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These excerpts taken from the PCG 8-K filed Oct 28, 2005. Consolidation of Variable Interest Entities
An entity is a variable interest entity, or VIE, if it does not have sufficient equity investment at risk, or if the holders of the entity’s equity instruments lack the essential characteristics of a controlling financial interest. The Financial Accounting Standards Board, or FASB, Interpretation No. 46, ‘‘Consolidation of Variable Interest Entities,’’ or FIN 46R, requires that the company that is subject to a majority of the risk of loss from a VIE’s activities, or is entitled to receive a majority of the entity’s residual returns, or both, consolidate the VIE. A company that consolidates a VIE is called the primary beneficiary.
PG&E Corporation and Utility adopted FIN 46R on January 1, 2004. The adoption of FIN 46R did not have an impact on net income.
Low-Income Housing Partnerships
The Utility invests in low-income housing partnerships, or LIHPs. The entities were formed to invest in low-income housing projects sponsored by non-profit organizations in the state of California. The Utility determined that it was the primary beneficiary of one LIHP, resulting in its consolidation, and an increase in total assets and total liabilities of $10 million in PG&E Corporation’s and the Utility’s Consolidated Balance Sheets. The consolidated LIHP has issued debt in the amount of $4 million, which is secured by assets of the partnership, totaling $24 million, and the Utility’s commitment to make capital infusions of approximately $10 million over the next five years.
The Utility is not considered to be the primary beneficiary of any other LIHPs. The maximum exposure to loss from its investment in unconsolidated LIHPs is the Utility’s investment of $5 million at March 31, 2005.
Power Purchase Agreements
The nature of power purchase agreements is such that the Utility could have a significant variable interest in a power purchase agreement counterparty if that entity is a VIE owning one plant that sells substantially all of its output to the Utility, and the contract price for power is correlated with the plant’s variable costs of production. The Utility determined that none of its current power purchase agreements represent significant variable interests. The FASB added a project to its agenda in March 2005 to review how companies determine whether an arrangement is a variable interest. Their findings could impact how the determination is applied to the Utility’s power purchase agreements in the future.
Consolidation of Variable Interest Entities
In December 2003, FASB issued Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” or FIN 46R. FIN 46R provides that an entity is a variable interest entity, or VIE, if it does not have sufficient equity investment at risk, or if the holders of the entity’s equity instruments lack the essential characteristics of a controlling financial interest. FIN 46R requires that the company that is subject to a majority of the risk of loss from a VIE’s activities, or is entitled to receive a majority of the entity’s residual returns, or both, consolidate the VIE. A company that consolidates a VIE is called the primary beneficiary.
PG&E Corporation and the Utility adopted FIN 46R on January 1, 2004. The adoption of FIN 46R did not have any impact on net income.
Low-Income Housing Partnerships
The Utility invests in low-income housing partnerships, or LIHPs. The entities were formed to invest in low-income housing projects sponsored by non-profit organizations in the state of California. The Utility determined that it was the primary beneficiary of one LIHP, resulting in its consolidation, and an increase in total assets and total liabilities of $12 million in PG&E Corporation’s and the Utility’s Consolidated Balance Sheets. The consolidated LIHP has issued debt in the amount of $5 million, which is secured by assets of the partnership, totaling $26 million, and the Utility’s commitment to make capital infusions of approximately $11 million over the next five years.
The Utility is not considered to be the primary beneficiary of any other LIHPs. The maximum exposure to loss from its investment in unconsolidated LIHPs is the Utility’s investment of $5 million at December 31, 2004.
Power Purchase Agreements
The nature of power purchase agreements is such that the Utility could have a significant variable interest in a power purchase agreement counterparty if that entity is a VIE owning one plant that sells substantially all of its output to the Utility, and the contract price for power is correlated with the plant’s variable costs of production. The Utility determined that none of its current power purchase agreements represent significant variable interests. The EITF continues to review how companies
determine whether an arrangement is a variable interest. Their findings could impact how the determination is applied to the Utility’s power purchase agreements in the future.
This excerpt taken from the PCG 10-K filed Feb 18, 2005. Consolidation of Variable Interest Entities In December 2003, FASB issued Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities," or FIN 46R. FIN 46R provides that an entity is a variable interest entity, or VIE, if it does not have sufficient equity investment at risk, or if the holders of the entity's equity instruments lack the essential characteristics of a controlling financial interest. FIN 46R requires that the company that is subject to a majority of the risk of loss from a VIE's activities, or is entitled to receive a majority of the entity's residual returns, or both, consolidate the VIE. A company that consolidates a VIE is called the primary beneficiary. PG&E Corporation and the Utility adopted FIN 46R on January 1, 2004. The adoption of FIN 46R did not have any impact on net income. Low-Income Housing Partnerships The Utility invests in low-income housing partnerships, or LIHPs. The entities were formed to invest in low-income housing projects sponsored by non-profit organizations in the state of California. The Utility determined that it was the primary beneficiary of one LIHP, resulting in its consolidation, and an increase in total assets and total liabilities of $12 million in PG&E Corporation's and the Utility's Consolidated Balance Sheets. The consolidated LIHP has issued debt in the amount of $5 million, which is secured by assets of the partnership, totaling $26 million, and the Utility's commitment to make capital infusions of approximately $11 million over the next five years. The Utility is not considered to be the primary beneficiary of any other LIHPs. The maximum exposure to loss from its investment in unconsolidated LIHPs is the Utility's investment of $5 million at December 31, 2004. Power Purchase Agreements The nature of power purchase agreements is such that the Utility could have a significant variable interest in a power purchase agreement counterparty if that entity is a VIE owning one plant that sells substantially all of its output to the Utility, and the contract price for power is correlated with the plant's variable costs of production. The Utility determined that none of its current power purchase agreements represent significant variable interests. The EITF continues to review how companies determine whether an arrangement is a variable interest. Their findings could impact how the determination is applied to the Utility's power purchase agreements in the future. | EXCERPTS ON THIS PAGE:
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