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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended
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Jun. 30, 2019
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 Condensed Consolidated Financial Statements above for bankruptcy-related policies and Note 2 of the Notes to the Consolidated Financial Statements in Item 8 of the 2018 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 June 30, 2019, 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 June 30, 2019, 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 and six months ended June 30, 2019 and 2018 were as follows:
| Pension Benefits |  | Other Benefits
| Three Months Ended June 30,
(in millions) | 2019 |  | 2018 |  | 2019 |  | 2018
Service cost for benefits earned (1) | $ | 111 |  |  | $ | 129 |  |  | $ | 14 |  |  | $ | 17 |
Interest cost | 190 |  |  | 172 |  |  | 19 |  |  | 18 |
Expected return on plan assets | (226 | ) |  | (256 | ) |  | (30 | ) |  | (32 | )
Amortization of prior service cost | (2 | ) |  | (2 | ) |  | 3 |  |  | 3 |
Amortization of net actuarial loss | — |  |  | 2 |  |  | (1 | ) |  | (2 | )
Net periodic benefit cost | 73 |  |  | 45 |  |  | 5 |  |  | 4 |
Regulatory account transfer (2) | 10 |  |  | 39 |  |  | — |  |  | — |
Total | $ | 83 |  |  | $ | 84 |  |  | $ | 5 |  |  | $ | 4 |
(1) A portion of service costs are capitalized pursuant to ASU 2017-07. (2) The Utility recorded these amounts to a regulatory account since they are probable of recovery from, or refund to, customers in future rates.
| Pension Benefits |  | Other Benefits
| Six Months Ended June 30,
(in millions) | 2019 |  | 2018 |  | 2019 |  | 2018
Service cost for benefits earned (1) | $ | 222 |  |  | $ | 257 |  |  | $ | 28 |  |  | $ | 33 |
Interest cost | 379 |  |  | 344 |  |  | 38 |  |  | 35 |
Expected return on plan assets | (453 | ) |  | (511 | ) |  | (61 | ) |  | (65 | )
Amortization of prior service cost | (3 | ) |  | (3 | ) |  | 7 |  |  | 7 |
Amortization of net actuarial loss | 1 |  |  | 3 |  |  | (2 | ) |  | (3 | )
Net periodic benefit cost | 146 |  |  | 90 |  |  | 10 |  |  | 7 |
Regulatory account transfer (2) | 21 |  |  | 77 |  |  | — |  |  | — |
Total | $ | 167 |  |  | $ | 167 |  |  | $ | 10 |  |  | $ | 7 |
(1) A portion of service costs are capitalized pursuant to ASU 2017-07. (2) 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. Service costs are reflected in Operating and maintenance on the Condensed Consolidated Statements of Income. There was no material difference between PG&E Corporation and the Utility for the information disclosed above. On February 27, 2019, PG&E Corporation and the Utility received final approval from the Bankruptcy Court to maintain existing pension and other benefit plans, other than the non-qualified pension plan, during the pendency of the Chapter 11 Cases. 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 June 30, 2019
Beginning balance | $ | (21 | ) |  | $ | 17 |  |  | $ | (4 | )
Amounts reclassified from other comprehensive income: |  |  |  |  |
Amortization of prior service cost (net of taxes of $1 and $1, respectively) (1) | (1 | ) |  | 2 |  |  | 1 |
Amortization of net actuarial loss (net of taxes of $0 and $1, respectively) (1) | — |  |  | — |  |  | — |
Regulatory account transfer (net of taxes of $1 and $0, respectively) (1) | 1 |  |  | (2 | ) |  | (1 | )
Net current period other comprehensive gain (loss) | — |  |  | — |  |  | — |
Ending balance | $ | (21 | ) |  | $ | 17 |  |  | $ | (4 | )
(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 June 30, 2018
Beginning balance | $ | (30 | ) |  | $ | 17 |  |  | $ | (13 | )
Amounts reclassified from other comprehensive income: (1) |  |  |  |  |
Amortization of prior service cost (net of taxes of $1 and $1, respectively) | (1 | ) |  | 2 |  |  | 1 |
Amortization of net actuarial loss (net of taxes of $1 and $1, respectively) | 1 |  |  | (1 | ) |  | — |
Regulatory account transfer (net of taxes of $0 and $0, respectively) | — |  |  | (1 | ) |  | (1 | )
Net current period other comprehensive gain (loss) | — |  |  | — |  |  | — |
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) | Six Months Ended June 30, 2019
Beginning balance | $ | (21 | ) |  | $ | 17 |  |  | $ | (4 | )
Amounts reclassified from other comprehensive income: |  |  |  |  |
Amortization of prior service cost (net of taxes of $1 and $2, respectively) (1) | (2 | ) |  | 5 |  |  | 3 |
Amortization of net actuarial loss (net of taxes of $0 and $1, respectively) (1) | 1 |  |  | (1 | ) |  | — |
Regulatory account transfer (net of taxes of $1 and $1, respectively) (1) | 1 |  |  | (4 | ) |  | (3 | )
Net current period other comprehensive gain (loss) | — |  |  | — |  |  | — |
Ending balance | $ | (21 | ) |  | $ | 17 |  |  | $ | (4 | )
(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) | Six Months Ended June 30, 2018
Beginning balance | $ | (25 | ) |  | $ | 17 |  |  | $ | (8 | )
Amounts reclassified from other comprehensive income: |  |  |  |  |
Amortization of prior service cost (net of taxes of $1 and $2, respectively) (1) | (2 | ) |  | 5 |  |  | 3 |
Amortization of net actuarial loss (net of taxes of $1 and $1, respectively) (1) | 2 |  |  | (2 | ) |  | — |
Regulatory account transfer (net of taxes of $0 and $1, respectively) (1) | — |  |  | (3 | ) |  | (3 | )
Reclassification of stranded income tax to retained earnings | (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.) There was no material difference between PG&E Corporation and the Utility for the information disclosed above. Revenue Recognition 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 because of seasonality, weather, and customer usage patterns. Regulatory Balancing Account Revenue The CPUC authorizes most of the Utility’s revenues in the Utility’s GRC and its GT&S rate case, 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:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(in millions) | 2019 |  | 2018 |  | 2019 |  | 2018
Electric |  |  |  |  |  |  |
Revenue from contracts with customers |  |  |  |  |  |  |
Residential | $ | 994 |  |  | $ | 1,039 |  |  | $ | 2,282 |  |  | $ | 2,375 |
Commercial | 1,135 |  |  | 1,234 |  |  | 2,088 |  |  | 2,307 |
Industrial | 326 |  |  | 354 |  |  | 619 |  |  | 678 |
Agricultural | 261 |  |  | 318 |  |  | 347 |  |  | 443 |
Public street and highway lighting | 16 |  |  | 18 |  |  | 33 |  |  | 38 |
Other (1) | — |  |  | 84 |  |  | (309 | ) |  | (118 | )
Total revenue from contracts with customers - electric | 2,732 |  |  | 3,047 |  |  | 5,060 |  |  | 5,723 |
Regulatory balancing accounts (2) | 214 |  |  | 265 |  |  | 678 |  |  | 540 |
Total electric operating revenue | $ | 2,946 |  |  | $ | 3,312 |  |  | $ | 5,738 |  |  | $ | 6,263 |
Natural gas |  |  |  |  |  |  |
Revenue from contracts with customers |  |  |  |  |  |  |
Residential | $ | 343 |  |  | $ | 452 |  |  | $ | 1,515 |  |  | $ | 1,410 |
Commercial | 129 |  |  | 119 |  |  | 369 |  |  | 315 |
Transportation service only | 304 |  |  | 264 |  |  | 686 |  |  | 560 |
Other (1) | (129 | ) |  | (128 | ) |  | (205 | ) |  | (179 | )
Total revenue from contracts with customers - gas | 647 |  |  | 707 |  |  | 2,365 |  |  | 2,106 |
Regulatory balancing accounts (2) | 350 |  |  | 215 |  |  | (149 | ) |  | (79 | )
Total natural gas operating revenue | 997 |  |  | 922 |  |  | 2,216 |  |  | 2,027 |
Total operating revenues | $ | 3,943 |  |  | $ | 4,234 |  |  | $ | 7,954 |  |  | $ | 8,290 |
(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. Recently Adopted Accounting Standards 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, the recognition of lease assets and lease liabilities on the balance sheet, and the disclosure of key information about leasing arrangements. Under the new standard, all lessees must recognize a ROU asset, reflecting the right to use the underlying asset for the lease term, and a lease liability, reflecting the obligation to make lease payments, on the balance sheet. Operating leases were previously not recognized on the balance sheet. PG&E Corporation and the Utility adopted the ASU on January 1, 2019. PG&E Corporation and the Utility elected certain practical expedients and will carry forward historical conclusions related to (1) contracts that contain leases, (2) existing lease and easement classification, and (3) initial direct costs. After adoption of the new standard, the Corporation and Utility elected to not separate lease and non-lease components. Additionally, PG&E Corporation and the Utility have elected not to restate comparative periods upon adoption. PG&E Corporation and the Utility determine if an arrangement is a lease at inception. As most of the leases do not provide implicit discount rates, the Utility uses an estimate of its incremental secured borrowing rates based on observed market data and other information available at the lease commencement date. The ROU assets and lease liabilities include only fixed lease payments. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease terms will only include options to extend or terminate the lease when it is reasonably certain that the Utility will exercise such options. The Utility recognizes lease expense in conformity with ratemaking. Operating leases are included in operating lease ROU assets and current and noncurrent operating lease liabilities on the Condensed Consolidated Balance Sheets. Finance leases are included in property, plant, and equipment, other current liabilities, and other noncurrent liabilities on the Condensed Consolidated Balance Sheets. Financing leases were immaterial for the six months ended June 30, 2019. Cash payments arising from operating leases were $848 million for the six months ended June 30, 2019 and are presented within operating activities on the Condensed Consolidated Statement of Cash Flows. Cash payments for the principal portion of the financing lease liability will continue to be presented within financing activities. Variable lease payments not included in the financing lease liability, if any, are presented within operating activities. On January 1, 2019, PG&E Corporation and the Utility recorded ROU assets and lease liabilities of $2.8 billion, representing the net present value of fixed lease payments and excluding any variable lease payments. This amount is presented within the supplemental disclosures of noncash activities for the six months ended, June 30, 2019. The majority of the Utility’s ROU assets and lease liabilities relate to various power purchase agreements. These power purchase agreements primarily consist of generation plants leased to meet customer demand plus applicable reserve margins, for terms between 5 years and 20 years. PG&E Corporation and the Utility have also recorded ROU assets and lease liabilities related to property and land leases. At June 30, 2019, the Utility’s operating leases had a weighted average remaining lease term of 6.1 years and a weighted average discount rate of 6.1%. The following table shows the lease expense recognized for the fixed and variable component of the Utility’s lease obligations:
(in millions) | Three Months Ended June 30, 2019 |  | Six Months Ended June 30, 2019
Operating lease fixed cost | $ | 114 |  |  | $ | 236 |
Operating lease variable cost | 490 |  |  | 799 |
Total operating lease costs | $ | 604 |  |  | $ | 1,035 |
The following table shows the Utility’s future expected operating lease payments:
(in millions) | June 30, 2019
2019 (1) | $ | 450 |
2020 | 679 |
2021 | 623 |
2022 | 548 |
2023 | 255 |
Thereafter | 692 |
Total lease payments | 3,247 |
Less imputed interest | (594 | )
Total | $ | 2,653 |
(1) Represents the remaining expected operating lease payments from July 1, 2019 through December 31, 2019. The following table shows the Utility’s future expected obligations for power purchase and other lease commitments:
(in millions) | December 31, 2018
2019 | $ | 684 |
2020 | 677 |
2021 | 621 |
2022 | 546 |
2023 | 252 |
Thereafter | 581 |
Total lease commitments | $ | 3,361 |
Accounting Standards Issued But Not Yet Adopted Fair Value Measurement In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements, which amends the existing guidance relating to the disclosure requirements for fair value measurements. The ASU will be effective for PG&E Corporation and the Utility on January 1, 2020 with early adoption permitted. PG&E Corporation and the Utility are currently evaluating the impact the guidance will have on their Condensed Consolidated Financial Statements and related disclosures. Intangibles-Goodwill and Other In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This ASU will be effective for PG&E Corporation and the Utility on January 1, 2020 with early adoption permitted. PG&E Corporation and the Utility are currently evaluating the impact of the guidance on their Condensed Consolidated Financial Statements and related disclosures. Financial Instruments—Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which provides a model, known as the current expected credit loss model, to estimate the expected lifetime credit loss on financial assets, including trade and other receivables, rather than incurred losses over the remaining life of most financial assets measured at amortized cost. The guidance also requires use of an allowance to record estimated credit losses on available-for-sale debt securities. This ASU will be effective for PG&E Corporation and the Utility on January 1, 2020. PG&E Corporation and the Utility are currently evaluating the impact of the guidance on their Condensed Consolidated Financial Statements and related disclosures.

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