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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Pacific Gas and Electric Company
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
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14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Pacific Gas and Electric Company
Notice of 1995 Annual Meeting * Proxy Statement
March 2, 1995
[LOGO OF PG&E APPEARS HERE]
Dear PG&E Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Pacific Gas and Electric Company on Wednesday, April 19, 1995, at 10:00 a.m. The
meeting will be held in the Masonic Auditorium, 1111 California Street, San
Francisco, California.
Your vote on the business to be considered at this meeting is important,
regardless of the number of shares you own. Whether or not you plan to attend
the meeting, please sign, date, and return your proxy as soon as possible in the
envelope provided so that your shares can be voted in accordance with your
instructions.
In addition to the election of directors and ratification of the selection
of independent public accountants for 1995, action also will be taken on such
other matters as may properly be presented at the meeting. This includes one
proposal submitted by an individual shareholder. For the reasons given, the
Board of Directors and management recommend that shareholders vote against this
proposal.
During the meeting, management will report on operations and other matters
affecting the Company, and will respond to shareholders' questions.
Sincerely,
/s/ Richard A. Clarke
Richard A. Clarke
Chairman of the Board
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Table of Contents
Notice of Annual Meeting of Shareholders
Proxy Statement
Items of Business
Election of Directors 2
Ratification of Selection of Independent Public Accountants 9
Shareholder Proposal 10
Executive Compensation 11
Other Information 19
Important
The Company has approximately 267,000 shareholder accounts. Many
shareholders own 100 shares or less. To ensure a proper representation at the
meeting, each shareholder, regardless of the number of shares owned, is
requested to sign, date, and return promptly the enclosed proxy, using the
accompanying postage-paid return envelope.
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Notice of Annual Meeting of Shareholders
March 2, 1995
To the Shareholders of Pacific Gas and Electric Company:
The annual meeting of shareholders of Pacific Gas and Electric Company will
be held in the Masonic Auditorium, 1111 California Street, San Francisco,
California, on Wednesday, April 19, 1995, at 10:00 a.m., for the purpose of:
[_] electing 16 directors to serve for the ensuing year;
[_] ratifying the Board of Directors' selection of Arthur Andersen & Co.
as the Company's independent public accountants for 1995;
[_] acting on one proposal submitted by an individual shareholder and
described on page 10; and
[_] transacting such other business as may properly come before the
meeting and any adjournment thereof.
Shareholders of record at the close of business on February 21, 1995, and
valid proxyholders may attend and vote at the meeting. If your shares are
registered in the name of a brokerage firm or trustee and you plan to attend the
meeting, please obtain from the firm or trustee a letter or other evidence of
your beneficial ownership of those shares to facilitate your admittance to the
meeting. If you are a participant in the Dividend Reinvestment Plan, please
note that the enclosed proxy covers all shares in your account, including any
shares which may be held in that Plan.
By Order of the Board of Directors,
/s/ Leslie H. Everett
Leslie H. Everett
Corporate Secretary
Real-time captioning services and headsets will be available for the
hearing impaired. Please contact an usher at the meeting if you wish to be
seated in the real-time captioning section or to use a headset.
Audio cassette recordings of the meeting will be available, without charge,
for shareholders with impaired vision. Please contact the office of the
Corporate Secretary, Mail Code B32, P.O. Box 770000, San Francisco, CA 94177, or
call (415) 973-2880.
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Proxy Statement
Your proxy, using the enclosed form, is solicited by the PG&E Board of Directors
for use at the annual meeting of shareholders to be held on April 19, 1995, and
at any adjournment thereof.
The only items of business which management intends to present at the
meeting are listed in the preceding Notice of Annual Meeting of Shareholders and
are explained in more detail on the following pages. By returning your signed
proxy, you authorize management to vote your shares as you indicate on these
items of business and to vote your shares in accordance with management's best
judgment in response to proposals initiated by others at the meeting.
You may revoke your signed proxy at any time before it is exercised at the
annual meeting. You may do this by advising the Corporate Secretary in writing
of your desire to revoke your proxy, or by submitting a duly executed proxy
bearing a later date. You also may revoke your proxy by attending the annual
meeting and indicating that you wish to vote in person.
Each shareholder of record at the close of business on February 21, 1995,
is entitled, for each share then held, to one vote on each proposal or item that
comes before the annual meeting. On February 21, 1995, the Company had
outstanding 34,819,782 shares of first preferred stock and 432,328,905 shares of
common stock entitled to vote at the meeting.
If you mark "Abstain" with respect to any proposal on your proxy, your
shares will be counted in the number of votes cast, but will not be counted as
votes for or against the proposal. If a broker or other nominee holding shares
for a beneficial owner does not vote on a proposal, the shares will not be
counted in the number of votes cast.
This proxy statement and accompanying proxy form were first mailed on or
about March 2, 1995, to shareholders entitled to vote at the meeting.
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Election of Directors
Sixteen directors will be elected to serve on the Company's Board of Directors
until the next annual meeting of shareholders or until their successors shall be
elected and qualified. The nominees for director whom the Board proposes for
election are consistent with the Company's policy that at least 75 percent of
the Board shall be composed of directors who are neither current nor former
officers or employees of the Company.
On the following pages, information is provided about the nominees for
director, including their principal occupations for the past five years, certain
other directorships, age, and length of service as a director of the Company.
Membership on Board committees, attendance at Board and committee meetings,
and ownership of stock in the Company are indicated in separate sections
following the individual resumes of the nominees.
Directors are elected from those nominated based on a plurality of votes
cast. Unless authority to vote is withheld or another contrary instruction is
indicated, signed proxies received will be voted for the election of the
nominees listed on the following pages, all of whom have agreed to serve if
elected. Should any of the nominees become unavailable at the time of the
meeting to accept nomination or election as a director, the proxyholders named
in the enclosed proxy will vote for substitute nominees at their discretion.
2
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Nominees for Director
Biographical Information
[PHOTO OF RICHARD A. CLARKE APPEARS HERE]
Richard A. Clarke
Mr. Clarke is Chairman of the Board of PG&E and was also Chief Executive Officer
of PG&E from May 1, 1986 to June 30, 1994. Mr. Clarke, 64, has been a director
of the Company since 1985 and also is a director of BankAmerica Corporation and
Potlatch Corporation.
[PHOTO OF HARRY M. CONGER APPEARS HERE]
Harry M. Conger
Mr. Conger is Chairman of the Board and Chief Executive Officer of Homestake
Mining Company and has been an executive officer of that company for more than
the past five years. Mr. Conger, 64, has been a director of the Company since
1982 and also serves as a director of ASA Limited, Baker Hughes Inc., and CalMat
Co.
[PHOTO OF WILLIAM S. DAVILA APPEARS HERE]
William S. Davila
Mr. Davila is President Emeritus of The Vons Companies, Inc. (retail grocery).
He was President of The Vons Companies, Inc. from 1986 until his retirement on
May 1, 1992. He also is a director of The Vons Companies, Inc. Mr. Davila, 63,
has been a director of the Company since 1992 and also is a director of Geo. A.
Hormel & Company and Wells Fargo & Company.
[PHOTO OF DAVID M. LAWRENCE, MD APPEARS HERE]
David M. Lawrence, MD
Dr. Lawrence is Chairman and Chief Executive Officer of Kaiser Foundation Health
Plan, Inc. and Kaiser Foundation Hospitals and has been an executive officer of
that company for more than the past five years. Dr. Lawrence, 54, has been a
director of the Company since January 1995.
[PHOTO OF RICHARD B. MADDEN APPEARS HERE]
Richard B. Madden
Mr. Madden is former Chairman of the Board and Chief Executive Officer of
Potlatch Corporation (diversified forest products). He was Chief Executive
Officer of that company from 1971 until his retirement on May 19, 1994, and
continues to serve as a director of Potlatch Corporation. Mr. Madden, 65, has
been a director of the Company since 1977 and also is a director of Consolidated
Freightways, Inc. and URS Corporation.
3
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[PHOTO OF GEORGE A. MANEATIS APPEARS HERE]
George A. Maneatis
Mr. Maneatis was President of PG&E from 1985 until his retirement on November 1,
1991. Mr. Maneatis, 68, has been a director of the Company since 1986.
[PHOTO OF MARY S. METZ APPEARS HERE]
Mary S. Metz
Dr. Metz is Dean of University Extension, University of California, Berkeley.
She has held that position since July 1991. Prior to that date, she was
President of Mills College, having held that position from 1981 until June 30,
1990. Dr. Metz, 57, has been a director of the Company since 1986 and also is a
director of Longs Drug Stores Corporation, Pacific Telesis Group, and Union
Bank.
[PHOTO OF WILLIAM F. MILLER APPEARS HERE]
William F. Miller
Dr. Miller is Professor of Public and Private Management and Professor of
Computer Science at Stanford University. He is President Emeritus of SRI
International (research and consulting), having been President and Chief
Executive Officer from September 1, 1979, until his retirement on December 1,
1990. Dr. Miller, 69, has been a director of the Company since 1983 and also is
a director of First Interstate Bancorp, Scios Nova, Inc., and Varian Associates,
Inc.
[PHOTO OF REBECCA Q. MORGAN APPEARS HERE]
Rebecca Q. Morgan
Ms. Morgan is President and Chief Executive Officer of Joint Venture: Silicon
Valley Network (nonprofit collaborative formed to address critical issues facing
Silicon Valley). She has held that position since September 1, 1993. Prior to
that date, she was a California State Senator since 1984. Ms. Morgan, 56, was
elected by the Board of Directors to serve as a director of the Company
beginning April 1, 1995.
[PHOTO OF JOHN B. M. PLACE APPEARS HERE]
John B. M. Place
Mr. Place is former Chairman of the Board and Chief Executive Officer of Crocker
National Corporation (formerly a bank holding company) and Crocker National
Bank. Mr. Place, 69, has been a director of the Company since 1982 and also is a
director of The Metropolitan Life Insurance Company.
[PHOTO OF SAMUEL T. REEVES APPEARS HERE]
Samuel T. Reeves
Mr. Reeves is President and Co-Chairman of the Board of Dunavant Enterprises,
Inc. (cotton merchandising) and has been an executive officer of that company
for more than the past five years. Mr. Reeves, 60, has been a director of the
Company since 1992.
4
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Nominees for Director
Continued
[PHOTO OF CARL E. REICHARDT APPEARS HERE]
Carl E. Reichardt
Mr. Reichardt is former Chairman of the Board and Chief Executive Officer of
Wells Fargo & Company (bank holding company) and Wells Fargo Bank, N.A. He was
an executive officer of Wells Fargo Bank, N.A. from 1978 until his retirement on
December 31, 1994, and continues to serve as a director of Wells Fargo &
Company. Mr. Reichardt, 63, has been a director of the Company since 1985 and
also is a director of ConAgra, Inc., Columbia/HCA Healthcare Corporation, Ford
Motor Company, and Newhall Management Corporation.
[PHOTO OF JOHN C. SAWHILL APPEARS HERE]
John C. Sawhill
Dr. Sawhill is President and Chief Executive Officer of The Nature Conservancy
(international environmental organization). He has held that position since
April 1, 1990. Prior to that date, he was a director of McKinsey & Company, Inc.
(management consultants) for more than five years. Dr. Sawhill, 58, has been a
director of the Company since 1990 and also is a director of The Vanguard Group,
Inc. and each of the Vanguard Funds, registered investment companies, and NACCO
Industries, Inc.
[PHOTO OF ALAN SEELENFREUND APPEARS HERE]
Alan Seelenfreund
Mr. Seelenfreund is Chairman of the Board and Chief Executive Officer of
McKesson Corporation (distributor of pharmaceuticals and health care products),
and has been an executive officer of that company for more than the past five
years. Mr. Seelenfreund, 58, has been a director of the Company since 1993 and
also is a director of Armor All Products Corporation.
[PHOTO OF STANLEY T. SKINNER APPEARS HERE]
Stanley T. Skinner
Mr. Skinner is President and Chief Executive Officer of PG&E and has been an
executive officer of the Company for more than the past five years. Mr. Skinner,
57, has been a director of the Company since 1986.
[PHOTO OF BARRY LAWSON WILLIAMS APPEARS HERE]
Barry Lawson Williams
Mr. Williams is President of Williams Pacific Ventures, Inc. (venture capital
and real estate) and has been an executive officer of that company for more than
the past five years. Mr. Williams, 50, has been a director of the Company since
1990 and also is a director of American President Companies, Ltd., Tenera, L.P.,
and Simpson Manufacturing Co., Inc.
5
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Information Regarding the Board of Directors
Board Committees
The Board of Directors is responsible for the overall affairs of the
corporation. To assist it in carrying out this responsibility, the Board has
delegated certain authority to several permanent committees, the membership,
effective April 1, 1995, and duties of which are as follows:
<TABLE>
<CAPTION>
Nominating and
Executive Audit Finance Compensation Public Policy
Committee Committee Committee Committee Committee
<S> <C> <C> <C> <C>
R. A. Clarke* H. M. Conger* C. E. Reichardt* J. B. M. Place* M. S. Metz*
H. M. Conger W. S. Davila R. A. Clarke W. F. Miller R. A. Clarke
R. B. Madden D. M. Lawrence, MD R. B. Madden S. T. Reeves W. S. Davila
M. S. Metz M. S. Metz W. F. Miller C. E. Reichardt G. A. Maneatis
J. B. M. Place R. Q. Morgan S. T. Skinner J. C. Sawhill J. C. Sawhill
C. E. Reichardt B. L. Williams B. L. Williams A. Seelenfreund
S. T. Skinner
*Chair
</TABLE>
Executive Committee. The Executive Committee (one meeting held in 1994), subject
to the provisions of law and certain limits imposed by the Board of Directors,
may exercise any of the powers and perform any of the duties of the Board. The
Committee meets as needed.
Audit Committee. The Audit Committee (four meetings held in 1994) satisfies
itself as to the independence and competence of the Company's independent public
accountants. It reviews with them and with the Company's officers and internal
auditors the scope and results of the independent accountants' audit work, the
Company's annual financial statements, and the Company's internal accounting and
control systems. The Committee also recommends to the Board the firm of
independent public accountants to be selected to audit the Company's accounts,
and makes further inquiries as it deems necessary or desirable to inform itself
as to the conduct of the Company's affairs. The Committee is composed entirely
of directors who are neither (a) present or former officers or employees of the
Company or any of its subsidiaries; (b) consultants to the Company or any of its
subsidiaries; nor (c) officers or employees of any other corporation on whose
board of directors any PG&E officer serves as a member.
Finance Committee. The Finance Committee (three meetings held in 1994) reviews
and recommends to the Board long-range financial policies and objectives, and
actions required to achieve those objectives. Specifically, the Committee
reviews capital and operating budgets, current and projected financial results
of operations, short-term and long-range financing plans, dividend policy,
financial management of the Company's retirement plan, and major commercial
banking, investment banking, financial consulting, and other financial relations
of the Company.
Nominating and Compensation Committee. The Nominating and Compensation Committee
(nine meetings held in 1994) reviews and makes recommendations to the Board of
Directors regarding the selection of nominees to serve as advisory directors and
directors of the Company, and the compensation and benefit policies and
practices of the Company. The Committee reviews and approves the compensation of
officers and certain non-officers of the Company except that of the Chairman of
the Board and that of the Chief Executive Officer, whose compensation is
established by the full Board. The Committee also reviews long-range planning
for executive development and succession. The Committee is composed entirely of
directors who are neither (a) present or former officers or employees of the
Company or any of its subsidiaries; (b) consultants to the Company or any of its
subsidiaries; nor (c) officers or employees of any other corporation on whose
board of directors any PG&E officer serves as a member.
The Committee will consider nominees recommended by shareholders for
election to the Board of Directors. The names of such nominees, accompanied by
relevant biographical information, should be submitted in writing to the
Corporate Secretary. The Committee seeks qualified, dedicated, and highly
regarded individuals who have experience relevant to PG&E's business operations,
who understand the complexities of the Company's business environment, and who
will represent the best interests of PG&E and all of its shareholders. In
accordance with the Company's long-standing commitment to equal opportunity, the
Committee continues to seek women and minority candidates for the Board.
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Public Policy Committee. The Public Policy Committee (two meetings held in 1994)
advises the Board of Directors regarding public policy issues which could
significantly affect the Company's customers, shareholders, or employees, or the
communities the Company serves.
The Committee reviews the Company's policies and practices to protect and
improve the quality of the environment, to support and contribute to charitable
and community service organizations, to ensure equal opportunity in hiring and
promoting employees, to encourage development of minority-owned and women-owned
businesses as suppliers to the Company, and to address shareholder rights and
corporate democracy issues.
Attendance at Board and Committee Meetings
Fifteen meetings of the Board of Directors and nineteen meetings of Board
committees were held in 1994. Overall attendance at such meetings was 95%.
Individual attendance at meetings of the Board of Directors and Board committees
was as follows: R. A. Clarke 100%, H. M. Conger 80%, W. S. Davila 100%, R. B.
Madden 89%, G. A. Maneatis 100%, M. S. Metz 100%, W. F. Miller 89%, J. B. M.
Place 100%, S. T. Reeves 96%, C. E. Reichardt 94%, J. C. Sawhill 100%, A.
Seelenfreund 74%, S. T. Skinner 100%, and B. L. Williams 95%.
Compensation of Directors
Each director who is not an employee of the Company receives a quarterly
retainer of $5,500 plus a fee of $1,000 for each Board or Board committee
meeting attended. Non-employee directors who chair Board committees receive an
additional quarterly retainer of $625. Under a deferred compensation plan,
directors may elect to defer with interest all or part of such compensation for
varying periods.
The Company's Retirement Plan for Non-Employee Directors provides a
retirement benefit for non-employee directors with at least five years of
service on the Board. Eligible retirees are entitled to receive quarterly
payments equal to the number of quarters which they served on the Board. The
amount of the quarterly payment is equal to the quarterly retainer as of the
date of the director's retirement. Indemnity policies cover accrued benefits
under the Retirement Plan for Non-Employee Directors and the Director's Deferred
Compensation Plan in the event that benefits are not paid when due.
Company officers who also are directors receive no additional compensation
for services as a member of the Board of Directors or of any Board committee.
Mr. Maneatis, a director of the Company, had an agreement with the Company
under which he provided strategic consulting services relating to his expertise
in nuclear power plant operations. The agreement terminated in October 1994.
Under the terms of the agreement, Mr. Maneatis received a retainer and fees for
actual consulting time. In 1994, Mr. Maneatis was paid $38,700 under the
agreement.
Certain Relationships and Related Transactions
Mr. Clarke, Chairman of the Board of the Company, also is a director of Bank of
America NT&SA, which was paid approximately $3,485,136 by the Company and its
subsidiaries during 1994 in fees and interest in connection with providing
credit and banking services to the Company and its subsidiaries in the normal
course of business. Such credit arrangements and services are expected to
continue to be provided in the future. Mr. Clarke has no personal interest in
these transactions.
Mr. Reichardt, a director of the Company, also is a director of Wells Fargo
Bank, N.A., which was paid approximately $1,100,411 by the Company and its
subsidiaries during 1994 in fees and interest in connection with providing
credit and banking services to the Company and its subsidiaries in the normal
course of business. Wells Fargo Nikko Investment Advisors, a joint venture in
which Wells Fargo Bank, N.A., has a 50 percent interest, was paid approximately
$896,482 for investment management services provided in the normal course of
business to PG&E's Retirement Plan and Postretirement Medical Trusts during
1994. Such credit arrangements and services are expected to continue to be
provided in the future. Mr. Reichardt has no personal interest in these
transactions.
Dr. Lawrence, a director of the Company, also is Chairman and Chief
Executive Officer of Kaiser Foundation Health Plan, Inc. and Kaiser Foundation
Hospitals, which was paid approximately $28,482,828 by the Company and its
subsidiaries during 1994 in fees in connection with providing health care
services for employees, retirees, and surviving dependents in the normal course
of business. Such services are expected to continue to be provided in the
future. Dr. Lawrence has no personal interest in these transactions.
Ms. Morgan, a director of the Company effective April 1, 1995, also is
President and Chief Executive Officer of Joint Venture: Silicon Valley Network
(JVSV Network), a nonprofit collaborative. As part of the Company's overall
efforts to retain customers and to stimulate the economy in PG&E's service
territory, in 1994 the Company provided $135,500 of support to JVSV Network. The
Company expects to continue providing support to JVSV Network in the future. Ms
Morgan has no personal interest in these transactions.
Board of Directors Retirement Policy
In December 1990, the Board of Directors reduced from 72 to 70 the age above
which any person may not be designated by the Board as a candidate for election
or reelection to the Board. The Board continued its policy
7
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that, in the case of a director who also is an officer of the Company, the
director's term ends upon his or her retirement from active employment unless
the term is extended by special action of the Board.
Security Ownership of Management
The following table sets forth the number of shares of the Company's common
stock beneficially owned (as defined in the rules of the Securities and Exchange
Commission) as of January 31, 1995, by the directors, the nominees for director,
the executive officers named in the Summary Compensation Table on page 16, and
all directors and executive officers as a group. None of the directors, nominees
for director, or executive officers owned any shares of the Company's preferred
stock. None of the directors, nominees for director, or executive officers, nor
the directors and executive officers as a group, owned as much as 1% of any
class of securities.
<TABLE>
<CAPTION>
(A) (B) (C)
Current Vested Options to
Name Stock Ownership(1) Purchase Common Stock(2) Total
<S> <C> <C> <C>
Richard A. Clarke 26,195 96,534 122,729
Harry M. Conger 4,438 4,438
William S. Davila 3,303 3,303
Melvin B. Lane(3) 2,000 2,000
David M. Lawrence, MD(3) 0 0
Leslie L. Luttgens(3) 3,123 3,123
Richard B. Madden 3,000 3,000
George A. Maneatis 17,818 33,000 50,818
Mary S. Metz 2,733 2,733
William F. Miller 10,184 10,184
Rebecca Q. Morgan(3) 0 0
John B. M. Place 3,409 3,409
Samuel T. Reeves 8,000 8,000
Carl E. Reichardt 2,000 2,000
John C. Sawhill 20,552 20,552
Alan Seelenfreund 500 500
Stanley T. Skinner 16,231 41,333 57,564
Barry Lawson Williams 1,718 1,718
James D. Shiffer 7,210 19,167 26,377
Robert D. Glynn, Jr. 3,477 11,666 15,143
Gregory M. Rueger 6,355 21,333 27,688
All directors and executive
officers as a group (29 persons) 175,633 325,264 500,897
</TABLE>
(1) Includes any shares held in the name of the spouse, minor children, or
other relatives sharing the home of the director or executive officer and,
in the case of executive officers, includes shares held in the Company's
Savings Fund Plan. Except as otherwise indicated below, the directors,
nominees for director, and executive officers have sole voting and
investment power over the shares shown. Voting power includes the power to
direct the voting of the shares held, and investment power includes the
power to direct the disposition of the shares held.
Also includes the following shares of the Company's common stock in which
the beneficial owners share voting and investment power: Mr. Davila, 200
shares; Mr. Lane, 2,000 shares; Mr. Madden, 3,000 shares; Dr. Metz, 1,160
shares; Dr. Miller, 10,184 shares; Mr. Place, 2,222 shares; and all
directors and executive officers as a group, 22,650 shares.
(2) Includes shares of the Company's common stock which Mr. Maneatis and the
executive officers have the right to acquire within 60 days of January 31,
1995, through the exercise of vested stock options granted under the
Company's Stock Option Plan. Mr. Maneatis and the executive officers have
neither voting power nor investment power with respect to shares shown
unless and until such shares are purchased through the exercise of the
options, pursuant to the terms of the Stock Option Plan.
(3) Mr. Lane and Mrs. Luttgens, currently directors, are not standing for
reelection at the 1995 annual meeting, in accordance with the Board of
Directors retirement policy. Dr. Lawrence and Ms. Morgan were recently
elected by the Board to replace Mr. Lane and Mrs. Luttgens and are standing
for election by shareholders for the first time this year.
8
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Ratification of Selection of Independent Public Accountants
On the recommendation of the Audit Committee, the Board of Directors has
selected Arthur Andersen & Co. as the independent public accountants to examine
the financial statements of the Company and its subsidiaries for the year 1995.
Arthur Andersen & Co. has been employed to perform this function for the Company
since 1981.
One or more representatives of Arthur Andersen & Co. will be present at the
annual meeting, and will have the opportunity to make a statement and to respond
to appropriate questions.
Although this appointment is not required to be submitted to a vote of the
shareholders, the Board believes it is appropriate as a matter of policy to
request that the shareholders ratify the appointment. If the shareholders should
not ratify the appointment, the Audit Committee will investigate the reasons for
shareholder rejection and the Board will reconsider the appointment.
A majority of the votes cast is required to ratify the appointment of the
independent public accountants.
The Board of Directors recommends a vote FOR the proposal to ratify the
selection of Arthur Andersen & Co. Proxies solicited by the Board of Directors
will be so voted unless shareholders specify otherwise in their proxies.
9
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Shareholder Proposal
Shareholder Proposal:
Compensation of Directors
Mr. Nick Rossi, P. O. Box 249, Boonville, California, 95415, holder of 600
shares of common stock, has given notice of his intention to present the
following proposal for action at the annual meeting:
"The shareholders of Pacific Gas and Electric request the Board of
Directors take the necessary steps to amend the company's governing instruments
to adopt the following:
Beginning on the 1996 Pacific Gas and Electric fiscal year all members of
the Board of Director's total compensation will be 2,000 shares of Pacific Gas
and Electric common stock each year. No other compensation of any kind will be
paid."
In support of this proposal, Mr. Rossi has submitted the following
statement:
"For many years the Rossi family have been submitting for shareholder vote,
at this corporation as well as other corporations, proposals aimed at putting
management on the same playing field as the shareholders. This proposal would do
just that.
"A few corporations have seen the wisdom in paying directors solely in
stock. Most notably, Scott Paper and Travelers. Ownership in the company is the
American way. We feel that this method of compensation should be welcomed by
anyone who feels they have the ability to direct a major corporation's fortunes.
"The directors would receive 2,000 shares each year. If the corporation
does well, the directors will make more money in the value of the stock they
receive and the dividend that usually rise with more profits. If things go bad,
they will be much more inclined to correct things, because it will be coming
directly out of their pockets. Instead of the way it is done now, where
directors receive the same compensation for good or bad performance."
The Board of Directors recommends a vote AGAINST this proposal:
PG&E's policy is to maintain a Board of Directors composed of qualified,
dedicated, and highly regarded individuals who have experience relevant to
PG&E's business operations, understand the complexities of the Company's
business environment, and represent the best interests of PG&E and all of its
shareholders.
PG&E has benefited greatly from the diversity of its Board members, who
have experience in a broad range of fields, including business, academia, and
community service. Differences in stock ownership have not influenced PG&E
directors' dedication to their duty to safeguard the investment of all PG&E
shareholders. Mandating that all compensation paid to directors be in the form
of PG&E common stock would not increase the Board's commitment and
accountability to shareholders. In fact, such a requirement could discourage or
prevent highly qualified individuals from serving on the Board in the future.
Furthermore, this shareholder proposal would restrict the Company's ability
to establish appropriate compensation for directors. PG&E's director
compensation is designed to be competitive with the compensation paid to
directors of other utilities and industrial companies. Directors' compensation
arbitrarily set at 2,000 shares per year may bear no relationship to fees that
other companies are paying their directors, and could result in fees which are
too high or too low, as compared with market practice. Setting compensation at a
fixed number of shares would inhibit the Company's ability to offer compensation
that is competitive with that offered by other companies and would reduce the
Company's ability to attract qualified directors.
With respect to stock ownership by our directors, there is nothing in this
proposal that prevents directors from selling their shares after they are
received. Therefore, if the proponent's objective is to ensure director stock
ownership or increase stock ownership, that objective is not accomplished
through this proposal. Moreover, the Company has an established program through
which directors may, at their option, reinvest all or part of their retainers
and fees in PG&E stock, thereby facilitating their increased stock ownership
over time.
For the reasons stated above, the Board of Directors recommends that
shareholders reject this proposal.
Approval of this shareholder proposal requires an affirmative vote of a
majority of the votes cast. Unless they are marked to the contrary, proxies
received will be voted AGAINST this proposal.
10
<PAGE>
- --------------------------------------------------------------------------------
Executive Compensation
Nominating and Compensation Committee Report on Compensation
PG&E is the nation's largest investor-owned gas and electric utility, serving
over 13 million people in Northern and Central California. In 1994, the
Company's assets totalled $27.8 billion and its earnings exceeded $1.0 billion.
PG&E delivers power to customers from a highly diversified electric generating
system, including hydroelectric, geothermal, wind, solar, and gas-fired
facilities, and from one of the most successful nuclear power plants in the
world. Through its affiliate U.S. Generating Company, PG&E has become a national
leader in the growing independent power production business, and currently is
exploring opportunities to expand internationally.
During the past five years, the Company has provided shareholders an
average annual return--the combination of dividends and stock price
appreciation--of 8.5 percent and, as shown in the graph on page 15, a cumulative
total shareholder return of 51 percent.
During 1994, the Company's total shareholder return, as well as that of the
Dow Jones Utilities Index, experienced a downturn. We believe that the downturn
reflects the overall decline in the price of utility stocks last year due to
rising interest rates and the focus of the financial community on increasing
competition in the electric utility business and the resulting industry
restructuring. While competition and industry restructuring put increasing
pressure on all electric utilities to cut costs, PG&E is committed to
maintaining a high level of safety and service. Meeting this challenge requires
exceptional people: men and women with skill, experience, vision, and
entrepreneurial spirit. It is these men and women, at every level in the
Company, who make the difference between superior performance and mediocrity,
and who create value for PG&E's shareholders and customers.
PG&E's compensation programs are designed to attract, retain, and motivate
these exceptional people. They reflect two fundamental principles which apply to
every officer of the Company:
1. PG&E's compensation and benefits programs are competitive with those of
other employers. PG&E competes for talent. Every company wants the most
qualified and competent employees. Attracting and retaining employees
who make the difference for shareholders, customers, and the Company
require that PG&E offer competitive compensation and benefits.
2. Part of every officer's compensation is tied directly to the Company's
performance for shareholders. If shareholders do well, officer
compensation rises. If shareholders do not do well, officer
compensation declines. In other words, a portion of every officer's
compensation is "incentive compensation" which is at risk based on the
Company's financial performance. The greater the officer's management
responsibilities, the larger the share of his or her total compensation
is at risk.
For officers, the Company has established the following four objectives to
implement these principles:
1. Base salary and annual incentive compensation combined should be
approximately equal to the average compensation paid by other large
energy utilities.
2. Total compensation (base salary, annual incentives, long-term
incentives, and benefits) should be about 80 percent of the average
total compensation of general industry.
3. Approximately one-half of target total compensation is tied directly
to financial performance for shareholders.
4. Incentive compensation is tied to both the Company's short-term and
longer-term financial performance. This reflects PG&E's commitment to
achieve sustained growth in value for shareholders.
Compensation for the Chairman of the Board and for the Chief Executive
Officer is approved by the Board of Directors based on the recommendation of the
Nominating and Compensation Committee of the Board, which is composed entirely
of independent non-employee directors. In establishing the compensation of these
two officers for 1994, the Board of Directors approved the recommendation of
the Nominating and Compensation Committee without modification. Compensation for
all other officers is approved by the Nominating and Compensation Committee. The
Nominating and Compensation Committee retains an independent consultant, Hewitt
Associates, to help evaluate the Company's compensation policies and to
recommend compensation alternatives which are consistent with those policies.
Founded in 1940, Hewitt Associates is an international firm of consultants and
actuaries specializing in the design and administration of employee compensation
and benefit programs. Hewitt Associates has been engaged by the Nominating and
Compensation Committee since 1990.
Effective with the Company's 1994 tax year, the Omnibus Budget
Reconciliation Act of 1993 eliminated the deductibility of compensation over $1
million paid to the five highest paid executive officers. However, the new law
does not apply to performance-based compensation provided that the performance
targets are objective and have been approved by shareholders. A substantial
portion of the compensation paid to PG&E's officers is wholly dependent upon the
performance of the Company and is determined by comparing changes in shareholder
value
11
<PAGE>
against predetermined performance targets set by the Committee at the beginning
of each year. Two of the three performance-based plans which the Company
currently uses were previously approved by the shareholders in 1992 and these
plans are tied exclusively to total shareholder return from stock price
appreciation and dividends.
In light of the new law, the Nominating and Compensation Committee is
currently reviewing the Company's performance-based plans to determine whether
additional changes would be appropriate. Although proposed regulations
explaining the new law were issued in December 1993, it is likely that these
rules will be further changed to reflect suggestions made during the formal
comment period, which ended in February 1994. To date, final regulations still
have not been issued. As a result, it would be premature as of this date to take
action on the Company's performance-based plans in time to submit changes to the
shareholders for action at the 1995 annual meeting of shareholders. As soon as
final regulations are issued, the Committee will determine if changes are
appropriate and whether the plans will be submitted to the shareholders at the
1996 annual shareholders meeting. It also is anticipated that the effect, if
any, of the new tax law on the Company's compensation tax deductions for 1994
and 1995 will be de minimis.
Principal Components of Compensation
Base Salary. Executive salaries are reviewed annually by the Nominating and
Compensation Committee based on (a) the results achieved by each individual, (b)
the Company's expected financial performance, measured by earnings per share for
the Company overall as well as for the Company's three major types of operations
(utility, Diablo Canyon, and PG&E Enterprises), dividends, and stock price
appreciation, and (c) changes in the average salaries paid by other large energy
utilities. Currently, 12 utilities are used as comparators for the purpose of
setting base salary and annual incentives. These utilities, which are among the
largest utilities nationwide, were selected by the Committee because they are
comparable to PG&E in size and their approach to compensation emphasizes long-
term incentives; five of these utilities are included in the Dow Jones Utilities
Index. The target established by the Nominating and Compensation Committee for
1994 officer salaries was the average salary paid to all officers of the 12
utilities used as comparators. In setting the 1994 salary levels for the
Company's executive officers, the Committee's objective was that the overall
average of the salaries paid to all PG&E officers as a group (including the CEO)
should be approximately equal to the target level.
In 1994, Chairman of the Board Richard A. Clarke, who also served as Chief
Executive Officer through June 30, 1994, received a base salary of $680,000.
This salary level is slightly below the average salary of chief executive
officers of other major energy utilities and slightly below 80 percent of the
average salary of CEOs of major industrial companies. President and Chief
Executive Officer Stanley T. Skinner, who was elected CEO effective July 1,
1994, received a base salary of $550,000 in 1994, consisting of six months of
salary based on an annual rate of $500,000 for the period January 1 through June
30, 1994, and six months of salary based on an annual rate of $600,000 for the
period July 1 through December 31, 1994. Mr. Skinner's base salary as Chief
Executive Officer is below the average salary of chief executive officers of
other major energy utilities and below 80 percent of the average salary of CEOs
of major industrial companies. The overall average of the actual base salaries
received by all PG&E officers (including Mr. Clarke and Mr. Skinner) for 1994
was slightly below the average salary paid to all officers of the 12 comparator
utilities. Consistent with the Company's extensive efforts to reduce costs in
1995, Mr. Clarke and Mr. Skinner each elected to receive a five percent decrease
in base salary for 1995, and the 1995 base salaries for all officers and all
management and non-bargaining unit employees were frozen at 1994 levels.
Annual Incentive. The Performance Incentive Plan for 1994 was designed to
provide annual incentives to all officers and all management and non-bargaining
unit employees based on the achievement of financial and service-related
objectives. The performance measures for 1994 were (a) the Company's success in
meeting the corporate earnings-per-share (EPS) objective, and (b) the success of
each employee's organizational unit in meeting its individual objectives, such
as cost control, quality of customer service, and operational efficiency. Awards
for the Chairman of the Board, the President and Chief Executive Officer, and
the two Executive Vice Presidents for 1994 are based entirely on the corporate
EPS performance objective. Awards for other participating employees are designed
to increase or decrease based on each organizational unit's success in meeting
its performance objectives. These objectives are not necessarily weighted
equally; the actual weightings for a given organizational unit are determined by
the Chairman of the Board and the head of the organizational unit. Prior to
1994, the Performance Incentive Plan used performance objectives based on EPS
for utility operations, Diablo Canyon operations, and PG&E Enterprises
operations. In 1994, these performance objectives were replaced by a single
corporate EPS objective in order to further ensure that awards not be paid if
the Company's overall financial performance is unsatisfactory.
At the beginning of the year, target awards are set based on each
participating employee's job responsibilities and salary level. Final awards are
determined by the Nominating and Compensation Committee and may range from zero
to twice the target, depending on the extent to which the Company achieves its
financial and service-related objectives. The Committee has discretion to modify
or eliminate awards.
12
<PAGE>
After reviewing the results achieved by the Company in 1994, the Committee
authorized Performance Incentive Plan awards equal to 52 percent of each
participating employee's target award, with no further adjustment for individual
organizational performance. In reaching this decision, the Committee exercised
the discretion reserved to it under the Plan to offset a one-time accounting
charge associated with the workforce reduction program. Without this adjustment,
the Company would have fallen short of the corporate EPS objective required for
any 1994 payout under the Plan. However, earnings from ongoing operations,
before one-time accounting adjustments, were above budgeted levels and would
have resulted in a payout of more than 100 percent of target.
The Committee's action underscores the directors' support for the Company's
long-term strategy to posture itself for success in a more competitive
marketplace. This may necessitate actions in the short run which would adversely
impact incentive plan results, but which are in the longer-term best interests
of customers and shareholders. The workforce reduction program in 1994 was an
example of such managerial action and the Committee determined that the
interests of shareholders would not be best served by penalizing Plan
participants for implementing these programs.
Long-Term Incentives. The Stock Option Plan and the Performance Unit Plan
provide incentives based on the Company's financial performance over time.
The Stock Option Plan provides incentives based on the Company's ability to
sustain financial performance over a three-to-ten year period.
Under the Plan, officers, managers, and other key employees receive stock
options based on their responsibilities and position in the Company. These
options allow them to purchase a certain number of shares of PG&E stock at the
market price on the date of grant (typically the first business day of each
year), provided that they hold the options for at least two full years and
exercise them within ten years. The Company does not reprice or change the terms
of options once they have been granted.
At the Nominating and Compensation Committee's discretion, stock options
may be granted with tandem "stock appreciation rights" which have vesting
periods and exercise guidelines that are similar to the options. These rights
allow option-holders to surrender their options when they have vested and
receive a cash payment equal to the difference between the exercise price and
the current market price. No stock appreciation rights have been granted under
the Plan since 1991.
Stock options also may be granted with tandem "dividend equivalents" which
provide for credits to be made to a dividend equivalent account equal to the
current common stock dividend as applied to the recipient's unexercised options.
This reflects the importance of dividends as a component of total shareholder
return. Option-holders are entitled to receive the amounts accumulated in their
dividend equivalent account only when, and to the extent that, the underlying
options or stock appreciation rights are exercised. If a stock appreciation
right is exercised, the option-holder receives the associated dividend
equivalent only if the stock price has appreciated by at least 5 percent per
year from the date of grant or by at least 25 percent if the options have been
held for more than five years.
The size of the stock option grant for each executive officer in 1994 was
determined by the Nominating and Compensation Committee based on the Company's
objectives of paying total compensation (base salary, annual incentives, long-
term incentives, and benefits) at about 80 percent of the average total
compensation of general industry and of tying approximately one-half of target
total compensation directly to corporate performance for shareholders. In making
stock option grants, the Committee is sensitive to the amount of stock options
previously granted to the executive officers, but the size of each executive
officer's stock option grant is determined primarily based on the compensation
objectives described above.
The Performance Unit Plan provides incentives based on the Company's
ability to sustain superior total returns for shareholders (dividends plus stock
price appreciation) over a three-year period.
Under the Plan, officers receive performance units reflecting their level
of responsibility in the Company. One-third of the units vest each year. At the
end of each year, the number of vested performance units is increased or
decreased based on the Company's three-year total return for shareholders
(dividends plus stock price appreciation) as compared with that of the 49 other
largest energy utilities in the nation. Each officer receives an incentive
payment equal to the final number of vested units multiplied by the average
market price of the Company's common stock during the 30-day calendar period
prior to the end of the year. Prior to 1993, Performance Unit Plan results for a
given year were based on an equal weighting of the Company's total return
performance in each of the three years of the vesting period. In order to align
incentive payments more closely with current Company performance, the Plan was
revised in 1993 so that the third year's performance is weighted at 60%, the
second year's performance at 25%, and the first year's performance at 15%.
Each time the Company pays a cash dividend on common stock, a recipient of
a performance unit receives a dividend equivalent payment in an amount equal to
the cash dividend per share as applied to the number of units held by the
recipient.
During the three years ended December 31, 1994, 1993, and 1992, the
Company's total return for shareholders ranked 45, 24, and 33, respectively,
among the 50 largest energy utilities in the nation. This performance resulted
in Performance Unit Plan payouts to officers for 1994 which were 22 percent of
target payouts. Officers also were granted units under the Performance Unit Plan
in 1994.
13
<PAGE>
Benefits. The Retirement Plan provides a lifetime annuity to all vested
employees, based on their salary level and years of service. The Savings Fund
Plan provides an opportunity for all employees to supplement their retirement
income through employee and Company contributions. The Flexible Benefits Plan
allows all employees not covered by collective bargaining agreements to choose
among a variety of benefit options, including medical and dental coverage and
life insurance.
Summary
We, the members of the Nominating and Compensation Committee of the Board of
Directors, believe that the Company's compensation programs are successful in
attracting and retaining qualified employees and in tying compensation directly
to performance for shareholders and service to customers. We will continue to
monitor closely the effectiveness and appropriateness of each of the components
of compensation to reflect changes in the Company's business environment.
March 2, 1995
Nominating and Compensation Committee
Leslie L. Luttgens, Chairman
William F. Miller
John B. M. Place
Samuel T. Reeves
John C. Sawhill
14
<PAGE>
Comparison of Five-Year Cumulative Total Shareholder Return(1)
[This graph compares the Company's cumulative total return to shareholders
(equal to dividends plus stock price appreciation) during the past five years
with that of the Standard & Poor's 500 Stock Index and the Dow Jones
Utilities Index.]
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG PACIFIC GAS AND ELECTRIC COMPANY, S&P 500 INDEX
AND DOW JONES UTILITIES INDEX
<CAPTION>
Measurement period Pacific S&P 500 Dow Jones
(Fiscal Year Covered) Gas & Elec. Index Utilities Index
- --------------------- ----------- -------- ---------------
<S> <C> <C> <C>
Measurement PT -
12/29/89 $ 100 $ 100 $ 100
1990 $ 122 $ 97 $ 95
1991 $ 168 $ 126 $ 110
1992 $ 181 $ 136 $ 114
1993 $ 202 $ 150 $ 126
1994 $ 151 $ 152 $ 106
</TABLE>
(1) Assumes $100 invested on December 29, 1989, in Pacific Gas and Electric
Company common stock, the Standard & Poor's 500 Stock Index, and the Dow
Jones Utilities Index, and assumes quarterly reinvestment of dividends. The
total shareholder returns shown are not necessarily Indicative of future
returns.
15
<PAGE>
Summary Compensation Table
[This table summarizes the principal components of compensation of the
Company's five highest paid executive officers.]
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------- ---------------------------
Awards Payouts
(A) (B) (C) (D) (E) (F) (G) (H)
Securities
Other Annual Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Options/SARs Payouts Compensation
Position Year ($) ($)(1) ($)(2) (# of Shares) ($)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C>
Richard A. Clarke, 1994 $680,000 $165,620 $45,266 25,000 $ 54,056 $43,920
Chairman of the Board(5) 1993 640,000 143,070 40,950 25,000 370,488 42,238
1992 640,000 303,000 43,678 25,000 652,000 42,561
Stanley T. Skinner, 1994 $550,000 $134,173 $26,193 15,000 $ 33,785 $56,860
President and Chief 1993 475,000 88,760 20,678 15,000 203,768 37,757
Executive Officer(6) 1992 475,000 188,100 31,822 15,000 358,600 42,108
James D. Shiffer, 1994 $310,000 $ 61,776 $22,421 10,000 $ 21,622 $33,130
Executive Vice President 1993 265,000 53,340 24,282 10,000 135,858 33,357
1992 265,000 112,800 22,895 10,000 217,377 30,088
Robert D. Glynn, Jr., 1994 $244,000 $ 50,817 $18,235 7,500 $ 17,120 $13,960
Executive Vice President 1993 198,000 38,790 19,472 7,500 98,772 11,389
1992 190,000 63,700 55,643 7,500 141,288 10,890
Gregory M. Rueger, 1994 $240,500 $ 39,858 $16,898 7,500 $ 16,217 $11,596
Senior Vice President and 1993 233,000 149,100 19,227 7,500 111,146 11,242
General Manager, 1992 225,000 146,300 22,146 7,500 195,600 10,955
Nuclear Power Generation
Business Unit
</TABLE>
(1) Represents payments received or deferred in 1995, 1994, and 1993 for
achievement of corporate and organizational objectives in 1994, 1993, and
1992, respectively, under the Performance Incentive Plan.
(2) Amounts reported consist of (i) officer benefit allowances, (ii) payments of
related taxes, and (iii) dividend equivalent payments on performance units
under the Performance Unit Plan.
(3) Represents payments received or deferred in 1995, 1994, and 1993 for
achievement of corporate performance objectives for the period 1990 through
1994 under the Performance Unit Plan.
(4) Amounts reported for 1994 consist of: (i) Company matching contributions to
the Savings Fund Plan (Mr. Clarke $6,750, Mr. Skinner $6,750, Mr. Shiffer
$6,750, Mr. Glynn $6,750, and Mr. Rueger $6,750); (ii) Company-paid premiums
on indemnity policies to secure the payment of benefits under the
Supplemental Executive Retirement Plan and the Deferred Compensation Plan
(Mr. Clarke $13,320, Mr. Skinner $5,370, Mr. Shiffer $1,020, Mr. Glynn
$2,340, and Mr. Rueger $750); (iii) payments received in lieu of vacation
(Mr. Skinner $26,534 and Mr. Shiffer $18,459); (iv) amounts received or
deferred under the Savings Fund Plan excess benefit arrangement (Mr. Clarke
$23,850, Mr. Skinner $18,000, Mr. Shiffer $6,900, Mr. Glynn $4,230, and Mr.
Rueger $4,073); and (v) that portion of interest accrued on deferred
compensation account balances in 1994 above 120% of the then applicable
federal rate (Mr. Clarke $0, Mr. Skinner $205, Mr. Shiffer $2, Mr. Glynn
$640, and Mr. Rueger $23).
(5) Mr. Clarke also served as Chief Executive Officer of the Company from
January 1, 1994, through June 30, 1994.
(6) Mr. Skinner served as President and Chief Operating Officer of the Company
from January 1, 1994, through June 30, 1994, and has served as President and
Chief Executive Officer since July 1, 1994.
16
<PAGE>
Option/SAR Grants in 1994
[This table summarizes the distribution and the terms and conditions of stock
options granted to the five highest paid executive officers in the past
year.]
<TABLE>
<CAPTION>
Grant
Individual Grants Date Value
- ---------------------------------------------------------------------------------------------------------------- ------------
(A) (B) (C) (D) (E) (F)
% of Total
Number of Securities Options/SARs Exercise or Grant Date
Underlying Options/SARs Granted to Base Price Expiration Present
Name Granted (#)(1) Employees in 1994 ($/Sh)(2) Date(3) Value ($)(4)
<S> <C> <C> <C> <C> <C>
Richard A. Clarke 25,000 4.19% $34.25 01-04-2004 $290,000
Stanley T. Skinner 15,000 2.51% $34.25 01-04-2004 174,000
James D. Shiffer 10,000 1.68% $34.25 01-04-2004 116,000
Robert D. Glynn, Jr. 7,500 1.26% $34.25 01-04-2004 87,000
Gregory M. Rueger 7,500 1.26% $34.25 01-04-2004 87,000
</TABLE>
(1) All options granted to executive officers in 1994 are exercisable as
follows: one-third of the options may be exercised on or after the second
anniversary of the date of grant, two-thirds on or after the third
anniversary, and 100 percent on or after the fourth anniversary. The options
were accompanied by tandem dividend equivalents which provide for credits to
be made to the officer's dividend equivalent account in the amount of the
current common stock dividend as applied to the officer's unexercised
options. Funds in the account are paid out only when, and to the extent
that, the underlying options are exercised. At the time of exercise, the
exercise price may be paid in cash or shares of PG&E common stock owned by
the optionee for at least one year, or "cashless exercise" procedures may be
used.
(2) The exercise price is equal to the closing price of the Company's common
stock on January 3, 1994, the date of grant.
(3) All options granted to executive officers in 1994 expire 10 years and one
day from the date of grant, subject to earlier expiration in the event of
the officer's termination of employment with the Company.
(4) Estimated present values include dividend equivalents and are based on the
Black-Scholes Model, a mathematical formula used to value options traded on
stock exchanges. The Black-Scholes Model considers a number of factors,
including the expected volatility and dividend rate of the stock, interest
rates, and time of exercise of the option. The following assumptions were
used in applying the Black-Scholes Model to the 1994 option grants shown in
the table above: volatility of 13.52%, risk-free rate of return of 4.71%,
dividend yield of $1.96, and an exercise date five years after the date of
grant. The ultimate value of the options will depend on the future market
price of the Company's stock, which cannot be forecast with reasonable
accuracy. That value will depend on the future success achieved by employees
for the benefit of all shareholders.
Aggregated Option/SAR Exercises in 1994 and Year-End Option/SAR Values
[This table summarizes exercises of stock options and tandem stock
appreciation rights (granted in prior years) by the five highest paid
executive officers in the past year, as well as the number and value of all
unexercised options held by the named executive officers at the end of 1994.]
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
Number of Securities Value of Unexercised
Shares Acquired Underlying Unexercised In-the-Money
on Exercise Value Realized Options/SARs at Options/SARs at
Name (#)(1) ($)(2) End of 1994 (#) End of 1994 ($)(3)
(Exercisable/ (Exercisable/
Unexercisable) Unexercisable)
<S> <C> <C> <C> <C>
Richard A. Clarke 0 $ 0 71,534/74,999 $159,389/$0
Stanley T. Skinner 0 0 26,333/45,000 46,749/ 0
James D. Shiffer 0 0 10,000/29,166 4,373/ 0
Robert D. Glynn, Jr. 0 0 5,166/21,500 3,061/ 0
Gregory M. Rueger 0 0 13,833/22,500 22,289/ 0
</TABLE>
(1) Represents the number of shares for which the named executive officers
exercised options and tandem SARs payable in cash.
(2) Excludes amounts received under tandem dividend equivalents.
(3) Based on a fair market value of $24.375, which was the closing price of
the Company's common stock on December 30, 1994.
17
<PAGE>
Long-Term Incentive Plan--Awards in 1994
[This table summarizes the long-term incentive awards made to the five
highest paid executive officers in the past year.]
<TABLE>
<CAPTION>
Estimated Future Payouts Under
Awards Non-Stock Price-Based Plans
----------------------------------------------- ----------------------------------------------
(A) (B) (C) (D) (E) (F)
Performance or
Other Period
Number of Shares, Until Maturation Threshold Target Maximum
Name Units, or Other Rights(1) or Payout ($ or #)(2) ($ or #)(2) ($ or #)(2)
<S> <C> <C> <C> <C> <C>
Richard A. Clarke 10,000 3 years 0 units 10,000 units 20,000 units
Stanley T. Skinner 7,750 3 years 0 units 7,750 units 15,500 units
James D. Shiffer 4,000 3 years 0 units 4,000 units 8,000 units
Robert D. Glynn, Jr. 3,500 3 years 0 units 3,500 units 7,000 units
Gregory M. Rueger 3,000 3 years 0 units 3,000 units 6,000 units
</TABLE>
(1) Represents performance units granted under the Performance Unit Plan. The
units vest one-third in each of the three years following the grant year,
and are earned over the vesting period based on the Company's three-year
total annual shareholder return (dividends plus stock price appreciation) as
compared with that achieved by the 49 other largest domestic energy
utilities. This performance target may be adjusted during the vesting
period, at the sole discretion of the Nominating and Compensation Committee,
to reflect extraordinary events beyond management's control. In determining
the Company's total annual shareholder return relative to the 49 other
utilities, third-year performance is weighted at 60%, second-year
performance at 25%, and first-year performance at 15%. Each time the Company
pays a cash dividend on common stock, the recipient of a performance unit
receives a dividend equivalent payment equal to the common stock dividend as
applied to the number of units held by the recipient.
(2) Payments are determined by multiplying the number of units earned in a given
year by the average market price of the Company's common stock for the last
30-day calendar period of the year.
Retirement Benefits
The Company provides retirement benefits to the executive officers named in the
Summary Compensation Table on page 16. The benefit formula is 1.6 percent of the
average of the three highest combined salary and annual incentive awards during
the last ten years of service multiplied by years of credited service. As of
December 31, 1994, the estimated annual retirement benefits for the five most
highly compensated executive officers, assuming credited service to age 65, are
as follows: Mr. Clarke, $480,783; Mr. Skinner, $385,761; Mr. Shiffer, $261,690;
Mr. Glynn, $105,591; and Mr. Rueger, $251,601. The amounts shown are single life
annuity benefits and would not be subject to any Social Security offsets.
18
<PAGE>
- --------------------------------------------------------------------------------
Other Information
Principal Shareholders
The only person or group known by the Company to be the beneficial owner of more
than 5 percent of any class of the Company's stock is shown below:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership(1) of Class
<S> <C> <C> <C>
Common Stock State Street Bank and 49,915,858 11.56
Trust Company(2)
225 Franklin Street
Boston, MA 02110
</TABLE>
(1) This information is based on beneficial ownership as of December 31, 1994.
(2) The information relating to the beneficial ownership of State Street Bank
and Trust Company is based on a Schedule 13G, dated February 10, 1995, filed
with the Securities and Exchange Commission. 46,416,948 shares are held by
the bank in its capacity as Trustee of the Company's Savings Fund Plan for
its employees. The Trustee may not vote these shares in the absence of
voting instructions from the Plan participants. The bank also holds
3,498,910 shares of the Company's common stock as trustee of various
collective investment funds and trusts. The bank has sole voting power with
respect to 3,098,635 of these shares, shared voting power with respect to
4,162 of these shares, sole investment power with respect to 3,491,613 of
these shares, and shared investment power with respect to 19,238 of these
shares.
19
<PAGE>
Proposals by Shareholders - 1996
Any proposal by a shareholder to be submitted for inclusion in proxy soliciting
material for the 1996 annual shareholders meeting must be received by the
Corporate Secretary of the Company after April 19, 1995, but no later than
November 3, 1995.
Annual Report
The Company's annual report for 1994, including financial statements was mailed
to shareholders on or about March 2, 1995.
Method and Cost of Soliciting Proxies
The Company intends to solicit proxies principally by mail. Proxies also may be
solicited by personal contact, telephone, or other means by officers and other
employees of the Company. The Company has retained D.F. King & Co., Inc. to
assist in the solicitation of proxies at an estimated fee of $11,000 plus
reimbursement of reasonable expenses. In addition, banks, brokers, and other
fiduciaries and nominees will be reimbursed for the reasonable expenses of
forwarding proxy materials to beneficial owners of the Company's stock. The
entire cost of soliciting proxies will be paid by the Company.
The Company also has retained Corporate Election Services, Inc. to assist
in the tabulation of proxies and to act as the inspector of elections at the
annual shareholders meeting.
Section 16(a) Compliance
In accordance with Section 16(a) of the Securities Exchange Act of 1934 and
Securities and Exchange Commission ("SEC") regulations, the Company's directors,
certain officers, and greater than 10 percent shareholders are required to file
reports of ownership and changes in ownership with the SEC and the New York
Stock Exchange and to furnish the Company with copies of all such reports they
file.
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that during
1994 all filing requirements applicable to its directors, officers, and 10
percent shareholders were satisfied.
Other Matters
Management does not know of any matter to be acted upon at the meeting other
than the matters above described. However, if any other matter should properly
come before the meeting, the proxyholders named in the enclosed proxy will vote
the shares for which they hold proxies in their discretion.
By Order of the Board of Directors,
/s/ Leslie H., Everett
Leslie H. Everett
Corporate Secretary
Please sign, date, and return your proxy as soon as possible.
20
<PAGE>
[LOGO OF PG&E APPEARS HERE]
[RECYCLING
LOGO
APPEARS
HERE] Printed with soybean ink on recycled/recyclable paper
<PAGE>
The undersigned hereby appoints Richard A. Clarke, Stanley T. Skinner, and
Leslie H. Everett, or any of them, proxies of the undersigned, with full power
of substitution, to vote the stock of the undersigned at the annual meeting of
shareholders of Pacific Gas and Electric Company, to be held at 1111 California
Street, San Francisco, California, on Wednesday, April 19, 1995, at 10:00 a.m.,
and at any adjournment thereof, as instructed on the reverse hereof and upon all
motions and resolutions which may properly be presented for consideration at
said meeting. This proxy is solicited by the Board of Directors of Pacific Gas
and Electric Company.
PG&E
Please mark, sign, date, and return this proxy
promptly to Corporate Election Services, P.O.
Box 3200, Pittsburgh, PA 15230-9544.
________________________________ ________, 1995
________________________________ ________, 1995
SHAREHOLDER'S SIGNATURE DATE
If you are signing for the shareholder, please
sign the shareholder's name and your name, and
state the capacity in which you act.
Shareholder's Proxy For Annual Meeting, April 19, 1995
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Please detach here and return this proxy to Corporate Election Services in
the enclosed reply envelope. *
[LOGO OF PG&E APPEARS HERE]
Pacific Gas and Electric Company
Annual Meeting
To be held at:
Masonic Auditorium
1111 California Street
San Francisco, CA 94108
April 19, 1995, at 10:00 a.m.
* Please use the attached ticket to attend the Annual Meeting. You also may
register at the meeting. *
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PG&E 1995 Annual Meeting Ticket
For the Annual Shareholders Meeting at
-----------------------------
10:00 a.m., on April 19, 1995
-----------------------------
to be held at the Masonic Auditorium, 1111 California Street, San Francisco.
(Doors open at 9:00 a.m. You may bypass the registration area and present this
ticket at the entrance to the auditorium.)
Note: Cameras, tape recorders, etc., will not be allowed in the auditorium
during the meeting, other than for Company purposes. A check room will be
provided. For your protection, all briefcases, purses, packages, etc., will be
subject to an inspection as you enter the meeting. We regret any inconvenience
this may cause you. (See reverse side for additional information.)
<PAGE>
Your proxy is solicited by the Board of Directors. Unless contrary instructions
are given below, the above designated proxies will vote the shares for which
they hold proxies in accordance with the recommendations of the Board of
Directors.
A. ELECTION OF DIRECTORS -- The Board of Directors recommends a vote FOR the
nominees named below.
- --------------------------------------------------------------------------------
FOR all nominees listed below. (Except WITHHOLD AUTHORITY to vote
as indicated to the contrary below) [_] for all nominees. [_]
Richard A. Clarke; Harry M. Conger; William S. Davila; David M. Lawrence,
MD; Richard B. Madden; George A. Maneatis; Mary S. Metz; William F. Miller;
Rebecca Q. Morgan; John B. M. Place; Samuel T. Reeves; Carl E. Reichardt;
John C. Sawhill; Alan Seelenfreund; Stanley T. Skinner; Barry Lawson
Williams.
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
B. The Board of Directors recommends a vote FOR the following:
- ----------------------------------------------------------------
The proposal to ratify the selection of Arthur Andersen & Co. as the
Company's independent public accountants.
FOR AGAINST ABSTAIN
[_] [_] [_]
C. The Board of Directors recommends a vote AGAINST the following:
- -------------------------------------------------------------------
Shareholder Proposal: Compensation of Directors
FOR AGAINST ABSTAIN
[_] [_] [_]
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Detach here and return the top section to Corporate Election Services in the
enclosed reply envelope. *
PG&E has reserved all available space at the Memorial Temple Garage at 1101
California Street (adjacent to the Masonic Auditorium) to provide complimentary
parking for our shareholders. However, capacity is limited. Please show your
annual meeting ticket to the garage attendant as you enter the garage.
Real-time captioning services and headsets will be available at the meeting for
shareholders with impaired hearing. Please contact an usher at the meeting if
you wish to be seated in the real-time captioning section or to use a headset.
<PAGE>
PG&E 1995 ANNUAL MEETING
SAVINGS FUND PLAN FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
VOTING INSTRUCTIONS TO THE TRUSTEE
PLEASE SIGN, DATE, AND RETURN THIS FORM PROMPTLY.
(Mark your voting instructions on the
reverse side.)
________________________________ ________, 1995
SIGNATURE DATE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Please detach here and return the top section to the Trustee in the enclosed
-------
reply envelope. *
TO ALL MEMBERS OF THE SAVINGS FUND PLAN:
As a member, you are entitled to direct the Trustee how to vote the shares
of PG&E common stock allocated to your account. This form is provided for your
use in giving the Trustee of the Plan confidential instructions to vote your
stock held in the Plan at the Company's annual meeting of shareholders on April
19, 1995. You have one vote for each share of stock credited to your account as
of February 21, 1995. Enclosed is a proxy statement which sets forth the
business to be transacted at the meeting. Please indicate your instructions on
this form and sign, date, and return the top section to State Street Bank and
Trust Company, Trustee of the Plan, in the envelope provided. If you sign but do
not otherwise complete the form, the Trustee will vote all shares in accordance
with the recommendations of the Board of Directors. Stock in your Plan account
for which the Trustee has not received voting directions will not be voted by
the Trustee. Members who also own stock outside the Plan will receive a separate
proxy form for those shares. Those proxies should be returned directly to the
Corporate Election Services for tabulation.
To ensure that your shares are represented at the meeting, it is important
that your voting instructions be received by the Trustee on or before April 18,
1995.
State Street Bank and Trust Company, as Trustee
of the Savings Fund Plan for employees of
Pacific Gas and Electric Company
Box 1997 G.P.O.
New York, N.Y. 10117-0024
RETAIN THE BOTTOM SECTION FOR YOUR RECORDS
<PAGE>
TO STATE STREET BANK AND TRUST COMPANY, TRUSTEE
Pursuant to the provisions of the Savings Fund Plan for employees of Pacific
Gas and Electric Company, you are instructed as indicated below with respect
to voting the shares of stock credited to my account in the Plan as of
February 21, 1995, at the annual meeting of shareholders of the Company to be
held on April 19, 1995, and at any adjournment thereof.
VOTING INSTRUCTIONS TO THE TRUSTEE -- 1995
A. ELECTION OF DIRECTORS -- The Board of Directors recommends a vote FOR the
nominees named below.
- --------------------------------------------------------------------------------
FOR all nominees listed below. (Except WITHHOLD AUTHORITY to vote
as indicated to the contrary below) [_] for all nominees. [_]
Richard A. Clarke; Harry M. Conger; William S. Davila; David M. Lawrence, MD;
Richard B. Madden; George A. Maneatis; Mary S. Metz; William F. Miller;
Rebecca Q. Morgan; John B. M. Place; Samuel T. Reeves; Carl E. Reichardt;
John C. Sawhill; Alan Seelenfreund; Stanley T. Skinner; Barry Lawson
Williams.
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
B. The Board of Directors recommends a vote FOR the following:
- ---------------------------------------------------------------
The proposal to ratify the selection of Arthur Andersen & Co. as the
Company's independent public accountants
FOR AGAINST ABSTAIN
[_] [_] [_]
C. The Board of Directors recommends a vote AGAINST the following:
- ------------------------------------------------------------------
Shareholder Proposal: Compensation of Directors
FOR AGAINST ABSTAIN
[_] [_] [_]
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Detach here and return the top section to the Trustee in the enclosed reply
-------
envelope. *
