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 20, 1995
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 - Year-to-Date Financial Results
The Performance Incentive Plan (Plan) is an annual incentive
compensation plan applicable to all regular, nonbargaining 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
combined 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 (Enterprises), a wholly owned subsidiary; and (2) the
performance of the employee's organizational unit in meeting its
individual objectives. The corporate and organizational
objectives include cost control, quality and reliability of
service to customers, financial performance 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 1995 Plan year was
disclosed in a Report on Form 8-K dated January 4, 1995, and was
based upon the corporate capital and operating budgets prepared
for 1995.
The 1995 budgeted earnings per share for the utility were derived
from, among other things, (i) budgeted revenues as authorized by
the California Public Utilities Commission (CPUC) for 1995 which
include the continuation of the Company's economic stimulus rate
and electric rate freeze, (ii) the Company's capital budget for
1995 of approximately $1.3 billion for utility operations and
(iii) budgeted operating expenses for utility operations that are
approximately 9% less than budgeted for 1994. The budgeted
operating expenses for utility operations assume Customer Energy
Efficiency (CEE) and electric research development and
demonstration (RD&D) expenditures that are $150 million less than
previously authorized for 1995, consistent with the CPUC
decisions issued in December 1994 granting the Company's request
for reduced CEE and RD&D expenditures in 1995. The utility
budgeted earnings per share assumes contribution to earnings of
$.10 per share from Pacific Gas Transmission Company.
The budgeted earnings per share for Diablo Canyon were derived
from, among other things, (i) a reduction in the price of power
produced by Diablo Canyon from 11.89 cents per kilowatt hour
(Kwh) in 1994 to 11.0 cents per Kwh in 1995, consistent with the
agreement reached with the CPUC's Division of Ratepayer Advocates
and other parties to modify the Diablo Canyon rate case
settlement, (ii) an operating capacity factor (excluding
refueling outages) of 91%, (iii) an overall annual capacity
factor of 85.4% and (iv) one 45-day refueling outage at Unit 1
during 1995. Budgeted operating expenses for 1995 relating to
Diablo Canyon are approximately 20% less than budgeted for 1994.
Budgeted capital expenditures for Diablo Canyon are approximately
$47 million for 1995, which is 55% less than budgeted for 1994.
The budgeted earnings per share for Enterprises assumes net
income of $9 million from U.S. Generating Company and PG&E
Properties, which is offset by budgeted net losses of $19 million
attributable primarily to DALEN Resources Corp. (DALEN) and two
new business areas, international power generation and new
products and services in U.S. utility markets. As disclosed in
Item 5.D. below, the Company has entered into an agreement to
sell to a third party all of the capital stock of DALEN in 1995.
All of the budgeted earnings per share amounts assume 430 million
shares of common stock outstanding. The budgeted earnings per
share amounts assume no significant gain or loss on the sale of
assets.
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 Enterprises. For
the three months ended March 31, 1995, selected financial
information is shown below:
(in thousands of dollars, except per share amounts)
Three Months Ended March 31, 1995
=================================================================
Actual (1) Budget (2)
(unaudited)
Operating Revenues:
Utility $ 1,776,081 $ 1,983,064
Diablo Canyon 463,904 (3) 430,401
PG&E Enterprises 67,366 72,217
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Total Consolidated $ 2,307,351 $ 2,485,682
=========== ==========
Net Income:
Utility $ 192,046 (4) $ 197,904
Diablo Canyon 139,613 (3) 115,571
PG&E Enterprises (2,972) (1,501)
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Total Consolidated $ 328,687 $ 311,974
=========== ==========
Earnings (Loss) Per
Common Share:
Utility $ 0.42 (4) $ 0.43
Diablo Canyon 0.32 (3) 0.26
PG&E Enterprises (0.01) 0.00
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Total Consolidated $ 0.73 $ 0.69
=========== ==========
(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. This information should
be read in conjunction with the 1994 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 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.
(3) Diablo Canyon operated at an overall capacity factor of
97.5% compared to a budgeted overall capacity factor of 91.0% for
the three months ended March 31, 1995.
(4) The earnings for the three-month period ended March 31,
1995, were adversely impacted by litigation reserves of $50
million ($.07 per share), but were offset primarily by lower
operating expenses.
B. Electric Open Access NOPR
On March 29, 1995, the Federal Energy Regulatory Commission
(FERC) issued a Notice of Proposed Rulemaking (NOPR) on open
access transmission, supplemented its previously issued NOPR on
stranded costs and announced a technical conference in the near
future to explore creation of a real-time electronic bulletin
board to convey transmission system information. The NOPR
proposes concepts for electric transmission that were used in gas
industry restructuring and requires that all public utilities
provide wholesale open access transmission service and ancillary
services in accordance with specified pro forma tariffs which
utilities would also have to use for their own wholesale power
transactions.
In the NOPR, the FERC concludes that the fact that most utilities
do not have tariffs offering open access wholesale transmission
services, impedes the transition to competitive markets and may
be unduly discriminatory under the Federal Power Act.
Accordingly, the FERC proposes, as Stage 1 of this process, to
require all public utilities to put into place standard open
access tariffs within 60 days after adoption of the FERC's final
rule on this subject. The FERC proposes tariffs will all conform
to the model tariffs attached to the NOPR; the rates for services
for each utility will be derived from cost information submitted
annually to the FERC by each utility. Utilities will be required
to unbundle wholesale generation and transmission services, and
offer separately stated rates for transmission and ancillary
services. In Stage 2, which commences 61 days after the rule
becomes final, utilities or customers may propose changes to the
standard tariffs. Existing transmission agreements will be
grandfathered and not abrogated. Open access tariffs that have
already been approved or are being considered by the FERC before
Stage 1 commences will be evaluated by the FERC to determine if
they conform to the standard tariff.
As part of the NOPR, the FERC considered "buy-sell" programs such
as that proposed by the Company, under which the utility would
purchase electricity on behalf of a customer from any supplier
chosen by the customer at a price previously negotiated by the
customer. The FERC concludes that buy-sell programs necessarily
involve retail wheeling to the end-use customer that falls within
the FERC's jurisdiction and accordingly, such programs cannot be
implemented except under a transmission tariff filed with the
FERC.
The FERC confirms that utilities are entitled to recover all
legitimate, prudent and verifiable costs stranded as a result of
retail wheeling, but also affirms that only state regulatory
commissions, not the FERC, shall be responsible for calculating
and levying transition and social costs due to retail wheeling.
The NOPR concludes that states may levy transition charges
through any mechanism they deem fit. However, the FERC attempts
to draw a line between distribution and transmission to afford
the states a mechanism for assessing a distribution surcharge to
recover transition costs.
Parties have approximately six months to comment on the NOPR. A
final rule is expected to be issued by mid-1996.
C. California Public Utilities Proceedings
1. Electric Fuel and Sales Balancing Accounts - ECAC/ERAM
On April 3, 1995, the Company filed an application with the CPUC
to request a net zero electric revenue change from revenue at
present rates. The application proposes a $74.6 million decrease
under the Energy Cost Adjustment Clause (ECAC) mechanism, a $5.9
million decrease under the Annual Energy Rate (AER) mechanism, a
$74.2 million increase under the Electric Revenue Adjustment
Mechanism (ERAM), and a $6.3 million increase under the
California Alternative Rates for Energy (CARE) program (formerly
known as the Low Income Rate Assistance program). The Company's
application proposes to continue its freeze of electric retail
rates by deferring until 1997 cost recovery of an estimated $85
million of its estimated ERAM balance at year-end 1995.
The revenue requirement proposal contained in the Company's
application assumes that the CPUC will approve the revised prices
for Diablo Canyon generation that are included in the proposed
modification to the Diablo Canyon rate case settlement. If the
CPUC does not approve the proposed modification, the estimated
ECAC/ERAM deferral needed to maintain a net zero revenue change
would increase from $85 million to $585.6 million.
The Company's application also includes a report on the Company's
gas and electric system operations during 1994 and requests a
finding that the Company's gas and electric operations were
reasonable during the 1994 record period.
The Company proposes that the electric revenue requirement and
rate outcomes of its 1996 General Rate Case, the 1995 Annual
Earnings Assessment Proceeding (relating to shareholder
incentives earned from CEE programs), the 1996 Cost of Capital
proceeding and the Low Emission Vehicle proceeding be
consolidated into this ECAC/ERAM proceeding. The proposed
treatment of these five applications that the Company will have
before the CPUC in 1995 produces a zero net change in electric
revenue requirement and continuation of the electric rate freeze
in 1996.
2. Biennial Cost Allocation Proceeding (BCAP)
On April 14, 1995, the Company filed an update to its application
with the CPUC in its 1995 BCAP reducing its gas revenue request
by $145 million from $170 million to an increase of $25 million
annually for the two-year period beginning January 1, 1996. The
reduction reflects a significant decline in current and near-term
natural gas prices and updated balancing account balances. The
Company's updated request reflects a $124 million increase in the
transportation revenues and a $99 million annual decrease in the
gas procurement revenue requirement expected over revenues at
present rates.
If the Company's request is approved in conjunction with its
proposed gas rate decrease in its 1996 General Rate Case, the gas
bill for a residential customer with bundled service will remain
constant.
D. Sale of DALEN Resources Corp.
Enterprises, a wholly owned subsidiary of the Company, entered
into an agreement on April 13, 1995 to sell its wholly owned
subsidiary, DALEN, to Enserch Exploration, Inc. (Enserch) for
$455 million, including $340 million in cash and the assumption
of $115 million of debt. DALEN is engaged in natural gas and oil
exploration and production primarily in the Gulf Coast, east
Texas, Anadarko and Rocky Mountain regions of the U.S. Enserch
is a natural gas and oil exploration and production company with
activities focused in Texas and the Gulf of Mexico.
The sale is expected to close by June 15, 1995, subject to due
diligence procedures and receipt of necessary regulatory
approvals. Depending upon the results of Enserch's due
diligence, the sale of DALEN is estimated to result in an after-
tax gain to the Company of no more than $15 million, or $.03 per
share.
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: April 20, 1995
