Credit: Shutterstock photoSummary:
We maintain our recommendation on PG&E Corporation at Outperform following its fourth quarter 2014 results. Though the company missed the Street expectation, its earnings increased year over year primarily owing to the impact of expense recovery authorized in the utility's 2014 General Rate Case. Growth drivers for the company include its stable financial position, strong cash generating capacity, well-set utility assets, disciplined investments in infrastructure projects and steadily growing customer count. However, penalties levied for the San Bruno and Carmel incidents, stringent utility regulations and several operational risks remain.
Overview:
San Francisco, CA-based PG&E Corporation is the parent holding company of California's largest regulated electric and gas utility, Pacific Gas and Electric Company (Pacific Gas). As of Dec 31, 2013, Pacific Gas served approximately 5.2 million electricity and around 4.4 million natural gas customers in northern and central California. The utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers. It engages in the business of electricity and natural gas distribution electricity generation, procurement, and transmission and natural gas procurement, transportation and storage. The utility also operates hydro-electric, nuclear and fossil-fueled power plants. At the end of Dec 31, 2013, the company owned a total generating capacity of 7,677 megawatt (MW). Of this, 2,240 MW were nuclear, 3,882 MW came from hydro-electric sources, 1,403 MW from fossil-fuel units, and 152 MW from photovoltaic sources.
The utility owns approximately 18,115 circuit miles of interconnected transmission lines operated at voltage of 500 kV to 60 kV and transmission substations with a capacity of approximately 62,289 megavolt ampere (MVA). Electricity is transmitted across these lines and substations and is then distributed to customers through approximately 141,000 circuit miles of distribution lines. The utility delivers 86,513 GWh to its customers. The utility is interconnected with electric power systems in the Western Electricity Coordinating Council, which includes many western states, Alberta and British Columbia, Canada, and parts of Mexico.
The utility's natural gas system consists of approximately 42,559 miles of distribution pipelines, approximately 6,000 miles of backbone and local transmission pipelines, and various storage facilities. PG&E procures natural gas directly from producers and marketers in both Canada and the United States. The utility is regulated primarily by the California Public Utilities Commission (CPUC) and the Federal Energy Regulatory Commission (FERC). Apart from these Nuclear Regulatory Commission (NRC) oversees the licensing, construction, operation, and decommissioning of the utility's nuclear generation facilities.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
