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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2023

PG&E Corporation and the Utility measure their cash equivalents, trust assets, and price risk management instruments at fair value. A three-tier fair value hierarchy is established that prioritizes the inputs to valuation methodologies used to measure fair value:

•Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

•Level 2 – Other inputs that are directly or indirectly observable in the marketplace.

•Level 3 – Unobservable inputs which are supported by little or no market activities.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets and liabilities measured at fair value on a recurring basis for PG&E Corporation and the Utility are summarized below. Assets held in rabbi trusts are held by PG&E Corporation and not the Utility.


	Fair Value Measurements
	At September 30, 2023
(in millions)	Level 1		Level 2		Level 3		Netting (1)		Total
Assets:
Short-term investments	$	487	$	—	$	—	$	—	$	487

Nuclear decommissioning trusts
Short-term investments	125		—		—		—		125
Global equity securities	1,933		—		—		—		1,933
Fixed-income securities	1,112		855		—		—		1,967
Assets measured at NAV	—		—		—		—		16
Total nuclear decommissioning trusts (2)	3,170		855		—		—		4,041
Customer credit trust
Short-term investments	108		—		—		—		108
Global equity securities	92		—		—		—		92
Fixed-income securities	22		97		—		—		119
Total customer credit trust	222		97		—		—		319
Price risk management instruments (Note 8)
Electricity	—		13		326		1		340
Gas	—		20		—		9		29
Total price risk management instruments	—		33		326		10		369
Rabbi trusts
Short-term investments	98		—		—		—		98
Global equity securities	5		—		—		—		5

Life insurance contracts	—		66		—		—		66
Total rabbi trusts	103		66		—		—		169
Long-term disability trust
Short-term investments	6		—		—		—		6
Assets measured at NAV	—		—		—		—		110
Total long-term disability trust	6		—		—		—		116
TOTAL ASSETS	$	3,988	$	1,051	$	326	$	10	$	5,501
Liabilities:
Price risk management instruments (Note 8)
Electricity	$	—	$	29	$	188	$	(6)	$	211
Gas	—		18		—		(1)		17
TOTAL LIABILITIES	$	—	$	47	$	188	$	(7)	$	228

(1) Includes the effect of the contractual ability to settle contracts under master netting agreements and cash collateral.

(2) Represents amount before deducting $631 million primarily related to deferred taxes on appreciation of investment value.


	Fair Value Measurements
	December 31, 2022
(in millions)	Level 1		Level 2		Level 3		Netting (1)		Total
Assets:
Short-term investments	$	658	$	—	$	—	$	—	$	658
Fixed-income securities	—		49		—		—		49
Nuclear decommissioning trusts
Short-term investments	117		—		—		—		117
Global equity securities	1,845		—		—		—		1,845
Fixed-income securities	1,094		791		—		—		1,885
Assets measured at NAV	—		—		—		—		25
Total nuclear decommissioning trusts (2)	3,056		791		—		—		3,872
Customer credit trust
Short-term investments	19		—		—		—		19
Global equity securities	218		—		—		—		218
Fixed-income securities	216		292		—		—		508
Total customer credit trust	453		292		—		—		745
Price risk management instruments (Note 8)
Electricity	—		94		432		40		566
Gas	—		604		—		327		931
Total price risk management instruments	—		698		432		367		1,497
Rabbi trusts
Short-term investments	25		—		—		—		25
Global equity securities	5		—		—		—		5
Fixed-income securities	—		69		—		—		69
Life insurance contracts	—		64		—		—		64
Total rabbi trusts	30		133		—		—		163
Long-term disability trust
Short-term investments	10		—		—		—		10
Assets measured at NAV	—		—		—		—		133
Total long-term disability trust	10		—		—		—		143
TOTAL ASSETS	$	4,207	$	1,963	$	432	$	367	$	7,127
Liabilities:
Price risk management instruments (Note 8)
Electricity	$	—	$	10	$	233	$	(20)	$	223
Gas	—		172		—		(166)		6
TOTAL LIABILITIES	$	—	$	182	$	233	$	(186)	$	229

(1) Includes the effect of the contractual ability to settle contracts under master netting agreements and cash collateral.

(2) Represents amount before deducting $575 million, primarily related to deferred taxes on appreciation of investment value.

Valuation Techniques

The following describes the valuation techniques used to measure the fair value of the assets and liabilities shown in the tables above. There are no restrictions on the terms and conditions upon which the investments may be redeemed. There were no material transfers between any levels for the nine months ended September 30, 2023 and 2022.

Trust Assets

Assets Measured at Fair Value

In general, investments held in the trusts are exposed to various risks, such as interest rate, credit, and market volatility risks. Nuclear decommissioning trust assets, customer credit trust assets and other trust assets are composed primarily of equity and fixed-income securities and also include short-term investments that are money market funds classified as Level 1.

Global equity securities primarily include investments in common stock that are valued based on quoted prices in active markets and are classified as Level 1.

Fixed-income securities are primarily composed of U.S. government and agency securities, municipal securities, and other fixed-income securities, including corporate debt securities. U.S. government and agency securities primarily consist of U.S. Treasury securities that are classified as Level 1 because the fair value is determined by observable market prices in active markets. A market approach is generally used to estimate the fair value of fixed-income securities classified as Level 2 using evaluated pricing data such as broker quotes, for similar securities adjusted for observable differences. Significant inputs used in the valuation model generally include benchmark yield curves and issuer spreads. The external credit ratings, coupon rate, and maturity of each security are considered in the valuation model, as applicable.

Assets Measured at NAV Using Practical Expedient

Investments in the nuclear decommissioning trusts and the long-term disability trust that are measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy tables above. The fair value amounts are included in the tables above in order to reconcile to the amounts presented in the Condensed Consolidated Balance Sheets. These investments include commingled funds that are composed of equity securities traded publicly on exchanges as well as fixed-income securities that are composed primarily of U.S. government securities, credit securities and asset-backed securities.

Price Risk Management Instruments

Price risk management instruments include physical and financial derivative contracts, such as power purchase agreements, forwards, futures, swaps, options, and CRRs that are traded either on an exchange or over-the-counter.

Power purchase agreements, forwards, and swaps are valued using a discounted cash flow model. Exchange-traded futures that are valued using observable market forward prices for the underlying commodity are classified as Level 1. Over-the-counter forwards and swaps that are identical to exchange-traded futures, or are valued using forward prices from broker quotes that are corroborated with market data are classified as Level 2. Exchange-traded options are valued using observable market data and market-corroborated data and are classified as Level 2.

Long-dated power purchase agreements that are valued using significant unobservable data are classified as Level 3. These Level 3 contracts are valued using either estimated basis adjustments from liquid trading points or techniques, including extrapolation from observable prices, when a contract term extends beyond a period for which market data is available. The Utility utilizes models to derive pricing inputs for the valuation of the Utility’s Level 3 instruments using pricing inputs from brokers and historical data.

The Utility holds CRRs to hedge the financial risk of CAISO-imposed congestion charges in the day-ahead market. Limited market data is available in the CAISO auction and between auction dates; therefore, the Utility utilizes historical prices to forecast forward prices. CRRs are classified as Level 3.

Level 3 Measurements and Uncertainty Analysis

Inputs used and the fair value of Level 3 instruments are reviewed period-over-period and compared with market conditions to determine reasonableness.

Significant increases or decreases in any of those inputs would result in a significantly higher or lower fair value, respectively. All reasonable costs related to Level 3 instruments are expected to be recoverable through rates; therefore, there is no impact on net income resulting from changes in the fair value of these instruments. See Note 8 above.

Fair Value at

(in millions)

At September 30, 2023

Valuation
Technique

Unobservable
Input

Fair Value Measurement

Assets

Liabilities

Range (1)/Weighted-Average Price (2)

Congestion revenue rights

282

112

Market approach

CRR auction prices

$ (145.09) - 287.80 / 1.07

Power purchase agreements

Discounted cash flow

Forward prices

$ 1.49 - 187.10 / 59.85

(1) Represents price per MWh.

(2) Unobservable inputs were weighted by the relative fair value of the instruments.

Fair Value at

(in millions)

At December 31, 2022

Valuation
Technique

Unobservable
Input

Fair Value Measurement

Assets

Liabilities

Range (1)/Weighted-Average Price (2)

Congestion revenue rights

305

138

Market approach

CRR auction prices

$ (145.09) - 2,724.93 / 0.89

Power purchase agreements

127

Discounted cash flow

Forward prices

$ (6.39) - 286.75 / 78.14

(1) Represents price per MWh.

(2) Unobservable inputs were weighted by the relative fair value of the instruments.

Level 3 Reconciliation

The following table presents the reconciliation for Level 3 price risk management instruments for the three and nine months ended September 30, 2023 and 2022, respectively:


	Price Risk Management Instruments
(in millions)	2023		2022
Asset balance as of July 1	$	126	$	11
Net realized and unrealized gains:
Included in regulatory assets and liabilities or balancing accounts (1)	12		20
Asset balance as of September 30	$	138	$	31

(1) The costs related to price risk management activities are recovered through rates. Accordingly, unrealized gains and losses are deferred in regulatory liabilities and assets and net income is not impacted.


	Price Risk Management Instruments
(in millions)	2023		2022
Asset (Liability) balance as of January 1	$	199	$	(34)
Net realized and unrealized gains (losses):
Included in regulatory assets and liabilities or balancing accounts (1)	(61)		65
Asset balance as of September 30	$	138	$	31

Financial Instruments

PG&E Corporation and the Utility use the following methods and assumptions in estimating fair value for financial instruments: the fair values of cash, net accounts receivable, short-term borrowings, accounts payable, customer deposits, and the Utility’s variable rate pollution control bond loan agreements approximate their carrying values as of September 30, 2023 and December 31, 2022, as they are short-term in nature.

The carrying amount and fair value of PG&E Corporation’s and the Utility’s long-term debt instruments were as follows (the table below excludes financial instruments with carrying values that approximate their fair values):


	At September 30, 2023				At December 31, 2022
(in millions)	Carrying Amount		Level 2 Fair Value		Carrying Amount		Level 2 Fair Value
Debt (Note 4)
PG&E Corporation	$	4,379	$	4,450	$	4,355	$	4,490
Utility	35,246		29,313		32,847		27,666

Nuclear Decommissioning Trust Investments

The following table provides a summary of equity securities and available-for-sale debt securities:


(in millions)	Amortized Cost		Total Unrealized Gains		Total Unrealized Losses		Total Fair Value
As of September 30, 2023
Nuclear decommissioning trusts
Short-term investments	$	125	$	—	$	—	$	125
Global equity securities	377		1,584		(12)		1,949
Fixed-income securities	2,134		2		(169)		1,967
Total (1)	$	2,636	$	1,586	$	(181)	$	4,041
As of December 31, 2022
Nuclear decommissioning trusts
Short-term investments	$	117	$	—	$	—	$	117
Global equity securities	413		1,468		(11)		1,870
Fixed-income securities	1,991		10		(116)		1,885
Total (1)	$	2,521	$	1,478	$	(127)	$	3,872

(1) Represents amounts before deducting $631 million and $575 million as of September 30, 2023 and December 31, 2022, respectively, primarily related to deferred taxes on appreciation of investment value.

The fair value of fixed-income securities by contractual maturity is as follows:


	As of
(in millions)	September 30, 2023
Less than 1 year	$	3
1–5 years	636
5–10 years	463
More than 10 years	865
Total maturities of fixed-income securities	$	1,967

The following table provides a summary of activity for the fixed-income and equity securities:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Proceeds from sales and maturities of nuclear decommissioning trust investments	$	475	$	766	$	1,226	$	2,135
Gross realized gains on securities	30		21		72		158
Gross realized losses on securities	(15)		(40)		(33)		(105)

Customer Credit Trust

The following table provides a summary of equity securities and available-for-sale debt securities:


(in millions)	Amortized Cost		Total Unrealized Gains		Total Unrealized Losses		Total Fair Value
As of September 30, 2023
Customer credit trust
Short-term investments	$	108	$	—	$	—	$	108
Global equity securities	82		13		(3)		92
Fixed-income securities	123		—		(4)		119
Total	$	313	$	13	$	(7)	$	319
As of December 31, 2022
Customer credit trust
Short-term investments	$	19	$	—	$	—	$	19
Global equity securities	219		13		(14)		218
Fixed-income securities	516		—		(8)		508
Total	$	754	$	13	$	(22)	$	745

The fair value of fixed-income securities by contractual maturity is as follows:


	As of
(in millions)	September 30, 2023
Less than 1 year	$	—
1–5 years	31
5–10 years	27
More than 10 years	61
Total maturities of fixed-income securities	$	119

The following table provides a summary of activity for the fixed-income and equity securities:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Proceeds from sales and maturities of customer credit trust investments	$	151	$	79	$	455	$	79
Gross realized gains on securities	9		8		17		8
Gross realized losses on securities (1)	(6)		(18)		(16)		(18)

(1) Includes $4 million and $7 million of impaired debt securities which were written down to their respective fair values during the nine months ended September 30, 2023 and the three and nine months ended September 30, 2022, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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