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 19, 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 - 1994 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 include 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 assume contribution to earnings of
$.10 per share from Pacific Gas Transmission Company (PGT), a
wholly owned subsidiary of the Company. 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 year ended December 31,
1994, assume 425 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 year ended December 31, 1994, selected financial
information is shown below:
<TABLE>
(in thousands, except per share amounts)
Year Ended December 31, 1994
=================================================================
<CAPTION>
Actual <1> Budget <2>
(unaudited)
<S> <C> <C>
Operating Revenues:
Utility $ 8,329,992 $ 8,361,297
Diablo Canyon 1,869,738 <F3> 1,748,955
PG&E Enterprises 247,621 226,862
----------- ----------
Total Consolidated $10,447,351 $10,337,114
=========== ===========
Net Income:
Utility $ 541,672 <F4> $ 843,844
Diablo Canyon 460,843 <F3> 386,112
PG&E Enterprises 4,935 9,777
----------- -----------
Total Consolidated $ 1,007,450 $ 1,239,733
=========== ===========
Earnings Per Common
Share:
Utility $ 1.16 <F4> $ 1.89
Diablo Canyon 1.04 <F3> 0.87
PG&E Enterprises 0.01 0.02
---------- ----------
Total Consolidated $ 2.21 $ 2.78
========== ===========
<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 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, March 31, and September
30, 1994.
<F2>
(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.
<F3>
(3) Diablo Canyon operated at an overall capacity factor of
80.7% compared to a budgeted overall capacity factor of 75.3% for
the year ended December 31, 1994. Diablo Canyon earnings for the
year ended December 31, 1994 reflect a charge of $18 million
($.02 per share) related to costs associated with the Company's
1994 workforce reduction program to reduce its workforce
positions by 3,000 by the end of 1995.
<F4>
(4) Utility earnings for the year ended December 31, 1994,
reflect a charge of $231 million ($.32 per share) related to
costs associated with the Company's 1994 workforce reduction
program to reduce its workforce by approximately 3,000 positions
by the end of 1995. Also, in the year ended December 31, 1994,
the Company incurred expenses of approximately $270 million ($.38
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,
and contingencies relating to commitments for gas transportation
capacity.
</FN>
</TABLE>
B. 1994 Consolidated Earnings (unaudited)
Attached hereto as an appendix is a copy of the unaudited
Condensed Statement of Consolidated Income for the three months
and year ended December 31, 1994 and 1993. The Company reported
earnings per common share of $2.21 for the year ended December
31, 1994.
C. Common Stock Dividend
In January 1995, the Company declared a quarterly common stock
dividend of $.49 per share, which corresponds to an annualized
dividend of $1.96 per share.
D. California Public Utilities Commission Proceedings - Core
Procurement Incentive Mechanism
On December 29, 1994, the Company filed an application for
approval of a three-year experimental gas procurement incentive
mechanism for core procurement purchases. The core procurement
incentive mechanism (CPIM) reflects an agreement with the CPUC's
Division of Ratepayer Advocates (DRA) and would, among other
things, replace traditional reasonableness review of core gas
procurement costs with a market-based standard.
The CPIM covers all of the Company's purchases of commodity gas
and pipeline capacity for its core and core-subscription
customers. (Core-subscription customers are noncore customers
who elect to receive combined procurement and transportation
service from the Company.) The CPIM does not cover storage
operations, gas and pipeline capacity purchased for the Company's
power plants or out-of-state pipeline capacity beyond that
reserved for the core and core-subscription customers.
Under the CPIM, the recoverability of the Company's core gas
purchases is determined by a comparison of actual costs against a
market benchmark. The Company is either rewarded or penalized
depending on whether its actual incurred costs fall below or
above the benchmark and a tolerance band, or reasonableness zone.
The Company would recover all costs that fall within the
reasonableness zone; ratepayers and shareholders would share the
costs or savings if actual costs fall above or below the
reasonableness zone.
The Company proposed an expedited schedule under which the CPUC
would approve the CPIM by April 30, 1995.
<PAGE>
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 19, 1995
<TABLE>
APPENDIX
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED STATEMENT OF CONSOLIDATED INCOME
(unaudited)
<CAPTION>
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Three months ended December 31, Twelve months ended December 31,
(in thousands, ------------------------------ -------------------------------
except per share amounts) 1994 1993 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric $1,951,734 $1,969,550 $ 8,027,976 $ 7,866,043
Gas 686,445 737,621 2,419,375 2,716,365
---------- ---------- ----------- -----------
Total operating revenues 2,638,179 2,707,171 10,447,351 10,582,408
---------- ---------- ----------- -----------
OPERATING EXPENSES
Cost of electric energy and gas 713,851 845,089 3,136,672 3,189,781
Operations 555,181 439,991 1,675,942 1,632,807
Maintenance 133,793 109,758 456,889 442,939
Depreciation and decommissioning 355,860 347,548 1,397,470 1,315,524
Administrative and general 276,023 290,480 973,302 1,041,453
Workforce reduction costs <1> 249,097 (6,500) 249,097 190,200
Income taxes 116,088 251,890 924,620 1,006,774
---------- ---------- ----------- -----------
Total operating expenses 2,399,893 2,278,256 8,813,992 8,819,478
---------- ---------- ----------- -----------
OPERATING INCOME 238,286 428,915 1,633,359 1,762,930
---------- ---------- ----------- -----------
OTHER INCOME AND (INCOME
DEDUCTIONS)
Interest income 50,914 21,577 108,092 85,642
Allowance for equity funds used
during construction 4,267 8,486 19,046 41,531
Other--net (3,115) (54,466) (8,344) (53,524)
---------- ---------- ----------- -----------
Total other income and
(income deductions) 52,066 (24,403) 118,794 73,649
---------- ---------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE 290,352 404,512 1,752,153 1,836,579
---------- ---------- ----------- -----------
INTEREST EXPENSE
Interest charges 188,397 244,137 757,656 849,710
Allowance for borrowed funds
used during construction (1,545) (48,007) (12,953) (78,626)
---------- ---------- ----------- -----------
Net interest expense 186,852 196,130 744,703 771,084
---------- ---------- ----------- -----------
NET INCOME 103,500 208,382 1,007,450 1,065,495
Preferred dividend requirement 14,289 14,899 57,603 63,812
---------- ---------- ----------- -----------
EARNINGS AVAILABLE FOR
COMMON STOCK $ 89,211 $ 193,483 $ 949,847 $ 1,001,683
========== ========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 430,622 430,914 429,846 430,625
EARNINGS PER COMMON SHARE $.21 $.45 $2.21 $2.33
DIVIDENDS DECLARED PER COMMON SHARE $.49 $.47 $1.96 $1.88
Selected financial information for each type of the Company's operations is as follows:
<CAPTION>
- --------------------------------------------------------------------------------------------------
Three months ended December 31, Twelve months ended December 31,
(in millions, ------------------------------ -------------------------------
except per share amounts) 1994 1993 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues:
Utility $ 2,110 $ 2,126 $ 8,329 $ 8,398
Diablo Canyon <2> 440 515 1,870 1,933
PG&E Enterprises 88 66 248 251
---------- ---------- ---------- ----------
Total $ 2,638 $ 2,707 $ 10,447 $ 10,582
========== ========== ========== ==========
Earnings (loss) per share:
Utility $ .03 $ .11 $ 1.16 <3> $ 1.18 <3>
Diablo Canyon <2> .18 .35 1.04 1.11
PG&E Enterprises .00 (.01) .01 .04
---------- ---------- ---------- ----------
Total $ .21 $ .45 $ 2.21 $ 2.33
========== ========== ========== ==========
<FN>
<F1>
(a) In the fourth quarter of 1994, the Company recorded a charge of $249 million ($.34 per share)
related to costs associated with reductions in PG&E's workforce of approximately 3,000 positions. As
of December 31, 1993, the Company had recorded estimated workforce reduction program costs for
management and bargaining unit employees of $264 million. The Company expensed $190 million ($.26 per
share) of such costs in 1993, and deferred the remaining $74 million for future rate recovery from gas
customers.
<F2>
(b) Diablo Canyon operating revenues and earnings per share for the three-month and twelve-month
periods December 31, 1994, compared with the same periods in 1993, decreased mostly due to a greater
number of refueling days offset by the impact of the increase in the price per kilowatthour as
provided in the Diablo Canyon rate case settlement. Both units of the nuclear power plant were
refueled in 1994 compared with only one unit in 1993. In addition, there were a greater number of
unscheduled outage days in 1994. The twelve-month period ended December 31, 1993 also reflects a $32
million ($.08 per share) adjustment to income tax expense for the impact of the one percentage point
increase in the federal income tax rate on Diablo Canyon's deferred liability and its operating
results for 1993. The Diablo Canyon plant capacity factors for the year ended December 31, 1994 and
1993 were 81% and 89%, respectively.
<F3>
(c) Utility earnings for the twelve months ended December 31, 1994 and 1993 included charges for gas
reasonableness and transportation capacity matters of approximately $135 million ($.19 per share) and
$126 million ($.19 per share), respectively. In addition, the Company established a reserve of $62
million ($.09 per share) in 1993 relating to the restructuring of its natural gas operations.
</FN>
</TABLE>
