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: October 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. Diablo Canyon Nuclear Power Plant - Diablo Canyon Rate Case
Settlement
As previously disclosed, in August 1994 the Division of Ratepayer
Advocates (DRA) of the California Public Utilities Commission
(CPUC) filed a petition seeking to modify the CPUC's 1993 order
refusing to reconsider the Diablo Canyon Rate Case Settlement
(Diablo Settlement). The DRA requested that the CPUC modify its
earlier decision for the purpose of reopening the Diablo Settlement
to consider modification of the payment methodology included in the
Diablo Settlement. In addition, the DRA recommended that the price
paid for electricity generated by the Diablo Canyon Nuclear Power
Plant (Diablo Canyon) be frozen at the 1994 price level. In
September 1994, the Company responded to the DRA petition,
requesting that the petition be rejected because it is contrary to
law, violates the DRA's contractual obligation as a party to a
settlement adopted by the CPUC and raises no new facts or
circumstances different from those rejected by the CPUC in the 1993
order referred to above.
On October 19, 1994, an Administrative Law Judge (ALJ) of the CPUC
issued a ruling on the DRA's petition. In his ruling, the ALJ
indicated that he considers the DRA's petition for modification as
a motion (1) to set a hearing to modify the pricing methodology
included in the Diablo Settlement and (2) to freeze Diablo Canyon
prices pending such a hearing. The ALJ rejected the Company's
assertion that since the DRA is a party to the Diablo Settlement it
is barred from unilaterally recommending changes in the Diablo
Settlement. The ALJ also reaffirmed the CPUC's authority to amend
any decision made by it. However, the ALJ indicated an
unwillingness to set a hearing on a case of such potential
magnitude without additional evidence on the issues. Accordingly,
the ALJ's ruling scheduled a hearing for December 20, 1994 on the
DRA's motion, and ordered the parties to submit affidavits and
exhibits in support of or opposed to DRA's motion prior to the
hearing.
B. 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 (PGT), 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 firm intrastate capacity, and the Company continues to
market the remaining capacity on a long-term firm and "as
available" basis.
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 September 30,
1994, assume 426 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.
As previously announced, the Company will be eliminating between
2,500 and 3,000 employment positions. It is currently estimated
that the workforce reduction program will cost approximately $280
million. In addition, depending on the impact of the reductions on
the Company's pension and other postretirement benefit plans, the
Company may have to recognize an additional cost of up to
approximately $50 million. The cost of the workforce reduction
program would be expensed in the fourth quarter of 1994. The
Company does not plan on seeking rate recovery for the cost of this
workforce reduction as it did in connection with the workforce
reduction program in 1993.
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 nine months ended September 30, 1994, selected financial
information is shown below:
(in thousands, except per share amounts)
Nine Months Ended September 30, 1994
=================================================================
Actual (1) Budget (2)
Operating Revenues: (unaudited)
Utility $ 6,219,175 $ 6,275,385
Diablo Canyon 1,429,947 (3) 1,335,223
PG&E Enterprises 160,050 171,610
----------- -----------
Total Consolidated $ 7,809,172 $ 7,782,218
=========== ===========
Net Income (Loss):
Utility $ 520,619 (4) $ 660,018
Diablo Canyon 379,053 (3) 301,948
PG&E Enterprises 4,278 5,493
----------- -----------
Total Consolidated $ 903,950 $ 967,459
=========== ===========
Earnings Per Common
Share:
Utility $ 1.14 (4) $ 1.48
Diablo Canyon 0.85 (3) 0.68
PG&E Enterprises 0.01 0.01
---------- -----------
Total Consolidated $ 2.00 $ 2.17
========== ===========
(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, and the Consolidated Financial
Statements and Notes to Consolidated Financial Statements in the
Quarterly Reports on Form 10-Q for the quarters ended June 30,
1994, and March 31, 1994.
(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
82.5% compared to a budgeted overall capacity factor of 76.9% for
the nine months ended September 30, 1994. The refueling outage at
Unit 2 began 14 days later than the starting date assumed in the
budget. As a consequence, the actual revenues exceed budgeted
amounts by approximately $43 million.
(4) In the nine-month period ended September 30, 1994, the Company
incurred expenses of approximately $245 million ($.34 per share)
resulting from reserves relating to the California Public Utilities
Commission's (CPUC) review of the reasonableness of the Company's
gas costs, an increase in litigation reserves, a reserve for a
portion of the gas revenues accumulated in balancing accounts,
contingencies relating to commitments for gas transportation
capacity and the writedown of gas inventories.
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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: October 21, 1994
