PG&E 2012 Annual Report Download - page 119

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 15: COMMITMENTS AND CONTINGENCIES (Continued)
Class Action Complaint
On August 23, 2012, a complaint was filed in the San Francisco Superior Court against PG&E Corporation and
the Utility (and other unnamed defendants) by individuals who seek certification of a class consisting of all California
residents who were customers of the Utility between 1997 and 2010, with certain exceptions. The plaintiffs allege that
the Utility collected more than $100 million in customer rates from 1997 through 2010 for the purpose of various
safety measures and operations projects but instead used the funds for general corporate purposes such as executive
compensation and bonuses. To state their claims, the plaintiffs cited the SED’s January 2012 investigative report of
the San Bruno accident that alleged, from 1996 to 2010, the Utility spent less on capital expenditures and operations
and maintenance expense for its natural gas transmission operations than it recovered in rates, by $95 million and
$39 million, respectively. The SED recommended in that report that the Utility should use such amounts to fund
future gas transmission expenditures and operations. Plaintiffs allege that PG&E Corporation and the Utility
engaged in unfair business practices in violation of Section 17200 of the California Business and Professions Code
(‘‘Section 17200’’) and claim that this violation also constitutes a violation of California Public Utilities Code
Section 2106 (‘‘Section 2106’’), which provides a private right of action for violations of the California constitution or
state laws by public utilities. Plaintiffs seek restitution and disgorgement under Section 17200 and compensatory and
punitive damages under Section 2106.
PG&E Corporation and the Utility contest the plaintiffs’ allegations. In January 2013, PG&E Corporation and
the Utility requested that the court dismiss the complaint on the grounds that the CPUC has exclusive jurisdiction to
adjudicate the issues raised by the plaintiffs’ allegations. In the alternative, PG&E Corporation and the Utility
requested that the court stay the proceeding until the CPUC investigations described above are concluded. The court
has set a hearing on the motion for April 26, 2013. Due to the early stage of this proceeding, PG&E Corporation
and the Utility are unable to estimate the amount (or range of amounts) of reasonably possible losses that may be
incurred in connection with this matter.
Spent Nuclear Fuel Storage Proceedings
Under the Nuclear Waste Policy Act of 1982, the DOE and electric utilities with commercial nuclear power
plants were authorized to enter into contracts under which the DOE would be required to dispose of the utilities’
spent nuclear fuel and high-level radioactive waste by January 1998, in exchange for fees paid by the utilities. The
DOE has been unable to meet its contractual obligation to the Utility to dispose of nuclear waste from the Utility’s
two nuclear generating units at Diablo Canyon and its retired nuclear facility at Humboldt Bay (‘‘Humboldt Bay
Unit 3’’). As a result, the Utility constructed an interim dry cask storage facility to store spent fuel at Diablo Canyon
through at least 2024, and a separate facility at Humboldt Bay. The Utility and other nuclear power plant owners
sued the DOE to recover the costs that they incurred to construct interim storage facilities for spent nuclear fuel.
On September 5, 2012, the U.S. Department of Justice and the Utility executed a settlement agreement that
awarded the Utility $266 million for spent fuel storage costs incurred through December 31, 2010. As of
December 31, 2012, the Utility has collected the settlement proceeds from the U.S. Treasury and recorded the
amount as a regulatory balancing account. The proceeds will be refunded to customers through rates in future
periods. The agreement also allows the Utility to submit annual claims to recover costs incurred in 2011, 2012 and
2013, which the Utility estimates to be approximately $25 million per year. These amounts will also be refunded to
customers in future periods. At December 31, 2012, PG&E Corporation and the Utility have not recorded any
receivables for annual claims in their Consolidated Balance Sheets. The agreement does not address costs incurred
for spent fuel storage after 2013 and such costs could be the subject of future litigation. Considerable uncertainty
continues to exist regarding when and whether the DOE will meet its contractual obligation to the Utility and other
nuclear power plant owners to dispose of spent nuclear fuel.
Nuclear Insurance
The Utility is a member of Nuclear Electric Insurance Limited (‘‘NEIL’’) which is a mutual insurer owned by
utilities with nuclear facilities. NEIL provides insurance coverage for property damages and business interruption
losses incurred by the Utility due to a nuclear event (meaning that nuclear material is released) that occurs at the
Utility’s two nuclear generating units at Diablo Canyon and the retired Humboldt Bay Unit 3. NEIL provides
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