<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 333-69437
U.S. GENERATING COMPANY 401(k) PROFIT-SHARING PLAN
7500 Old Georgetown Road
Suite 1300
Bethesda, Maryland 20814-6161
(Full title of the plan and the address of the plan, if different from that
of the issuer named below)
PG&E CORPORATION
One Market, Spear Tower
Suite 2400
San Francisco, California 94105
(Name of issuer of the securities held pursuant to the Plan of its
principal executive office)
<PAGE>
REQUIRED INFORMATION
1. The Statement of Net Assets Available for Benefits with Fund Information as
of December 31, 1997 and 1996 and the Statement of Changes in Net Assets
Available for Benefits with Fund Information for the Year Ended December
31, 1997, together with supplemental schedules and the report of Arthur
Andersen LLP, independent accountants, are contained in Exhibit 1 to this
Annual Report.
2. The Consent of Arthur Andersen LLP, independent accountants, is contained
in Exhibit 2 to this Annual Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
U.S. GENERATING COMPANY 401(k)
PROFIT-SHARING PLAN
December 21, 1998 By: U.S. GENERATING COMPANY, as
Plan Administrator
By: /s/ STEPHEN A. HERMAN
--------------------------------
Stephen A. Herman
Senior Vice President and General Counsel
<PAGE>
EXHIBIT 1
U.S. Generating Company 401(k) Profit-Sharing Plan
Table of Contents
I. U.S. GENERATING COMPANY 401(K) PROFIT-SHARING PLAN
-----------------------------------------------------------------
Financial Statements As of December 31, 1997 and 1996 Together With Auditors'
Report
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
As of December 31, 1997 and 1996 6
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
For the Year Ended December 31, 1997 7
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1997 and 1996 8
SCHEDULE I ITEM 27(A) SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
As of December 31, 1997 13
SCHEDULE II ITEM 27(D) SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1997 14
SCHEDULE III PARTY-IN-INTEREST TRANSACTIONS
For the Year Ended December 31, 1997 *
SCHEDULE IV OBLIGATIONS IN DEFAULT
As of December 31, 1997 *
SCHEDULE V LEASES IN DEFAULT
As of December 31, 1996 *
</TABLE>
* Schedules omitted because there were no such transactions, obligations, or
leases in default.
<PAGE>
Report of Independent Public Accountant
To the Administrative Committee of
U.S. Generating Company 401(k) Profit-Sharing Plan:
We have audited the accompanying statements of net assets available for benefits
of U.S. Generating Company 401(k) Profit-Sharing Plan (the "Plan") as of
December 31, 1997 and 1996, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1997. These financial
statements are the responsibility of the Plan's administrative committee. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the year ended December 31, 197, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplement schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in
the statement of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the changes in net assets
available for plan benefits of each fund. The supplemental schedules and fund
information have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
December 11, 1998
<PAGE>
I. II. U.S. GENERATING COMPANY 401(K) PROFIT-SHARING PLAN
A. Statements of Net Assets Available for Plan Benefits
As of December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Investments:
At fair value (Note 2)
Pooled separate accounts $30,837,543 $ -
Shares of registered investment companies 25,298,580
Participant loan fund 1,567,220 1,264,726
------------- -------------
32,404,763 26,563,306
At contract value (Note 3)
Guaranteed investment contract 2,690,021
------------- -------------
Net assets available for benefits $35,094,784 $26,563,306
============= =============
</TABLE>
<PAGE>
III. U.S. GENERATING COMPANY 401(K) PROFIT-SHARING PLAN
A. Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Participant Directed
-----------------------------------------------------------------------
CIGNA
Actively CIGNA
CIGNA Managed Stock
Guaranteed Fixed Founders Market
Vanguard Income Income Balanced Index
Funds Fund Account Account Account
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Additions:
Contributions
Participants $ - $ 333,916 $ 9,653 $ 516,792 $ 378,593
Employer - 233,525 5,667 329,680 232,089
----------- ---------- ---------- ---------- ----------
Total contributions - 567,441 15,320 846,472 610,682
----------- ---------- ---------- ---------- ----------
Investment income
Net appreciation (depreciation) in fair
value of investments - - 6,684 782,805 813,073
Interest from loans and investments - 140,193 12,433 8,865 13,031
----------- ---------- ---------- ---------- ----------
Total investment income - 140,193 6,684 795,238 821,938
----------- ---------- ---------- ---------- ----------
Rollovers - 39,374 42,106 91,801 144,948
----------- ---------- ---------- ---------- ----------
Total additions - 747,008 64,110 1,733,511 1,577,568
----------- ---------- ---------- ---------- ----------
Deductions:
Benefits paid to participants - (234,625) (732,688) (474,006) (359,860)
Other expenses - (815) - (1,031) (649)
----------- ---------- ---------- ---------- ----------
Total deductions - (235,440) (732,688) (475,037) (360,509)
----------- ---------- ---------- ---------- ----------
Loans issued to participants - (80,743) - (86,232) (76,802)
Loan principal repayments - 61,641 - 54,974 44,772
Interfund transfers/forfeitures - 177,282 1,031,505 (370,398) 396,814
Transfer from Vanguard to CIGNA (26,563,306) 2,020,273 - 4,790,583 2,235,545
----------- ---------- ---------- ---------- ----------
Changes in net assets available for benefits (26,563,306) 2,690,021 362,927 5,647,401 3,817,388
----------- ---------- ---------- ---------- ----------
Net assets available for benefits:
Beginning of year 26,563,306 - - - -
----------- ---------- ---------- ---------- ----------
End of year $ - $2,690,021 $ 362,927 $5,647,401 $3,817,388
=========== ========== ========== ========== ==========
<CAPTION>
Participant Directed
---------------------------------------------------------------------
Fidelity
Founders Growth & PBHG AIM Templeton
Growth Income Growth Constellation Foreign
Account Account Account Account Account
----------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Additions:
Contributions
Participants $ 574,190 $ 569,614 $ 344,092 $ 536,394 $ 305,433
Employer 341,178 343,989 201,228 321,036 181,451
----------- ---------- ---------- ---------- ----------
Total contributions 915,368 913,603 545,320 857,430 486,884
----------- ---------- ---------- ---------- ----------
Investment income
Net appreciation (depreciation) in fair
value of investments 1,313,600 1,052,852 (65,581) 328,858 146,217
Interest from loans and investments 13,031 12,835 9,928 13,465 11,757
----------- ---------- ---------- ---------- ----------
Total investment income 1,326,631 1,065,687 (55,653) 342,323 157,974
Rollovers 98,367 33,026 51,694 98,357 55,773
----------- ---------- ---------- ---------- ----------
Total additions 2,340,366 2,012,316 541,361 1,298,110 700,631
----------- ---------- ---------- ---------- ----------
Deductions:
Benefits paid to participants (242,055) (190,955) (20,872) (186,664) (34,260)
Other expenses (1,171) (1,040) (395) (776) (728)
----------- ---------- ---------- ---------- ----------
Total deductions (243,226) (191,995) (21,267) (187,440) (34,988)
----------- ---------- ---------- ---------- ----------
Loans issued to participants (147,758) (120,808) (77,828) (101,587) (83,510)
Loan principal repayments 64,981 57,775 56,242 95,505 35,971
Interfund transfers/forfeitures 182,181 (124,417) (35,877) (1,168,012) (89,078)
Transfer from Vanguard to CIGNA 3,839,951 4,347,496 1,868,344 3,977,518 2,218,870
----------- ---------- ---------- ---------- ----------
Changes in net assets available for benefits 6,036,495 5,980,367 2,330,975 3,914,094 2,747,896
----------- ---------- ---------- ---------- ----------
Net assets available for benefits:
Beginning of year - - - - -
----------- ---------- ---------- ---------- ----------
End of year $6,036,495 $5,980,367 $2,330,975 $3,914,094 $2,747,896
=========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
IV. U.S. GENERATING COMPANY 401(K) PROFIT-SHARING PLAN
A. Notes to Financial Statements As of December 31, 1997 and 1996
1. Description of the Plan:
The following description of the U.S. Generating Company (the "Company") 401(k)
Profit-Sharing Plan (the "Plan") provides only general information.
Participants should refer to the Plan agreement for a more complete description
of the Plan's provisions.
General
The Plan was established by the Company on January 1, 1990, to provide
retirement, death, and disability benefits for eligible employees. The Plan is
a defined contribution plan covering all full-time employees of the Company
scheduled to work an average of 20 hours or more each week. It is subject to
the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
Former employees of U.S. Operating Services Company ("USOSC") became employees
of the Company on January 1, 1995, and as a result, are eligible to participate
in the Plan as of that date. The USOSC employees' asset balances transferred to
the Plan from USOSC's Retirement Savings Plan upon its termination on December
29, 1995. In addition, former employees of the J. Makowski Company ("JMC")
became employees of the Company on July 16, 1995, and as a result, are eligible
to participate in the Plan as of that date. The JMC employees' asset balances
of $2,596,598 were transferred to the Plan from JMC's pension plan on July 1,
1996.
Plan Participation
Employees are eligible for participation in the Plan on their employment
commencement date.
Contributions
Participants may make tax-deferred cash contributions of up to 10 percent of
pretax annual compensation, as defined in the Plan. Participants may also
contribute amounts representing distributions from other qualified defined
benefit or contribution plans. The Company matches employee contributions up to
5 percent of each employee's base compensation. Effective January 1, 1995,
participants can contribute up to 5 percent of their annual compensation, as
defined by the Plan, on an after-tax basis. Contributions are subject to
certain Internal Revenue Service ("IRS") limitations.
Participant Accounts
Each participant's account is credited with the participant's contribution and
an allocation of the Company's contribution and Plan earnings. Allocations are
based on participant earnings as defined in the Plan agreement. Forfeited
balances or terminated participants' nonvested accounts are used to reduce
future Company contributions.
5
<PAGE>
Vesting
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company's contributions and earnings thereon is based
on years of continuous service. Participants vest according to the following
schedule:
<TABLE>
<CAPTION>
Years of Service % Vested
---------------- --------
<S> <C>
Less than 2 years 0%
2 years, but less than 3 years 40%
3 years, but less than 4 years 60%
4 years, but less than 5 years 80%
Five or more years 100%
</TABLE>
Investment Options
Investment options as of December 31, 1997 included the following:
. CIGNA Guaranteed Income Fund This fund is designed to preserve capital and
produce attractive fixed income returns through investments primarily in
high quality, fixed income instruments such as intermediate-term bonds and
commercial mortgages.
. CIGNA Actively Managed Fixed Income Account This account is designed to
outperform benchmark and comparable actively managed funds over full market
cycles through investments primarily in high quality corporate and
Government fixed income securities.
. Founders Balanced Account This CIGNA separate account invests solely in the
Founders Balanced Fund. The objective of this fund is to provide the
investor with a combination of growth, income, and capital preservation
through investments in stocks, bonds, and short-term investments.
. Fidelity Growth & Income Account This CIGNA separate account invests solely
in the Fidelity Growth & Income Portfolio. The objective of this portfolio
is to seek a high total return through a combination of capital
appreciation and current income by primarily investing in equity securities
of companies currently paying dividends.
. CIGNA Stock Market Index Account This account is designed to provide long-
term growth of capital and income through investments in stocks in the S&P
500 Index.
. Founders Growth Account This CIGNA separate account invests solely in the
Founders Growth Fund. The objective of this fund is to provide long-term
growth of capital primarily through investments in domestic common stocks
of companies with strong performance records, solid market positions,
reasonable financial strength, and continuous operating records of at least
three years.
. PBHG Growth Account This CIGNA separate account invests solely in the PBHG
Growth Fund. The objective of this fund is to provide capital appreciation
through investments in common stocks and convertible stocks of small- and
medium-sized growth companies that trade in the United States or Canada on
registered exchanges or in the over-the-counter market.
. AIM Constellation Account This CIGNA separate account invests solely in the
AIM Constellation Fund. The objective of this fund is to provide capital
appreciation through investments in common stocks, with emphasis on medium-
sized and smaller emerging growth companies.
6
<PAGE>
. Templeton Foreign Account This CIGNA separate account invests solely in the
Templeton Foreign Fund. The objective of this fund is to provide long-term
capital growth through a flexible policy of investing in stocks and, to a
lesser extent, debt obligations of companies and governments outside the
United States.
Participant Loans
Participants may borrow from vested funds credited to their individual accounts.
The amount borrowed, when added to any outstanding loans that the participant
may have under the Company's retirement plan, cannot exceed the lesser of 50
percent of the participant's total vested account balances for both plans, or
$50,000 reduced by the participant's highest outstanding loan balance for the
year. In no event can the participant borrow more than $50,000. Loans for the
purchase of a residence are for a period up to 15 years; all other loans are for
a period not exceeding 5 years. All loans bear interest at a rate comparable
with the prime rate.
Plan Administration
The Plan is administered by an administrative committee consisting of five
employees of the Company. The administrative committee is responsible for
reviewing the books and records of the Plan and for serving as liaison between
Plan participants and the trustee. All funds in the Plan are held in trust by
CIGNA. Funds allocated to CIGNA are invested in a combination of equity and
fixed-income investments. Prior to January 1, 1997, Vanguard Fiduciary Trust
Company served as the trustee for the Plan.
Retirements and Terminations
In the case of normal retirement, retirement due to permanent disability, or
termination of employment, a participant's benefits shall be paid in the form of
a lump-sum distribution or in monthly, quarterly, or annual installment
payments, not to exceed the life expectancy of the participant or designated
beneficiary. However, participants in the Plan prior to January 1, 1994, may
elect a single life annuity (if not married) or a qualified joint and survivor
annuity (if married). If a participant dies before retirement, the beneficiary
will receive the value of the participant's vested account balance in a lump-sum
distribution or in monthly, quarterly, or annual installment payments, not to
exceed the life expectancy of the beneficiary.
2. Summary of Significant Accounting Policies:
Basis of Presentation
The financial statements of the Plan have been prepared using the accrual method
of accounting. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
7
<PAGE>
Investment Valuation and Income Recognition
The Plan's investments are stated at fair market value as certified by the
trustee, except for its investment contract which is valued at contract value
(Note 3).
Purchases and sales of securities are recorded on the trade date. Interest
income is recorded on the accrual basis. Dividends are recorded on the ex-
dividend date.
Administrative Expenses
Except to the extent paid by the Company, administrative expenses of the Plan
are paid out of the Plan's assets and charged against each participant's account
in the same proportion as the participant's account bears to the total balance
of all participant accounts.
Payment of Benefits
Benefit payments are recorded when paid.
3. Investment Contract with Insurance Company:
In 1997, the Plan entered into an investment contract with CIGNA. CIGNA
maintains the contributions in a pooled account. The account is credited with
earnings on the underlying investments and charged for Plan withdrawals and
administrative expenses charged by CIGNA. The contract is included in the
financial statements at contract value (which represents contributions made
under the contract, plus earnings, less withdrawals and administrative expenses)
because it is fully benefit responsive. For example, participants may
ordinarily direct the withdrawal or transfer of all or a portion of their
investment at contract value. There are no reserves against contract value for
credit risk of the contract issuer or otherwise. The contract value of the
investment contract approximates the fair value. The average yield and
crediting interest rate were approximately 6 percent for 1997. The crediting
interest rate was approximately 6 percent at December 31, 1997. The crediting
interest rate may be changed by CIGNA every six months and based on an agreed-
upon formula between the Plan and CIGNA, but cannot be less than zero.
4. Investments:
CIGNA, the Plan's trustee, is responsible for maintaining and investing Plan
assets, as directed by participants. A detail of the Plan's investments at fair
value and at cost is shown on Schedule I. A summary of transactions that
represent 5 percent or more of the Plan's net assets for the year ended December
31, 1997, are separately identified on Schedule II. Investments that represent
5 percent or more of the Plan's net assets are identified in the following
table.
<TABLE>
<S> <C>
Investments at fair value:
CIGNA Guaranteed Income Fund $2,690,021
Founders Balanced Account 5,647,401
Fidelity Growth & Income Account 3,817,388
CIGNA Stock Market Index Account 6,036,495
Founders Growth Account 5,980,367
PBHG Growth Account 2,330,975
AIM Constellation Account 3,914,094
Templeton Foreign Account 2,747,896
</TABLE>
8
<PAGE>
5. Plan Termination:
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100 percent vested in their accounts.
6. Tax Status:
The IRS has determined and informed the Company by a letter dated May 16, 1996,
that the Plan and related trust are designed in accordance with applicable
sections of the Internal Revenue Code ("IRC"). The Plan has been amended since
receiving the determination letter. However, the Plan administrator and the
Plan's tax counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
9
<PAGE>
Schedule I
V. U.S. GENERATING COMPANY 401(K) PROFIT-SHARING PLAN
A. Item 27(a) Schedule of Assets Held for Investment Purposes
As of December 31, 1997
<TABLE>
<CAPTION>
Fair Market
Investments Description Cost Value
----------- ----------- ---- -----------
<S> <C> <C> <C>
CIGNA Guaranteed Income Fund* Guaranteed Investment Contract $ 2,690,021 $ 2,690,021
CIGNA Actively Managed Fixed Income
Account* Separate Account 358,816 362,927
Founders Balanced Account* Separate Account 4,962,574 5,647,401
Fidelity Growth & Income Account* Separate Account 3,114,625 3,817,388
CIGNA Stock Market Index Account*
Separate Account 4,885,710 6,036,495
Founders Growth Account* Separate Account 5,022,612 5,980,367
PBHG Growth Account* Separate Account 2,359,073 2,330,975
AIM Constellation Account* Separate Account 3,603,205 3,914,094
Templeton Foreign Account* Separate Account 2,635,088 2,747,896
Participant Loan Fund (interest rates Participant Loans Other Than Mortgages
ranging from 6.0% to 10.5%) 1,567,220 1,567,220
----------- -----------
Total $31,198,944 $35,094,784
=========== ===========
</TABLE>
* Represents parties in interest.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE SCHEDULES.
10
<PAGE>
VI. U.S. GENERATING COMPANY 401(K) PROFIT-SHARING PLAN
A. Item 27(d) Schedule of Reportable Transactions
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Purchases Sales
----------------------------- ------------------------------- Net Market
Number of Cost of Number of Proceeds from Value Gain or
Identity of Issue Transactions Purchases Transactions Sales (Loss)
----------------- ------------ ----------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
CIGNA Guaranteed Income Fund* 63 $ 3,821,274 60 $1,257,806 $
CIGNA Actively Managed Fixed Income Fund* 29 1,094,546 5 738,303 2,574
Founders Balanced Account* 60 6,289,794 104 1,424,003 96,783
Fidelity Growth & Income Account* 85 3,803,467 78 810,033 121,191
CIGNA Stock Market Index Account* 110 5,877,846 97 1,157,132 164,996
Founders Growth Account* 95 5,932,546 88 1,007,415 97,481
PBHG Growth Account* 94 3,184,506 69 786,365 (39,069)
AIM Constellation Account* 90 5,248,214 93 1,662,356 17,347
Templeton Foreign Account* 88 3,066,026 73 462,465 31,527
----------- ---------- --------
Totals $38,318,219 $9,305,878 $492,830
=========== ========== ========
</TABLE>
* Represents parties in interest.
Note: Reportable transactions are defined as follows:
(1) Any single transaction in excess of 5 percent of the current value of the
Plan's assets at the beginning of the year.
(2) A series of transactions involving securities of the same issue or the
same person and property other than securities which, in the aggregate,
amount to more than 5 percent of the current value of the Plan's assets
at the beginning of the year.
(3) Any transaction involving securities that has occurred with the same
person in an amount in excess of 5 percent of the current value of the
Plan's assets at the beginning of the year.
(4) A series of transactions involving the same person and involving property
other than securities which, in the aggregate, amount to more than 5
percent of the current value of the Plan's assets at the beginning of the
year.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE SCHEDULES.
11
<PAGE>
EXHIBIT 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 11-K, into PG&E Corporation's previously filed
Registration Statement File Nos. 333-69437.
ARTHUR ANDERSEN LLP
Washington, D.C.
December 21, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE SCHEDULES.
