Business Context and Reporting Period
PG&E Corporation is a California holding company whose primary operating subsidiary, Pacific Gas and Electric Company, provides regulated electric and natural-gas generation, transmission, distribution, and procurement services in Northern and Central California. This combined Form 10-K covers the fiscal year ended December 31, 2021. The filing provides annual results; it does not provide a separate Q4-only income statement or cash-flow statement.
The businesses operate under CPUC and FERC cost-of-service regulation, with base revenues generally decoupled from sales volumes. PG&E and the Utility emerged from Chapter 11 on July 1, 2020.
Key Financial Metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Operating revenue | $20.642 billion | $18.469 billion | +11.8% |
| Operating income | $1.883 billion | $1.755 billion | +7.3% |
| Net loss | $88 million | $1.304 billion | Improved by $1.216 billion |
| Loss attributable to common shareholders | $102 million | $1.318 billion | Improved by $1.216 billion |
| Basic and diluted EPS | $(0.05) | $(1.05) | Improved |
| Net cash from operating activities | $2.262 billion | $(19.130) billion | Improved by $21.392 billion |
| Capital expenditures | $7.689 billion | $7.690 billion | Essentially flat |
| Net cash used in investing activities | $6.905 billion | $7.748 billion | Use declined by $843 million |
| Net cash from financing activities | $4.323 billion | $25.928 billion | Declined by $21.605 billion |
Operating margin was approximately 9.1% in 2021, compared with approximately 9.5% in 2020. Net margin was approximately negative 0.4% in 2021 versus negative 7.1% in 2020. The Utility reported net income of $138 million and income available for common stock of $124 million in 2021, compared with $411 million and $397 million, respectively, in 2020.
- Electric operating revenue increased to $15.131 billion from $13.858 billion, while natural-gas operating revenue increased to $5.511 billion from $4.611 billion.
- Operating and maintenance expense increased to $10.200 billion from $8.684 billion on a consolidated basis, primarily due to higher labor and insurance costs and a $135 million wildfire-response and mitigation charge.
- Interest expense increased to $1.601 billion from $1.260 billion, primarily because of additional debt issued after emergence from bankruptcy.
- Wildfire-related claims, net of recoveries, were $258 million in 2021 versus $251 million in 2020. Wildfire fund expense was $517 million versus $413 million.
- At December 31, 2021, consolidated assets were $103.327 billion and total equity was $21.223 billion. PG&E Corporation had $38.225 billion of consolidated long-term debt, including current portions; the Utility had $33.632 billion of long-term debt.
- Available liquidity was approximately $2.2 billion, consisting of $165 million of Utility cash, $126 million of PG&E Corporation cash, and approximately $1.9 billion of revolving-credit availability. The filing separately reports $1.923 billion of facility availability before considering certain presentation and liquidity classifications.
Material Changes Versus the Prior Comparable Period
- Cash flow from operations rebounded sharply because 2020 included approximately $18.8 billion of payments satisfying pre-petition wildfire claims and $5.2 billion of Wildfire Fund contributions; 2021 included $758 million paid to the Fire Victim Trust and $193 million of Wildfire Fund contributions.
- PG&E Corporation’s loss attributable to common shareholders narrowed substantially. The 2020 period included approximately $1.5 billion of backstop premium and related reorganization expense, while 2021 included no comparable charge.
- 2021 net income was materially affected by a $1.3 billion after-tax charge associated with the grantor trust election for the Fire Victim Trust.
- The Utility issued significant debt in 2021, including $2.4 billion of First Mortgage Bonds in March, $800 million in June, and $1.75 billion of bonds in November, partly refinancing maturing or revolving debt.
- PG&E Recovery Funding LLC issued approximately $860 million of recovery bonds to finance wildfire-mitigation capital expenditures.
- The Utility completed the sale of its San Francisco General Office complex for approximately $947 million of proceeds. Approximately $471 million was recorded as regulatory liabilities expected to benefit customers, $370 million as a financing obligation, and $106 million as deferred revenue.
- PG&E Corporation did not sell shares under its $400 million at-the-market equity program in 2021. Common dividends remained suspended, and the filing states that the timing of any resumption of common dividends is uncertain.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Total Utility capital expenditures, including accruals, were $8.6 billion in 2021. Forecast capital expenditures are $7.8 billion to $8.9 billion for 2022, $7.9 billion to $10.4 billion for 2023, $7.9 billion to $10.7 billion for 2024, $8.0 billion to $11.3 billion for 2025, and $8.1 billion to $12.0 billion for 2026.
- The Utility’s 2023 GRC application requested $15.461 billion of 2023 revenue requirements, compared with $11.901 billion currently authorized for 2022. The requested amount and future rate recovery remain subject to CPUC review.
- Management continues to prioritize wildfire mitigation, including enhanced powerline safety settings, vegetation management, inspections, public-safety power shutoffs, system hardening, and a commitment to underground 10,000 miles of electric distribution lines in high-fire-threat districts.
- Recorded probable wildfire liabilities at December 31, 2021 were $800 million for the 2019 Kincade fire, $375 million for the 2020 Zogg fire, and $1.15 billion for the 2021 Dixie fire. These amounts represent the lower end of reasonably estimable losses and exclude several potentially material categories of damages, fines, penalties, restitution, and other claims.
- For the Dixie fire, recorded probable recoveries totaled $1.161 billion, consisting of $563 million of insurance, $101 million through FERC transmission rates, $347 million through the WEMA, and $150 million from the Wildfire Fund. Recovery is not assured.
- Criminal proceedings related to the Kincade and Zogg fires could result in fines, penalties, restitution, and non-monetary remedies. The filing states that any restitution could materially exceed recorded liabilities and may not be covered by insurance.
- The Utility remained in step 1 of the CPUC’s Enhanced Oversight and Enforcement Process because of deficiencies in prioritizing enhanced vegetation management. A higher step, additional penalties, or other regulatory action remains possible.
- The Utility reported missed or incomplete inspections, including approximately 55,000 poles in 2020. Two CPUC citations resulted in penalties of $2.5 million and $5 million, paid in December 2021.
- COVID-19 continues to pressure collections and liquidity. Accounts receivable more than 30 days past due were approximately $1.1 billion at year-end, $832 million higher than at December 31, 2019. The Utility received approximately $300 million of California Arrearage Payment Program funding in January 2022.
- Regulatory assets, including current regulatory balancing-account receivables, totaled $12.7 billion, while regulatory liabilities totaled $13.8 billion. Recovery or refund depends on future regulatory decisions.
- Environmental remediation liabilities were $1.263 billion at year-end. The filing states that undiscounted future costs could increase to as much as $2.2 billion if contamination or remediation requirements are greater than currently estimated.
- Diablo Canyon is scheduled for retirement of Unit 1 by 2024 and Unit 2 by 2025. The unrecovered investment was approximately $1.16 billion at December 31, 2021, and the plant’s retirement and replacement-power requirements remain material planning considerations.
Most Important Facts for Investors to Verify
- Whether Kincade, Zogg, Dixie, or future wildfire liabilities exceed recorded accruals and whether insurance, regulatory, or Wildfire Fund recoveries are ultimately collected.
- The status and outcome of criminal wildfire proceedings, related civil claims, the CPUC Safety Culture investigation, and the Enhanced Oversight and Enforcement Process.
- CPU C decisions on the 2023 GRC, 2021 WMCE application, 2018 CEMA settlement, cost-of-capital proceedings, and other requests involving approximately $5.4 billion of tracked but not yet fully recovered costs.
- Refinancing needs and maturity concentration, including approximately $4.469 billion of consolidated debt principal scheduled for 2022 and $4.577 billion scheduled for 2023.
- Whether PG&E can reduce debt while funding annual capital expenditures of roughly $8 billion or more and maintain sufficient liquidity and capital-market access.
- The effect of the Fire Victim Trust’s future stock sales, potential additional share issuances, and the 4.75% ownership restrictions on dilution and trading liquidity.
- Whether customer-rate increases, distributed generation, community choice aggregation, natural-gas electrification, and declining gas demand affect cost recovery and authorized returns.
- The assumptions supporting regulatory-asset recoverability, Wildfire Fund amortization, wildfire insurance receivables, environmental liabilities, and nuclear decommissioning obligations.