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: January 24, 1994
PACIFIC GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
California 1-2348 94-0742640
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification Number)
77 Beale Street, P.O.Box 770000, San Francisco, California 94177
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(415) 973-7000
<PAGE>
Item 5. Other Events
A. Performance Incentive Plan - 1993 Financial Results
The Performance Incentive Plan (Plan) is an annual incentive
compensation plan applicable to all regular employees of the
Company and designated subsidiaries. Under recently negotiated
labor contracts, bargaining unit employees will no longer
participate in the Plan beginning in 1994. The Plan provides for
awards based on (1) the Company's success in meeting overall
corporate financial performance objectives, based on earnings per
share for the Company's utility operations, Diablo Canyon nuclear
power plant (Diablo Canyon) operations and the Company's
nonregulated operations conducted through PG&E Enterprises, a
wholly-owned subsidiary; and (2) the performance of the
employee's organizational unit in meeting its individual
objectives. For 1994, the earnings per share objectives for the
Company's three types of operations will be replaced by a single
corporate earnings per share objective. The corporate and
organizational objectives include quality and reliability of
service to customers, financial performance, cost control and
operational efficiency.
Under the Plan, the Nominating and Compensation Committee of the
Board (Committee) makes the final determination of awards based
upon achievement of the Plan objectives. The Committee has the
discretion to modify or eliminate awards.
The performance measurement targets for the 1993 Plan year were
disclosed in a Report on Form 8-K dated January 21, 1993, and
were based upon the corporate capital and operating budgets
prepared for 1993. The budgeted earnings per share for the
utility were derived from the Company's operating budget for
1993, which reflects, among other things, the results of the
Company's 1993 General Rate Case decision. The budgeted earnings
per share for Diablo Canyon were derived from, among other
things, (1) an operating capacity factor (excluding refueling
outages) of 89%, (2) an overall annual capacity factor of 80% and
(3) one 77-day refueling outage at Unit 2 during 1993, which
includes additional time to perform a detailed reactor inspection
required by the Nuclear Regulatory Commission approximately every
ten years which was originally scheduled for 1995. The budgeted
earnings per share for the year ending December 31, 1993,
assume 430 million shares of common stock outstanding.
As previously reported, the Company discloses the year-to-date
financial performance of the Company relating to the three types
of operations: utility, Diablo Canyon and PG&E Enterprises. For
the year ended December 31, 1993, selected financial information
is shown below:
(in thousands, except per share amounts)
Year Ended December 31, 1993
=================================================================
Actual (1) Budget (2)
Operating Revenues: (unaudited)
Utility $ 8,398,209 $ 8,603,171
Diablo Canyon 1,932,855 (3) 1,736,111
PG&E Enterprises 251,344 219,844
----------- -----------
Total Consolidated $10,582,408 $10,559,126
=========== ===========
Net Income:
Utility $ 552,457 (4) $ 810,693
Diablo Canyon 495,993 (3) 427,661
PG&E Enterprises 17,045 2,024
----------- -----------
Total Consolidated $ 1,065,495 $ 1,240,378
=========== ===========
Earnings Per Common
Share:
Utility $ 1.18 (4) $ 1.75
Diablo Canyon 1.11 (3) 0.96
PG&E Enterprises 0.04 0.00
----------- -----------
Total Consolidated $ 2.33 $ 2.71
=========== ===========
(1) In the opinion of management, the unaudited "actual"
financial information presented above reflects all adjustments to
date which are necessary to present a fair statement of operating
revenues, net income and earnings per common share for the year.
All material adjustments are of a normal recurring nature, except
as noted below. This information should be read in conjunction
with the 1992 Consolidated Financial Statements and Notes to
Consolidated Financial Statements incorporated by reference in
the Company's Annual Report on Form 10-K, and the Consolidated
Financial Statements and Notes to Consolidated Financial
Statements in the Quarterly Reports on Form 10-Q for the quarters
ended September 30, 1993, June 30, 1993 and March 31, 1993.
(2) The budgeted amounts were performance targets and not
forecasts of actual performance that was expected to be realized
by the Company. The budgeted amounts do not reflect the
resolution of various regulatory uncertainties or other
contingencies, including those disclosed in the Company's Notes
to Consolidated Financial Statements and those matters disclosed
in (4) below.
(3) Diablo Canyon operated at an overall capacity factor of
88.9% compared to a budgeted overall capacity factor of 79.6% for
the year ended December 31, 1993. In August 1993, as required
under SFAS 109, "Accounting for Income Taxes," the Company made
an adjustment to income of approximately $32 million ($.08 per
share) attributable to deferred tax liability for Diablo Canyon
resulting from the increase in the federal income tax rate.
(4) As previously disclosed, in the first quarter of 1993, the
Company announced a corporate reorganization and workforce
reduction program. As of December 31, 1993, the Company has
recorded workforce reduction program costs, net of a curtailment
gain relating to pension benefits, of $264 million. In April
1993, the Company announced a freeze on electric rates through
1994 and as a result, the Company has expensed $190 million of
the workforce reduction program costs ($.26 per share) to date
relating to electric operations. The remaining $74 million of
such costs relating to gas operations has been deferred for rate
recovery in 1994 and 1995. The Company is seeking rate recovery
of all costs incurred in connection with the workforce reduction
program relating to electric and gas operations.
Alberta and Southern Gas Co. Ltd. (A&S), a wholly owned Canadian
gas purchasing subsidiary, restructured its gas purchase
contracts with Canadian gas producers and resolved all litigation
and claims arising from such contracts, effective November 1,
1993. The Company incurred transition costs of $228 million,
consisting of settlement payments to producers and amounts
incurred by A&S in reducing certain administrative and general
functions resulting from the restructuring, and deferred
approximately $143 million of these costs for future rate
recovery. In addition, A&S holds firm transportation capacity on
Canadian gas pipelines and, due to the uncertainty of A&S's
ability to broker or assign such capacity for which A&S remains
obligated to pay, the Company has reserved $31 million. As of
December 31, 1993, the Company has expensed a total of $116
million relating to the transition costs and the transportation
commitment; the Company expensed $93 million or $.15 per share
during the year ended December 31, 1993, and a total of $23
million or $.03 per share in prior years.
In November 1993, the assigned Administrative Law Judge of the
California Public Utilities Commission (CPUC) issued a proposed
decision which recommends a disallowance of $46 million of gas
costs plus accrued interest of approximately $15 million in
connection with the Company's Canadian gas procurement activities
during 1988 through 1990. As of December 31, 1993, the Company
has reserved $61 million or $.08 per share relating to this
potential disallowance. The ALJ's proposed decision is not
binding and is subject to modification by the CPUC. The Company's
earnings for 1993 may be revised depending upon the timing and
magnitude of the final CPUC decision. The final CPUC decision is
expected to be issued in February 1994. Any revision would be
reflected in the Company's audited financial statements for 1993,
to be released in late February 1994.
The CPUC has not allowed the Company to include in rates the
demand charges associated with capacity held by the Company on
Transwestern Pipeline Company (Transwestern) prior to a
reasonableness review. As a result of the uncertainty of market
demand for such capacity and of future rate recovery, the Company
has reserved $34 million or $.05 per share relating to the
Transwestern transportation commitment as of December 31, 1993.
B. 1993 Consolidated Earnings (unaudited)
Attached hereto as an appendix is a copy of the unaudited
Condensed Statement of Consolidated Income for the three months
and year ended December 31, 1993 and 1992. The Company reported
earnings per common share of $2.33 for the year ended December
31, 1993. The Company's earnings for 1993 may be revised
depending upon the timing and magnitude of the final CPUC
decision and any resulting disallowance in connection with the
Company's Canadian gas procurement activities during 1988 through
1990. The final CPUC decision is expected to be issued in
February 1994. Any revision would be reflected in the Company's
audited financial statements for 1993, to be released in late
February 1994.
C. Common Stock Dividend
In January 1994, the Company raised the quarterly common stock
dividend 4%, from an annualized rate of $1.88 per share to $1.96
per share.
The amount of the Company's common stock dividend is based on a
number of financial considerations, including objectives of
sustainability, financial flexibility and competitiveness with
investment opportunities of similar risk. Over time the Company
plans to reduce its dividend payout ratio (dividends declared
divided by earnings available for common stock) to reflect the
increased business risk in the utility industry and the earnings
volatility associated with the Diablo Canyon rate case
settlement.
D. Potential Sale of PG&E Resources Company
In January 1994, the Company's board of directors authorized the
Company to explore the market for divestiture of PG&E Resources
Company (Resources), a wholly owned indirect subsidiary of the
Company. Resources is an oil and gas exploration company
headquartered in Dallas, Texas. The Company has retained a
financial adviser in this effort.
E. Hinkley Compressor Station Litigation
In May 1993, a complaint was filed in San Bernardino County
Superior Court on behalf of a number of individuals seeking
recovery of an unspecified amount of damages for personal
injuries and property damage allegedly suffered as a result of
exposure to chromium near the Company's Hinkley Compressor
Station, located along the Company's gas transmission system in
San Bernardino County, as well as punitive damages. In August
1993, the complaint was amended to add 21 individuals, for a
total of 77 plaintiffs. The complaint pleads seventeen causes of
action, including negligence, trespass, nuisance, negligent and
intentional misrepresentation, fraudulent concealment, inverse
condemnation and strict liability.
The plaintiffs contend that between 1951 and 1966 the Company
discharged Chromium VI contaminated waste water into unlined
ponds, which led to chromium percolating into the groundwater of
surrounding property. The plaintiffs further allege that the
Company disposed of the chromium in those ponds to avoid costly
alternatives. In 1987, the Company undertook an extensive
project to ensure that potential groundwater chromium
contamination did not endanger local residents.
In November 1993, the parties engaged in private mediation
sessions. On December 20, 1993, the plaintiffs filed an offer to
compromise and settle their claims against the Company for $250
million.
The Company is unable to estimate the ultimate outcome of this
matter, but such outcome could have a significant adverse impact
on the Company's results of operations for a future period. The
Company believes that the ultimate outcome of this matter would
not have a significant adverse impact on the Company's financial
position.
SIGNATURE
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.
PACIFIC GAS AND ELECTRIC COMPANY
GORDON R. SMITH
By ________________________________
GORDON R. SMITH
Vice President and Chief
Financial Officer
Dated: January 24, 1994
APPENDIX
<TABLE>
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED STATEMENT OF CONSOLIDATED INCOME
(unaudited)
<CAPTION>
- ---------------------------------------------------------------------------------------------
Three months ended December 31, Twelve months ended December 31,
(in thousands, ------------------------------ -------------------------------
except per share amounts) 1993 1992 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric $1,969,550 $1,877,461 $ 7,866,043 $ 7,747,492
Gas 737,621 680,326 2,716,365 2,548,596
---------- ---------- ----------- -----------
Total operating revenues 2,707,171 2,557,787 10,582,408 10,296,088
---------- ---------- ----------- -----------
OPERATING EXPENSES
Cost of electric energy and gas 880,383 938,371 3,342,264 3,479,433
Operations 404,697 378,359 1,480,324 1,442,812
Maintenance 109,758 152,969 442,939 484,751
Depreciation and decommissioning 347,548 302,903 1,315,524 1,221,490
Administrative and general 290,480 221,119 1,041,453 927,316
Workforce reduction costs (a) (6,500) - 190,200 -
Income taxes 251,890 177,870 1,006,774 906,845
---------- ---------- ----------- -----------
Total operating expenses 2,278,256 2,171,591 8,819,478 8,462,647
---------- ---------- ----------- -----------
OPERATING INCOME 428,915 386,196 1,762,930 1,833,441
---------- ---------- ----------- -----------
OTHER INCOME AND (INCOME
DEDUCTIONS)
Interest income 21,577 17,814 85,642 87,244
Allowance for equity funds used
during construction 8,486 13,423 41,531 39,368
Other--net (b) (54,466) (21,356) (53,524) (3,006)
---------- ---------- ----------- -----------
Total other income and
(income deductions) (24,403) 9,881 73,649 123,606
---------- ---------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE 404,512 396,077 1,836,579 1,957,047
---------- ---------- ----------- -----------
INTEREST EXPENSE
Interest charges 244,137 206,270 849,710 830,683
Allowance for borrowed funds
used during construction (48,007) (15,997) (78,626) (44,217)
---------- ---------- ----------- -----------
Net interest expense 196,130 190,273 771,084 786,466
---------- ---------- ----------- -----------
NET INCOME 208,382 205,804 1,065,495 1,170,581
Preferred dividend requirement 14,899 17,630 63,812 78,887
---------- ---------- ----------- -----------
EARNINGS AVAILABLE FOR
COMMON STOCK $ 193,483 $ 188,174 $ 1,001,683 $ 1,091,694
========== ========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 430,914 426,173 430,625 422,714
EARNINGS PER COMMON SHARE $.45 $.44 $2.33 $2.58
DIVIDENDS DECLARED PER COMMON SHARE $.47 $.44 $1.88 $1.76
Selected financial information for each type of the Company's operations is as follows:
- --------------------------------------------------------------------------------------------
Three months ended December 31, Twelve months ended December 31,
(in millions, ------------------------------ -------------------------------
except per share amounts) 1993 1992 1993 1992
- --------------------------------------------------------------------------------------------
Operating revenues:
Utility $ 2,126 $ 2,122 $ 8,398 $ 8,306
Diablo Canyon (c) 515 383 1,933 1,781
PG&E Enterprises 66 53 251 209
---------- ---------- ---------- ----------
Total $ 2,707 $ 2,558 $ 10,582 $ 10,296
========== ========== ========== ==========
Earnings (loss) per share:
Utility (b) $ .11 $ .35 $ 1.18 $ 1.61
Diablo Canyon (c) .35 .09 1.11 .99
PG&E Enterprises (.01) - .04 (.02)
---------- ---------- ---------- ----------
Total (a) $ .45 $ .44 $ 2.33 $ 2.58
========== ========== ========== ==========
<FN>
(a) As of December 31, 1993, the Company has recorded estimated workforce
reduction program costs for management and bargaining unit employees of
$264 million. In April 1993, the Company announced a freeze on electric
rates through 1994 and to date the Company has expensed $190 million of such
costs ($.26 per share) relating to electric operations. The remaining $74
million of such costs was deferred for future rate recovery from gas customers.
(b) The decrease in utility earnings per share for the three-month period ended
December 31, 1993, compared with the same period in 1992, was primarily due to
reserves of $126 million ($.19 per share) for Canadian gas costs incurred by the
Company from 1988 through 1990 and for contingencies relating to its commitments
for gas transportation capacity. The decrease in utility earnings per share for
the twelve-month period ended December 31, 1993, compared with the same period
in 1992, was primarily due to reserves of $62 million ($.09 per share) relating
to the restructuring of natural gas operations, and the impact of the workforce
reduction program, Canadian gas costs, and transportation capacity contingencies
discussed above.
(c) Diablo Canyon operating revenues and earnings per share for the three-
month period ended December 31, 1993, compared with the same period in 1992,
increased mostly due to fewer scheduled refueling days in the fourth quarter of
1993. The increase in Diablo Canyon operating revenues and earnings per share
for the twelve-month period ended December 31, 1993, compared with the same
period in 1992, was primarily due to the annual increase in the price per
kilowatthour as provided in the Diablo Canyon rate case settlement.
</TABLE>
