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FAIR VALUE MEASUREMENTS | 3 Months Ended
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Mar. 31, 2022
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS PG&E Corporation and the Utility measure their cash equivalents, trust assets, and price risk management instruments at fair value. A three-tier fair value hierarchy is established that prioritizes the inputs to valuation methodologies used to measure fair value: •Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. •Level 2 – 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. Assets held in rabbi trusts are held by PG&E Corporation and not the Utility.
| Fair Value Measurements
| At March 31, 2022
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Netting (1) |  | Total
Assets: |  |  |  |  |  |  |  |  |
Short-term investments | $ | 245 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 245 |
Nuclear decommissioning trusts |  |  |  |  |  |  |  |  |
Short-term investments | 73 |  |  | — |  |  | — |  |  | — |  |  | 73 |
Global equity securities | 2,297 |  |  | — |  |  | — |  |  | — |  |  | 2,297 |
Fixed-income securities | 1,135 |  |  | 831 |  |  | — |  |  | — |  |  | 1,966 |
Assets measured at NAV | — |  |  | — |  |  | — |  |  | — |  |  | 30 |
Total nuclear decommissioning trusts (2) | 3,505 |  |  | 831 |  |  | — |  |  | — |  |  | 4,366 |
Price risk management instruments (Note 8) |  |  |  |  |  |  |  |  |
Electricity | — |  |  | 27 |  |  | 209 |  |  | 4 |  |  | 240 |
Gas | — |  |  | 5 |  |  | — |  |  | 40 |  |  | 45 |
Total price risk management instruments | — |  |  | 32 |  |  | 209 |  |  | 44 |  |  | 285 |
Rabbi trusts |  |  |  |  |  |  |  |  |
Fixed-income securities | — |  |  | 99 |  |  | — |  |  | — |  |  | 99 |
Life insurance contracts | — |  |  | 73 |  |  | — |  |  | — |  |  | 73 |
Total rabbi trusts | — |  |  | 172 |  |  | — |  |  | — |  |  | 172 |
Long-term disability trust |  |  |  |  |  |  |  |  |
Short-term investments | 6 |  |  | — |  |  | — |  |  | — |  |  | 6 |
Assets measured at NAV | — |  |  | — |  |  | — |  |  | — |  |  | 145 |
Total long-term disability trust | 6 |  |  | — |  |  | — |  |  | — |  |  | 151 |
TOTAL ASSETS | $ | 3,756 |  |  | $ | 1,035 |  |  | $ | 209 |  |  | $ | 44 |  |  | $ | 5,219 |
Liabilities: |  |  |  |  |  |  |  |  |
Price risk management instruments (Note 8) |  |  |  |  |  |  |  |  |
Electricity | $ | — |  |  | $ | 30 |  |  | $ | 233 |  |  | $ | (16) |  |  | $ | 247 |
Gas | — |  |  | 11 |  |  | — |  |  | (9) |  |  | 2 |
TOTAL LIABILITIES | $ | — |  |  | $ | 41 |  |  | $ | 233 |  |  | $ | (25) |  |  | $ | 249 |
(1) Includes the effect of the contractual ability to settle contracts under master netting agreements and cash collateral. (2) Represents amount before deducting $731 million primarily related to deferred taxes on appreciation of investment value.
| Fair Value Measurements
| December 31, 2021
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Netting (1) |  | Total
Assets: |  |  |  |  |  |  |  |  |
Short-term investments | $ | 289 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 289 |
Nuclear decommissioning trusts |  |  |  |  |  |  |  |  |
Short-term investments | 22 |  |  | — |  |  | — |  |  | — |  |  | 22 |
Global equity securities | 2,504 |  |  | — |  |  | — |  |  | — |  |  | 2,504 |
Fixed-income securities | 1,158 |  |  | 866 |  |  | — |  |  | — |  |  | 2,024 |
Assets measured at NAV | — |  |  | — |  |  | — |  |  | — |  |  | 31 |
Total nuclear decommissioning trusts (2) | 3,684 |  |  | 866 |  |  | — |  |  | — |  |  | 4,581 |
Price risk management instruments (Note 8) |  |  |  |  |  |  |  |  |
Electricity | — |  |  | 9 |  |  | 214 |  |  | 6 |  |  | 229 |
Gas | — |  |  | 4 |  |  | — |  |  | 137 |  |  | 141 |
Total price risk management instruments | — |  |  | 13 |  |  | 214 |  |  | 143 |  |  | 370 |
Rabbi trusts |  |  |  |  |  |  |  |  |
Fixed-income securities | — |  |  | 104 |  |  | — |  |  | — |  |  | 104 |
Life insurance contracts | — |  |  | 76 |  |  | — |  |  | — |  |  | 76 |
Total rabbi trusts | — |  |  | 180 |  |  | — |  |  | — |  |  | 180 |
Long-term disability trust |  |  |  |  |  |  |  |  |
Short-term investments | 6 |  |  | — |  |  | — |  |  | — |  |  | 6 |
Assets measured at NAV | — |  |  | — |  |  | — |  |  | — |  |  | 132 |
Total long-term disability trust | 6 |  |  | — |  |  | — |  |  | — |  |  | 138 |
TOTAL ASSETS | $ | 3,979 |  |  | $ | 1,059 |  |  | $ | 214 |  |  | $ | 143 |  |  | $ | 5,558 |
Liabilities: |  |  |  |  |  |  |  |  |
Price risk management instruments (Note 8) |  |  |  |  |  |  |  |  |
Electricity | — |  |  | 11 |  |  | 248 |  |  | (24) |  |  | 235 |
Gas | — |  |  | 10 |  |  | — |  |  | (3) |  |  | 7 |
TOTAL LIABILITIES | $ | — |  |  | $ | 21 |  |  | $ | 248 |  |  | $ | (27) |  |  | $ | 242 |
(1) Includes the effect of the contractual ability to settle contracts under master netting agreements and cash collateral. (2) Represents amount before deducting $783 million, primarily related to deferred taxes on appreciation of investment value. Valuation Techniques The following describes the valuation techniques used to measure the fair value of the assets and liabilities shown in the tables above. There are no restrictions on the terms and conditions upon which the investments may be redeemed. There were no material transfers between any levels for the three months ended March 31, 2022 and 2021. Trust Assets Assets Measured at Fair Value In general, investments held in the trusts are exposed to various risks, such as interest rate, credit, and market volatility risks. Nuclear decommissioning trust assets and other trust assets are composed primarily of equity and fixed-income securities and also include short-term investments that are money market funds valued at Level 1. Global equity securities primarily include investments in common stock that are valued based on quoted prices in active markets and are classified as Level 1. Fixed-income securities are primarily composed of U.S. government and agency securities, municipal securities, and other fixed-income securities, including corporate debt securities. U.S. government and agency securities primarily consist of U.S. Treasury securities that are classified as Level 1 because the fair value is determined by observable market prices in active markets. A market approach is generally used to estimate the fair value of fixed-income securities classified as Level 2 using evaluated pricing data such as broker quotes, for similar securities adjusted for observable differences. Significant inputs used in the valuation model generally include benchmark yield curves and issuer spreads. The external credit ratings, coupon rate, and maturity of each security are considered in the valuation model, as applicable. Assets Measured at NAV Using Practical Expedient Investments in the nuclear decommissioning trusts and the long-term disability trust that are measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy tables above. The fair value amounts are included in the tables above in order to reconcile to the amounts presented in the Condensed Consolidated Balance Sheets. These investments include commingled funds that are composed of equity securities traded publicly on exchanges as well as fixed-income securities that are composed primarily of U.S. government securities, credit securities and asset-backed securities. Price Risk Management Instruments Price risk management instruments include physical and financial derivative contracts, such as power purchase agreements, forwards, futures, swaps, options, and CRRs that are traded either on an exchange or over-the-counter. Power purchase agreements, forwards, and swaps are valued using a discounted cash flow model. Exchange-traded futures that are valued using observable market forward prices for the underlying commodity are classified as Level 1. Over-the-counter forwards and swaps that are identical to exchange-traded futures, or are valued using forward prices from broker quotes that are corroborated with market data are classified as Level 2. Exchange-traded options are valued using observable market data and market-corroborated data and are classified as Level 2. Long-dated power purchase agreements that are valued using significant unobservable data are classified as Level 3. These Level 3 contracts are valued using either estimated basis adjustments from liquid trading points or techniques, including extrapolation from observable prices, when a contract term extends beyond a period for which market data is available. The Utility utilizes models to derive pricing inputs for the valuation of the Utility’s Level 3 instruments using pricing inputs from brokers and historical data. The Utility holds CRRs to hedge the financial risk of CAISO-imposed congestion charges in the day-ahead market. Limited market data is available in the CAISO auction and between auction dates; therefore, the Utility utilizes historical prices to forecast forward prices. CRRs are classified as Level 3. Level 3 Measurements and Uncertainty Analysis Inputs used and the fair value of Level 3 instruments are reviewed period-over-period and compared with market conditions to determine reasonableness. Significant increases or decreases in any of those inputs would result in a significantly higher or lower fair value, respectively. All reasonable costs related to Level 3 instruments are expected to be recoverable through rates; therefore, there is no impact to net income resulting from changes in the fair value of these instruments. See Note 8 above.
|  | Fair Value at |  |  |  |  |  |
(in millions) |  | At March 31, 2022 |  | Valuation Technique |  | Unobservable Input |  |
Fair Value Measurement |  | Assets |  | Liabilities |  |  |  | Range (1)/Weighted-Average Price (2)
Congestion revenue rights |  | $ | 180 |  |  | $ | 95 |  |  | Market approach |  | CRR auction prices |  | $ (2,265.69) - 2,265.94 / 0.41
Power purchase agreements |  | $ | 29 |  |  | $ | 138 |  |  | Discounted cash flow |  | Forward prices |  | $ (6.75) - 247.15 / 50.98
(1) Represents price per megawatt-hour. (2) Unobservable inputs were weighted by the relative fair value of the instruments.
|  | Fair Value at |  |  |  |  |  |
(in millions) |  | At December 31, 2021 |  | Valuation Technique |  | Unobservable Input |  |
Fair Value Measurement |  | Assets |  | Liabilities |  |  |  | Range (1)/Weighted-Average Price (2)
Congestion revenue rights |  | $ | 188 |  |  | $ | 93 |  |  | Market approach |  | CRR auction prices |  | $ (40.77) - 2,265.94 / 0.40
Power purchase agreements |  | $ | 26 |  |  | $ | 155 |  |  | Discounted cash flow |  | Forward prices |  | $ (7.97) - 256.20 / 47.17
(1) Represents price per megawatt-hour. (2) Unobservable inputs were weighted by the relative fair value of the instruments. Level 3 Reconciliation The following table presents the reconciliation for Level 3 price risk management instruments for the three months ended March 31, 2022 and 2021, respectively:
| Price Risk Management Instruments
(in millions) | 2022 |  | 2021
Liability balance as of January 1 | $ | (34) |  |  | $ | (72) |
Net realized and unrealized gains: |  |  |
Included in regulatory assets and liabilities or balancing accounts (1) | 10 |  |  | (22) |
Liability balance as of March 31 | $ | (24) |  |  | $ | (94) |
(1) The costs related to price risk management activities are fully passed through to customers in rates. Accordingly, unrealized gains and losses are deferred in regulatory liabilities and assets and net income is not impacted. Financial Instruments PG&E Corporation and the Utility use the following methods and assumptions in estimating fair value for financial instruments: the fair values of cash, net accounts receivable, short-term borrowings, accounts payable, customer deposits, and the Utility’s variable rate pollution control bond loan agreements approximate their carrying values as of March 31, 2022 and December 31, 2021, as they are short-term in nature. The carrying amount and fair value of PG&E Corporation’s and the Utility’s long-term debt instruments were as follows (the table below excludes financial instruments with carrying values that approximate their fair values):
| At March 31, 2022 |  | At December 31, 2021
(in millions) | Carrying Amount |  | Level 2 Fair Value |  | Carrying Amount |  | Level 2 Fair Value
Debt (Note 5) |  |  |  |  |  |  |
PG&E Corporation | $ | 4,618 |  |  | $ | 4,610 |  |  | $ | 4,619 |  |  | $ | 4,796 |
Utility | 32,704 |  |  | 30,702 |  |  | 31,816 |  |  | 35,803 |
Nuclear Decommissioning Trust Investments The following table provides a summary of equity securities and available-for-sale debt securities:
(in millions) | Amortized Cost |  | Total Unrealized Gains |  | Total Unrealized Losses |  | Total Fair Value
As of March 31, 2022 |  |  |  |  |  |  |
Nuclear decommissioning trusts |  |  |  |  |  |  |
Short-term investments | $ | 73 |  |  | $ | — |  |  | $ | — |  |  | $ | 73 |
Global equity securities | 468 |  |  | 1,876 |  |  | (17) |  |  | 2,327 |
Fixed-income securities | 2,005 |  |  | 38 |  |  | (77) |  |  | 1,966 |
Total (1) | $ | 2,546 |  |  | $ | 1,914 |  |  | $ | (94) |  |  | $ | 4,366 |
As of December 31, 2021 |  |  |  |  |  |  |
Nuclear decommissioning trusts |  |  |  |  |  |  |
Short-term investments | $ | 22 |  |  | $ | — |  |  | $ | — |  |  | $ | 22 |
Global equity securities | 479 |  |  | 2,066 |  |  | (10) |  |  | 2,535 |
Fixed-income securities | 1,938 |  |  | 98 |  |  | (12) |  |  | 2,024 |
Total (1) | $ | 2,439 |  |  | $ | 2,164 |  |  | $ | (22) |  |  | $ | 4,581 |
(1) Represents amounts before deducting $731 million and $783 million as of March 31, 2022 and December 31, 2021, respectively, primarily related to deferred taxes on appreciation of investment value. The fair value of fixed-income securities by contractual maturity is as follows:
| As of
(in millions) | March 31, 2022
Less than 1 year | $ | 8 |
1–5 years | 611 |
5–10 years | 458 |
More than 10 years | 889 |
Total maturities of fixed-income securities | $ | 1,966 |
The following table provides a summary of activity for the fixed-income and equity securities:
| Three Months Ended March 31,
(in millions) | 2022 |  | 2021
Proceeds from sales and maturities of nuclear decommissioning investments | $ | 421 |  |  | $ | 551 |
Gross realized gains on securities | 56 |  |  | 55 |
Gross realized losses on securities | (7) |  |  | (13) |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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