SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report: January 16, 1997
Exact Name of
Commission Registrant State or other IRS Employer
File as specified Jurisdiction of Identification
Number in its charter Incorporation Number
- - ----------- -------------- --------------- --------------
1-12609 PG&E Corporation California 94-3234914
1-2348 Pacific Gas and California 94-0742640
Electric Company
77 Beale Street, P.O. Box 770000, San Francisco, California 94177
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code:(415) 973-7000
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). In 1996,
the Plan provided 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)),
Diablo Canyon Nuclear Power Plant (Diablo Canyon) operations and
PG&E's diversified operations, conducted principally through PG&E
Enterprises (Enterprises); and (2) the performance of the
employee's organizational unit in meeting its specific unit, team
or individual objectives.1/ 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. In 1996, awards for the
Chairman of the Board and Chief Executive Officer, the President
and Chief Operating Officer, the Executive Vice President and
certain other officers, were based entirely on PG&E's corporate
performance financial objectives.
Under the Plan, the Nominating and Compensation Committee of the
PG&E Board of Directors (Committee) makes the final determination
of awards for officers based upon achievement of the Plan
objectives. 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 1996 Plan year was
disclosed in a Current Report on Form 8-K/A dated January 18,
1996, and was based upon the corporate capital and operating
budgets prepared for 1996. The 1996 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
__________
1/ On January 1, 1997, PG&E Corporation became the holding
company for PG&E, PGT and Enterprises. For 1997 the corporate
financial objective used in making awards under the Plan will be
based on PG&E Corporation's earnings per common share, taking
into account PG&E utility operations (including Diablo Canyon
operations), and financial results of PG&E Corporation's other
subsidiaries, including PGT and Enterprises.
(CPUC) for 1996 which included 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 were 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 1996 utility budgeted
earnings per common share assumed contribution to earnings of
$.11 per share from PGT.
The 1996 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
kilowatt-hour (kWh) in 1995 to 10.5 cents per kWh in 1996,
consistent with the agreement to modify the Diablo Canyon rate
case settlement (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 were approximately equal to those budgeted for
1995. Budgeted capital expenditures for Diablo Canyon were
approximately $35 million for 1996, which is approximately 10%
more than actual capital expenditures in 1995.
The 1996 budgeted earnings per common share for diversified
operations assumed net income of $15 million from U.S. Generating
Company, 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.
All of the 1996 budgeted earnings per common share amounts
assumed 406 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 diversified operations. For the twelve months
ended December 31, 1996, selected financial information is shown
below:
(in thousands of dollars, except per share amounts)
Twelve Months Ended December 31, 1996
=================================================================
Actual (1) Budgeted
(2)
(unaudited)
Operating Revenues: $ 9,609,972 $ 9,550,743
Net Income (Loss):
Utility $ 291,680 (3) $ 670,186
Diablo Canyon 497,204 (4) 498,381
Diversified Operations (33,675) (5) (10,810)
----------- ----------
Total Consolidated $ 755,209 $1,157,757
=========== ==========
Earnings (Loss) Per
Common Share:
Utility $ 0.65 (3) $ 1.60
Diablo Canyon 1.18 (4) 1.20
Diversified Operations (0.08) (5) (0.03)
----------- ----------
Total Consolidated $ 1.75 $ 2.77
=========== ===========
(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 1995 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, 1996, June 30, 1996 and March 31, 1996.
(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.
(3) Utility earnings were adversely impacted by several one-time
charges including $182 million ($.26 per share) relating to the
proposed Gas Accord Settlement and contingencies related to
Transwestern gas transportation commitments, and $133 million
($.19 per share) for the settlement of litigation related to
groundwater contamination near the Hinkley Compressor Station.
In addition, utility maintenance and other operating expenses in
distribution and customer services were higher than budgeted by
approximately $90 million ($.12 per share).
(4) Diablo Canyon operated at an overall capacity factor of
88.1% compared to a budgeted overall capacity factor of 88.8% for
the twelve months ended December 31, 1996.
(5) Earnings reflect one-time charges of $59 million ($.09 per
share) related to downward adjustments in the market values of a
natural gas storage project and certain property.
B. 1996 Consolidated Earnings (unaudited)
Attached hereto as an appendix is a copy of the unaudited
Condensed Statement of Consolidated Income for PG&E Corporation
for the three months and year ended December 31, 1996 and 1995.
The Condensed Statement of Consolidated Income includes PG&E and
its wholly-owned and controlled subsidiaries and, therefore, also
represents what became PG&E Corporation on January 1, 1997, and
its subsidiaries. PG&E reported earnings per common share of
$1.75 for the year ended December 31, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned thereunto duly authorized.
PG&E CORPORATION
and
PACIFIC GAS AND ELECTRIC COMPANY
CHRISTOPHER P. JOHNS
By ________________________________
CHRISTOPHER P. JOHNS
Controller
Dated: January 16, 1997
<PAGE>
<TABLE>
PG&E CORPORATION*
CONDENSED STATEMENT OF CONSOLIDATED INCOME
(unaudited)
<CAPTION>
- - --------------------------------------------------------------------------------------------------
Three months ended December 31, Twelve months ended December 31,
(in thousands, ------------------------------ -------------------------------
except per share amounts) 1996 1995 1996 1995
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES 2,700,686 2,227,224 9,609,972 9,621,765
OPERATING EXPENSES
Cost of electric energy and gas 1,001,042 600,768 3,065,325 2,450,120
Maintenance and other operating 596,102 617,986 2,410,671 2,095,161
Depreciation and decommissioning 305,908 334,889 1,221,952 1,360,118
Administrative and general 288,664 221,907 1,016,439 953,381
---------- ---------- ----------- -----------
Total operating expenses 2,191,716 1,775,550 7,714,387 6,858,780
---------- ---------- ----------- -----------
OPERATING INCOME 508,970 451,674 1,895,585 2,762,985
---------- ---------- ----------- -----------
OTHER INCOME AND (INCOME
DEDUCTIONS)
Interest income 10,784 22,009 72,900 72,524
Allowance for equity funds used
during construction 4,630 2,347 13,941 20,039
Other--net (35,741) 32,649 (16,480) 58,564
---------- ---------- ----------- -----------
Total other income and
(income deductions) (20,327) 57,005 70,361 151,127
---------- ---------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE 488,643 508,679 1,965,946 2,914,112
---------- ---------- ----------- -----------
INTEREST EXPENSE
Interest charges 163,315 171,551 663,523 690,581
Allowance for borrowed funds
used during construction (2,510) (1,511) (7,780) (10,643)
---------- ---------- ----------- -----------
Net interest expense 160,805 170,040 655,743 679,938
---------- ---------- ----------- -----------
PRETAX INCOME 327,838 338,639 1,310,203 2,234,174
---------- ---------- ----------- -----------
INCOME TAXES 178,808 111,554 554,994 895,289
---------- ---------- ----------- -----------
NET INCOME 149,030 227,085 755,209 1,338,885
Preferred dividend requirement and
redemption premium 8,279 25,399 33,113 70,288
---------- ---------- ----------- -----------
EARNINGS AVAILABLE FOR
COMMON STOCK $ 140,751 $ 201,686 $ 722,096 $ 1,268,597
========== ========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 408,982 416,655 412,542 423,692
EARNINGS PER COMMON SHARE $.34 $.48 $1.75 $2.99
DIVIDENDS DECLARED PER COMMON SHARE $.30 $.49 $1.77 $1.96
Earnings per share 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) 1996 1995 1996 1995
- - --------------------------------------------------------------------------------------------------
Earnings per share:
Utility (a) $ .07 $ .44 $ .65 $ 1.80
Diablo Canyon (b) .37 .03 1.18 1.16
Diversified operations (c) (.10) .01 (.08) .03
---------- ---------- ----------- ----------
Total $ .34 $ .48 $ 1.75 $ 2.99
========== ========== =========== ==========
* The Condensed Statement Of Consolidated Income includes PG&E and its wholly-owned and controlled
subsidiaries and, therefore, also represents what became PG&E Corporation on January 1, 1997, and
its subsidiaries.
(a) Earnings per share decreased for the twelve-month period ending December 31, 1996, due, in part,
to charges of $182 million ($.26 per share) for contingencies related to gas transportation
commitments and an increase in litigation costs of $67 million ($.10 per share).
(b) Diablo Canyon earnings per share increased for the three-month period ended December 31, 1996,
principally due to a scheduled refueling in the fourth quarter of 1995.
(c) Earnings per share decreased for the three- and twelve-month periods ending December 31, 1996,
due primarily to $59 million ($.09 per share) of write downs of PG&E's nonregulated investments.
</TABLE>
<PAGE>
