SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: January 18, 1996
PACIFIC GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
California 1-2348 94-0742640
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification Number)
77 Beale Street, P.O.Box 770000, San Francisco, California 94177
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(415) 973-700
Item 5. Other Events
A. Performance Incentive Plan - Year-to-Date Financial Results
The Performance Incentive Plan (Plan) is an annual incentive
compensation plan applicable to all regular, nonbargaining unit
employees of Pacific Gas and Electric Company (PG&E) and designated
subsidiaries. The Plan provides for awards based on (1) PG&E's
success in meeting overall corporate financial performance objectives,
based on combined earnings per common share for PG&E's utility
operations (including Pacific Gas Transmission Company (PGT), a wholly
owned subsidiary of PG&E), Diablo Canyon Nuclear Power Plant (Diablo
Canyon) operations and PG&E's nonregulated operations, conducted
through PG&E Enterprises (Enterprises), a wholly owned subsidiary of
PG&E; and (2) the performance of the employee's organizational unit in
meeting its specific unit, team or individual objectives. The
organizational objectives may include such measures as cost control,
quality and reliability of service to customers, public and employee
safety, 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 for officers. The Committee has
the discretion to modify or eliminate awards for officers. The final
determination of non-officer awards is made by the chief executive
officer, who also has the discretion to modify or eliminate non-
officer awards.
The performance measurement target for the 1995 Plan year was
disclosed in a Report on Form 8-K dated January 4, 1995, and was based
upon the corporate capital and operating budgets prepared for 1995.
The 1995 budgeted earnings per common share for the utility were
derived from, among other things, (i) budgeted revenues as authorized
by the California Public Utilities Commission (CPUC) for 1995 which
included the continuation of PG&E's economic stimulus rate and
electric rate freeze, (ii) PG&E's capital budget for 1995 of
approximately $1.3 billion for utility operations and (iii) budgeted
operating expenses for utility operations that were approximately 9%
less than budgeted for 1994. The budgeted operating expenses for
utility operations assumed Customer Energy Efficiency (CEE) and
electric research development and demonstration (RD&D) expenditures
that were $150 million less than previously authorized for 1995,
consistent with the CPUC decisions issued in December 1994 granting
PG&E's request for reduced CEE and RD&D expenditures in 1995. The 1995
utility budgeted earnings per common share assumed contribution to
earnings of $.10 per share from PGT.
The 1995 budgeted earnings per common share for Diablo Canyon were
derived from, among other things, (i) a reduction in the price of
power produced by Diablo Canyon from 11.89 cents per kilowatt-hour
(kWh) in 1994 to 11.0 cents per kWh in 1995, consistent with the
agreement to modify the Diablo Canyon rate case settlement (Diablo
Settlement), which was approved by the CPUC in May 1995, (ii) an
operating capacity factor (excluding refueling outages) of 91.0%,
(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 were approximately 20% less than
budgeted for 1994.
The 1995 budgeted earnings per common share for Enterprises assumed
net income of $9 million from U.S. Generating Company and PG&E
Properties, offset by budgeted net losses of $19 million attributable
primarily to DALEN Resources Corp. (DALEN) and two new business areas,
international power generation and new products and services in U.S.
utility markets. As noted in footnote (4) below, in June 1995
Enterprises completed the sale to a third party of all of the capital
stock of DALEN.
All of the 1995 budgeted earnings per common share amounts assumed 430
million shares of common stock outstanding. The budgeted earnings per
common share amounts assumed no significant gain or loss on the sale
of assets.
On a quarterly basis, PG&E has disclosed year-to-date financial
performance relating to the three types of operations: utility, Diablo
Canyon and Enterprises. For the twelve months ended December 31,
1995, selected financial information is shown below:
<TABLE>
(in thousands of dollars, except per share amounts)
Twelve Months Ended December 31, 1995
=================================================================
<CAPTION>
Actual <F1> Budget <F2>
(unaudited)
<S> <C> <C>
Operating Revenues:
Utility $ 7,600,946 $ 8,212,242
Diablo Canyon 1,844,633 <F3> 1,833,777
PG&E Enterprises 176,186 301,784
----------- ----------
Total Consolidated $ 9,621,765 $10,347,803
=========== ==========
Net Income (Loss):
Utility $ 819,053 $ 809,590
Diablo Canyon 507,107 <F3> 491,313
PG&E Enterprises 12,725 <F4> (9,720)
----------- ----------
Total Consolidated $ 1,338,885 $1,291,183
=========== ==========
Earnings (Loss) Per
Common Share:
Utility $ 1.80 $ 1.77
Diablo Canyon 1.16 (3) 1.11
PG&E Enterprises 0.03 (4) (0.02)
----------- ----------
Total Consolidated $ 2.99 $ 2.86
=========== ===========
<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 year. All material
adjustments are of a normal recurring nature, except as noted below.
This information should be read in conjunction with the 1994
Consolidated Financial Statements and Notes to Consolidated Financial
Statements incorporated by reference in PG&E'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 September 30, 1995, June 30, 1995 and
March 31, 1995.
<F2>
(2) The budgeted corporate earnings per common share was a
performance target and not a forecast of actual performance that was
expected to be realized by PG&E. The budgeted amount does not reflect
the resolution of various regulatory uncertainties or other
contingencies, including those disclosed in the Notes to PG&E's
Consolidated Financial Statements.
<F3>
(3) Diablo Canyon operated at an overall capacity factor of
86.0% compared to a budgeted overall capacity factor of 85.4% for
the twelve months ended December 31, 1995. Actual operating expenses
for 1995 were lower than budgeted.
<F4>
(4) In June 1995, Enterprises completed the sale of DALEN, resulting
in a gain of $.03 per common share in the twelve-month period ended
December 31, 1995.
</FN>
</TABLE>
B. Performance Incentive Plan - 1996 Target
The following information constitutes a "forward looking statement"
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and is intended to
be subject to the safe harbor protection created by those sections.
The performance measurement target for the 1996 Plan year is based on
the corporate operating and capital budgets prepared for 1996 which
result in a budgeted corporate earnings per common share of $2.77.
The following table sets forth the budgeted earnings per common share
for the three types of operations which comprise the overall budgeted
corporate earnings per common share as approved by the Board of
Directors in December 1995:
Budgeted 1996 Earnings Per Common Share
Utility 1.60
Diablo Canyon 1.20
Diversified Operations* (0.03)
-------
Total $ 2.77
=======
__________
* Diversified operations represent PG&E's non-regulated operations,
principally Enterprises.
The 1996 budgeted earnings per common share for the utility were
derived from, among other things, (i) budgeted revenues as authorized
by the CPUC for 1996 which include the results of the 1996 General
Rate Case (GRC), (ii) PG&E's capital budget for 1996 of approximately
$1.3 billion for utility operations and (iii) budgeted utility
operating expenses that are approximately $250 million greater than
the amount adopted by the CPUC for recovery in the 1996 GRC. The
higher expense level is primarily attributable to several projects
related to transmission and distribution system reliability, and
improved customer service and public information systems. The utility
budgeted earnings per common share assumes contribution to earnings of
$.11 per common share from PGT.
The budgeted earnings per common share for Diablo Canyon were derived
from, among other things, (i) a reduction in the price of power
produced by Diablo Canyon from 11.0 cents per kWh in 1995 to 10.5
cents per kWh in 1996, consistent with the agreement to modify the
Diablo Settlement which was approved by the CPUC in 1995, (ii) an
operating capacity factor (excluding refueling outages) of 94.0%,
(iii) an overall annual capacity factor of 88.8% and (iv) one 40-day
refueling outage at Unit 2 during 1996. Budgeted operating expenses
for 1996 relating to Diablo Canyon are approximately equal to those
budgeted for 1995. Budgeted capital expenditures for Diablo Canyon
are approximately $35 million for 1996, which is approximately 10%
more than actual capital expenditures in 1995.
The budgeted earnings per common share for Diversified Operations
assumes net income of $15 million from U.S. Generating Company, which
is offset by budgeted net losses of $28 million attributable primarily
to business activities involving international power generation and
distribution, and energy products and services in U.S. utility
markets. Actual results may vary significantly depending on the
availability of attractive investment or acquisition opportunities.
All of the 1996 budgeted earnings per common share amounts assume that
the average number of shares of common stock outstanding during 1996
is 406 million. The budgeted earnings per common share amounts assume
no significant gain or loss on the sale of assets.
The budgeted corporate earnings per common share is a performance
target and is not a forecast of actual performance that will be
realized by PG&E. Actual performance during the year may differ
materially from the budgeted amount. The budgeted amount does not
reflect the resolution of various regulatory uncertainties or other
contingencies, including those disclosed in the Notes to PG&E's
Consolidated Financial Statements, which could materially affect
PG&E's performance during the year. Among others these uncertainties
include:
- - The outcome of the California electric industry restructuring
and the transition to a competitive environment, including the
extent to which PG&E will be able to recover its costs of
uneconomic assets and obligations (costs which are above
market and could not be recovered under market-based pricing)
through rates. The restructuring may adversely impact PG&E's
returns on its investments in utility generating assets and
its ability to recover certain other costs, including
qualifying facilities (QF) power purchase obligations and
generation-related regulatory assets. In the event that
recovery of these costs and investments through a competitive
transition charge (CTC) or otherwise, becomes unlikely, PG&E
would write-off applicable portions of its electric generation
assets and record a charge to earnings related to the lack of
recovery of such costs. The net book value of PG&E's electric
generation assets, excluding Diablo Canyon, was approximately
$2.7 billion at September 30, 1995. The net book value of
PG&E's investment in Diablo Canyon was approximately $4.9
billion at September 30, 1995. The electric generation-related
regulatory assets, excluding balancing accounts of $467
million as of September 30, 1995, which are expected to be
recovered in the near term, were estimated to be approximately
$1.5 billion at September 30, 1995.
- - Changes in accounting due to changes in the regulatory or
competitive environment, including a change in the method or
lives used to depreciate plant and the possible discontinued
application of Statement of Financial Accounting Standards
(SFAS) No. 71. If PG&E determines that some portion or all of
its future rates will no longer be based on cost-of-service,
PG&E will discontinue application of SFAS 71 for that portion
of its operations. If such discontinuance should occur, PG&E
would write off applicable regulatory assets to the extent
that cost recovery is not assured. Total regulatory assets
were approximately $3.4 billion at September 30, 1995.
- - The continued operation of Diablo Canyon at assumed operating
levels and under the rates and terms specified in the Diablo
Settlement. Under the prices for 1996, each Diablo Canyon
operating unit contributes approximately $2.7 million in
revenue per day.
- - The outcome of the Gas Accord negotiations and resolution of
existing regulatory issues. PG&E has proposed to settle
several outstanding gas regulatory issues that are currently
pending at the CPUC in separate proceedings. These issues
include PG&E's capacity commitments with Transwestern Pipeline
Company, the Interstate Transition Cost Surcharge proceeding
and the reasonableness proceeding for the Pipeline Expansion
Project. Negotiations on the Gas Accord began in October
1995. Any agreement reached by PG&E and other parties must be
approved by the CPUC before it may be implemented.
C. 1995 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, 1995 and 1994. PG&E reported earnings per
common share of $2.99 for the year ended December 31, 1995.
D. Common Stock Dividend
In January 1996, PG&E declared a quarterly common stock dividend of
$.49 per share, which corresponds to an annualized dividend of $1.96
per share.
PACIFIC GAS AND ELECTRIC COMPANY
BRUCE R. WORTHINGTON
By ________________________________
BRUCE R. WORTHINGTON
Senior Vice President and
General Counsel
Dated: January 18, 1996
<TABLE>
APPENDIX
PACIFIC GAS AND ELECTRIC COMPANY
CONDENSED STATEMENT OF CONSOLIDATED INCOME
(unaudited)
<CAPTION>
- --------------------------------------------------------------------------------------------------
Three months ended December 31, Twelve months ended December 31,
(in thousands, ------------------------------ -------------------------------
except per share amounts) 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric utility $1,662,429 $1,933,670 $ 7,386,307 $ 8,021,547
Gas utility 529,414 598,243 2,059,117 2,081,062
Diversified operations 35,381 87,571 176,341 247,621
---------- ---------- ----------- ----------
Total operating revenues 2,227,224 2,619,484 9,621,765 10,350,230
---------- ---------- ----------- ----------
OPERATING EXPENSES
Cost of electric energy and gas 650,432 774,658 2,607,558 3,341,840
Maintenance and other operating 568,322 657,576 1,937,723 1,964,735
Depreciation and decommissioning 334,889 355,860 1,360,118 1,397,470
Administrative and general 221,907 276,023 971,576 973,302
Workforce reduction costs (b) - 249,097 (18,195) 249,097
---------- ---------- ----------- -----------
Total operating expenses 1,775,550 2,313,214 6,858,780 7,926,444
---------- ---------- ----------- -----------
OPERATING INCOME 451,674 306,270 2,762,985 2,423,786
---------- ---------- ----------- -----------
OTHER INCOME AND (INCOME
DEDUCTIONS)
Interest income 22,009 43,911 72,524 79,643
Allowance for equity funds used
during construction 2,347 4,267 20,039 19,046
Other--net 32,649 29,479 58,564 37,996
---------- ---------- ----------- -----------
Total other income and
(income deductions) 57,005 77,657 151,127 136,685
---------- ---------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE 508,679 383,927 2,914,112 2,560,471
---------- ---------- ----------- -----------
INTEREST EXPENSE
Interest charges 171,551 181,394 690,581 729,207
Allowance for borrowed funds
used during construction (1,511) (1,545) (10,643) (12,953)
---------- ---------- ----------- -----------
Net interest expense 170,040 179,849 679,938 716,254
---------- ---------- ----------- -----------
PRETAX INCOME 338,639 204,078 2,234,174 1,844,217
---------- ---------- ----------- -----------
INCOME TAXES 111,554 100,578 895,289 836,767
---------- ---------- ----------- -----------
NET INCOME 227,085 103,500 1,338,885 1,007,450
Preferred dividend requirement and
redemption premium 25,399 14,289 70,288 57,603
---------- ---------- ----------- -----------
EARNINGS AVAILABLE FOR
COMMON STOCK $ 201,686 $ 89,211 $ 1,268,597 $ 949,847
========== ========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 416,655 430,622 423,692 429,846
EARNINGS PER COMMON SHARE $.48 $.21 $2.99 $2.21
DIVIDENDS DECLARED PER COMMON SHARE $.49 $.49 $1.96 $1.96
Selected financial information for each type of the Company's operations is as follows:
- --------------------------------------------------------------------------------------------------
Three months ended December 31, Twelve months ended December 31,
(in millions, ------------------------------ -------------------------------
except per share amounts) 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------
Operating revenues:
Utility $ 1,886 $ 2,091 $ 7,601 $ 8,232
Diablo Canyon (a) 306 440 1,845 1,870
Diversified operations 35 88 176 248
---------- ---------- ----------- ----------
Total $ 2,227 $ 2,619 $ 9,622 $ 10,350
========== ========== =========== ==========
Earnings per share:
Utility (b) $ .44 $ .03 $ 1.80 $ 1.15
Diablo Canyon (a) .03 .18 1.16 1.04
Diversified operations (c) .01 .00 .03 .02
---------- ---------- ----------- ----------
Total $ .48 $ .21 $ 2.99 $ 2.21
========== ========== =========== ==========
(a) Diablo Canyon earnings per share for the twelve-month period ended December 31, 1995, compared
with the same period in 1994, increased due to a higher plant capacity factor and lower operating
expenses. Both units of the nuclear power plant were refueled in 1994 compared with only one in 1995.
The Diablo Canyon plant capacity factors for the year ended December 31, 1995, and 1994, were 86% and
81%, respectively. Diablo Canyon operating revenues and earnings per share for the three-month period
ended December 31, 1995, compared with the same period in 1994, decreased due to a greater number of
scheduled refueling days and unscheduled outages in 1995. In addition, Diablo Canyon operating
revenues and earnings per share for the three-month and twelve-month periods ended December 31, 1995,
were impacted by a decline in the price per kilowatt-hour as provided in the modified pricing
provisions of the Diablo Canyon rate case settlement.
(b) 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.
Utility earnings for the twelve-month period ended December 31, 1994, included charges for gas matters
of approximately $135 million ($.19 per share).
(c) Diversified operations represent the Company's non-regulated operations, principally PG&E
Enterprises. Enterprises' earnings per share for the twelve-month period ended December 31, 1995, and
1994, were $.03 per share and $.01 per share, respectively.
</TABLE>
