COMMON STOCK AND SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2023

Common Stock And Share-Based Compensation [Abstract]

COMMON STOCK AND SHARE-BASED COMPENSATION

COMMON STOCK AND SHARE-BASED COMPENSATION

PG&E Corporation had 2,133,597,758 shares of common stock outstanding at December 31, 2023, which excludes 477,743,590 shares of common stock owned by the Utility. PG&E Corporation held all of the Utility’s outstanding common stock at December 31, 2023.

Settlement of Equity Units

During 2020, PG&E Corporation issued 16 million PG&E Corporation equity units. The equity units represent the right of the unit holders to receive, on the settlement date, between 137 million and 168 million shares of PG&E Corporation common stock. The common stock received was based on the value of PG&E Corporation common stock over a measurement period specified in the purchase contract component of each equity unit and was subject to certain adjustments as provided therein. The common stock received by these unit holders was originally valued at approximately $1.3 billion and recognized in shareholders’ equity by PG&E Corporation upon the issuance of the equity units. During the year ended December 31, 2023, all equity units were settled, resulting in the issuance of 137 million shares of PG&E Corporation common stock, valued at approximately $1.3 billion.

Ownership Restrictions in PG&E Corporation’s Amended Articles

Under Section 382 of the IRC, if a corporation (or a consolidated group) undergoes an “ownership change,” net operating loss carryforwards and other tax attributes may be subject to certain limitations (which could limit PG&E Corporation or the Utility’s ability to use these DTAs to offset taxable income). In general, an ownership change occurs if the aggregate stock ownership of certain shareholders (generally five percent shareholders, applying certain look-through and aggregation rules) increases by more than 50% over such shareholders’ lowest percentage ownership during the testing period (generally three years). The Amended Articles limit Transfers (as defined in the Amended Articles) that increase a person’s or entity’s (including certain groups of persons) ownership of PG&E Corporation’s equity securities to 4.75% or more prior to the Restriction Release Date (as defined in the Amended Articles) without approval by the Board of Directors of PG&E Corporation.

Shares of PG&E Corporation common stock held directly by the Utility are attributed to PG&E Corporation for income tax purposes and are therefore effectively excluded from the total number of outstanding equity securities when calculating a person’s Percentage Stock Ownership (as defined in the Amended Articles) for purposes of the 4.75% ownership limitation in the Amended Articles. For example, although PG&E Corporation had 2,611,366,666 shares outstanding as of February 14, 2024, only 2,133,623,076 shares (that is, the number of outstanding shares of common stock less the number of shares held directly by the Utility) count as outstanding for purposes of the ownership restrictions in the Amended Articles. As such, based on the total number of outstanding equity securities, a person’s effective Percentage Stock Ownership limitation for purposes of the Amended Articles as of February 14, 2024 was 3.88% of the outstanding shares. At various dates throughout 2022 and 2023, the Fire Victim Trust exchanged Plan Shares for an equal number of New Shares in the manner contemplated by the Share Exchange and Tax Matters Agreement; in each case, the Fire Victim Trust thereafter reported that it sold the applicable New Shares. During the year ended December 31, 2023, the Fire Victim Trust’s sale of PG&E Corporation common stock in the aggregate amount of 247,743,590 shares resulted in an aggregate tax benefit of $1.2 billion recorded in PG&E Corporation’s and the Utility’s Consolidated Financial Statements. Cumulatively through December 31, 2023, the Fire Victim Trust has sold all of its 477,743,590 shares resulting in an aggregate tax benefit of approximately $2.0 billion recorded in PG&E Corporation’s and the Utility’s Consolidated Financial Statements. As of February 14, 2024, the Fire Victim Trust reported having sold all of the shares of PG&E Corporation common stock it had owned and no longer owning any shares.

As of the date of this report, it is more likely than not that PG&E Corporation has not undergone an ownership change and consequently, its net operating loss carryforwards and other tax attributes are not limited by Section 382 of the IRC.

Dividends

On November 27, 2023, the Board of Directors of PG&E Corporation declared a quarterly common stock dividend of $0.01 per share, totaling $21 million, which was paid by January 16, 2024, to holders of record as of December 29, 2023.

On February 14, 2024, the Board of Directors of PG&E Corporation declared a quarterly common stock dividend of $0.01 per share, payable on April 15, 2024, to holders of record as of March 28, 2024.

Under the Utility’s Articles of Incorporation, the Utility cannot pay common stock dividends unless all cumulative preferred dividends on the Utility’s preferred stock have been paid.  Additionally, the CPUC requires the Utility to maintain a capital structure composed of at least 52% equity on average. The CPUC has granted the Utility a temporary waiver from compliance with its authorized capital structure until 2025 for the financing in place upon the Utility’s emergence from Chapter 11.

Subject to the foregoing restrictions, any decision to declare and pay dividends in the future will be made at the discretion of the Boards of Directors and will depend on, among other things, results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Boards of Directors may deem relevant.

Long-Term Incentive Plans

The LTIP (i.e., the PG&E Corporation 2014 LTIP or the PG&E Corporation 2021 LTIP, as applicable) permits various forms of share-based incentive awards, including stock options, restricted stock units, performance shares, and other share-based awards, to eligible employees of PG&E Corporation and its subsidiaries.  Non-employee directors of PG&E Corporation are also eligible to receive certain share-based awards.  A maximum of 91 million shares of PG&E Corporation common stock (subject to certain adjustments) has been reserved for issuance under the LTIP, of which 61,716,764 shares were available for future awards at December 31, 2023.

The following table provides a summary of total share-based compensation expense recognized by PG&E Corporation for share-based incentive awards for 2023:

(in millions)	2023		2022		2021
Restricted stock units	64		60		35
Performance shares	27		55		21
Total compensation expense (pre-tax)	$	91	$	115	$	56
Total compensation expense (after-tax)	$	65	$	83	$	40

Share-based compensation costs are generally not capitalized.  There was no material difference between PG&E Corporation and the Utility for the information disclosed above.

Stock Options

The exercise price of stock options granted under the LTIP and all other outstanding stock options is equal to the market price of PG&E Corporation’s common stock on the date of grant.  Stock options generally have a 10-year term and vest over three years of continuous service, subject to accelerated vesting in certain circumstances. As of December 31, 2023, there were no unrecognized compensation costs related to nonvested stock options for PG&E Corporation.

The fair value of each stock option on the date of grant is estimated using the Black-Scholes valuation method. No stock options were granted in 2023 or 2022.

Expected volatilities are based on historical volatility of PG&E Corporation’s common stock.  The expected dividend payment is the dividend yield at the date of grant.  The risk-free interest rate for periods within the contractual term of the stock option is based on the U.S. Treasury rates in effect at the date of grant.  The expected life of stock options is derived from historical data that estimates stock option exercises and employee departure behavior.

There was no tax benefit recognized from stock options for the year ended December 31, 2023.

The following table summarizes stock option activity for PG&E Corporation and the Utility for 2023:

	Number of Stock Options	Weighted Average Grant- Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1	2,152,132	$	7.36		$	—
Granted (1)	—	—			—
Exercised	—	—			—
Forfeited or expired	(755,871)	5.80			—
Outstanding at December 31	1,396,261	8.20		2.29	—
Vested or expected to vest at December 31	1,396,261	8.20		2.29	—
Exercisable at December 31	1,396,261	$	8.20	2.29	$	—

(1) Represents additional payout of existing stock option grants.

Restricted Stock Units

Restricted stock units generally vest equally over three years. Vested restricted stock units are settled in shares of PG&E Corporation common stock accompanied by cash payments to settle any dividend equivalents associated with the vested restricted stock units.  Compensation expense is generally recognized ratably over the vesting period based on grant-date fair value.  The weighted average grant-date fair value for restricted stock units granted during 2023, 2022, and 2021 was $15.70, $11.40, and $11.01, respectively.  The total fair value of restricted stock units that vested during 2023, 2022, and 2021 was $64 million, $46 million, and $19 million, respectively.  The tax detriment from restricted stock units that vested in 2023 was $26 million.  In general, forfeitures are recorded ratably over the vesting period, using historical averages and adjusted to actuals when vesting occurs.  As of December 31, 2023, $74 million of total unrecognized compensation costs related to nonvested restricted stock units was expected to be recognized over the remaining weighted average period of 1.42 years.

The following table summarizes restricted stock unit activity for 2023:

	Number of Restricted Stock Units	Weighted Average Grant- Date Fair Value
Nonvested at January 1	10,978,120	$	11.21
Granted	4,337,632	15.70
Vested	(5,710,073)	11.16
Forfeited	(337,254)	12.77
Nonvested at December 31	9,268,425	$	13.29

Performance Shares

Performance shares generally vest three years after the grant date.  Following vesting, performance shares are settled in shares of common stock based on either PG&E Corporation’s total shareholder return relative to a specified group of industry peer companies over a three-year performance period (“TSR”) or an internal PG&E Corporation metric (subject in some instances to a multiplier based on TSR).  Dividend equivalents, if any, are paid in cash based on the amount of common stock to which the recipients are entitled.

Compensation expense attributable to performance shares is generally recognized ratably over the applicable three-year period based on the grant-date fair value determined using a Monte Carlo simulation valuation model for the TSR-based awards or the grant-date market value of PG&E Corporation common stock for awards based on internal metrics.  The weighted average grant-date fair value for performance shares granted during 2023, 2022, and 2021 was $13.39, $13.44, and $11.83 respectively.  In general, forfeitures are recorded ratably over the vesting period, using historical averages and adjusted to actuals when vesting occurs.  As of December 31, 2023, $43 million of total unrecognized compensation costs related to nonvested performance shares was expected to be recognized over the remaining weighted average period of 1.27 years.

The following table summarizes activity for performance shares in 2023:

	Number of Performance Shares	Weighted Average Grant- Date Fair Value
Nonvested at January 1	11,022,054	$	10.68
Granted	4,881,031	13.39
Vested	(8,049,294)	9.16
Forfeited	(1,251,499)	13.2
Nonvested at December 31	6,602,292	$	14.06