PG&E Corp annual report, FY2022

PG&E Corporation 2022 Form 10-K Summary

Business context and reporting period

PG&E Corporation is a California holding company whose principal operating subsidiary, Pacific Gas and Electric Company, provides regulated electric and natural gas generation, transmission, distribution, and related services in Northern and Central California. This combined Form 10-K covers the fiscal year ended December 31, 2022, with comparative results for 2021 and 2020. The filing is not a quarterly report; the requested “2022 Q4” period is included in the full-year filing.

Financial performance and position

Metric	2022	2021	Change
PG&E Corporation operating revenues	$21.680 billion	$20.642 billion	+5%
PG&E Corporation net income	$1.814 billion	$(88) million	Improved by $1.902 billion
Income attributable to common shareholders	$1.800 billion	$(102) million	Improved by $1.902 billion
Diluted EPS	$0.84	$(0.05)	Improved
Utility operating revenues	$21.680 billion	$20.642 billion	+5%
Utility net income	$2.226 billion	$138 million	+1,513%
Operating income	$1.837 billion	$1.883 billion	Down $46 million
PG&E Corporation total assets	$118.644 billion	$103.327 billion	+$15.317 billion

Revenue growth was driven primarily by higher regulated base revenues, FERC formula-rate revenues, gas revenues, CEMA-related revenue recognition, GT&S recovery, and nuclear decommissioning revenues. Electric revenue declined modestly to $15.060 billion from $15.131 billion, while natural gas revenue increased to $6.620 billion from $5.511 billion.

Reported profitability benefited materially from a $1.338 billion income tax benefit, including an $870 million tax benefit associated with Fire Victim Trust share sales. Results also reflected $608 million of net SB 901 securitization charges, $477 million of Wildfire Fund expense, $237 million of net wildfire-related claims, and $3.856 billion of depreciation, amortization, and decommissioning expense. The filing does not provide a conventional operating or net profit margin as a headline measure; based on reported figures, net income margin was approximately 8.4% in 2022 versus negative 0.4% in 2021, while operating margin was approximately 8.5% versus 9.1%.

Cash flow, capital investment, debt, and liquidity

Utility operating cash flow was $3.831 billion, compared with $2.448 billion in 2021.
Utility investing cash outflow was $10.069 billion, including $9.584 billion of capital expenditures and approximately $1.0 billion invested in the customer credit trust.
Utility financing cash inflow was $6.879 billion, principally reflecting recovery-bond issuances and other debt financing.
PG&E Corporation reported $734 million of cash and cash equivalents at December 31, 2022; the Utility reported $609 million.
Reported total liquidity was approximately $2.9 billion, consisting of approximately $734 million of consolidated cash and $2.2 billion of revolving-credit availability. The Utility separately reported $609 million of cash and approximately $1.5 billion of availability under its revolving credit facility, plus $205 million available under the receivables securitization program.
PG&E Corporation had approximately $4.68 billion of outstanding indebtedness, while the Utility had approximately $45.6 billion. Consolidated long-term debt was $47.742 billion, excluding short-term borrowings and current long-term debt classifications.
The Utility issued $7.5 billion of SB 901 recovery bonds and approximately $983 million of AB 1054 recovery bonds in 2022. Proceeds were used for wildfire-cost recovery, debt redemptions, credit-facility repayment, and fire-risk-mitigation expenditures.
Total 2022 capital expenditures, including accruals, were $9.6 billion. Management forecast Utility capital expenditures of $7.9 billion to $11.2 billion for 2023.

Material changes versus the prior comparable period

PG&E Corporation moved from a $102 million common-shareholder loss in 2021 to $1.800 billion of income in 2022, primarily because of the tax benefit related to Fire Victim Trust share sales and improved Utility earnings.
Natural gas revenue increased 20%, but natural gas costs increased 83% to $2.100 billion because of higher commodity prices and demand. Electricity costs declined 15% to $2.756 billion.
Interest expense increased 20% at PG&E Corporation and 21% at the Utility, reflecting higher debt balances and higher variable interest rates.
Depreciation, amortization, and decommissioning expense increased 13% to $3.856 billion, primarily because of capital additions and increased decommissioning expense.
Regulatory assets increased to $16.443 billion from $9.207 billion, primarily because of the SB 901 securitization regulatory asset and increased wildfire and vegetation-management balances. Regulatory liabilities increased to $17.630 billion from $11.999 billion.
Utility customer accounts receivable more than 30 days past due were approximately $1.1 billion at year-end, $890 million above the December 31, 2019 balance. The filing does not clearly quantify the portion attributable specifically to COVID-19.
The Utility had no PSPS events in 2022, expanded EPSS to all high-fire-risk areas, and undergrounded 180 miles of lines, exceeding its 175-mile plan.

Guidance, outlook, commentary, risks, and unusual items

Management expects substantial ongoing investment in wildfire mitigation, grid resilience, electrification, renewable generation, storage, and gas-system safety. Requested 2023 GRC revenue requirements were $15.82 billion, with a requested weighted-average rate base of $50.41 billion; the filing states a decision was scheduled for the third quarter of 2023.
The Utility targets a 2% annual reduction in non-fuel operating and maintenance costs through efficiency and its Lean operating system, while increasing safety and climate-related capital investment.
California’s SB 846 supports continued Diablo Canyon operations through no later than 2030, subject to NRC and state approvals. The Utility received access to a DWR loan agreement of up to $1.4 billion and was conditionally selected for up to approximately $1.1 billion under the DOE Civil Nuclear Credit Program.
As of December 31, 2022, recorded wildfire liabilities were $1.025 billion for the 2019 Kincade fire, $400 million for the 2020 Zogg fire, $1.175 billion for the 2021 Dixie fire, and $100 million for the 2022 Mosquito fire. These amounts generally represent the lower end of reasonably estimable probable losses and exclude several categories of potentially material damages.
Probable wildfire recoveries included $430 million of insurance for Kincade, $370 million for Zogg, and $530 million of insurance, $115 million through FERC rates, $388 million through WEMA, and $175 million from the Wildfire Fund for Dixie. Recovery estimates remain subject to regulatory, litigation, insurance, and fund-availability risk.
The Utility faced criminal proceedings related to the Zogg fire. Following dismissals, 11 counts remained as of the filing date; the company stated that a conviction could result in fines, penalties, and restitution materially exceeding recorded liabilities, and that insurance may not cover restitution.
OEIS approved the 2022 wildfire mitigation plan and issued the 2022 safety certification. However, OEIS’s draft report found that the Utility did not substantially comply with its 2020 WMP; a final determination and possible CPUC penalties were unresolved at filing.
The Utility recorded a $300 million liability for wildfire-related securities claims before insurance, with a probable net loss of $145 million after related D&O insurance matters.
Environmental remediation liabilities were $1.282 billion at year-end. Management stated undiscounted future environmental costs could reach approximately $2.3 billion if contamination or required remediation is greater than anticipated.
PG&E Corporation’s $26.6 billion of federal and $25.2 billion of California net operating loss carryforwards may be limited if an ownership change occurs under Section 382. Ownership restrictions generally limit acquisitions to less than 4.75%, subject to exceptions.
PG&E Corporation common dividends remained prohibited under the Chapter 11 plan until $6.2 billion of specified Non-GAAP Core Earnings is recognized. The Utility reinstated common dividends in 2022 and paid $1.275 billion to PG&E Corporation.
The filing identifies significant estimation uncertainty in regulatory asset recovery, wildfire liabilities and recoveries, Wildfire Fund useful life, environmental remediation, asset-retirement obligations, and future regulatory outcomes.

Most important facts for investors to verify

Whether wildfire liabilities and related insurance, WEMA, FERC, and Wildfire Fund recoveries ultimately differ materially from recorded amounts.
The outcome of the Zogg criminal proceeding, related restitution exposure, and the proposed or pending regulatory settlements.
Whether the Utility receives full recovery of approximately $6.2 billion of recorded memorandum and balancing-account costs and the timing of such recovery.
The final outcome of the 2023 GRC, including authorized revenue requirements, rate base, wildfire-mitigation spending, and the treatment of self-insurance.
Whether Diablo Canyon receives all required NRC, state, and federal approvals for operations through 2030 and the final terms of related government funding.
Debt maturities, refinancing costs, variable-rate exposure, credit ratings, and compliance with financing covenants.
The final OEIS and CPUC conclusions regarding 2020 WMP compliance and any resulting penalties or required corrective actions.
The sustainability of reported 2022 earnings after excluding the Fire Victim Trust tax benefit and other unusual regulatory, securitization, and wildfire-related items.