SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report: January 7, 1997
Exact Name of
Commission Registrant IRS Employer
File as specified State of Identification
Number in its charter Incorporation Number
- ----------- -------------- ------------- --------------
1-12609 PG&E Corporation California 94-3234914
1-2348 Pacific Gas and California 94-0742640
Electric Company
77 Beale Street, P.O. Box 770000, San Francisco, California 94177
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code:(415) 973-7000
Item 5. Other Events
A. Electric Industry Restructuring
1. Unbundling Application
On December 6, 1996, Pacific Gas and Electric Corporation (PG&E),
a wholly owned subsidiary of PG&E Corporation, filed an electric
unbundling application to identify and separate components of
electric rates, effective January 1, 1998, in compliance with
California Public Utilities Commission (CPUC) electric
restructuring decisions and the electric industry restructuring
legislation (AB 1890) enacted into law in California in 1996.
PG&E's filing separates the total CPUC-jurisdictional electric
revenue requirement of approximately $7.57 billion (based on
current rates and on the current forecast of 1997 sales) into the
four functional cost categories of public purpose programs (3.6
percent), distribution (26.4 percent), transmission (4.1
percent), and generation (65.9 percent). Within the generation
category, the competition transition charge (CTC) will be broken
out on a residual basis when the Power Exchange prices are known.
PG&E's filing also:
- proposes the starting point for PG&E's
hydroelectric/geothermal generation performance-based ratemaking
(PBR) at approximately $545 million;
- proposes changes in the electric tariff schedules,
including elimination of the Electric Revenue Adjustment
Mechanism (ERAM) and Energy Cost Adjustment Clause (ECAC) and
introduction of a transition period ratemaking mechanism to track
revenues by function; and
- proposes that bills for full-service (bundled) customers
show separate charges for transmission, distribution, public
purpose programs, and energy (based on the Power Exchange price),
plus the charges for the CTC and other nonbypassable charges.
2. Electric Deferred Refund Account
On December 9, 1996, the CPUC issued a decision establishing
electric deferred refund accounts for PG&E, Southern California
Edison Company (SCE) and San Diego Gas & Electric Company
(SDG&E), into which the utilities are ordered to place credits
for CPUC-ordered electric disallowances, the utility electric
generation (UEG) share of CPUC-ordered gas disallowances,
electric and UEG gas settlement amounts resulting from
reasonableness disputes and fuel-related cost refunds made to the
utilities based on regulatory agency decisions, plus interest
charges. The utilities were ordered to establish the account by
December 20, and to include within it any such credits described
above which are already recorded in the utility's ECAC and ERAM
but have not been amortized in rates (which in PG&E's case
amounts to approximately $75 million), as well as pending or
future refunds or disallowances. The utilities are also ordered
to file advice letters by January 31 of each year, setting forth
their annual refund plans for directly refunding to electric
customers the dollars accumulated in the deferred refund account.
The effect of this decision is to reduce the amount of PG&E's
ECAC\ERAM overcollection as of December 31, 1996. Under AB 1890,
the end of year 1996 overcollection balance is applied toward
recovery of CTC.
PG&E intends to file a petition for rehearing of this decision.
3. Roadmap Decision
On December 20, 1996, the CPUC adopted a second "roadmap"
decision outlining the necessary steps to accomplish electric
utility industry restructuring. The schedules set forth in the
decision represent the CPUC's timeline to effectuate the
beginning of the transition period for electric restructuring no
later than January 1, 1998.
The roadmap decision discusses the impact of AB 1890 on certain
issues addressed by the CPUC in its 1995 electric industry
restructuring decision, namely voluntary divestiture, return on
equity, the mandatory buy-sell requirement imposed on investor-
owned electric utilities with respect to the Power Exchange, and
direct access phase in. The roadmap decision largely finds that
the 1995 policy decision conforms with AB 1890 in these areas.
However, pursuant to AB 1890, the roadmap decision finds that the
mandatory buy-sell requirement should end on December 31, 2001
instead of December 31, 2002. The roadmap decision also
discusses implementation activities underway and presents the
current or planned schedules for the major implementation
proceedings.
This decision also requires a new annual Revenue Adjustment
Proceeding (RAP) to review, track and compare each utility's
authorized revenue requirements with the actual recorded revenues
and make any necessary adjustments or updates due to the
authorized revenues for any PBR mechanisms, various purchase
power contracts, public purposes programs, nuclear facilities,
nuclear decommissioning, transition costs and other proceedings.
The authorized revenues would be established in their respective
proceedings and consolidated into the RAP. The reconciliation of
authorized revenues with actual recorded revenues will be used to
determine the extent to which CTC has been recovered during the
CTC recovery transition period. In addition, the CPUC
established a Nuclear Decommissioning Costs Triennial Proceeding
to determine the nuclear decommissioning costs of the utilities
over a three-year period, in the absence of general rate cases.
The CPUC also seeks proposals which would establish a generic
method for reviewing the restructuring or modification of
qualifying facility contracts, possibly including standard
measures of reasonableness.
4. Cost Recovery Plan
On December 20, 1996, the CPUC approved the cost recovery plan
filed by PG&E in compliance with AB 1890, as well as the plans
filed by SCE and SDG&E. The plans propose a framework for the
utilities' recovery of certain costs that would otherwise be
rendered unrecoverable by the move from regulation to competition
in the electric utility industry. The plans and the CPUC
decision approving them also describe how ratemaking will be
accomplished during the early stages of the transition to
competition. The provisions of the plans approved by the CPUC
include, among other things, a freeze of electric rates at June
10, 1996 levels, a rate decrease of at least ten percent for
residential and small commercial customers for 1998-2002 to be
financed by "rate reduction bonds", and, pursuant to the
provisions of AB 1890, approval of an increase in PG&E's base
revenues for 1997 of approximately $164 million. The CPUC orders
PG&E to establish a balancing account to track expenditure of the
increased authorized base revenues to ensure that they are used
solely to enhance transmission and distribution system safety and
reliability and that any funds collected and not so used are
credited against future safety and reliability base revenue
requirements, as provided for in AB 1890.
5. Environmental Impact Report
On December 20, 1996, the CPUC adopted an interim opinion and
order addressing its compliance activities under the California
Environmental Quality Act (CEQA) relating to electric industry
restructuring. In its decision, the CPUC indicated that it had
halted preparation of an environmental impact report (EIR)
studying the effects of its 1995 electric industry restructuring
decision in light of the passage of AB 1890. The CPUC indicated
that the EIR was intended to assess the environmental effects of
moving to a more competitive market structure as envisioned by
the 1995 decision, and that the passage of AB 1890 eliminated the
CPUC's discretion to make a decision on moving to a competitive
market or to frame the basic structure of that market. The CPUC
thus determined that preparation of an EIR was neither
appropriate nor necessary. The CPUC did indicate that it would
prepare a report, outside the CEQA context, containing
environmental information relating to restructuring efforts.
B. 1997 ECAC
Also on December 20, 1996, the CPUC issued a decision in PG&E's
ECAC proceeding, authorizing a revenue decrease of approximately
$720 million. The three elements of this decrease are: (1) a
reduction in ECAC revenues of approximately $565 million; (2) a
reduction in ERAM revenues of approximately $153 million; and (3)
an increase in the California Alternate Rates for Energy (CARE)
program, which supports energy rate discounts for low-income
customers, of approximately $2 million. This net reduction of
approximately $720 million is partially offset by a revenue
increase of approximately $160 million resulting from the
consolidation of revenue changes from the ERAM component of other
proceedings, the Cost of Capital proceeding and the Annual Energy
Assessment Proceeding, which sets rate adjustments resulting from
shareholder incentives earned on Customer Energy Efficiency
programs.
As provided in PG&E's cost recovery plan as approved by the CPUC,
electric rates will not be changed from 1996 levels. Instead,
the consolidated net reduction of approximately $560 million will
be available to offset any net revenue requirement change that
results from PG&E's pending application to modify the Diablo
Canyon Rate Case Settlement to, among other things, allow
acceleration of Diablo Canyon depreciation (as to which a
decision is expected in March 1997) and used to offset PG&E's
CTCs. In addition, this decision indefinitely suspends PG&E's
Annual Energy Rate (AER) mechanism, which had placed PG&E at
partial risk for variations between actual and forecasted
electric energy costs.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned thereunto duly authorized.
PG&E CORPORATION
and
PACIFIC GAS AND ELECTRIC COMPANY
BRUCE R. WORTHINGTON
By ________________________________
BRUCE R. WORTHINGTON
General Counsel
Dated: January 7, 1997
