PG&E Corp 8-K Filing Summary
Business Context and Reporting Period
This Form 8-K, dated November 17, 2017, reports on the filing of the 2019 Gas Transmission and Storage (GT&S) rate case application by Pacific Gas and Electric Company (PG&E), a subsidiary of PG&E Corporation. The application was submitted to the California Public Utilities Commission (CPUC) and covers the regulatory period from 2019 through 2021, with optional projections for 2022.
Key Financial Metrics and Requests
- 2019 Revenue Requirement: Requested at $1.59 billion, representing a $289 million increase over the 2018 adjusted authorized revenue requirement of $1.301 billion.
- Future Revenue Projections: Proposed requirements are $1.73 billion for 2020, $1.91 billion for 2021, and $1.91 billion for 2022 (contingent on a fourth year).
- Rate Base: The requested 2019 rate base is $4.66 billion, an increase of $0.95 billion from the 2018 adjusted authorized rate base of $3.71 billion.
- Capital Expenditure Forecasts: Estimated at $971 million for 2019, $963 million for 2020, and $804 million for 2021 (excluding common capital allocations).
- Excluded Amounts: The request excludes approximately $576 million in capital spending from 2011-2014 subject to CPUC audit (Gas Accord V) and potential adjustments related to an IRS private letter ruling.
Material Changes and Drivers
The requested increase in revenue requirements is primarily driven by increased infrastructure investment and costs associated with new natural gas storage safety and environmental regulations. Key regulatory drivers include:
- DOGGR Regulations: Six new safety measures issued in 2016 following the Aliso Canyon leak, with draft rules requiring biennial well integrity assessments.
- PHMSA Rules: Interim final rules effective January 2017 addressing pipeline safety and reporting.
- CPUC General Order 112-F: Effective January 2017, mandating expenditures for gas leak repair, surveys, and high-consequence area identification.
PG&E proposes a natural gas storage strategy involving the discontinuation of operations at two gas storage fields to reduce long-term costs and safety risks.
Outlook, Risks, and Management Commentary
Management anticipates a prehearing conference in early 2018 to establish a procedural schedule. The filing highlights several uncertainties and risks:
- Regulatory Uncertainty: The Utility cannot predict if the $576 million in audited capital spending will be authorized. Additionally, PHMSA implementation timeframes are being challenged in federal courts.
- Accounting Mechanisms: PG&E proposes a new two-way Gas Storage Balancing Account and a memorandum account to track costs related to anticipated regulations.
- Infrastructure Strategy: Plans include making 1,100 miles of pipelines capable of in-line inspection, inspecting over 2,100 miles, and replacing vintage pipelines to improve system safety.
Investor Verification Checklist
- Verify the CPUC's final decision on the $576 million capital spending exclusion from the 2011-2014 Gas Accord V.
- Monitor the status of federal court challenges regarding PHMSA implementation timeframes.
- Track the CPUC's approval of the proposed Gas Storage Balancing Account and memorandum accounts.
- Confirm the timeline and financial impact of the proposed closure or sale of two gas storage fields.
- Review the outcome of the prehearing conference scheduled for early 2018 regarding the procedural schedule.