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 4, 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 - 1995 Target
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 is
based on the corporate operating and capital budgets prepared for
1995 which result in a budgeted corporate earnings per common
share of $2.86. 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 1994:
Budgeted 1995 Earnings Per Common Share
Utility $ 1.77
Diablo Canyon 1.11
Enterprises (0.02)
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Total $ 2.86
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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 1995 budgeted earnings per share for the utility were derived
from, among other things, (i) budgeted revenues as authorized by
the 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 previously
disclosed, the Company has proposed the sale of DALEN in 1995
through an initial public offering of DALEN's common stock.
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.
B. California Public Utilities Commission Proceedings
1. 1995 Electric Rate Stabilization / Attrition Rate
Adjustment
On December 21, 1994, the CPUC issued a resolution authorizing
the Company to implement an Attrition Rate Adjustment (ARA) to
keep the Company's retail electric rates unchanged through 1995,
consistent with the Company's 1995 electric rate freeze. The
CPUC authorized the Company to forgo the electric rate increase
of approximately $170 million that otherwise would have occurred
on January 1, 1995 as authorized in the Company's 1993 General
Rate Case. In addition, the CPUC adopted the Company's proposal
to decrease electric base revenues in an amount equal to the
increase in revenues the CPUC approved in the Company's 1995 Cost
of Capital proceeding and Energy Cost Adjustment Clause (ECAC)
proceeding (see Item B.2. below), and the increase in revenues
contemplated by the proposed settlement in the Helms Pumped
Storage Project (Helms) proceeding, such that electric rates will
not increase through the end of 1995.
The CPUC also authorized the implementation of an ARA which
results in an increase of $68.6 million for gas base rates.
Combined with the previously authorized increases of $33.2
million relating to the 1995 Cost of Capital proceeding and $31.3
million for partial recovery of amounts accrued in the Interstate
Transition Cost Surcharge balancing account, and approval of the
Company's request to reduce authorized funding for gas CEE
programs in 1995 by $33.1 million, gas revenues will increase,
effective January 1, 1995, by approximately $100 million, or 4.7%
over rates in effect since August 1994.
On December 21, 1994, the CPUC also granted the Company's request
for reductions of approximately $100 million in authorized
funding levels for 1995 electric CEE programs and $17 million for
electric RD&D programs. The request for such reductions was made
as part of the Company's electric rate freeze plan.
2. ECAC
On December 21, 1994, the CPUC issued a decision in the Company's
1995 ECAC proceeding which adopts all of the Company's proposals
to continue the electric rate freeze currently in effect,
including a $157.8 million ECAC increase to be offset by an
attrition base rate decrease, an early refund of $83.5 million in
CEE program dollars collected from ratepayers but not spent in
1993 and 1994, and deferral of collection of approximately $443.7
million of ECAC costs forecasted to be undercollected as of
December 31, 1995. In granting the deferral, the decision
continues imposition of the three conditions placed on the first
deferral in last year's proceeding: (i) reinstatement of the
Annual Energy Rate (AER) mechanism, which places shareholders at
risk for nine percent of any deviations from forecasted
operations, (ii) no interest on the estimated revenue requirement
deferral, and (iii) written notification to all parties if the
Company forecasts that rates would need to rise an additional
five percent or more to amortize the undercollection.
The decision agreed with the Company that the forgoing of
interest on the deferral amount was limited to the adopted
deferral amount and not to undercollections resulting from
forecast error. The decision also makes it clear that the
deferral would not be considered a transition cost in any
restructuring of the electric industry, but should be separately
collected from the customers receiving electric service during
the period in which the deferred amounts were incurred.
3. 1988 - 1990 Gas Reasonableness Proceedings
As previously disclosed, in March 1994, the CPUC issued a
decision on the Company's Canadian gas procurement activities
during 1988 through 1990. The decision orders a disallowance of
$90 million of gas costs, plus accrued interest estimated at
approximately $25 million through December 31, 1993. The CPUC
decision found that the Company could have saved its customers
money if it had bargained more aggressively with its then-
existing Canadian suppliers or bought lower-priced gas from other
Canadian sources. The Company filed a request for rehearing of
this decision, which was denied in November 1994.
On December 21, 1994, the Company filed a complaint against the
CPUC in the U.S. District Court for the Northern District of
California challenging this decision by the CPUC. The complaint
alleges that the CPUC disallowance order purports to regulate the
foreign and interstate purchase and transportation of natural
gas, matters within the exclusive jurisdiction of United States
and Canadian regulatory authorities. Accordingly, the complaint
alleges, such order is preempted by federal law and violates the
Company's rights under the United States Constitution. The
complaint seeks injunctive and declaratory relief.
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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: January 4, 1995
