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: November 24, 1997
Exact Name of
Commission Registrant State or other IRS Employer
File as specified Jurisdiction 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
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Item 5. Other Events
The following information includes forward-looking statements
that involve a number of risks, uncertainties, and assumptions.
A number of factors which could cause actual results to differ
materially from those indicated in the forward-looking statements
are described in more detail below. Words such as "expects,"
"intends," "plans," and similar expressions identify those
statements which are forward-looking.
A. Electric Industry Restructuring
1. Divestiture
On November 18, 1997, the Board of Directors of Pacific Gas and
Electric Company (PG&E) and its parent holding company, PG&E
Corporation, approved PG&E's sale of three electric generating
plants to Duke Energy Power Services, Inc. (Duke Energy) in
PG&E's first power plant auction. Duke Energy was the successful
bidder for the Morro Bay Power Plant located in San Luis Obispo
County, the Moss Landing Power Plant located in Monterey County,
and the Oakland Power Plant located in Alameda County. These
three fossil-fueled plants have a combined capacity of 2,645
megawatts (MW).
Duke Energy's bid was $501 million for these three fossil-fueled
plants. The combined book value for these three fossil-fueled
plants is approximately $380 million.
As previously reported, the gain from the sale of these plants
would be used to offset transition costs (the costs of generation-
related assets and obligations which prove to be uneconomic in
the new competitive framework) associated with other PG&E
electric generation facilities. Therefore, PG&E Corporation does
not expect any earnings or losses from these sales.
Among other conditions, including regulatory approval of the
transfer of various permits and licenses, the sales are subject
to final approval by the California Public Utilities Commission
(CPUC). PG&E expects that the sale will close by March 31,
1998, assuming the CPUC approves the sale by the end of 1997 on
terms that are satisfactory to PG&E and that will not materially
increase the burdens on the new owner.
As required by the California electric industry restructuring
legislation, PG&E employees will continue to operate and maintain
the three power plants under a two-year operations and
maintenance agreement with the new owner to ensure system
reliability during the transition period. To the extent that
payments to PG&E under these agreements exceed PG&E's cost of
operating the plants, PG&E would offset PG&E's other transition
costs. Conversely, to the extent PG&E's operating costs exceed
the revenues from these agreements, PG&E would have lower
earnings.
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PG&E will retain liability for required environmental remediation
of any pre-closing soil or groundwater contamination at these
plants. PG&E Corporation does not expect any material adverse
impact on its or PG&E's financial condition or results of
operations as a result of retaining such environmental
remediation liability.
Duke Energy owns and operates electric generation facilities in
the United States, primarily in North and South Carolina where it
serves the electrical needs of about two million customers. Duke
Energy is a subsidiary of Duke Energy Corporation, a global
energy company headquartered in Charlotte, North Carolina, with
more than $20 billion in assets.
Subject to CPUC approval, PG&E plans to conduct the second
auction of its remaining fossil-fueled generation portfolio (the
Hunters Point and Potrero Power Plants both located in San
Francisco County, and the Contra Costa and Pittsburg Power Plants
both located in Contra Costa County) and all of its geothermal
facilities (The Geysers located in Lake and Sonoma counties) in
the first half of 1998. These additional plants to be sold by
PG&E have a combined generating capacity of 4,718 MW and a
combined book value of approximately $750 million.
2. Competition Transition Charge Proceeding
On November 19, 1997, the CPUC issued a decision confirming the
eligibility of PG&E's various categories of non-nuclear
generation-related costs for accelerated recovery as transition
costs through the nonbypassable competition transition charge
(CTC) ratemaking mechanism. The CPUC reduced the authorized rate
of return on common equity to 90% of the embedded cost of debt
for all PG&E's non-nuclear generation-related assets, including
hydroelectric facilities, retroactive to July 28, 1997. The
reduced rate of return on common equity is now 6.77% as compared
to the previously authorized rate of 11.6%.
The CPUC also determined that certain of PG&E's generation-
related regulatory assets are not eligible for recovery as
transition costs. PG&E will write-off these regulatory assets in
the fourth quarter of 1997. (In general, regulatory assets are
expenses deferred in the current period and allowed to be
included in rates in subsequent periods.) As a result of this
decision, PG&E Corporation expects that its earnings for 1997
will be reduced by approximately $34 million ($.08 per share)
caused by the retroactive reduction of the rate of return on
common equity and the write-off of regulatory assets.
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B. Gas Accord
On November 19, 1997, the CPUC unanimously approved PG&E's
proposed gas transmission tariffs (with minor modifications) and
related contract amendments allowing PG&E to implement the Gas
Accord Settlement, the multi-party settlement agreement that will
restructure PG&E's natural gas services and its role in the
natural gas market, and establish gas transmission rates from the
date of implementation of the Gas Accord through December 2002.
(As previously reported, the Gas Accord was approved by the CPUC
on August 1, 1997.) With the CPUC's approval of the tariffs,
PG&E expects that the Gas Accord will be fully implemented by
March 1, 1998.
In addition, the CPUC ruled that a recent $80 million payment
made to PG&E by a party to cancel its long-term contract for gas
transportation service from PG&E can be retained by PG&E to
mitigate PG&E's increased risk for recovering revenues from the
released transmission capacity in the future. PG&E Corporation
expects that this additional income will result in an increase in
earnings of approximately $.12 per share.
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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
CHRISTOPHER P. JOHNS
By ________________________________
CHRISTOPHER P. JOHNS
Vice President and Controller
(PG&E Corporation)
Vice President and Controller
(Pacific Gas and Electric Company)
Dated: November 24, 1997
