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 5, 1999
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
Pacific Gas and Electric Company PG&E Corporation
77 Beale Street, P.O. Box 770000 One Market, Spear Tower,
San Francisco, California 94177 Suite 2400
San Francisco, California 94105
(Address of principal executive offices) (Zip Code)
Pacific Gas and Electric Company PG&E Corporation
(415) 973-7000 (415) 267-7000
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
A. Pacific Gas and Electric Company's Post-Transition Period
Ratemaking Proceeding
On October 21, 1999, the California Public Utilities Commission
(CPUC) issued a decision in Pacific Gas and Electric Company's post-
transition period ratemaking proceeding. (Pacific Gas and Electric
Company (Utility) is the California utility subsidiary of PG&E
Corporation.) Among other matters, the CPUC's decision addresses the
mechanisms for ending the current electric rate freeze and for
establishing post-transition period accounting mechanisms and rates.
Under the California electric industry restructuring legislation,
investor-owned utilities are permitted to recover transition costs
(uneconomic generation costs) until the earlier of December 31,
2001, or when the utilities have recovered their authorized
transition costs as determined by the CPUC (the transition period),
with certain exceptions. During the transition period, electric
rates for residential and small commercial customers remain frozen.
The timing of the end of the rate freeze will, in part, depend on
the timing of the valuation of the Utility's hydroelectric
generating assets and the ultimate determined value of such assets
since any excess of market value over the assets' book value would
be used to reduce transition costs. (The CPUC is considering the
Utility's proposal that these assets be auctioned in a separate
proceeding.) If the value of the Utility's hydroelectric generation
assets is significantly higher than the related book value, the
transition period (and correspondingly, the rate freeze) could end
before December 31, 2001.
Among other matters, the CPUC's decision states that the Utility may
not continue to price electric generation from its Diablo Canyon
Nuclear Power Plant (Diablo Canyon) based on the incremental cost
incentive price (ICIP) after the Utility has completed recovery of
all Utility-owned generation related transition costs. Instead,
after the transition period, Diablo Canyon generation must be sold
at the prevailing market price for power. Further, with the end of
the transition period, the Utility will be required to begin sharing
the net benefits of operating Diablo Canyon on a fifty-fifty basis
with ratepayers.
The ICIP was established by the CPUC effective January 1, 1997, as a
performance-based mechanism to recover Diablo Canyon's variable and
other operating costs and capital addition costs. The ICIP
mechanism establishes a rate per kilowatt hour (kWh) generated by
the facility based upon a forecast of ongoing costs, capital
<PAGE>
additions, and capacity factors for the period 1997 through 2001.
The ICIP prices for 1999, 2000, and 2001 are 3.37 cents per kWh,
3.43 cents per kWh, and 3.49 cents per kWh, respectively. The
average price for base load electric energy (the price received for
a constant level of electric generation for all hours of electric
demand) sold at market rates to the California Power Exchange (PX)
for the nine-month period ended September 30, 1999, was 2.5 cents
per kWh. Future market prices may be higher or lower.
The CPUC's decision also prohibits the Utility from collecting after
the rate freeze any electric costs incurred during the rate freeze
but not recovered during the rate freeze, including costs that are
not transition costs and not related to generation assets such as
under-collected accounting balances relating to power purchases and
other unrecovered transition costs.
The Utility intends to file an application for rehearing vigorously
challenging the CPUC's decision.
The ultimate financial impact of the provisions of the CPUC's
decision described above will depend on the date the Utility's
transition cost recovery is completed and the rate freeze ends,
future costs including Diablo Canyon operating costs, future market
prices for electricity, the amount of any electric non-transition
costs that have been incurred but not recovered as of the end of the
rate freeze, the timing of various regulatory proceedings in which
the Utility seeks approval for rate recovery of various costs
incurred during the rate freeze, and other variables PG&E Corporation
and the Utility are unable to predict.
B. Pacific Gas and Electric Company's 2000 Cost of Capital
Proceeding
On November 1, 1999, the Utility filed its 2000 cost of capital
application with the CPUC to establish its authorized rates of return
on an unbundled basis for electric and gas distribution operations.
To reflect increasing interest rates, the Utility has requested a
return on equity (ROE) of 12.5 percent and an overall rate of return
of 9.76 percent as compared to its 1999 authorized rates of 10.6
percent ROE and 8.75 percent overall rate of return. The Utility has
not requested any change in its authorized capital structure for
2000. The Utility's current authorized capital structure is 46.2
percent long-term debt, 5.8 percent preferred stock, and 48 percent
common equity.
If granted, the requested ROE would increase electric distribution
revenues by approximately $127.8 million and gas distribution
<PAGE>
revenues by approximately $36.6 million, based on the rate base
included by the Utility in its attrition rate adjustment (ARA)
filing for the year 2000. The Utility's 1999 General Rate Case (GRC)
application contained a proposal for ARA filings to adjust revenues
in 2000 and 2001 if the Utility's requested performance-based
ratemaking (PBR) mechanism is not adopted by the CPUC. As the
Utility's PBR application is still pending, the Utility filed an ARA
request to increase revenues in 2000 over the amount of revenues
requested by the Utility in the GRC. The proposed decision in the
Utility's GRC issued by the CPUC administrative law judge on October
19, 1999, recommends that the Utility not be allowed to adjust 2000
and 2001 revenues through ARA filings. Therefore, the actual
increase in revenues attributable to the Utility's requested ROE for
the year 2000 will depend on the amount of rate base authorized by
the CPUC in the Utility's GRC, whether the CPUC permits ARA filings
for 2000 and 2001 and, if so, the amount of any increase in rate
base authorized through an ARA filing.
Any electric revenue change ultimately adopted by the CPUC is not
expected to affect customer electric rates because electric rates
are frozen at current levels for all customers through a transition
period ending no later than March 2002, as part of the California
electric industry restructuring legislation. Under this frozen
electric rate structure, the proposed increase in electric revenues
would decrease the amount of revenues available to recover transition
costs (certain generation-related transition costs which prove to be
uneconomic under the new competitive electric generation market).
The requested increase in gas distribution revenues would increase
gas customer distribution rates by 1.7 percent of total gas
revenues.
The Utility requested that hearings regarding its 2000 cost of
capital application begin in March 2000, and that a final CPUC
decision be issued in June 2000.
The Utility's rates for its gas transmission, storage, and gas
gathering operations through 2002 have been set in the Gas Accord, a
multi-party settlement agreement approved by the CPUC in 1997.
Initial rates under the Gas Accord were based generally on the
Utility's 1996 authorized revenue requirement for these functions,
including the 1996 authorized ROE of 11.6 percent and overall return
of 9.49 percent, and negotiated throughput levels. For subsequent
years through 2002, the revenue requirement and rates escalate in
accordance with a formula negotiated in the Gas Accord.
The Utility's electric transmission operations are regulated by the
Federal Energy Regulatory Commission (FERC). On September 1, 1999,
the Utility filed a request with the FERC to increase future
<PAGE>
electric transmission revenues by $46 million annually to $370
million, reflecting a requested ROE of 12.5 percent and an overall
rate of return of 9.66 percent for the year 2000.
<PAGE>
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
By CHRISTOPHER P. JOHNS
---------------------
CHRISTOPHER P. JOHNS
Vice President and Controller
(PG&E Corporation)
Vice President and Controller
(Pacific Gas and Electric Company)
Dated: November 5, 1999
