PG&E 2012 Annual Report Download - page 27

committed to spending approximately $277 million for these conversions. These funds are conditionally committed
depending on the timing of the work, including the schedules of the respective cities, counties, and communication
utilities involved. The Utility expects to spend $86 million each year in connection with these projects. Consistent
with past practice, the Utility expects that these capital expenditures will be included in rate base as each individual
project is completed, resulting in the capital expenditures being recoverable from customers.
The contractual commitments table above also excludes potential payments associated with unrecognized tax
positions. Due to the uncertainty surrounding tax audits, PG&E Corporation and the Utility cannot make reliable
estimates of the amounts and periods of future payments to major tax jurisdictions related to unrecognized tax
benefits. Matters relating to tax years that remain subject to examination are discussed in Note 9 of the Notes to the
Consolidated Financial Statements.
CAPITAL EXPENDITURES
The Utility makes various capital investments in its electric generation and electric and natural gas transmission
and distribution infrastructure to maintain and improve system reliability, safety, and customer service; to extend the
life of or replace existing infrastructure; and to add new infrastructure to meet growth. Most of the Utility’s revenue
requirements to recover forecasted capital expenditures are authorized in the GRC, TO, and GT&S rate cases. (See
‘‘2014 General Rate Case’’ below.) The Utility also collects additional revenue requirements to recover capital
expenditures related to projects that have been specifically authorized by the CPUC, such as new power plants, gas
or electric distribution projects, and the SmartMeterTM advanced metering infrastructure.
The Utility’s capital expenditures for property, plant, and equipment totaled $4.8 billion in 2012, $4.2 billion in
2011, and $3.9 billion in 2010. The Utility forecasts that capital expenditures will total approximately $5.1 billion in
2013, including expenditures related to its pipeline safety enhancement plan.
Natural Gas Pipeline Safety Enhancement Plan
On December 28, 2012, the CPUC issued a decision that approved the Utility’s proposed pipeline safety
enhancement plan (filed in August 2011) but disallowed the Utility’s request for rate recovery of a significant portion
of plan-related costs the Utility forecasted it would incur over the first phase of the plan (2011 through 2014). The
CPUC decision limited the Utility’s recovery of capital expenditures to $1.0 billion of the total $1.4 billion requested.
As a result, the Utility recorded a charge of $353 million in 2012 for disallowed capital expenditures. (See ‘‘Natural
Gas Matters—CPUC Gas Safety Rulemaking Proceeding’’ below.)
Oakley Generation Facility
On December 20, 2012, the CPUC approved an amended purchase and sale agreement between the Utility and
a third-party developer that provides for the construction of a 586-megawatt natural gas-fired facility in Oakley,
California. The CPUC authorized the Utility to recover the purchase price through rates. During January 2013,
several parties filed applications for rehearing of the CPUC decision. PG&E Corporation and Utility are uncertain
whether the CPUC will modify its decision based on these applications.
NATURAL GAS MATTERS
PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash flows, have continued
to be negatively affected by costs the Utility has incurred to improve the safety and reliability of the Utility’s natural
gas operations, as well as by costs related to the on-going regulatory proceedings, investigations, and civil lawsuits
related to the San Bruno accident and the Utility’s natural gas operations. Since the San Bruno accident, PG&E
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