2010 FERC Form 1 - Pacific Gas and Electric Company

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)
Unrealized gain/(loss) – Regulatory assets and
liabilities (1)
$ (260) $ 15
Realized gain/(loss) – Cost of electricity (2) (573) (701)
Realized gain/(loss) – Cost of natural gas (2) (79) (54)
Total commodity risk instruments $ (912) $ (740)
(1) Unrealized gains and losses on commodity risk-related derivative instruments are recorded to regulatory
assets or liabilities rather than being recorded to the Consolidated Statements of Income. These amounts
exclude the impact of cash collateral postings.
(2) These amounts are fully passed through to customers in rates. Accordingly, net income was not impacted
by realized amounts on these instruments.
Cash inflows and outflows associated with the settlement of all derivative instruments are included in operating cash flows on
PG&E Corporation’s and the Utility’s Consolidated Statements of Cash Flows.
The majority of the Utility’s commodity risk-related derivative instruments contain collateral posting provisions tied to the
Utility’s credit rating from each of the major credit rating agencies. If the Utility’s credit rating were to fall below investment grade,
the Utility would be required to immediately post additional cash to fully collateralize its net liability derivative positions.
At December 31, 2010, the additional cash collateral that the Utility would be required to post if its credit risk-related
contingency features were triggered was as follows:
(in millions)
Derivatives in a liability position with credit risk-related
contingencies that are not fully collateralized $ (518)
Related derivatives in an asset position -
Collateral posting in the normal course of business related
to these derivatives 7
Net position of derivative contracts/additional collateral
posting requirements (1) $ (511)
(1) This calculation excludes the impact of closed but unpaid positions, as their settlement is
not impacted by any of the Utility’s credit risk-related contingencies.
NOTE 11: FAIR VALUE MEASUREMENTS
PG&E Corporation and the Utility measure their cash equivalents, trust assets, and price risk management instruments at fair
value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based
on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a
basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are supported by little or no market activities.
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value.
Assets and liabilities measured at fair value on a recurring basis for PG&E Corporation and the Utility are summarized below
(money market investments and assets held in rabbi trusts are held by PG&E Corporation and not the Utility):
FERC FORM NO. 1 (ED. 12-88) Page 123.32