This excerpt taken from the PCG 8-K filed Oct 28, 2005.
Achievement of 52% Equity Ratio
The Settlement Agreement provides that the CPUC will set the Utilitys capital structure and authorized ROE in the Utilitys annual cost of capital proceedings in its usual manner; provided that, the authorized ROE shall not be less than 11.22% per year and the authorized equity ratio for ratemaking purposes shall not be less than 52%. In January 2005, the equity component of the Utilitys capital structure grew to 52%, as compared to about 48% during the first quarter of 2004. As a result, the Utilitys equity earnings in the three months ended March 31, 2005, increased by approximately $14 million compared to the same period in 2004.
Under the Settlement Agreement, the Utility is entitled to earn a ROE of 11.22% on an authorized 52% equity ratio until the Utilitys long-term issuer credit ratings are at least A- from Standard & Poors Ratings Services (S&P) or A3 from Moodys Investors Service (Moodys). As described below, on February 16, 2005, S&P announced that it had upgraded its corporate credit rating on the Utility to BBB from BBB- and on March 3, 2005, Moodys announced that it had upgraded the Utilitys issuer credit rating to Baa1 from Baa3.
The currently authorized ROE of 11.22% will be in effect until the Utilitys 2006 cost of capital application is approved by the CPUC. The Utility plans to file its 2006 cost of capital application with the CPUC on May 9, 2005 for its electric utility generation and distribution operations and gas distribution operations.