REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS

12 Months Ended

Dec. 31, 2021

REGULATORY ASSETS, LIABILITIES, AND BALANCING ACCOUNTS

Regulatory Assets

Long-term regulatory assets are comprised of the following:


	Balance at December 31,				Recovery Period
(in millions)	2021		2020
Pension benefits (1)	$	708	$	2,245	Indefinitely
Environmental compliance costs	1,089		1,112		32 years
Utility retained generation (2)	133		181		6 years
Price risk management	216		204		19 years
Unamortized loss, net of gain, on reacquired debt	37		49		23 years
Catastrophic event memorandum account (3)	1,119		842		1 - 3 years
Wildfire expense memorandum account (4)	347		400		TBD years
Fire hazard prevention memorandum account (5)	75		137		1 - 3 years
Fire risk mitigation memorandum account (6)	44		66		1 - 3 years
Wildfire mitigation plan memorandum account (7)	424		390		1 - 3 years
Deferred income taxes (8)	1,849		908		51 years
Insurance premium costs (9)	207		294		3 - 4 years
Wildfire mitigation balancing account (10)	273		156		1 - 3 years
General rate case memorandum accounts (11)	—		376		1 - 2 years
Vegetation management balancing account (12)	1,411		592		1 - 3 years
COVID-19 pandemic protection memorandum accounts (13)	49		84		TBD years
Other	1,226		942		Various
Total long-term regulatory assets	$	9,207	$	8,978

(1) Payments into the pension and other benefits plans are based on annual contribution requirements. As these annual requirements continue indefinitely into the future, the Utility expects to continuously recover pension benefits.

(2) In connection with the settlement agreement entered into among PG&E Corporation, the Utility, and the CPUC in 2003 to resolve the Utility’s 2001 proceeding under Chapter 11, the CPUC authorized the Utility to recover $1.2 billion of costs related to the Utility’s retained generation assets. The individual components of these regulatory assets are being amortized over the respective lives of the underlying generation facilities, consistent with the period over which the related revenues are recognized.

(3) Includes costs of responding to catastrophic events that have been declared a disaster or state of emergency by competent federal or state authorities. As of December 31, 2021 and 2020, $49 million in COVID-19 related costs was recorded to CEMA regulatory assets. Recovery of CEMA costs is subject to CPUC review and approval.

(4) Balance as of December 31, 2021 represents incremental wildfire claims and outside legal expenses related to the 2021 Dixie fire. Balance as of December 31, 2020 is comprised of incremental wildfire liability insurance premium costs for the period July 26, 2017 through December 31, 2019. Recovery of WEMA costs is subject to CPUC review and approval.

(5) Includes costs associated with the implementation of regulations and requirements adopted to protect the public from potential fire hazards associated with overhead power line facilities and nearby aerial communication facilities that have not been previously authorized in another proceeding. Recovery of FHPMA costs is subject to CPUC review and approval.

(6) Includes costs associated with the 2019 WMP for the period January 1, 2019 through June 4, 2019 and other incremental costs associated with fire risk mitigation. Recovery of FRMMA costs is subject to CPUC review and approval.

(7) Includes costs associated with the 2019 WMP for the period June 5, 2019 through December 31, 2019 and the 2020 WMP for the period of January 1, 2020 through December 31, 2020 and the 2021 WMP for the period of January 1, 2021 through December 31, 2021. Recovery of WMPMA costs is subject to CPUC review and approval.

(8) Represents cumulative differences between amounts recognized for ratemaking purposes and expense recognized in accordance with GAAP.

(9) Represents excess liability insurance premium costs recorded to RTBA and adjustment mechanism for costs determined in other proceedings, as authorized in the 2020 GRC and 2019 GT&S rate cases, respectively.

(10) Includes costs associated with certain wildfire mitigation activities for the period January 1, 2020 through December 31, 2021. Noncurrent balance represents costs above 115% of adopted revenue requirements, which are subject to CPUC review and approval.

(11) The GRC memorandum accounts record the difference between the gas and electric revenue requirements in effect on January 1, 2020 and through February 28, 2021 as authorized by the CPUC in December 2020. These amounts will be recovered through rates over 22 months, beginning March 1, 2021.

(12) Represents costs from routine vegetation management and EVM activities previously recorded in the FRMMA/WMPMA, and tree mortality and fire risk reduction work previously recorded in CEMA for the period January 1, 2020 through December 31, 2021. Recovery of VMBA costs above 120% of adopted revenue requirements is subject to CPUC review and approval.

(13) On April 16, 2020, the CPUC passed a resolution that established the CPPMA to recover costs associated with customer protections, including higher uncollectible costs related to a moratorium on electric and gas service disconnections for residential and small business customers. The CPPMA applies only to certain residential and small business customers and was approved on July 27, 2020 with an effective date of March 4, 2020. As of December 31, 2021, the Utility had recorded an under-collection of $30 million, representing incremental bad debt expense over what was collected in rates for the period the CPPMA was in effect. The remaining $19 million is associated with program costs and higher accounts receivable financing costs. Recovery of CPPMA costs is subject to CPUC review and approval.

In general, regulatory assets represent the cumulative differences between amounts recognized for ratemaking purposes and expense or accumulated other comprehensive income (loss) recognized in accordance with GAAP. Additionally, the Utility does not earn a return on regulatory assets if the related costs do not accrue interest. Accordingly, the Utility earns a return on its regulatory assets for retained generation, and regulatory assets for unamortized loss, net of gain, on reacquired debt.

Regulatory Liabilities

Long-term regulatory liabilities are comprised of the following:


	Balance at December 31,
(in millions)	2021		2020
Cost of removal obligations (1)	$	7,306	$	6,905
Recoveries in excess of AROs (2)	388		458
Public purpose programs (3)	946		948
Employee benefit plans (4)	1,229		995
Transmission tower wireless licenses (5)	446		—
SFGO sale (6)	343		—
Other	1,341		1,118
Total long-term regulatory liabilities	$	11,999	$	10,424

(1) Represents the cumulative differences between the recorded costs to remove assets and amounts collected in rates for expected costs to remove assets.

(2) Represents the cumulative differences between ARO expenses and amounts collected in rates. Decommissioning costs related to the Utility’s nuclear facilities are recovered through rates and are placed in nuclear decommissioning trusts. This regulatory liability also represents the deferral of realized and unrealized gains and losses on these nuclear decommissioning trust investments. See Note 11 below.

(3) Represents amounts received from customers designated for public purpose program costs expected to be incurred beyond the next 12 months, primarily related to energy efficiency programs.

(4) Represents cumulative differences between incurred costs and amounts collected in rates for post-retirement medical, post-retirement life and long-term disability plans.

(5) Represents the portion of the net proceeds received from the sale of transmission tower wireless licenses that will be returned to customers. Of the $446 million, $311 million and $135 million will be refunded to FERC and CPUC jurisdiction customers, respectively. See Note 3 above.

(6) Represents the noncurrent portion of the net gain on the sale of the SFGO, which closed on September 17, 2021, that will be distributed to customers over a five-year period, beginning in 2022.

Regulatory Balancing Accounts

The Utility tracks (1) differences between the Utility’s authorized revenue requirement and customer billings, and (2) differences between incurred costs and customer billings. To the extent these differences are probable of recovery or refund over the next 12 months, the Utility records a current regulatory balancing account receivable or payable. Regulatory balancing accounts that the Utility expects to collect or refund over a period exceeding 12 months are recorded as other noncurrent assets – regulatory assets or noncurrent liabilities – regulatory liabilities, respectively, in the Consolidated Balance Sheets. These differences do not have an impact on net income. Balancing accounts fluctuate during the year based on seasonal electric and gas usage and the timing of when costs are incurred and customer revenues are collected.

Current regulatory balancing accounts receivable and payable are comprised of the following:


	Receivable Balance at December 31,
(in millions)	2021		2020
Gas distribution and transmission	$	—	$	102
Energy procurement	310		413
Public purpose programs	321		292
Fire hazard prevention memorandum account	50		121
Fire risk mitigation memorandum account	14		33
Wildfire mitigation plan memorandum account	67		161
Wildfire mitigation balancing account	91		27
General rate case memorandum accounts	468		313
Vegetation management balancing account	127		115
Insurance premium costs	605		135
Wildfire expense memorandum account	440		—
Residential uncollectibles balancing accounts	127		—
Other	379		289
Total regulatory balancing accounts receivable	$	2,999	$	2,001


	Payable Balance at December 31,
(in millions)	2021		2020
Electric distribution	$	121	$	55
Electric transmission	24		267
Gas distribution and transmission	83		76
Energy procurement	211		158
Public purpose programs	259		410
Nuclear decommissioning adjustment mechanism	137		—
Other	286		279
Total regulatory balancing accounts payable	$	1,121	$	1,245

The electric distribution and utility generation accounts track the collection of revenue requirements approved in the GRC. The electric transmission accounts track recovery of costs related to the transmission of electricity approved in the FERC TO rate cases. The gas distribution and transmission accounts track the collection of revenue requirements approved in the GRC and the GT&S rate case. Energy procurement balancing accounts track recovery of costs related to the procurement of electricity, including any environmental compliance-related activities. Public purpose programs balancing accounts are primarily used to record and recover authorized revenue requirements for CPUC-mandated programs such as energy efficiency. The FHPMA tracks costs that protect the public from potential fire hazards. The FRMMA and WMPMA balances track costs that are recoverable within 12 months as requested in the 2020 WMCE application. The WMBA tracks costs associated with wildfire mitigation revenue requirement activities. The GRC memorandum accounts track the difference between the revenue requirements in effect on January 1, 2021 and the revenue requirements authorized in the final decision for the 2020 GRC. The VMBA tracks routine and EVM activities. The insurance premium costs track the current portion of incremental excess liability insurance costs recorded to RTBA and adjustment mechanism for costs determined in other proceedings, as authorized in the 2020 GRC and 2019 GT&S rate cases, respectively. In addition to insurance premium costs recorded in Regulatory balancing accounts receivable and in Long-term regulatory assets above, at December 31, 2021, there was $82 million in insurance premium costs recorded in Current regulatory assets. The WEMA balancing accounts track insurance premium costs paid by the Utility between July 26, 2017 through December 31, 2019 that are incremental to those authorized in the 2017 GRC. On October 21, 2021, the CPUC adopted a final decision approving a settlement agreement among the Utility and other active parties that authorized the Utility to recover $445.5 million over a 12-month period beginning January 1, 2022. The RUBA tracks costs associated with customer protections, including higher uncollectible costs related to a moratorium on electric and gas service disconnections for residential customers. The nuclear decommissioning adjustment mechanism tracks costs related to the closure of the Diablo Canyon power plant.