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: April 21, 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
Item 5. Other Events
A. Performance Incentive Plan - Year-to-Date Financial Results
The Performance Incentive Plan (Plan) is an annual incentive
compensation plan applicable to all regular non-bargaining unit
employees of the Company and designated subsidiaries. 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; and (2) the performance of
the employee's organizational unit in meeting its individual
objectives. 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 target for the 1994 Plan year was
disclosed in a Report on Form 8-K dated January 10, 1994, and
was based upon the corporate capital and operating budgets
prepared for 1994. The Company's overall earnings per share are
comprised of earnings per share for the Company's three types of
operations: utility, Diablo Canyon nuclear power plant (Diablo
Canyon) and nonregulated through PG&E Enterprises, a wholly owned
subsidiary.
The 1994 budgeted earnings per share for the utility were derived
from, among other things, (i) budgeted revenues as authorized by
the CPUC for 1994 which includes the impact of the Company's
economic stimulus rate, the electric rate freeze and the
corporate reorganization and workforce reduction program
announced in early 1993, (ii) the Company's capital budget for
1994 of approximately $1.4 billion for utility operations and
(iii) budgeted operating expenses for utility operations that are
approximately 5% less than budgeted for 1993. The utility
budgeted earnings per share assumes contribution to earnings of
$.10 per share from Pacific Gas Transmission Company, a wholly
owned subsidiary of the Company, of which $.09 per share relates
to the interstate portion of the PGT-PG&E pipeline expansion
project. The budgeted earnings per share for utility assumes no
earnings for the California portion of the expansion project. As
previously disclosed, shippers on the California portion of the
PGT-PG&E pipeline expansion project have only executed long-term
firm transportation contracts for approximately 40% of the
intrastate capacity, and the Company continues negotiations for
the remaining capacity.
The budgeted earnings per share for Diablo Canyon were derived
from, among other things, (i) an operating capacity factor
(excluding refueling outages) of 91%, (ii) an overall annual
capacity factor of 75.3% and (iii) one 64-day refueling outage at
Unit 1 and one 62-day refueling outage at Unit 2 during 1994.
Budgeted operating expenses for 1994 relating to Diablo Canyon
are approximately 13% more than budgeted for 1993. Budgeted
capital expenditures for Diablo Canyon are approximately $105
million for 1994.
The budgeted earnings per share for the period ending March 31,
1994 assume 429 million shares outstanding. The budgeted earnings
per share amounts assume no significant gain or loss on the sale of
assets. Actual performance during the year may differ materially
from the budgeted amounts.
On a quarterly basis, 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 three months ended March 31, 1994, selected financial
information is shown below:
(in thousands, except per share amounts)
Three Months Ended March 31, 1994
=================================================================
Actual (1) Budget (2)
Operating Revenues: (unaudited)
Utility $ 2,025,679 $ 1,981,661
Diablo Canyon 434,602 (3) 408,251
PG&E Enterprises 2,754 715
----------- -----------
Total Consolidated $ 2,463,035 $ 2,390,627
=========== ===========
Net Income (Loss):
Utility $ 141,392 (5) $ 186,113
Diablo Canyon 95,824 (3) 76,163
PG&E Enterprises (264)(4) (77)
----------- -----------
Total Consolidated $ 236,952 $ 262,199
=========== ===========
Earnings Per Common
Share:
Utility $ 0.31 (5) $ 0.41
Diablo Canyon 0.21 (3) 0.17
PG&E Enterprises 0.00 (4) 0.00
---------- -----------
Total Consolidated $ 0.52 $ 0.58
========== ===========
(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
interim period. All material adjustments are of a normal
recurring nature, except as noted below. The actual results above
are not necessarily indicative of the results to be obtained in the
full fiscal year. This information should be read in conjunction
with the 1993 Consolidated Financial Statements and Notes to
Consolidated Financial Statements incorporated by reference in the
Company's Annual Report on Form 10-K.
(2) The budgeted amounts are performance targets and not
forecasts of actual performance that is expected or will 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, which could affect the
Company's performance during the year.
(3) Diablo Canyon operated at an overall capacity factor of
84.9% compared to a budgeted overall capacity factor of 81.0% for
the three months ended March 31, 1994.
(4) In January 1994, the Company's board of directors approved a
final plan for the disposition in 1994 of PG&E Resources Company
(Resources), a wholly owned indirect subsidiary of PG&E
Enterprises, if market conditions remain favorable. Resources'
operations for the three months ended March 31, 1994, resulted in
net income of $1,462,000, net of a $3,133,000 tax benefit.
(5) Two California Public Utilities Commission (CPUC) decisions on
the reasonableness of the Company's gas costs for the period 1988
through 1990 resulted in additional expenses of $65 million ($.09
per share) in the three-month period ended March 31, 1994. Based
on the CPUC reasoning in the aforementioned decisions, the Company
recorded additional reserves for 1991 through 1993 Canadian gas
costs of $23 million ($.03 per share) in the three-month period
ended March 31, 1994.
B. California Public Utilities Commission Proceedings -
1. Electric Fuel and Sales Balancing Accounts - ECAC/ERAM
On April 1, 1994, the Company filed an application with the CPUC to
request a two percent increase in electric revenues over rates in
effect April 1, 1994. If adopted, the requested rate increase
would result in a net electric revenue requirement increase
(currently estimated to be $157.4 million) effective January 1,
1995. The increase consists of a $327.2 million increase under the
Energy Cost Adjustment Clause (ECAC) balancing account, a $165.3
million decrease under the Electric Revenue Adjustment Mechanism
(ERAM) balancing account, a $3.6 million decrease under the Annual
Energy Rate (AER) mechanism and a $0.9 million decrease under the
Low Income Rate Assistance (LIRA) account. The Company's
application indicates that its proposal limits the requested
revenue increase to two percent by deferring cost recovery of a
portion of its estimated ECAC balance at year-end 1994.
Accordingly, the Company requests authority to defer beyond 1995
cost recovery of $275.1 million of the forecasted undercollection
in the ECAC balancing account as of December 31, 1994, with no
interest accrual on the amount deferred.
The Company's application also requests that Customer Energy
Efficiency (CEE) funds which are unspent as of year-end 1994 be
applied to revenue balancing accounts. Unspent electric CEE funds
(estimated to be $51.7 million as of January 1, 1994) would be
applied to reduce the ERAM undercollection and unspent gas CEE
funds (estimated to be $17.1 million as of January 1, 1994) would
be applied in the Company's upcoming Biennial Cost Allocation
Proceeding to reduce the undercollection in the gas fixed cost
balancing accounts.
In addition to the requested revenue increase, the Company's
application seeks the elimination of the AER mechanism commencing
January 1, 1995. The AER was reinstated by the CPUC beginning in
1994 as a cost containment incentive. In its application, the
Company argues that the Regulatory Reform Initiative recently
proposed by the Company includes significant new energy cost
control incentives that are better than the AER, and therefore the
CPUC should eliminate the AER.
The Company's application also includes a report on the Company's
electric system operations during the 1993 record period, and
requests a finding that the Company's electric operations were
reasonable during the 1993 record period.
2. Biennial Cost Allocation Proceeding (BCAP)
In September 1993, the Company submitted an interim, or trigger,
filing as permitted under the BCAP mechanism to set new rates for
the second year of the BCAP period if amortization of accumulated
over- or under- collections in balancing accounts would change gas
rates by more than five percent. In March 1994, the Company filed
an update to the September trigger filing. The Company's updated
filing requests an increase of $167.7 million in the Company's core
(residential and smaller commercial customers) gas revenue
requirement, which would result in a 9.63% increase in core rates
over rates currently in effect. The Company requested that the
proposed increase be implemented on May 15, 1994. The CPUC has not
yet acted on the Company's request.
3. Electric Industry Restructuring
On April 20, 1994, the CPUC issued an order instituting rulemaking
and order instituting investigation addressing electric industry
restructuring. According to the press release issued by the CPUC,
the CPUC's order proposes a two-part strategy for reforming the
regulation of electric services in California.
The first part of the CPUC proposal would offer consumers
voluntary, direct access to a range of electric generation
providers, including the state's investor-owned utilities,
beginning in 1996. The CPUC proposes to grant consumers who
receive "transmission level service" of over 50 kilovolts direct
access to competing power providers beginning January 1, 1996.
Eligibility for direct access would be expanded gradually over six
years, until all California consumers of electricity have the
opportunity to choose among generation providers. Under the CPUC's
proposal, any consumer, regardless of size, may continue to receive
electric service from the utility at prices regulated by the CPUC.
The second part of the CPUC's proposal would replace California's
traditional regulatory framework with performance-based regulation.
The CPUC indicates that this reform would shift California
utilities away from traditional ratemaking which tends to base
utility earnings on capital expenditures and recovery of expenses,
toward a performance-based regulatory approach designed to reward
the utility for efficient operations, management, and investment.
In its press release, the CPUC stated that its proposal seeks to
put downward pressure on prices, encourage an efficient,
environmentally sound electric services infrastructure and enhance
California's competitiveness. The press release indicates that
earnings floors and ceilings will protect the financial integrity
of utilities and avoid excessive profits and rates being paid by
customers during the transition phase.
Initial comments on the CPUC's proposal are due on May 20, 1994.
The CPUC has scheduled a full panel hearing on June 14, 1994 to
hear public comment, and may hold further hearings if warranted.
The CPUC anticipates the adoption of final rules in August 1994.
C. Franchise Fees Litigation
On March 31, 1994, the Counties of Alameda and Santa Clara filed a
complaint in Santa Clara County Superior Court against the Company
on behalf of themselves and purportedly as a class action on behalf
of 47 counties with which the Company has gas or electric franchise
contracts. Franchise contracts require the Company to pay fees on
an annual basis to cities and counties for the right to use or
occupy public streets and roads. The complaint alleges that, since
at least 1988, the Company has intentionally underpaid its
franchise fees to the counties in an unspecified amount.
The complaint cites two reasons for the alleged underpayment of
fees. The plaintiffs allege that the Company has been using the
wrong methodology to compute the franchise fees payable to the
plaintiff counties. The plaintiffs also allege that fees have been
underpaid due to incorrect calculations under the methodology used
by the Company.
Based on limited investigation thus far, should the counties
prevail on the issue of franchise fee calculation methodology, the
Company's annual system-wide county franchise fees could increase
by approximately $15 million. The complaint also seeks damages for
alleged underpayments for the prior six years, which could be as
much as $90 million (exclusive of interest).
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
THOMAS C. LONG
By ________________________________
THOMAS C. LONG
Controller and Chief
Accounting Officer
Dated: April 21, 1994
