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: May 9, 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
A. Electric Industry Restructuring
1 Direct Access Implementation
On May 6, 1997, the California Public Utilities Commission (CPUC)
issued a decision in its direct access proceeding which
authorizes full implementation of direct access for all electric
customers beginning January 1, 1998. Customers participating in
direct access would purchase their electric power directly either
through: (1) competing nonutility retail electric providers such
as brokers, marketers, aggregators, or other retailers; or (2)
direct negotiated contracts with electric generators. All
customers, whether they choose direct access or not, must pay the
competition transition charge, or CTC, which will be collected by
their distribution utility in connection with recovery of
transition costs under electric industry restructuring.
Utilities must begin accepting requests for direct access on
November 1, 1997 to become effective on or after January 1, 1998.
The CPUC decision provides that electric customers with an
electricity demand, or load, of 20 kilowatts (kW) or more must
have meters that are capable of providing hourly data in order to
participate in direct access. Those customers with a load less
than 20 kW may participate in direct access either through "load
profiling" or by installing an hourly meter. (Load profiling
approximates how much electricity a type of customer uses, and
bills according to average use by that type of customer.) The
customer will be responsible for the cost of the meter and the
meter installation.
The CPUC decision also addresses aggregation of customer loads,
affiliate transactions, access to customer information, and the
registration process for entities offering electric service to
residential and small commercial customers.
The CPUC decision orders utilities to file a direct access
implementation plan by July 1, 1997 detailing the process and
procedures that the utility will use to manage direct access
requests. The CPUC expects to approve the plans by September 17,
1997. In addition, a series of workshops and reports will take
place over the next several months to address the implementation
details associated with direct access.
2. Unbundling of Revenue Cycle Services
On May 6, 1997, the CPUC also issued a decision addressing the
separation, or unbundling, of utility revenue cycle services,
which include metering, billing, customer service inquiries, and
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uncollectibles. Under this decision, beginning January 1, 1998,
energy service providers supplying the direct access market will
be able to choose one of three billing options:
1. Consolidated Energy Supplier Billing, under which the
utility would bill the energy supplier for the services
provided directly by the utility to the customer and the
supplier in turn would provide a consolidated bill to the
customer;
2. Consolidated Distribution Company Billing, under which the
utility would place the supplier's energy charge on a
distribution bill; or
3. Dual Billing, under which the energy supplier and the
utility would bill separately for their own services.
Also beginning on January 1, 1998, energy service providers may
provide metering services to their customers with a demand
greater than 20 kW, and beginning January 1, 1999, energy service
providers may provide metering to all their customers. Energy
service providers offering metering services to customers must
enter into service agreements with the utility specifying the
type of data to be collected, the means for sharing data, and
means for ensuring that metering equipment is properly installed
and maintained.
This decision requires utilities to separately identify cost
savings that result when billing, metering and related services
are provided by another entity and ensure that customers are not
charged by the utility for those services in such circumstances.
In addition, the CPUC has directed parties to propose metering
standards by July 25, 1997 to ensure that all meters provide
information and communicate in the same way.
3. Diablo Canyon Ratemaking
As previously disclosed, in 1996 PG&E filed with the CPUC a
proposal for pricing Diablo Canyon Nuclear Power Plant (Diablo
Canyon) generation at market prices and completing recovery of
the investment in Diablo Canyon by the end of 2001. Under its
proposal, PG&E would replace the existing Diablo Canyon
performance-based ratemaking (PBR) mechanism with: (1) a sunk
cost revenue requirement to recover net investment in the plant,
including a return on this net investment, and (2) a PBR
mechanism to recover the facility's variable and other operating
costs and capital addition costs. As proposed by PG&E, the sunk
cost revenue requirement would be set to accelerate recovery of
Diablo Canyon sunk costs from a twenty-year period ending in 2016
to a five-year period beginning January 1, 1997 and ending
December 31, 2001. The related return on common equity
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associated with Diablo Canyon sunk costs would be reduced to 90
percent of PG&E's long-term cost of debt. (PG&E's authorized
long-term cost of debt was 7.52 percent in 1996.) PG&E's proposed
PBR mechanism would establish a rate per kilowatt hour (kWh)
generated by the facility. This rate would be based upon a fixed
forecast of on-going costs, capital additions, and capacity
factors for the entire electric industry restructuring transition
period.
Also as previously disclosed, on February 28, 1997, an
administrative law judge (ALJ) of the CPUC issued a proposed
decision (PD) regarding PG&E's ratemaking proposal for Diablo
Canyon. In April 1997, the ALJ issued a revised PD (ALJ PD)
which supersedes the earlier PD. With significant exceptions,
the ALJ PD, as revised, generally would adopt the overall
ratemaking structure proposed by PG&E. However, the ALJ PD would
exclude several items totaling $160 million from the sunk cost
revenue requirement, including out-of-core fuel inventory,
materials and supplies inventory, and prepaid insurance expenses.
The ALJ PD requires that these costs be recovered through the PBR
mechanism discussed below. The ALJ PD finds that PG&E's
ratemaking proposal is subject to a requirement for a prudence
review of the plant's original construction costs, and adopts a
prudence disallowance which excludes approximately $70 million of
Diablo Canyon construction costs from the sunk cost requirement.
On May 2, 1997, a CPUC Commissioner issued an alternate PD for
the CPUC's consideration. Similar to the ALJ PD, the alternate
PD would adopt the overall ratemaking structure proposed by PG&E.
However, the alternate PD finds that a prudence review is not
required and would include in the sunk cost revenue requirement
the disallowed construction costs excluded in the ALJ PD. The
alternate PD also would include the above-market components of
out-of-core nuclear fuel inventory, and materials and supplies
inventory.
Both the ALJ PD and the alternate PD would adopt the PBR
mechanism that PG&E had proposed to recover Diablo Canyon's on-
going costs and capital additions. However, both adopt PBR rates
per kWh generated by Diablo Canyon which are different from those
proposed by PG&E. Variances in these rates result principally
from different assumptions used in the forecasts of Diablo Canyon
capacity factors, operation and maintenance costs, and cost escalation
factors. PG&E has proposed PBR rates for the years 1997 through
2001 of 3.59 cents, 3.71 cents, 3.86 cents, 4.04 cents, and 4.32
cents, respectively. The ALJ PD would set PBR rates for the
years 1997 through 2001 of 3.26 cents, 3.31 cents, 3.37 cents,
3.43 cents, and 3.49 cents, respectively. The PBR rates set by
the alternate PD are not fixed in advance, but are subject to an
escalation formula based on the previous year's consumer price
index (CPI), less a 0.5 percent productivity factor. Based on a
3.1 percent annual CPI estimate, the alternate PD would set PBR
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rates for the years 1997 through 2001 of 3.54 cents, 3.62 cents,
3.71 cents, 3.80 cents and 3.90 cents, respectively.
If either the ALJ PD or the alternate PD is adopted, its
effective date would be January 1, 1997. Both the ALJ PD and the
alternate PD would terminate, rather than modify as proposed by
PG&E, the existing Diablo Canyon ratemaking settlement effective
on the date a final decision is adopted by the CPUC. As
previously disclosed, PG&E has sought clarification from the CPUC
that the termination of the settlement would not affect Diablo
Canyon's "must take" status during the electric industry
restructuring transition period.
Neither PD is a final decision of the CPUC, and both are subject
to change prior to final action by the CPUC. The PDs are
currently scheduled for consideration by the full CPUC at its May
21 decision conference.
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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
Controller
(PG&E Corporation)
Vice President and Controller
(Pacific Gas and Electric Company)
Dated: May 9, 1997
