New And Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

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 known as the VIE's primary beneficiary and is required to consolidate the VIE. In determining whether consolidation of a particular entity is required, PG&E Corporation and the Utility first evaluate whether the entity is a VIE. If the entity is a VIE, PG&E Corporation and the Utility use a qualitative approach to determine if either is the primary beneficiary of 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, 2014, 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, 2014, it did not consolidate any of them.

PG&E Corporation affiliates have entered into four tax equity agreements to fund residential and commercial retail solar energy installations with four separate privately held funds that are considered VIEs. Under these agreements, PG&E Corporation has made cumulative lease payments and investment contributions of $363 million from 2010 to 2014 to these companies in exchange for the right to receive benefits from local rebates, federal grants, and a share of the customer payments made to these companies. At March 31, 2014 and December 31, 2013, the carrying amount of PG&E Corporation's investment in these agreements was $93 million and $98 million, respectively. PG&E Corporation has no material remaining commitment to fund these agreements. PG&E Corporation determined that it does not have control over the companies' significant economic activities, such as the design of the companies, vendor selection, construction, and the ongoing operations of the companies. Since PG&E Corporation was not the primary beneficiary of any of these VIEs at March 31, 2014, it did not consolidate any of them.

Pension And Other Postretirement Benefits

Pension and Other Postretirement Benefits

PG&E Corporation and the Utility provide a non-contributory defined benefit pension plan for eligible employees, as well as contributory postretirement medical plans for retirees and their eligible dependents, and non-contributory postretirement life insurance plans for eligible employees and retirees.

The net periodic benefit costs reflected in PG&E Corporation's Condensed Consolidated Financial Statements for the three months ended March 31, 2014 and 2013 were as follows:

	Pension Benefits						Other Benefits
	Three Months Ended March 31,
(in millions)	2014			2013			2014			2013
Service cost for benefits earned	$	99		$	115		$	11		$	13
Interest cost		173			156			19			19
Expected return on plan assets		(202	)		(162	)		(26	)		(20	)
Amortization of prior service cost		5			5			6			6
Amortization of net actuarial loss		-			27			-			1
Net periodic benefit cost		75			141			10			19
Less: transfer to regulatory account ⁽¹⁾		9			(57	)		-			-
Total	$	84		$	84		$	10		$	19

⁽¹⁾ The Utility recorded these amounts to a regulatory account since they are probable of recovery from customers in futures 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			Other
	Benefits			Benefits			Investments		Total
(in millions, net of income tax)	Three Months Ended March 31, 2014
Beginning balance	$	(7	)	$	15		$	42	$	50
Other comprehensive income before reclassifications:
Gain on investments (net of taxes of $0, $0, and $4,
respectively)		-			-			5		5
Amounts reclassified from other comprehensive income: ⁽¹⁾
Amortization of prior service cost (net of taxes of
$2, $2, and $0, respectively)		3			4			-		7
Transfer to regulatory account (net of taxes of
$2, $2, and $0, respectively)		(3	)		(4	)		-		(7	)
Net current period other comprehensive income		-			-			5		5
Ending balance	$	(7)		$	15		$	47	$	55

⁽¹⁾ These components are included in the computation of net periodic pension and other postretirement 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, 2013
Beginning balance	$	(28	)	$	(77	)	$	4	$	(101	)
Other comprehensive income before reclassifications:
Gain on investments (net of taxes of $0, $0, and $4,
respectively)		-			-			6		6
Amounts reclassified from other comprehensive income: ⁽¹⁾
Amortization of prior service cost (net of taxes of
$2, $3, and $0, respectively)		3			3			-		6
Amortization of net actuarial loss (net of taxes of
$11, $0, and $0, respectively)		16			1			-		17
Transfer to regulatory account (net of taxes of
$13, $0, and $0, respectively)		(19	)		-			-		(19	)
Net current period other comprehensive income		-			4			6		10
Ending balance	$	(28)		$	(73)		$	10	$	(91)

- 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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