SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
COMMISSION FILE NUMBER 333-30715
---------
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST PG&E-1
----------------------------
(Issuer of the Certificates)
PG&E Funding LLC
----------------
(Exact name of Registrant as Specified in its Charter)
Delaware 94-3274751
-------- ----------
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
245 Market Street, Room 424, San Francisco, California 94105
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 972-5467
-------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X]. No___.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H 1(A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH
THE REDUCED DISCLOSURE FORMAT.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
PG&E FUNDING LLC
BALANCE SHEET (IN THOUSANDS)
<CAPTION>
Balance at June 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 1,267 $ 5,188
Current portion of Transition Property receivable 324,465 301,288
Accounts receivable 6 -
---------- ----------
TOTAL CURRENT ASSETS 325,738 306,476
NONCURRENT ASSETS:
Restricted funds 17,779 14,405
Transition Property receivable 2,471,978 2,602,080
Unamortized debt issuance expenses 17,343 19,813
---------- ----------
TOTAL NONCURRENT ASSETS 2,507,100 2,636,298
---------- ----------
TOTAL ASSETS $2,832,838 $2,942,774
========== ==========
LIABILITIES AND MEMBER'S EQUITY
- ---------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 4 $ 3,468
Interest payable 2,957 11,653
Current portion of long-term debt 289,181 125,000
---------- ----------
TOTAL CURRENT LIABILITIES 292,142 140,121
Long-term debt 2,510,620 2,775,575
---------- ----------
TOTAL LIABILITIES 2,802,762 2,915,696
MEMBER'S EQUITY 30,076 27,078
---------- ----------
TOTAL LIABILITIES AND MEMBER'S EQUITY $2,832,838 $2,942,774
========== ==========
<FN>
The accompanying Notes to Financial Statements are an integral part of this
statement.
</TABLE>
<PAGE>
<TABLE>
PG&E FUNDING LLC
STATEMENT OF INCOME AND CHANGES IN MEMBER'S EQUITY (IN THOUSANDS)
<CAPTION>
Three months ended Six months ended
June 30, 1998 June 30, 1998
----------------- ---------------
<S> <C> <C>
INCOME
- ------
Income from Transition Property receivable $49,283 $100,184
Interest income 773 1,226
------- -------
TOTAL INCOME 50,056 101,410
EXPENSES
- ----------
Interest expense 46,411 93,179
Servicing fees 1,339 3,151
Administrative and general 48 72
------- -------
TOTAL EXPENSES 47,798 96,402
------- -------
NET INCOME $ 2,258 $5,008
Member's equity - beginning of period 27,818 27,078
Member's distributions - (2,010)
------- ------
MEMBER'S EQUITY AT JUNE 30, 1998 $30,076 $30,076
======= =======
<FN>
The accompanying Notes to Financial Statements are an integral part of this
statement.
</TABLE>
<PAGE>
<TABLE>
PG&E FUNDING LLC
CONDENSED STATEMENT OF CASH FLOWS (IN THOUSANDS)
FOR THE SIX MONTHS ENDED JUNE 30,
<CAPTION>
1998
---------
<S> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $102,281
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (100,819)
Equity distributions to Member (2,010)
Net change in restricted funds (3,373)
--------
NET CASH USED IN FINANCING ACTIVITIES (106,202)
--------
NET CHANGE IN CASH AND CASH EQUIVALENTS (3,921)
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1997 5,188
--------
CASH AND CASH EQUIVALENTS AT JUNE 30, 1998 $ 1,267
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 99,532
<FN>
The accompanying Notes to Financial Statements are an integral part of this
statement.
</TABLE>
<PAGE>
Notes to Financial Statements
- -----------------------------
A. Basis of Presentation
This Quarterly Report on Form 10-Q includes the financial statements of PG&E
Funding LLC, a Delaware special purpose limited liability company, whose sole
member is Pacific Gas and Electric Company, a wholly owned subsidiary of PG&E
Corporation. This quarterly report should be read in conjunction with PG&E
Funding LLC's Financial Statements and Notes to Financial Statements included
in its 1997 Annual Report on Form 10-K.
PG&E Funding LLC believes that the accompanying statements reflect all
adjustments that are necessary to present a fair statement of the financial
position and results of operations for the interim period. All material
adjustments are of a normal recurring nature unless otherwise disclosed in
this Form 10-Q. Results of operations for interim periods are not necessarily
indicative of results to be expected for a full year.
PG&E Funding LLC was organized for the limited purposes of issuing Notes and
holding and servicing the Transition Property. Transition Property is the
right to be paid a specified amount (presented in the financial statements as
"Transition Property receivable") from a nonbypassable charge levied on
residential electric customers and small commercial electric customers. The
nonbypassable charge was authorized by the California Public Utilities
Commission (the "CPUC") pursuant to the electric industry restructuring
mandated by California Assembly Bill 1890, as amended by California Senate
Bill 477.
PG&E Funding LLC is a single-member limited liability company. Accordingly,
all federal income tax effects and all material State of California franchise
tax effects of PG&E Funding LLC's activities accrue to Pacific Gas and
Electric Company.
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
income, expenses, assets, and liabilities and the disclosure of contingencies.
Actual results could differ from these estimates.
B. California Voter Initiative
----------------------------
On June 24, 1998, the California Secretary of State officially
certified a Voter Initiative for the November 3, 1998 statewide election,
based on the required submission of petitions containing a sufficient number
of valid signatures. On July 17, 1998, the Secretary of State designated the
Voter Initiative as Proposition 9 on the ballot.
Proposition 9 seeks to amend or repeal Assembly Bill 1890,
Chapter 854, California Statutes of 1996 (as amended, the "Statute") in
various respects, including requiring utilities to provide a 10% reduction
in electricity rates charged to residential and small commercial customers in
addition to the 10% rate reduction that was effective as of January 1, 1998.
Among other things, Proposition 9 would prohibit the collection of the
separate nonbypassable charges payable by residential and small commercial
customers (the "FTA Charges") by Pacific Gas and Electric Company for the
payment of rate reduction bonds, such as the Certificates, or if such a
prohibition were found to be unenforceable by a court of competent
jurisdiction, require Pacific Gas and Electric Company to offset any such FTA
Charge by crediting back to the customer the amount of such charge. In
addition, Proposition 9 states that "any underwriter or bond purchaser who
purchases rate reduction bonds after November 15, 1997 . . . shall be deemed
to have notice of the [Voter Initiative]."
On May 22, 1998, a group known as "Californians for Affordable and
Reliable Electric Services" ("CARES") filed a petition in the Third District
Court of Appeal (Californians for Affordable and Reliable Electric Service v.
Bill Jones, et al.) to invalidate Proposition 9 on the grounds that it
represents an unconstitutional impairment of contract rights, and that it is an
unconstitutional attempt to implement actions by statute that only can be done
through a state constitutional amendment. Supporters of CARES include the
California State Chamber of Commerce, the state's investors owned utilities
<PAGE>
(including Pacific Gas and Electric Company), and a wide range of business,
environmental, and consumer groups. On July 2nd, the Court denied the
CARES petition. On July 6, 1998, CARES filed a petition for review of the
appellate court's ruling with the California Supreme Court. On July 15, 1998,
the California Supreme Court denied CARES' petition for review. Neither the
appellate court's ruling nor the California Supreme Court's ruling represent a
ruling on the merits of Proposition 9. Such rulings do not preclude further
legal challenge to Proposition 9 if it is approved by the voters in November.
If Proposition 9 is approved by the voters, costly and time consuming
litigation will ensue. Any such litigation may adversely affect the secondary
market for the Certificates, including the price and liquidity of the
Certificates. Further, the collection of the FTA Charges necessary to pay the
Certificates while the litigation is pending would be precluded if an immediate
stay is not granted. Even if a stay is granted, there may be terms and
conditions imposed in connection with the stay that may adversely affect
Certificateholders. The failure to pay interest on the Certificates when due
could give rise to an event of default permitting acceleration of the
maturity of the Certificates.
Finally, if Proposition 9 is ultimately upheld against legal
challenge, the primary source for payments on the Certificates would become
unavailable, and Certificateholders could incur a loss of their investment.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following analysis of the results of operations of PG&E Funding LLC
is in an abbreviated format pursuant to Instruction H of Form 10-Q.
Such analysis should be read in conjunction with the Financial
Statements included herein and the Financial Statements and Notes to Financial
Statements included in PG&E Funding LLC's Annual Report on Form 10-K for the
year ended December 31, 1997.
PG&E Funding LLC is a special purpose, single member limited liability
company organized in July 1997 for the limited purposes of holding and
servicing the Transition Property (as described below), issuing notes secured
primarily by the Transition Property and performing related activities.
Pacific Gas and Electric Company, as the sole member of PG&E Funding LLC, owns
all of the equity securities of PG&E Funding LLC. PG&E Funding LLC's
organizational documents require it to operate in a manner such that it should
not be consolidated in the bankruptcy estate of Pacific Gas and Electric
Company in the event Pacific Gas and Electric Company becomes subject to such
a proceeding.
In December 1997, PG&E Funding LLC acquired Transition Property and issued
$2,901,000,000 in principal amount of the PG&E Funding LLC Notes,
Series 1997-1, Class A-1 through Class A-8 (the "Notes"), with scheduled
maturities ranging from ten months to ten years and final maturities ranging
from two to eleven years. The Notes were issued pursuant to an Indenture
dated December 8, 1997 between PG&E Funding LLC and Bankers Trust Company of
California, N.A., as trustee (the "Indenture"). PG&E Funding LLC sold the
Notes to the California Infrastructure and Economic Development Bank Special
Purpose Trust PG&E-1, a Delaware business trust (the "Trust"), which issued
certificates corresponding to each class of Notes (the "Certificates") in a
public offering. PG&E Funding LLC entered into a servicing agreement
(the "Servicing Agreement") with Pacific Gas and Electric Company pursuant to
which Pacific Gas and Electric Company is required to service the Transition
Property on behalf of PG&E Funding LLC.
The California Public Utilities Code (the "PU Code") provides for the
creation of "Transition Property." A financing order dated September 3, 1997
(the "Financing Order") issued by the CPUC, together with the related
Issuance Advice Letter, establishes, among other things, separate nonbypassable
charges (the "FTA Charges") payable by residential electric customers and small
commercial electric customers in an aggregate amount sufficient to repay in
full the Certificates, fund the Overcollateralization Subaccount established
under the Indenture and pay all related costs and fees. Under the PU Code and
the Financing Order, the owner of Transition Property is entitled to collect
FTA Charges until such owner has received amounts sufficient to retire all
outstanding series of Certificates and cover related fees and expenses and the
Overcollateralization amount described in the Financing Order.
<PAGE>
In order to enhance the likelihood that actual collections with respect
to the Transition Property are neither more nor less than the amount necessary
to amortize the Notes in accordance with their expected amortization
schedules, pay all related fees and expenses, and fund certain accounts
established pursuant to the Indenture as required, the Servicing Agreement
requires Pacific Gas and Electric Company, as the Servicer of the Transition
Property, to seek, and the Financing Order and the PU Code require the CPUC to
approve, periodic adjustments to the FTA Charges. Such adjustments will be
based on actual collections and updated assumptions by the Servicer as to
future usage of electricity by specified customers, future expenses relating
to the Transition Property, the Notes and the Certificates, and the rate of
delinquencies and write-offs. The Servicer has not sought any such
adjustments to date.
Income generated from the Transition Property receivable for the three and
six month periods ended June 30, 1998 was approximately $49,283,000 and
$100,184,000 respectively. PG&E Funding LLC also earned interest from other
investments of approximately $773,000 and $1,226,000 respectively for the
three- and six- month periods ended June 30, 1998. Quarter to date and year
to date interest expense of approximately $46,411,000 and $93,179,000
respectively relates to interest on the Notes and the amortization of debt
issuance expenses and the discount on the Notes. PG&E Funding LLC also
incurred servicing fees of approximately $1,339,000 and $3,151,000
respectively for the three- month and six- month periods ended June 30, 1998.
PG&E Funding LLC uses collections of the Transition Property receivable to
make scheduled principal and interest payments on the Notes. Income earned on
the Transition Property receivable is expected to offset (1) interest expense
on the Notes, (2) amortization of debt issuance expenses and the discount on
the Notes and (3) the fees charged by Pacific Gas and Electric Company for
servicing the Transition Property and providing administrative services to
PG&E Funding LLC.
For the second quarter of 1998, collections of FTA Charges were
approximately $131,918,000. This brought the total year to date collections
as of June 30, 1998 to approximately $207,110,000 and resulted in a surplus of
approximately $2,347,000 after deducting year to date scheduled principal and
interest payments on the Notes of approximately $200,351,000, payments of
approximately $3,687,000 for servicing fees and other expenses and
approximately $725,000 retained to fund the Overcollateralization Account
established under the Indenture. The surplus will be applied toward future
payments on the Notes.
California Voter Initiative:
- ----------------------------
As discussed under the caption "RECENT DEVELOPMENTS--Voter
Initiative" in the Prospectus Supplement dated November 25, 1997 (the
"Prospectus Supplement") for the California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1, Rate Reduction Certificates,
Series 1997-1 (the "Certificates") and in PG&E Funding LLC's Report on
Form 10-K for the year ended December 31, 1997, certain California groups had
previously submitted to the California State Attorney General a proposed ballot
initiative (the "Voter Initiative") relating to the Certificates, which were
issued in December 1997.
On June 24, 1998, the California Secretary of State officially
certified the Voter Initiative for the November 3, 1998 statewide election,
based on the required submission of petitions containing a sufficient number of
valid signatures. On July 17, 1998, the Secretary of State designated the Voter
Initiative as Proposition 9 on the ballot.
Proposition 9 seeks to amend or repeal Assembly Bill 1890, Chapter 854,
California Statutes of 1996 (as amended, the "Statute") in various respects,
including requiring utilities, such as Pacific Gas and Electric Company, to
provide a 10% reduction in electricity rates charged to residential and small
commercial customers in addition to the 10% rate reduction that was effective
as of January 1, 1998. Among other things, Proposition 9 would prohibit the
collection of the separate nonbypassable charges payable by residential and
small commercial customers by a utility, such as Pacific Gas and Electric
Company, for the payment of rate reduction bonds, such as the Certificates,
or if such a prohibition were found to be unenforceable by a court of competent
jurisdiction, require the utility to offset any such FTA Charge by crediting
back to the customer the amount of such charge. In addition, Proposition 9
states that "any underwriter or bond purchaser who purchases rate reduction
<PAGE>
bonds after November 15, 1997 . . . shall be deemed to have notice of the
[Voter Initiative]."
On May 22, 1998, a group known as "Californians for Affordable and
Reliable Electric Services" ("CARES") filed a petition in the Third District
Court of Appeal (Californians for Affordable and Reliable Electric Service v.
Bill Jones, et al.) to invalidate Proposition 9 on the grounds that it
represents an unconstitutional impairment of contract rights, and that it is an
unconstitutional attempt to implement actions by statute that only can be done
through a state constitutional amendment. Supporters of CARES include the
California State Chamber of Commerce, the state's investors owned utilities
(including Pacific Gas and Electric Company), and a wide range of business,
environmental, and consumer groups. On July 2nd, the Court denied the
CARES petition. On July 6, 1998, CARES filed a petition for review of the
appellate court's ruling with the California Supreme Court. On July 15, 1998,
the California Supreme Court denied CARES' petition for review. Neither the
appellate court's ruling nor the California Supreme Court's ruling represent a
ruling on the merits of Proposition 9. Such rulings do not preclude further
legal challenge to Proposition 9 if it is approved by the voters in November.
If Proposition 9 is approved by the voters, costly and time consuming
litigation will ensue. Any such litigation may adversely affect the secondary
market for the Certificates, including the price and liquidity of the
Certificates. Further, the collection of the FTA Charges necessary to pay the
Certificates while the litigation is pending would be precluded if an immediate
stay is not granted. Even if a stay is granted, there may be terms and
conditions imposed in connection with the stay that may adversely affect
Certificateholders. The failure to pay interest on the Certificates when due
could give rise to an event of default permitting acceleration of the maturity
of the Certificates.
Finally, if Proposition 9 is ultimately upheld against legal
challenge, the primary source for payments on the Certificates would become
unavailable, and Certificateholders could incur a loss of their investment.
YEAR 2000:
- ---------
The Year 2000 issue exists because software products use only two digits to
identify a year in the date field and were developed without considering the
impact of the upcoming change in the century. Some software products might
fail or function incorrectly if not repaired or replaced with Year 2000
compliant products. In addition, many electronic monitoring and control systems
have two-digit date coding embedded within their circuitry and may also be
susceptible to failure or incorrect operation unless corrected or replaced with
Year 2000 compliant products.
PG&E Funding LLC is dependent on Pacific Gas and Electric Company, as
servicer of the Transition Property, to collect the FTA charges from
residential and small commercial customers and remit the FTA charges to
the Trust.
PG&E Funding LLC understands that Pacific Gas and Electric Company is
focusing its efforts to be Year 2000 ready on those software and embedded
systems which are critical to its business. Pacific Gas and Electric Company
has informed PG&E Funding LLC that it expects to complete remediation of the
critical software systems by the end of 1998 and to complete testing of these
systems by the third quarter of 1999. Although Pacific Gas and Electric
Company has completed an inventory of all embedded systems to assess the degree
of Year 2000 compliance, additional embedded systems that require Year 2000
remediation may be discovered as it begins the remediation and testing phases
of its compliance effort. Pacific Gas and Electric Company expects to complete
its assessment of all critical embedded systems, and to repair or replace those
systems found to be non-compliant, by the fourth quarter of 1999. The costs of
such remediation will be borne by Pacific Gas and Electric Company and not
PG&E Funding LLC.
Pacific Gas and Electric Company also depends upon external parties
including customers, suppliers, business partners, government agencies, and
financial institutions to reliably deliver Pacific Gas and Electric Company's
products and services to enable it to service the Transition Property.
Pacific Gas and Electric Company has begun to assess the degree to which third
parties with whom it has significant business relationships have adequate
<PAGE>
plans to address Year 2000 problems. Pacific Gas and Electric Company expects
to complete this assessment by the fourth quarter of 1998.
To the extent appropriate, PG&E Funding LLC plans to take advantage of the
contingency plans which may be developed by Pacific Gas and Electric Company to
reduce the risk of material impacts on operations from Year 2000 problems.
Due to the speculative nature of contingency planning, it is uncertain whether
such plans actually will be sufficient to reduce the risk of material impacts
on PG&E Funding LLC's operations due to Year 2000 problems.
Pacific Gas and Electric Company's current schedule is subject to change,
depending on developments that may arise through further assessment of its
systems and through the remediation and testing phases of its compliance
effort. Further, Pacific Gas and Electric Company's current schedule is
partially dependent on the efforts of third parties including vendors,
suppliers, and customers. Therefore, delays by third parties may cause its
schedule to change.
Based on Pacific Gas and Electric Company's current schedule for the
completion of Year 2000 tasks, PG&E Funding LLC understands that Pacific Gas
and Electric Company believes that its plan is adequate to secure Year 2000
readiness of its critical systems. Nevertheless, achieving Year 2000 readiness
is subject to many risks and uncertainties, as described above. If Pacific
Gas and Electric Company, or third parties, fail to achieve Year 2000 readiness
with respect to critical systems affecting the collection and remittance of FTA
charges, there could be a material adverse impact on PG&E Funding LLC's results
of operations, financial condition, and cash flows.
Forward-looking Information:
- ----------------------------
This Quarterly Report on Form 10-Q, including the preceding discussion of
financial condition and results of operations, and elsewhere, contains forward
looking statements that involve risks and uncertainties. These statements are
based on the beliefs and assumptions of management and on information currently
available to management. Words such as "estimates", "expects", "anticipates",
"plans", "believes", and similar expressions identify forward looking
statements involving risks and uncertainties. Actual results or outcomes could
differ materially as a result of such important factors discussed above as the
passage and implementation of, and the commencement and outcome of litigation
involving Proposition 9 on the November 1998 ballot and the ability of Pacific
Gas and Electric Company to address and to make year 2000 ready the computer
systems used by Pacific Gas and Electric Company as servicer of the
Transition Property.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to PG&E Funding LLC or the Trust.
PART II
OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The Quarterly Servicer's Certificate dated June 25, 1998 attached as
Exhibit 99.1 hereto includes certain additional information regarding
collections of FTA Charges.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
27 Financial Data Schedule for the quarter ended
June 30, 1998.
99.1 Quarterly Servicer's Certificate dated June 25, 1998.
(b) Reports on Form 8-K filed during the quarter ended June 30, 1998:
1. June 24, 1998
Item 5. Other Events
A. Voter Initiative (Proposition 9)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on this the 14th day of August, 1998.
PG&E FUNDING LLC, as Registrant
By /s/ GABRIEL B. TOGNERI
-----------------------------
Gabriel B. Togneri, Treasurer
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule
99.1 Quarterly Servicer's Certificate
dated June 25, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information for the period ended June
30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 17,779
<TOTAL-CURRENT-ASSETS> 325,738
<TOTAL-DEFERRED-CHARGES> 17,343
<OTHER-ASSETS> 2,471,978
<TOTAL-ASSETS> 2,832,838
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 25,338
<RETAINED-EARNINGS> 4,738
<TOTAL-COMMON-STOCKHOLDERS-EQ> 30,076
0
0
<LONG-TERM-DEBT-NET> 2,510,620
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 289,181
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,961
<TOT-CAPITALIZATION-AND-LIAB> 2,832,838
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 3,223
<TOTAL-OPERATING-EXPENSES> 3,223
<OPERATING-INCOME-LOSS> (3,223)
<OTHER-INCOME-NET> 101,410
<INCOME-BEFORE-INTEREST-EXPEN> 98,187
<TOTAL-INTEREST-EXPENSE> 93,179
<NET-INCOME> 5,008
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 102,281
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
EXHIBIT 99.1
QUARTERLY SERVICER'S CERTIFICATE
Exhibit E to Servicing Agreement
Quarterly Servicer's Certificate
California Infrastructure and Economic Development Bank Special
Purpose Trust PG&E-1
$2,901,000,000 Rate Reduction Certificates, Series 1997-1
Pursuant to Section 4.01(d)(ii) of the Transition Property Servicing
Agreement dated as of December 8, 1997 (the "Transition Property Servicing
Agreement") between Pacific Gas and Electric Company, as Servicer, and PG&E
Funding LLC, as Note Issuer, the Servicer does hereby certify as follows:
Capitalized terms used in the Quarterly Servicer's Certificate (the
"Quarterly Certificate") have their respective meanings as set forth in the
Agreement. References herein to certain sections and subsections are
references to the respective sections of the Agreement.
Collection Periods: Mar. '98, Apr. '98, May '98
Distribution Date: June 25, 1998
<TABLE>
<CAPTION>
1. Collections Allocable and Aggregate Amounts Available for the Current Distribution Date:
<S> <C>
i. Remittances for the Mar.'98 Collection Period $45,611,637.00
ii. Remittances for the Apr.'98 Collection Period $44,379,193.00
iii. Remittances for the May.'98 Collection Period $41,927,257.00
iv. Net Earnings on Collection Account $655,211.78
-------------------
v. General Sub-Account Balance $132,573,298.78
vi. Reserve Sub-Account Balance $77,052.96
vii. Overcollateralization Sub-Account Balance $362,625.00
viii.Capital Sub-Account Balance (less $100K) $14,405,000.00
-------------------
ix. Collection Account Balance $147,417,976.74
2. Outstanding Principal Balance and Collection Account Balance as of Prior Distribution Date:
i. Class A-1 Principal Balance $106,301,458.00
ii. Class A-2 Principal Balance $265,000,000.00
iii. Class A-3 Principal Balance $280,000,000.00
iv. Class A-4 Principal Balance $300,000,000.00
v. Class A-5 Principal Balance $290,000,000.00
vi. Class A-6 Principal Balance $375,000,000.00
vii. Class A-7 Principal Balance $866,000,000.00
viii.Class A-8 Principal Balance $400,000,000.00
-------------------
ix. Rate Reduction Certificate Principal Balance $2,882,301,458.00
x. Reserve Sub-Account Balance $77,052.96
xi. Overcollateralization Sub-Account Balance $362,625.00
xii. Capital Sub-Account Balance $14,405,000.00
<PAGE>
3. Required Funding/Payments as of Current Distribution Date:
i. Projected Class A-1 Certificate Balance $24,180,963.00
ii. Projected Class A-2 Certificate Balance $265,000,000.00
iii. Projected Class A-3 Certificate Balance $280,000,000.00
iv. Projected Class A-4 Certificate Balance $300,000,000.00
v. Projected Class A-5 Certificate Balance $290,000,000.00
vi. Projected Class A-6 Certificate Balance $375,000,000.00
vii. Projected Class A-7 Certificate Balance $866,000,000.00
viii.Projected Class A-8 Certificate Balance $400,000,000.00
-------------------
ix. Projected Class A Certificate Balance $2,800,180,963.00
x. Required Class A-1 Coupon $1,578,576.65
xi. Required Class A-2 Coupon $3,981,625.00
xii. Required Class A-3 Coupon $4,305,000.00
xiii.Required Class A-4 Coupon $4,620,000.00
xiv. Required Class A-5 Coupon $4,531,250.00
xv. Required Class A-6 Coupon $5,925,000.00
xvi. Required Class A-7 Coupon $13,899,300.00
xvii.Required Class A-8 Coupon $6,480,000.00
xviii.Required Overcollateralization Funding $362,625.00
xix. Required Capital Sub-Account Funding $0.00
4. Allocation of Remittances as of Current Distribution Date Pursuant to 8.02(d) of Indenture:
i. Note, Delaware and Certificate Trustee Fees $1,163.33
ii. Quarterly Servicing Fee $1,801,438.41
iii. Quarterly Administration Fee $25,000.00
iv. Operating Expenses (subject to $100,000 cap) $16,746.69
v. Quarterly Interest $45,320,751.65
1. Class A-1 Certificate Coupon Payment $1,578,576.65
2. Class A-2 Certificate Coupon Payment $3,981,625.00
3. Class A-3 Certificate Coupon Payment $4,305,000.00
4. Class A-4 Certificate Coupon Payment $4,620,000.00
5. Class A-5 Certificate Coupon Payment $4,531,250.00
6. Class A-6 Certificate Coupon Payment $5,925,000.00
7. Class A-7 Certificate Coupon Payment $13,899,300.00
8. Class A-8 Certificate Coupon Payment $6,480,000.00
vi. Principal Due and Payable $0.00
vii. Quarterly Principal $82,120,495.00
1. Class A-1 Certificate Principal Payment $82,120,495.00
2. Class A-2 Certificate Principal Payment $0.00
3. Class A-3 Certificate Principal Payment $0.00
4. Class A-4 Certificate Principal Payment $0.00
5. Class A-5 Certificate Principal Payment $0.00
6. Class A-6 Certificate Principal Payment $0.00
7. Class A-7 Certificate Principal Payment $0.00
8. Class A-8 Certificate Principal Payment $0.00
viii.Operating Expenses (in excess of $100,000) $0.00
ix. Funding of Overcollateralization Sub-Account (to required level) $362,625.00
x. Funding of Capital Sub-Account (to required level) $0.00
xi. Net Earnings Released to Note Issuer $655,211.78
xii. Released to Note Issuer upon Series Retirement: Overcollateralization Sub-Account $0.00
xiii.Released to Note Issuer upon Series Retirement: Capital Sub-Account $0.00
xiv. Deposits to Reserve Sub-Account $2,269,866.92
xv. Released to Note Issuer upon Series Retirement: Collection Account $0.00
5. Outstanding Principal Balance and Collection Account Balance as of current distribution date:
(after giving effect to payments to be made on such distribution date):
i. Class A-1 Principal Balance $24,180,963.00
ii. Class A-2 Principal Balance $265,000,000.00
iii. Class A-3 Principal Balance $280,000,000.00
iv. Class A-4 Principal Balance $300,000,000.00
v. Class A-5 Principal Balance $290,000,000.00
vi. Class A-6 Principal Balance $375,000,000.00
vii. Class A-7 Principal Balance $866,000,000.00
viii.Class A-8 Principal Balance $400,000,000.00
-------------------
ix. Rate Reduction Certificate Principal Balance $2,800,180,963.00
x. Reserve Sub-Account Balance $2,346,919.88
xi. Overcollateralization Sub-Account Balance $725,250.00
xii. Capital Sub-Account Balance $14,405,000.00
6. Sub-Account Draws as of Current Distribution Date (if applicable, pursuant to Section 8.02(e) of Indenture):
i. Reserve Sub-Account $0.00
ii. Overcollateralization Sub-Account $0.00
iii. Capital Sub-Account $0.00
-------------------
iv. Total Draws $0.00
<PAGE>
7. Shortfalls In Interest and Principal Payments as of Current Distribution Date:
i. Quarterly Interest $0.00
1. Class A-1 Certificate Coupon Payment $0.00
2. Class A-2 Certificate Coupon Payment $0.00
3. Class A-3 Certificate Coupon Payment $0.00
4. Class A-4 Certificate Coupon Payment $0.00
5. Class A-5 Certificate Coupon Payment $0.00
6. Class A-6 Certificate Coupon Payment $0.00
7. Class A-7 Certificate Coupon Payment $0.00
8. Class A-8 Certificate Coupon Payment $0.00
ii. Quarterly Principal $0.00
1. Class A-1 Certificate Principal Payment $0.00
2. Class A-2 Certificate Principal Payment $0.00
3. Class A-3 Certificate Principal Payment $0.00
4. Class A-4 Certificate Principal Payment $0.00
5. Class A-5 Certificate Principal Payment $0.00
6. Class A-6 Certificate Principal Payment $0.00
7. Class A-7 Certificate Principal Payment $0.00
8. Class A-8 Certificate Principal Payment $0.00
8. Shortfalls in Required Sub-Account Levels as of Current Distribution Date:
i. Overcollateralization Sub-Account $0.00
ii. Capital Sub-Account $0.00
9. Distributions of Principal per $1,000 of Original Principal Amount
Principal Payment
per $1,000 of
Original Principal Principal Payment Orig. Principal Amt.
[ A ] [ B ] [ B/A x 1,000]
------------------ ----------------- --------------------
i. Class A-1 $106,301,458.00 $82,120,495.00 $772.524635
ii. Class A-2 $265,000,000.00 $0.00 $0.000000
iii. Class A-3 $280,000,000.00 $0.00 $0.000000
iv. Class A-4 $300,000,000.00 $0.00 $0.000000
v. Class A-5 $290,000,000.00 $0.00 $0.000000
vi. Class A-6 $375,000,000.00 $0.00 $0.000000
vii. Class A-7 $866,000,000.00 $0.00 $0.000000
viii.Class A-8 $400,000,000.00 $0.00 $0.000000
----------------- ----------------- -------------------
$2,882,301,458.00 $82,120,495.00
10. Distributions of Interest per $1,000 of Original Principal Amount
Interest Payment
per $1,000 of
Original Principal Interest Payment Orig. Principal Amt.
[ A ] [ B ] [ B/A x 1,000]
------------------ ----------------- --------------------
i. Class A-1 $106,301,458.00 $1,578,576.65 $14.850000
ii. Class A-2 $265,000,000.00 $3,981,625.00 $15.025000
iii. Class A-3 $280,000,000.00 $4,305,000.00 $15.375000
iv. Class A-4 $300,000,000.00 $4,620,000.00 $15.400000
v. Class A-5 $290,000,000.00 $4,531,250.00 $15.625000
vi. Class A-6 $375,000,000.00 $5,925,000.00 $15.800000
vii. Class A-7 $866,000,000.00 $13,899,300.00 $16.050000
viii.Class A-8 $400,000,000.00 $6,480,000.00 $16.200000
----------------- ----------------- -------------------
$2,882,301,458.00 $45,320,751.65
IN WITNESS HEREOF, the undersigned has duly executed and delivered this
Quarterly Servicer's Certificate this the 15th day of June, 1998.
PACIFIC GAS AND ELECTRIC COMPANY, as Servicer
by: /s/ CHRISTOPHER JOHNS
---------------------------
Christopher Johns
Vice President & Controller
</TABLE>
<PAGE>
