PCG Revised Estimates: July 29, 2017

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Auvila_PCG_QN_2016_2Q_Revised_Estimates_2016_07_29

Excerpt:

Market Price (7/29/2016): $63.94/share; ST-Target: $75/share; NIV: $111/share

Addendum to correctly account for the 2015 GT&S accounting true-up

  • We apologize for this addendum; however, we felt it necessary to change our estimates due to an incorrect interpretation of the accounting true-up stemming from the 2015 GT&S rate case
  • The following lays out the correct accounting true-up, which is now correctly applied to our model
  • From a cash perspective, PCG is expected to start collecting the authorized revenue from the 2015 GT&S rate case starting in August 1, 2016, subject to potential refunds based on the phase 2 penalty decision stemming from the San Bruno tragedy that would allocate some $850MM of operating and capital expenditure disallowances sometime in 2H2016; for our modeling purposes, we assume that this decision occurs in 4Q2016
  • In addition to the increase in rates, starting August 1, 2016, PCG is authorized to charge customers for the undercollections due to the delayed decision in the 2015 GT&S rate case; this undercollections cover all of 2015 and the first seven months of 2016 totaling some $790MM over a 36-month period
  • From an accounting perspective, the total undercollections for 2015 and the first seven months of 2016 is expected to be booked in two lump sums; the first portion is expected to be booked in 2H16 (for modeling purposes, we assume that it would be booked in 4Q2016) concurrent with the phase 2 penalty decision and the second portion is expected to be booked in 1Q2017
  • The total undercollections is roughly $790MM; 29/36th of this is expected to be booked concurrent with the phase 2 penalty decision in 2H2016 (for modeling purposes, we assume that it would be booked in 4Q2016) and 7/36th would be booked in 1Q2017

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