non-bypassable charge that the Utility expects will continue until those costs are fully recovered. The Utility requested that the CPUC authorize the collection of increased annual revenue requirements beginning on January 1, 2017 based on these updated cost estimates.

The estimated nuclear decommissioning cost is discounted for GAAP purposes and recognized as an ARO on the Condensed Consolidated Balance Sheets. The total nuclear decommissioning obligation accrued in accordance with GAAP was $3.3 billion at March 31, 2016, which includes an $818 million adjustment to reflect the increased cost estimates described above, and $2.5 billion at December 31, 2015. These estimates are based on the 2016 decommissioning cost studies, prepared in accordance with the CPUC requirements. Changes in these estimates could materially affect the amount of the recorded ARO for these assets.

Pension And Other Postretirement Benefits

Pension and Other Postretirement 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 months ended March 31, 2016 and 2015 were as follows:

	Pension Benefits				Other Benefits
	Three Months Ended March 31,
(in millions)	2016		2015		2016		2015
Service cost for benefits earned	$	113	$	119	$	13	$	13
Interest cost		179		168		19		18
Expected return on plan assets		(207)		(218)		(27)		(28)
Amortization of prior service cost		2		4		4		5
Amortization of net actuarial loss		6		3		1		1
Net periodic benefit cost		93		76		10		9
Regulatory account transfer (1)		(8)		9		-		-
Total	$	85	$	85	$	10	$	9

(1) The Utility recorded these amounts to a regulatory account since they are probable of recovery from, or refund to, customers in future rates.

There was no material difference between PG&E Corporation and the Utility for the information disclosed above.

Amounts Reclassified Out of Accumulated Other Comprehensive Income

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

The changes, net of income tax, in PG&E Corporation’s accumulated other comprehensive income (loss) are summarized below:

	Pension		Other
	Benefits		Benefits		Total
(in millions, net of income tax)	Three Months Ended March 31, 2016
Beginning balance	$	(23)	$	16	$	(7)
Amounts reclassified from other comprehensive income: (1)
Amortization of prior service cost
(net of taxes of $1 and $2, respectively)		1		2		3
Amortization of net actuarial loss
(net of taxes of $2 and $0, respectively)		4		1		5
Regulatory account transfer
(net of taxes of $3 and $2, respectively)		(5)		(3)		(8)
Net current period other comprehensive loss		-		-		-
Ending balance	$	(23)	$	16	$	(7)

(1) These components are included in the computation of net periodic pension and other postretirement benefit costs. (See the “Pension and Other Postretirement Benefits” table above for additional details.)

	Pension		Other		Other
	Benefits		Benefits		Investments		Total
(in millions, net of income tax)	Three Months Ended March 31, 2015
Beginning balance	$	(21)		15		17		11
Amounts reclassified from other comprehensive income:
Amortization of prior service cost
(net of taxes of $2, $2, and $0, respectively) (1)		2		3		-		5
Amortization of net actuarial loss
(net of taxes of $1, $0, and $0, respectively) (1)		2		-		-		2
Regulatory account transfer
(net of taxes of $3, $2, and $0, respectively) (1)		(4)		(3)		-		(7)
Change in investments
(net of taxes of $0, $0, and $12, respectively)		-		-		(17)		(17)
Net current period other comprehensive loss		-		-		(17)		(17)
Ending balance	$	(21)	$	15	$	-	$	(6)

There was no material difference between PG&E Corporation and the Utility for the information disclosed above, with the exception of other investments which are held by PG&E Corporation.

- Definition

Disclosure of accounting policy for consolidation to describe the significant judgments and assumptions made in determining whether a variable interest held by the entity requires the variable interest entity to be consolidated and (or) disclose information about its involvement with the variable interest entity; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; and the significant factors considered and judgments made in determining that the power to direct the activities that significantly impact the economic performance of the variable interest entity are shared (as defined).

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- Definition

Disclosure of accounting policy for pension and other postretirement benefit plans. This accounting policy may address (1) the types of plans sponsored by the entity, and the benefits provided by each plan (2) groups that participate in (or are covered by) each plan (3) how plan assets, liabilities and expenses are measured, including the use of any actuaries and (4) significant assumptions used by the entity to value plan assets and liabilities and how such assumptions are derived.

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