PG&E Corp 8-K Filing Summary
Business Context and Reporting Period
This Form 8-K, dated September 12, 2019, reports on the California Public Utilities Commission (CPUC) approval of a revised decision regarding the 2019 Gas Transmission and Storage (GTS) rate case for Pacific Gas and Electric Company (PG&E), a subsidiary of PG&E Corporation. The filing details the authorized revenue requirements and rate base adjustments for the period 2019 through 2022.
Key Financial Metrics
The CPUC adopted a 2019 revenue requirement of $1.332 billion, representing a $31 million increase over the 2018 authorized level of $1.301 billion. The approved 2019 rate base is $4.46 billion, an increase of $0.75 billion from 2018. Adopted capital expenditures for 2019 are set at $726 million. The filing does not provide consolidated revenue, profit, cash flow, or debt figures for the parent company or the utility for the reporting period.
Material Changes Versus Prior Period
- Revenue Requirement: The approved 2019 revenue requirement ($1.332 billion) is significantly lower than the Utility's request of $1.485 billion. Future years (2020-2022) also show approved amounts below the Utility's requests.
- Rate Base Adjustments: The CPUC removed $304 million of pipeline replacement capital expenditures from the 2016-2018 period due to cost overruns. Additionally, approximately $576 million of capital spending related to 2011-2014 remains subject to audit and is excluded from the current rate base.
- Capital Expenditures: Approved 2019 capital expenditures ($726 million) are $104 million lower than the requested $830 million.
- Operating Expenses: Pursuant to California Senate Bill 901, officer compensation costs were reduced, lowering 2019 operating expenses by $1.428 million and capital expenditures by $0.455 million.
Guidance, Outlook, and Risks
The Decision adopted a Natural Gas Storage Strategy with minor modifications regarding the decommissioning or sale of the Los Medanos and Pleasant Creek storage fields. A two-way balancing account for storage costs was established, subject to future reasonableness reviews. The Utility faces uncertainty regarding the $576 million in capital spending subject to audit, as it cannot predict if these costs will be approved for inclusion in future rate bases. The filing notes the adoption of 19 new expense and capital one-way balancing and memorandum accounts.
Investor Verification Checklist
- Verify the impact of the $304 million rate base reduction on future earnings and cash flow projections.
- Monitor the status of the $576 million in capital expenditures subject to CPUC audit and the likelihood of their inclusion in future rate bases.
- Review the specific financial implications of the decommissioning or sale of the Los Medanos and Pleasant Creek storage fields.
- Assess the effect of the lower-than-requested revenue requirements for 2020-2022 on long-term utility profitability.