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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended
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Mar. 31, 2018
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For a summary of the significant accounting policies used by PG&E Corporation and the Utility, see Note 2 of the Notes to the Consolidated Financial Statements in Item 8 of the 2017 Form 10-K. Variable Interest Entities A VIE is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, or whose equity investors lack any characteristics of a controlling financial interest. An enterprise that has a controlling financial interest in a VIE is a primary beneficiary and is required to consolidate the VIE. Some of the counterparties to the Utility’s power purchase agreements are considered VIEs. Each of these VIEs was designed to own a power plant that would generate electricity for sale to the Utility. To determine whether the Utility has a controlling interest or was the primary beneficiary of any of these VIEs at March 31, 2018, the Utility assessed whether it absorbs any of the VIE’s expected losses or receives any portion of the VIE’s expected residual returns under the terms of the power purchase agreement, analyzed the variability in the VIE’s gross margin, and considered whether it had any decision-making rights associated with the activities that are most significant to the VIE’s performance, such as dispatch rights and operating and maintenance activities. The Utility’s financial obligation is limited to the amount the Utility pays for delivered electricity and capacity. The Utility did not have any decision-making rights associated with any of the activities that are most significant to the economic performance of any of these VIEs. Since the Utility was not the primary beneficiary of any of these VIEs at March 31, 2018, it did not consolidate any of them. Pension and Other Post-Retirement Benefits PG&E Corporation and the Utility sponsor a non-contributory defined benefit pension plan and cash balance plan. Both plans are included in “Pension Benefits” below. Post-retirement medical and life insurance plans are included in “Other Benefits” below. The net periodic benefit costs reflected in PG&E Corporation’s Condensed Consolidated Financial Statements for the three months ended March 31, 2018 and 2017 were as follows:
| Pension Benefits |  | Other Benefits
| Three Months Ended March 31,
(in millions) | 2018 |  | 2017 |  | 2018 |  | 2017
Service cost for benefits earned | $ | 128 |  |  | $ | 118 |  |  | $ | 16 |  |  | $ | 15 |
Interest cost | 172 |  |  | 179 |  |  | 17 |  |  | 19 |
Expected return on plan assets | (255 | ) |  | (193 | ) |  | (33 | ) |  | (24 | )
Amortization of prior service cost | (1 | ) |  | (2 | ) |  | 4 |  |  | 4 |
Amortization of net actuarial loss | 1 |  |  | 6 |  |  | (1 | ) |  | 1 |
Net periodic benefit cost | 45 |  |  | 108 |  |  | 3 |  |  | 15 |
Regulatory account transfer (1) | 39 |  |  | (23 | ) |  | — |  |  | — |
Total | $ | 84 |  |  | $ | 85 |  |  | $ | 3 |  |  | $ | 15 |
(1) The Utility recorded these amounts to a regulatory account since they are probable of recovery from, or refund to, customers in future rates. Non-service costs are reflected in Other income, net on the Condensed Consolidated Statements of Income. There was no material difference between PG&E Corporation and the Utility for the information disclosed above. Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (Loss) The changes, net of income tax, in PG&E Corporation’s accumulated other comprehensive income (loss) are summarized below:
| Pension Benefits |  | Other Benefits |  | Total
(in millions, net of income tax) | Three Months Ended March 31, 2018
Beginning balance | $ | (25 | ) |  | $ | 17 |  |  | $ | (8 | )
Amounts reclassified from other comprehensive income: |  |  |  |  |
Amortization of prior service cost (net of taxes of $0 and $1, respectively) (1) | (1 | ) |  | 3 |  |  | 2 |
Amortization of net actuarial loss (net of taxes of $0 and $0, respectively) (1) | 1 |  |  | (1 | ) |  | — |
Regulatory account transfer (net of taxes of $0 and $1, respectively) (1) | — |  |  | (2 | ) |  | (2 | )
Reclassification of stranded income tax to retained earnings (net of taxes of $0 and $0, respectively) | (5 | ) |  | — |  |  | (5 | )
Net current period other comprehensive gain (loss) | (5 | ) |  | — |  |  | (5 | )
Ending balance | $ | (30 | ) |  | $ | 17 |  |  | $ | (13 | )
(1) These components are included in the computation of net periodic pension and other post-retirement benefit costs. (See the “Pension and Other Post-Retirement Benefits” table above for additional details.)
| Pension Benefits |  | Other Benefits |  | Total
(in millions, net of income tax) | Three Months Ended March 31, 2017
Beginning balance | $ | (25 | ) |  | $ | 16 |  |  | $ | (9 | )
Amounts reclassified from other comprehensive income: (1) |  |  |  |  |
Amortization of prior service cost (net of taxes of $1 and $2, respectively) | (1 | ) |  | 2 |  |  | 1 |
Amortization of net actuarial loss (net of taxes of $3, and $0, respectively) | 3 |  |  | 1 |  |  | 4 |
Regulatory account transfer (net of taxes of $2 and $2, respectively) | (2 | ) |  | (3 | ) |  | (5 | )
Net current period other comprehensive gain (loss) | — |  |  | — |  |  | — |
Ending balance | $ | (25 | ) |  | $ | 16 |  |  | $ | (9 | )
(1) These components are included in the computation of net periodic pension and other post-retirement benefit costs. (See the “Pension and Other Post-Retirement Benefits” table above for additional details.) There was no material difference between PG&E Corporation and the Utility for the information disclosed above. Recently Adopted Accounting Standards Revenue Recognition Standard In May 2014, the FASB issued ASU No. 2014-9, Revenue from Contracts with Customers (Topic 606), which amends the previous revenue recognition guidance. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across entities, industries, jurisdictions, and capital markets and to provide more useful information to users of financial statements through improved and expanded disclosure requirements. PG&E Corporation and the Utility applied the requirements using the modified retrospective method when the ASU became effective on January 1, 2018. The adoption of this guidance did not have a material impact on the Condensed Consolidated Financial Statements as of the adoption date or for the three months ended March 31, 2018. A majority of the Utility's revenue from contracts with customers continues to be recognized on a monthly basis based on applicable tariffs and customers' monthly consumption. Such revenue is recognized using the invoice practical expedient which allows an entity to recognize revenue in the amount that directly corresponds to the value transferred to the customer. Revenue from Contracts with Customers The Utility recognizes revenues when electricity and natural gas services are delivered. The Utility records unbilled revenues for the estimated amount of energy delivered to customers but not yet billed at the end of the period. Unbilled revenues are included in accounts receivable on the Condensed Consolidated Balance Sheets. Rates charged to customers are based on CPUC and FERC authorized revenue requirements. Revenues can vary significantly from period to period as a result of seasonality, weather, and customer usage patterns. The FERC authorizes the Utility’s revenue requirements in periodic (often annual) TO rate cases. The Utility’s ability to recover revenue requirements authorized by the FERC is dependent on the volume of the Utility’s electricity sales, and revenue is recognized only for amounts billed and unbilled, net of revenues subject to refund. Regulatory Balancing Account Revenue The CPUC authorizes most of the Utility’s revenues in the Utility’s GRC and its GT&S rate cases, which generally occur every three or four years. The Utility’s ability to recover revenue requirements authorized by the CPUC in these rate cases is independent, or “decoupled” from the volume of the Utility’s sales of electricity and natural gas services. The Utility recognizes revenues that have been authorized for rate recovery, are objectively determinable and probable of recovery, and are expected to be collected within 24 months. Generally, electric and natural gas operating revenue is recognized ratably over the year. The Utility records a balancing account asset or liability for differences between customer billings and authorized revenue requirements that are probable of recovery or refund. The CPUC also has authorized the Utility to collect additional revenue requirements to recover costs that the Utility has been authorized to pass on to customers, including costs to purchase electricity and natural gas, and to fund public purpose, demand response, and customer energy efficiency programs. In general, the revenue recognition criteria for pass-through costs billed to customers are met at the time the costs are incurred. The Utility records a regulatory balancing account asset or liability for differences between incurred costs and customer billings or authorized revenue meant to recover those costs, to the extent that these differences are probable of recovery or refund. As a result, these differences have no impact on net income. The following table presents the Utility's revenues disaggregated by type of customer:
(in millions) | Three Months Ended March 31,
Electric | 2018
Revenue from contracts with customers |
Residential | $ | 1,336 |
Commercial | 1,073 |
Industrial | 324 |
Agricultural | 125 |
Public street and highway lighting | 20 |
Other (1) | (201 | )
Total revenue from contracts with customers - electric | 2,677 |
Regulatory balancing accounts (2) | 274 |
Total electric operating revenue | $ | 2,951 |
Natural gas |
Revenue from contracts with customers |
Residential | $ | 958 |
Commercial | 196 |
Transportation service only | 297 |
Other (1) | (52 | )
Total revenue from contracts with customers - gas | 1,399 |
Regulatory balancing accounts (2) | (294 | )
Total natural gas operating revenue | 1,105 |
Total operating revenues | $ | 4,056 |
(1) This activity is primarily related to the change in unbilled revenue, partially offset by other miscellaneous revenue items. (2) These amounts represent revenues authorized to be billed or refunded to customers. Presentation of Net Periodic Pension and Post-Retirement Benefit Costs In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715), which amends the guidance relating to the presentation of net periodic pension cost and net periodic other post-retirement benefit costs. PG&E Corporation and the Utility applied the requirements when the ASU became effective on January 1, 2018. On a retrospective basis, the amendment requires an employer to separate the service cost component from the other components of net benefit cost and provides explicit guidance on how to present the service cost component and other components in the income statement. As a result, the Condensed Consolidated Statements of Income for PG&E Corporation and the Utility were restated. This change resulted in increases to Operating and maintenance expenses and Other income, net, of $13 million and $14 million for PG&E Corporation and the Utility, respectively, for the three months ended March 31, 2017. On a prospective basis, the ASU limits the component of net benefit cost eligible to be capitalized to service costs. The FERC has allowed and the Utility has made a one-time election to adopt the new FASB guidance for regulatory filing purposes. In January 2018, the CPUC approved modifications to the Utility’s calculation for pension-related revenue requirements to allow for capitalization of only the service cost component determined by a plan’s actuaries. The capitalization of service costs only will result in higher rate base and will lead to a reduction in the Utility's 2018 revenues. The changes in capitalization of retirement benefits did not have a material impact on PG&E Corporation’s and the Utility’s Condensed Consolidated Financial Statements. Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance relating to the recognition, measurement, presentation, and disclosure of financial instruments. The amendments require equity investments (excluding those accounted for under the equity method or those that result in consolidation) to be measured at fair value, with changes in fair value recognized in net income. The majority of PG&E Corporation’s and the Utility’s investments are held in the nuclear decommissioning trusts and gains or losses are refundable or recoverable, respectively, from customers through rates. The ASU became effective for PG&E Corporation and the Utility on January 1, 2018 and did not have a material impact on the Condensed Consolidated Financial Statements and related disclosures. Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. When amounts are reclassified from accumulated other comprehensive income to the Condensed Consolidated Statement of Income, PG&E Corporation and the Utility recognize the related income tax expense at the tax rate in effect at that time. The ASU is effective for PG&E Corporation and the Utility on January 1, 2019, and early adoption is permitted. PG&E Corporation and the Utility early adopted this ASU on January 1, 2018, resulting in an immaterial reclassification. Accounting Standards Issued But Not Yet Adopted Recognition of Lease Assets and Liabilities In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the guidance relating to the definition of a lease, recognition of lease assets and lease liabilities on the balance sheet, and the disclosure of key information about leasing arrangements. In November, 2017, the FASB tentatively decided to amend the new leasing guidance such that entities may elect not to restate their comparative periods in the period of adoption. Under the new standard, all lessees must recognize an asset and liability on the balance sheet. Operating leases were previously not recognized on the balance sheet. The ASU will be effective for PG&E Corporation and the Utility on January 1, 2019, with early adoption permitted. PG&E Corporation and the Utility plan to adopt this guidance in the first quarter of 2019. PG&E Corporation and the Utility expect this standard to increase lease assets and lease liabilities on the Condensed Consolidated Balance Sheets and do not expect the guidance will have a material impact on the Condensed Consolidated Statements of Income, Statements of Cash Flows and related disclosures.

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