Utility's Commitment to Local Recovery and Support Initiatives Reflected in a $238 Million Charge for the Quarter
Release and Selected Tables
(San Francisco)—PG&E Corporation (NYSE: PCG) reported today that its third quarter financial results
include a charge totaling $238 million on a pre-tax basis, or $0.36 per share, related to the September 9, 2010
natural gas transmission pipeline accident in San Bruno, California.
The charge includes a $220 million provision for property damage, personal injury, and other legal claims
arising from the accident, including the cost of the Rebuild San Bruno Fund established by PG&E in the days
following the tragedy to provide ongoing support and assistance to residents and the city of San Bruno. The
company notes that costs associated with property damage, personal injury, and other legal claims could
ultimately range from $220 million to as much as $400 million before factoring in any insurance recoveries.
Consistent with accounting practice, the low end of this range was accrued in the third quarter.
The additional $18 million of costs associated with the accident reflected in the quarter's results were
incurred in connection with re-inspecting the company's natural gas transmission lines, providing immediate
support to the San Bruno community, and other activities following the accident. The ultimate level of direct
costs for these and other related activities could range from $100 million to $150 million through the end of 2011.
"In keeping with the commitment that began the night of September 9th, PG&E has been working on
multiple fronts to do the right thing for the families and the community affected by this terrible accident," said
Peter A. Darbee, Chairman, CEO, and President of PG&E Corporation.
Including the charges, net income after dividends on preferred stock (also called "income available for
common shareholders") was $258 million, or $0.66 per share, in the third quarter ended September 30, 2010, as
reported in accordance with generally accepted accounting principles (GAAP). This compares with $318 million,
or $0.83 per share, in the same period last year.
On a non-GAAP basis, excluding the charges for the San Bruno accident, PG&E Corporation's earnings
from operations for the quarter were $398 million, or $1.02 per share. In the same period last year, earnings from
operations were $358 million, or $0.93 per share.
PG&E Corporation is lowering its overall guidance on a GAAP-basis to reflect estimated costs associated
with the San Bruno accident. The guidance includes the full range for claims and direct costs discussed above. It
does not reflect any insurance recoveries, which may not occur until after 2011. GAAP earnings guidance is now
$2.72 to $2.92 per share for 2010 and $3.27 to $3.72 per share for 2011.
Non-GAAP guidance for earnings from operations is reaffirmed in the range of $3.35 to $3.50 per share
for 2010 and is updated with a narrower range of $3.65 to $3.80 per share for 2011. The upper end of the
guidance for 2011 has been reduced by $0.05, to reflect the proposed settlement of the Utility's 2011 General Rate
Case, as well as other regulatory decisions.
Guidance is based on various assumptions, including that Pacific Gas and Electric Company maintains a
ratemaking capital structure of 52 percent common equity on average and achieves a return on equity of at least
11.35 percent, while growing its asset base and achieving other operational objectives discussed in publicly
available conference calls and presentations.
In addition to disclosing historical financial information and providing guidance on a GAAP basis, PG&E
Corporation discloses historical financial results and provides guidance based on "earnings from operations" in
order to provide a measure that allows investors to compare the underlying financial performance of the business
from one period to another, exclusive of items that management believes do not reflect the normal course of
operations. Earnings from operations are not a substitute or alternative for consolidated net income presented in
accordance with GAAP (see the accompanying financial tables for a reconciliation of results and guidance based
on earnings from operations to results and guidance based on consolidated net income in accordance with GAAP).
Supplemental Financial Information:
- In addition to the financial information accompanying this release, an expanded package of supplemental
financial and operational information for the quarter will be furnished to the Securities and Exchange
Commission and also will be available shortly on PG&E Corporation's website (www.21yicho.icu).
Conference Call with the Financial Community to Discuss Third Quarter Results:
- Today's call at 11:30 a.m., Eastern Time, is open to the public on a listen-only basis via webcast. Please
visit www.21yicho.icu for more information and instructions for accessing the webcast. The call will be
archived on the website. Also, a toll-free replay will be accessible shortly after the live call through 9:00
p.m., Eastern Time, on November 18, 2010, by dialing 866-415-9493. International callers may dial 585-
419-6446. For both domestic and international callers, a confirmation code 23726 will be required to
access the replay.
This press release and the tables contain forward-looking statements regarding management's estimate of the
potential costs associated with the San Bruno accident and guidance for PG&E Corporation's 2010 and 2011
earnings per share from operations that are based on current expectations and various assumptions that
management believes are reasonable. These statements and assumptions are necessarily subject to various risks
and uncertainties, the realization or resolution of which may be outside of management's control. Actual results
may differ materially. Factors that could cause actual results to differ materially include:
- the Utility's ability to efficiently manage capital expenditures and its operating and maintenance expenses
within authorized levels and timely recover its costs through rates;
- the outcome of pending and future regulatory or legislative proceedings or investigations, including the
investigations by the National Transportation Safety Board ("NTSB") and the California Public Utilities
Commission ("CPUC") into the cause of the San Bruno accident and the safety of the Utility's natural gas
transmission pipelines in its northern and central California service territory, and whether the Utility is
required to incur costs to comply with regulatory or legislative mandates that it is unable to recover
through rates or insurance;
- the adequacy and price of electricity and natural gas supplies and whether the new day-ahead, hour-ahead,
and real-time wholesale electricity markets established by the California Independent System Operator
will continue to function effectively, the extent to which the Utility can manage and respond to the
volatility of electricity and natural gas prices, and the ability of the Utility and its counterparties to post or
- explosions, fires, accidents, mechanical breakdowns, the disruption of information technology and
systems, and similar events that may occur while operating and maintaining an electric and natural gas
system in a large service territory with varying geographic conditions that can cause unplanned outages,
reduce generating output, damage the Utility's assets or operations, subject the Utility to third-party claims
for property damage or personal injury, or result in the imposition of civil, criminal, or regulatory fines or
penalties on the Utility;
- the impact of storms, earthquakes, floods, drought, wildfires, disease, and similar natural disasters, or acts
of terrorism or vandalism, that affect customer demand or that damage or disrupt the facilities, operations,
or information technology and systems owned by the Utility, its customers, or third parties on which the
- the potential impacts of climate change on the Utility's electricity and natural gas businesses;
- changes in customer demand for electricity and natural gas resulting from unanticipated population growth
or decline, general economic and financial market conditions, changes in technology that include the
development of alternative technologies that enable customers to increase their reliance on self-generation,
or other reasons;
- the occurrence of unplanned outages at the Utility's two nuclear generating units at Diablo Canyon Power
Plant ("Diablo Canyon"), the availability of nuclear fuel, the outcome of the Utility's application to renew
the operating licenses for Diablo Canyon, and potential changes in laws or regulations promulgated by the
Nuclear Regulatory Commission or environmental agencies with respect to the storage of spent nuclear
fuel, security, safety, or other matters associated with the operations at Diablo Canyon;
- whether the Utility earns incentive revenues or incurs obligations under incentive ratemaking mechanisms,
such as the CPUC's incentive ratemaking mechanism relating to energy savings achieved through
implementation of the utilities' customer energy efficiency programs;
- the impact of federal or state laws or regulations, or their interpretation, on energy policy and the
regulation of utilities and their holding companies;
- whether the Utility can successfully implement its program to install advanced meters for its electric and
natural gas customers and integrate the new meters with its customer billing and other systems, the
outcome of the independent investigation ordered by the CPUC and the California Legislature into
customer concerns about the new meters, and the ability of the Utility to implement various rate changes
including "dynamic pricing" by offering electric rates that can vary with the customer's time of use and
are more closely aligned with wholesale electricity prices;
- how the CPUC interprets and enforces the financial and other conditions imposed on PG&E Corporation
when it became the Utility's holding company and the extent to which the interpretation or enforcement of
these conditions has a material impact on PG&E Corporation;
- the extent to which PG&E Corporation or the Utility incurs costs in connection with third-party claims or
litigation, including those arising from the San Bruno accident, that are not recoverable through insurance,
rates, or from other third parties;
- the ability of PG&E Corporation, the Utility, and counterparties to access capital markets and other
sources of credit in a timely manner on acceptable terms;
- the impact of environmental laws and regulations and the costs of compliance and remediation;
- the loss of customers due to various forms of bypass and competition, including municipalization of the
Utility's electric distribution facilities, increasing levels of "direct access" by which consumers procure
electricity from alternative energy providers, and implementation of "community choice aggregation,"
which permits cities and counties to purchase and sell electricity for their local residents and businesses;
- the outcome of federal or state tax audits and the impact of changes in federal or state tax laws, policies, or
- other factors and risks discussed in PG&E Corporation and the Utility's 2009 Annual Report on Form 10-
K and other reports filed with the Securities and Exchange Commission.