UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: April 22, 2019
(Date of earliest event reported)
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Commission
File Number
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Exact Name of Registrant
as specified in its charter
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State or Other Jurisdiction of
Incorporation or Organization
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IRS Employer
Identification Number
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1-12609
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PG&E CORPORATION
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California
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94-3234914
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1-2348
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PACIFIC GAS AND ELECTRIC COMPANY
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California
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94-0742640
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77 Beale Street
P.O. Box 770000
San Francisco, California 94177
(Address of principal executive offices) (Zip Code)
(415) 973-1000
(Registrant's telephone number, including area code)
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77 Beale Street
P.O. Box 770000
San Francisco, California 94177
(Address of principal executive offices) (Zip Code)
(415) 973-7000
(Registrant's telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of
1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Emerging growth company
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PG&E Corporation
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☐ | ||
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Emerging growth company
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Pacific Gas and Electric Company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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PG&E Corporation
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Pacific Gas and Electric Company
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| Item 8.01 |
Other Events.
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2020 Cost of Capital Proceeding
On April 22, 2019, Pacific Gas and Electric Company (the “Utility”), a subsidiary of PG&E Corporation, filed an
application with the California Public Utilities Commission (the “CPUC”), requesting that the CPUC authorize the Utility's capital structure and rates of return for its electric generation, electric and natural gas distribution, and natural gas
transmission and storage rate base beginning on January 1, 2020. In its application, the Utility requested that the CPUC approve the Utility’s proposed capital structure (i.e., the relative weightings of common equity, preferred equity, and
debt), as well as the proposed return on equity, proposed cost of preferred stock, and proposed cost of debt. The Utility requested a 16 percent rate of return on equity for 2020, which would result in a $1.2 billion increase in its revenue
requirement. The estimated revenue increase is based on the current rate base and does not reflect projected infrastructure investments in 2019 and beyond (see below).
The following table compares the currently authorized capital structure and rates of return which will remain in effect
through 2019 with those requested in the Utility’s application for 2020:
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2019 Currently Authorized
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2020 Requested
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Cost
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Capital
Structure
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Weighted
Cost
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Cost
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Capital
Structure
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Weighted
Cost
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Return on common equity
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10.25
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%
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52.0
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%
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5.33
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%
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16.0
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%
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52.0
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%
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8.32
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%
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Preferred stock
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5.60
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%
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1.0
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%
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0.06
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%
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5.52
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%
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0.5
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%
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0.03
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%
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Long-term debt
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4.89
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%
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47.0
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%
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2.30
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%
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5.16
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%
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47.5
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%
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2.45
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%
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Weighted average cost of capital
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7.69
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%
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10.80
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%
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The proposed cost of capital and capital structure will be essential for the Utility to attract new investment capital to
upgrade, maintain, and modernize its critical energy infrastructure. The Utility indicated in its application that, over the next four years (2019-2022), the Utility expects to fund up to $28 billion in energy infrastructure investments,
including $21 billion in electric and gas safety and reliability and system hardening, $4 billion in new gas pipelines and electric powerlines, $1 billion in power generation, and $2 billion in information technology, equipment and facilities.
The Utility indicated in its application that its requested return on equity reflects the wildfire-related challenges that
the Utility is facing. The Utility proposed to amend its cost of capital application with an updated cost of capital if the CPUC or the California legislature implemented actions to materially reduce the extent of the wildfire risk-related
challenges and structural problems facing customers, the Utility, and its shareholders. The Utility also proposed to file a new cost of capital application with the CPUC on or about the time it emerges from its Chapter 11 bankruptcy
proceeding. The Utility requested in its cost of capital application that the annual cost of capital adjustment mechanism be continued, although its normal operation could be superseded by a new cost of capital application. (The annual cost
of capital adjustment mechanism is a tool to modify the cost of long-term debt and cost of equity authorized by the CPUC based on changes in interest rates.)
Revenue Requirements
For 2020, the Utility expects that the proposed cost of capital, if adopted, would result in revenue requirement increases of
approximately $844 million for electric generation and distribution and $229 million gas distribution operations, assuming 2017 authorized rate base amounts. The revenues for the gas transmission and storage operations would increase by
approximately $159 million, assuming 2018 authorized rate base amounts. However, if the CPUC subsequently approves different electric and gas rate base amounts for the Utility in its 2019 Gas Transmission and Storage (GT&S) Rate Case and
its 2020 General Rate Case (GRC), both currently pending before the CPUC, the revenue requirement changes resulting from the Utility’s requested 2020 return on equity may differ from the amounts reflected in this cost of capital application.
The following table compares the revenue requirement amounts currently authorized in the Utility’s 2015 GT&S rate case
and the 2017 GRC, with those requested in the Utility’s 2020 cost of capital application:
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Revenue Requirement
$ in millions
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Authorized in 2017
GRC and 2015 GT&S
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Requested in 2020
Cost of Capital
Application
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Electric generation and distribution
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$
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6,266
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$
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7,110
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Gas distribution
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$
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1,739
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$
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1,968
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Gas transmission and storage
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$
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1,269
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$
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1,428
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The Utility is unable to predict the timing and outcome of this proceeding.
As previously disclosed, due to the net charges recorded in connection with the 2018 Camp Fire and the 2017 Northern
California wildfires as of December 31, 2018, on February 28, 2019, the Utility submitted to the CPUC an application for a waiver of the capital structure condition. This cost of capital application does not modify that request.
For more information about the Utility’s cost of capital, see PG&E Corporation and the Utility’s joint Annual Report on
Form 10-K for the year ended December 31, 2018.
Forward-Looking Statements
This current report on Form 8-K contains forward-looking statements that are not historical facts, including statements about
the beliefs, expectations, estimates, future plans and strategies of PG&E Corporation and the Utility. These statements are based on current expectations and assumptions, which management believes are reasonable, and on information
currently available to management, but are necessarily subject to various risks and uncertainties. In addition to the risk that these assumptions prove to be inaccurate, factors that could cause actual results to differ materially from those
contemplated by the forward-looking statements include whether the CPUC grants this cost of capital application, and the other factors disclosed in PG&E Corporation and the Utility’s joint Annual Report on Form 10-K for the year ended
December 31, 2018, and their subsequent reports filed with the Securities and Exchange Commission. Additional factors include, but are not limited to, those associated with the Chapter 11 cases of PG&E Corporation and the Utility that
commenced on January 29, 2019. PG&E Corporation and the Utility undertake no obligation to publicly update or revise any forward-looking statements, whether due to new information, future events or otherwise, except to the extent required
by law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be
signed on their behalf by the undersigned thereunto duly authorized.
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PG&E CORPORATION
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Dated: April 22, 2019
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By:
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/s/ JASON P. WELLS
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JASON P. WELLS
Senior Vice President and Chief Financial Officer
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PACIFIC GAS AND ELECTRIC COMPANY
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Dated: April 22, 2019
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By:
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/s/ DAVID S. THOMASON
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DAVID S. THOMASON
Vice President, Chief Financial Officer and Controller
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