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 19, 1995
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) 973-700
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 officer awards based upon
achievement of the Plan objectives. The Committee has the discretion
to modify or eliminate officer awards. The final determination of
non-officer awards is made by the chief executive officer, who also
has the discretion to modify or eliminate non-officer 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 to modify the
Diablo Canyon rate case settlement, which was approved by the CPUC in
May 1995, (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 noted in footnote (4) below, in June 1995
Enterprises completed the sale to a third party of all of the capital
stock of DALEN.
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 nine months ended September 30, 1995, selected financial
information is shown below:
<TABLE>
(in thousands of dollars, except per share amounts)
Nine Months Ended September 30, 1995
=================================================================
<CAPTION>
Actual <F1> Budget <F2>
(unaudited)
<S> <C> <C>
Operating Revenues:
Utility $ 5,720,458 $ 6,151,326
Diablo Canyon 1,538,986 <F3> 1,456,190
PG&E Enterprises 140,860 225,200
----------- ----------
Total Consolidated $ 7,400,304 $ 7,832,716
=========== ==========
Net Income (Loss):
Utility $ 615,770 $ 631,411
Diablo Canyon 490,424 <F3> 424,440
PG&E Enterprises 5,606 <F4> (7,193)
----------- ----------
Total Consolidated $ 1,111,800 $1,048,658
=========== ==========
Earnings (Loss) Per
Common Share:
Utility $ 1.36 $ 1.39
Diablo Canyon 1.13 <F3> 0.96
PG&E Enterprises 0.01 <F4> (0.02)
----------- ----------
Total Consolidated $ 2.50 $ 2.33
=========== ===========
<FN>
<F1>
(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, 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, 1995 and March 31, 1995.
<F2>
(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.
<F3>
(3) Diablo Canyon operated at an overall capacity factor of
96.2% compared to a budgeted overall capacity factor of 90.8% for
the nine months ended September 30, 1995.
<F4>
(4) In June 1995, Enterprises completed the sale of DALEN, resulting
in a gain of $.03 per share in the nine-month period ended
September 30, 1995.
</FN>
</TABLE>
B. Holding Company Formation
On October 18, 1995, the Board of Directors of Pacific Gas and
Electric Company (PG&E) authorized management to seek appropriate
regulatory approvals for the formation of a holding company structure.
Under such structure the holders of common stock of PG&E would become
the holders of common stock of a new holding company which, in turn,
would own all the common stock of PG&E. The debt and preferred stock
of PG&E would remain outstanding at the PG&E level and would not
become obligations or securities of the holding company.
This transaction would not result in any change in PG&E's ownership of
California utility operations, which currently represent substantially
all of the assets, revenues and earnings of the PG&E consolidated
group. It is intended that PG&E's ownership interests in Pacific Gas
Transmission Company (PGT) and PG&E Enterprises, two of PG&E's wholly
owned subsidiaries, would be transferred to the holding company and
released from the lien of PG&E's First and Refunding Mortgage. PGT is
a gas pipeline company with operations in the Pacific Northwest and
PG&E Enterprises is an entity with interests in various unregulated
activities, including independent power development and production.
Together, those subsidiaries represent approximately 10 percent of
PG&E's consolidated assets and 5 percent of PG&E's consolidated
revenues and earnings at year end 1994.
PG&E believes that the formation of a holding company will help the
Company to respond more effectively and efficiently to competitive
changes taking place in the utility industry and to new business
opportunities that may arise from those changes. In this respect it
is believed that this structure will provide greater financing
flexibility and will enhance the financial separation of regulated and
unregulated businesses.
PG&E will be seeking approval of the transaction from the California
Public Utilities Commission, the Federal Energy Regulatory Commission
and the Nuclear Regulatory Commission. PG&E's shareholders will be
asked to approve the transaction at PG&E's next annual meeting in
April 1996. PG&E does not expect to complete the process of forming a
holding company structure before mid-1996.
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
Senior Vice President and
Chief Financial Officer
Dated: October 19, 1995
