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 10, 1994
PACIFIC GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
California 1-2348 94-0742640
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(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 - 1994 Target
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 target for the 1994 Plan year is
based on the corporate operating and capital budgets prepared for
1994 which result in a budgeted corporate earnings per common
share of $2.78. The following table sets forth the budgeted
earnings per share for the three types of operations which
comprise the overall budgeted corporate earnings per share as
approved by the Board of Directors in December 1993:
Budgeted 1994 Earnings Per Common Share
Utility $ 1.89
Diablo Canyon 0.87
PG&E Enterprises 0.02
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Total $ 2.78
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The budgeted corporate earnings per share is a performance target
and is not a forecast of actual performance that will be realized
by the Company. The budgeted amount does not reflect the
resolution of various regulatory uncertainties or other
contingencies, including those disclosed in the Notes to the
Company's Consolidated Financial Statements, which could affect
the Company's performance during the year. Actual performance
during the year may differ materially from the budgeted amount.
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.
All of the budgeted earnings per share amounts assume 425 million
shares of common stock outstanding. The budgeted earnings per
share amounts assume no significant gain or loss on the sale of
assets.
B. California Public Utilities Commission (CPUC) Proceedings
1. Electric Fuel and Sales Balancing Accounts
On December 17, 1993, the CPUC issued a decision authorizing a
net zero change in the Company's electric revenue requirement for
the twelve month forecast period beginning January 1, 1994. The
decision also authorizes a gas revenue increase of approximately
$4 million relating to the Company's customer energy efficiency
(CEE) programs for the same forecast period. The new rates are
effective as of January 1, 1994.
The net zero change in the Company's overall annual electric
revenue requirement for 1994 is composed of a $112 million
increase under the Energy Cost Adjustment Clause (ECAC) balancing
account, a $7 million increase under the Annual Energy Rate (AER)
mechanism, a $129 decrease under the Electric Revenue Adjustment
Mechanism (ERAM), a $1 million decrease under the Low Income Rate
Assistance account and a $11 million increase for recovery of
incentives earned on CEE programs.
As previously disclosed, in April 1993, the Company announced
that it will freeze retail electric rates through the end of 1994
as part of its electric rate initiative. The Company has
indicated that the electric rate freeze would be accomplished, in
part, by the deferral of recovery of undercollections in the
various ECAC and ERAM balancing accounts to the extent necessary
to avoid any ECAC/ERAM-related electric rate increases on January
1, 1994. Accordingly, the Company had requested the authority to
defer beyond 1994 cost recovery of approximately $255 million of
the forecasted undercollections in the ECAC/ERAM balancing
accounts as of December 31, 1993. In its decision, the CPUC
approved the Company's request, but cautioned that the CPUC does
not view its action as simply a deferral with payment due in
1995. Rather, the CPUC indicated that it expects the Company to
take the necessary measures over the year to reduce its rates.
With the stated objective of providing additional incentives for
cost containment, the CPUC refused to allow the Company to
collect interest on the revenue requirement deferral and ordered
the reinstatement of the AER mechanism, which was indefinitely
suspended in August 1990. The reinstatement of the AER mechanism
places the Company at partial risk for variations between actual
and forecasted energy expenses in that only 91% of actual energy
costs are recoverable through the ECAC. The AER provides for
recovery of 9% of forecasted energy costs and the amounts
collected under the AER will not be adjusted if actual costs
differ from the amounts authorized. Therefore, the Company would
be at risk for 9% of actual energy costs above the 1994 forecast,
subject to a cap of 140 basis points on overall earnings, and
shareholders would be rewarded with 9% of any fuel cost savings.
With respect to CEE, the decision authorizes the Company to
recover in rates over three years an aggregate electric and gas
revenue increase of approximately $41 million for shareholder
incentives relating to CEE measures installed in 1992, a
reduction from the $59 million initially requested by the
Company. Those revenues will be recovered in equal annual
amounts beginning in 1994. The electric and gas revenue
increases authorized in rates for 1994 relating to CEE of $11
million and $4 million, respectively, include one third of the
1992 incentives as well as amounts earned in previous years.
However, the decision also provides that the $41 million allowed
as shareholder incentives shall be subject to refund pending
completion of a CPUC audit of all the Company's 1990-1992 CEE
expenses. The audit is required to be completed by the end of
1994.
2. 1994 Attrition Rate Adjustment
On December 17, 1993, the CPUC issued a resolution authorizing
the Company to implement an Attrition Rate Adjustment (ARA)
effective January 1, 1994, which results in an increase of $41
million for electric base rates and $54 million for gas base
rates. These adjustments incorporate the final decision in the
1994 cost of capital proceeding. As part of the Company's
electric rate initiative, the $41 million ARA increase excludes
approximately $19 million of increased taxes attributable to the
higher corporate tax rate recently adopted for which the Company
would otherwise have sought recovery through the ARA mechanism
but instead will forego.
The CPUC's resolution also authorizes the Company to reduce its
1994 electric and gas base revenues by approximately $143 million
and $60 million, respectively, primarily as a result of the net
savings from the workforce reduction program and changes in the
Company's obligation to make future contributions toward
post-retirement medical benefits. Pursuant to the electric rate
initiative, these reductions in revenue requirements for electric
operations were used to offset the $41 million ARA increase as to
hold electric base revenues constant, resulting in a consolidated
net change in electric rates of zero effective as of January 1,
1994, with the excess savings to be amortized in 1995 rates.
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 10, 1994
