PG&E Earnings Call Insights: Potential Penalties and Oakley

PG&E Corp (NYSE:PCG) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Potential Penalties

Angie Storozynski – Macquarie Research Equities: I might have missed the statements about how much you’ve accrued for the potential penalty versus the $1 billion to $1.2 billion equity guidance. So your Slide 9 says that does not include potential penalties above the accrued levels. So what’s the accrued level?

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Kent M. Harvey – SVP and CFO: The accrued level is $200 million.

Angie Storozynski – Macquarie Research Equities: So that issuance is largely a function of basically unrecoverable expenses?

Kent M. Harvey – SVP and CFO: And our capital expenditure program.

Angie Storozynski – Macquarie Research Equities: Okay. I’m basically a little bit stunned that this is how much equity you would need in 2013. I would have assumed that this is partly a function of the penalty well in excess of the $200 million that you have already accrued for, but that’s fine. Now can you talk a little bit more about the FERC transmission ROE. It seems extremely low.

Kent M. Harvey – SVP and CFO: We received a FERC staff order in our Transmission Owner case that essentially ordered us to file with a 9.1 return on equity. So obviously something we don’t think is adequate to attract capital. We think it’s a very narrow way to actually consider what our true cost of equity is and we hope to be able to resolve it through summer discussions or else through the legal process, but it’s going to take us a while to actually resolve. So we have assumed the 9.1 return on equity for the electric transmission component of our business in our 2013 guidance.