2010 FERC Form 1 - Pacific Gas and Electric Company

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Name of Respondent PACIFIC GAS AND ELECTRIC COMPANY This Report is: (1) X An Original (2) A Resubmission Date of Report (Mo, Da, Yr) 04/08/2011 Year/Period of Report 2010/Q4 NOTES TO FINANCIAL STATEMENTS (Continued) (in millions) 2011 2012 Total Utility Average fixed interest rate 4.59% 4.66% 4.63% Energy recovery bonds $ 404 $ 423 $ 827 While PERF is a wholly owned consolidated subsidiary of the Utility, it is legally separate from the Utility. The assets (including the recovery property) of PERF are not available to creditors of the Utility or PG&E Corporation, and the recovery property is not legally an asset of the Utility or PG&E Corporation. NOTE 6: COMMON STOCK AND SHARE-BASED COMPENSATION PG&E Corporation Of the 395,227,205 shares of PG&E Corporation common stock outstanding at December 31, 2010, 475,880 shares were granted as restricted stock under the PG&E Corporation Long-Term Incentive Program and the 2006 Long-Term Incentive Plan (“2006 LTIP”) and 5,105,505 shares were issued for the accounts of participants in PG&E Corporation’s 401(k) plan and Dividend Reinvestment and Stock Purchase Plan (“DRSPP”). In addition, between June 23 and June 29, 2010, PG&E Corporation issued 16,370,779 shares of common stock upon conversion of the $247 million principal amount of Convertible Subordinated Notes. (See Note 4 above.) On November 4, 2010, PG&E Corporation entered into an Equity Distribution Agreement pursuant to which PG&E Corporation's sales agents may offer and sell, from time to time, PG&E Corporation common stock having an aggregate gross offering price of up to $400 million. Sales of the shares are made by means of ordinary brokers’ transactions on the New York Stock Exchange, or in such other transactions as agreed upon by PG&E Corporation and the sales agents and in conformance with applicable securities laws. As of December 31, 2010, PG&E Corporation had issued 2,357,796 shares of its common stock pursuant to the Equity Distribution Agreement for cash proceeds of $110 million, net of fees and commissions paid of $1 million. Utility Dividends As of December 31, 2010, PG&E Corporation held all of the Utility’s outstanding common stock. The Boards of Directors of PG&E Corporation and the Utility have each adopted a dividend policy. Under the Utility’s Articles of Incorporation, the Utility cannot pay common stock dividends unless all cumulative preferred dividends on the Utility’s preferred stock have been paid. PG&E Corporation and the Utility each have revolving credit facilities that require the company to maintain a ratio of consolidated total debt to consolidated capitalization of at most 65%. This covenant, along with the CPUC’s requirement for the Utility to maintain the 52% equity component of its capital structure, are considered to be restrictions on the payment of dividends. Based on the calculation of these ratios for each company, no amount of PG&E Corporation’s retained earnings and $5.3 billion of the Utility’s retained earnings were restricted at December 31, 2010. In addition, the Utility was required to maintain at least $9.7 billion of its net assets as equity in order to maintain the capital structure of at least 52% equity at December 31, 2010. As a result, $9.7 billion of the Utility’s net assets are restricted and may not be transferred to PG&E Corporation in the form of cash dividends. The Boards of Directors of PG&E Corporation and the Utility declare dividends quarterly. On December 15, 2010, the Board of Directors of PG&E Corporation declared a quarterly dividend of $0.455 per share, totaling $183 million, which was paid on January 15, 2011 to shareholders of record on December 31, 2010. Long-Term Incentive Plan FERC FORM NO. 1 (ED. 12-88) Page 123.18
Name of Respondent PACIFIC GAS AND ELECTRIC COMPANY This Report is: (1) X An Original (2) A Resubmission Date of Report (Mo, Da, Yr) 04/08/2011 Year/Period of Report 2010/Q4 NOTES TO FINANCIAL STATEMENTS (Continued) The 2006 LTIP permits the award of various forms of incentive awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, deferred compensation awards, and other stock-based awards, to eligible employees of PG&E Corporation and its subsidiaries. Non-employee directors of PG&E Corporation are also eligible to receive restricted stock and either stock options or restricted stock units under the formula grant provisions of the 2006 LTIP. A maximum of 12 million shares of PG&E Corporation common stock (subject to adjustment for changes in capital structure, stock dividends, or other similar events) has been reserved for issuance under the 2006 LTIP, of which 7,856,348 shares were available for award at December 31, 2010. Awards made under the PG&E Corporation LTIP before December 31, 2005 and still outstanding continue to be governed by the terms and conditions of the PG&E Corporation LTIP. PG&E Corporation and the Utility use an estimated annual forfeiture rate of 2.5% for stock options and restricted stock and 2% for performance shares, based on historic forfeiture rates, for purposes of determining compensation expense for share-based incentive awards. The following table provides a summary of total compensation expense for PG&E Corporation and the Utility for share-based incentive awards for 2010, 2009, and 2008: (in millions) 2010 2009 2008 Stock Options $ - $ - $ 2 Restricted Stock 14 9 22 Restricted Stock Units 9 11 - Performance Shares: Liability Awards 22 37 33 Equity Awards 11 - - Total Compensation Expense (pre-tax) $ 56 $ 57 $ 57 Total Compensation Expense (after-tax) $ 33 $ 34 $ 34 There were no significant stock-based compensation costs capitalized during 2010, 2009 and 2008. There was no material difference between PG&E Corporation and the Utility for the information disclosed above. Stock Options The exercise price of stock options granted under the 2006 LTIP and all other outstanding stock options is equal to the market price of PG&E Corporation’s common stock on the date of grant. Stock options generally have a 10-year term and vest over four years of continuous service, subject to accelerated vesting in certain circumstances. The following table summarizes total intrinsic value (fair market value of PG&E Corporation’s common stock less exercise price) of options exercised: PG&E Corporation (in millions) 2010 2009 2008 Intrinsic value of options exercised $ 15 $ 18 $ 13 The tax benefit from stock options exercised totaled $0.5 million, $6 million, and $4 million for 2010, 2009, and 2008 respectively. The following table summarizes stock option activity for 2010: FERC FORM NO. 1 (ED. 12-88) Page 123.19 Weighted Average Remaining
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2010 ANNUAL REPORT of Pacific Gas a
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SELECTED FINANCIAL DATA - CLASS A,
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2010 FERC Form 1 - Pacific Gas and Electric Company

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