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 31, 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. Acquisitions
1. Acquisition of Valero Energy Corporation
On January 31, 1997, PG&E Corporation and Valero Energy
Corporation (Valero) announced that they have entered into a
definitive agreement and plan of merger (the Agreement) for the
acquisition of Valero by PG&E Corporation. The acquisition would
be accomplished through the merger of Valero with a subsidiary of
PG&E Corporation to be formed for purposes of the acquisition
(the Merger). As part of the Merger, PG&E Corporation common
stock would be issued in exchange for the outstanding shares of
Valero common stock. The cost of the acquisition would total
approximately $1.5 billion (plus adjustments for working capital
and other adjustments), comprised of approximately $722.5 million
in PG&E Corporation common stock and the assumption of debt and
liabilities, subject to certain adjustments. The number of
shares of PG&E Corporation ultimately issued upon consummation of
the Merger will vary depending on the average market price of
PG&E Corporation common stock before the Merger closes, subject
to specified limits. The Merger is expected to be completed in
mid-1997. Completion of the Merger is subject to a number of
conditions, including the approval of Valero's shareholders,
federal antitrust clearance, and other customary closing
conditions. In addition, because Valero operates a power
marketing subsidiary, the Merger will require the approval of the
Federal Energy Regulatory Commission.
Valero is a publicly traded intrastate natural gas company
headquartered in San Antonio, Texas. Valero conducts its natural
gas business, consisting of natural gas and natural gas liquids
(NGL) operations, through its wholly owned subsidiary, Valero
Natural Gas Company (VNG). VNG's operations include the
gathering, transportation, marketing and storage of natural gas,
the processing, transportation and marketing of natural gas
liquids, and the marketing of electric power. Valero owns and
operates approximately 6,400 miles of natural gas pipeline and
jointly owns or leases approximately 1,100 miles of pipeline,
including the Valero-Teco West Texas pipeline from Waha in west
Texas to the San Antonio area. VNG's pipeline system has the
capacity to transport more than 3 billion cubic feet of gas per
day. VNG owns and operates 536 miles of NGL pipelines and eight
natural gas processing plants with a combined capacity of
approximately 1.3 billion cubic feet per day of gas throughput,
producing approximately 80,000 barrels per day of NGLs in 1996.
In addition to its natural gas-related business, Valero also has
one other major subsidiary, Valero Refining and Marketing Company
(Valero R&M), which operates a refinery in Corpus Christi, Texas,
and certain other refining assets. The Agreement requires that
prior to the Merger, Valero distribute 100 percent of the stock
of Valero R&M to Valero's shareholders, so that PG&E Corporation
would acquire only Valero's natural gas business and not its
refining business.
2. Acquisition of Teco Pipeline Company
On January 27, 1997, PG&E Corporation acquired Teco Pipeline
Company (Teco) and its subsidiaries. The cost of the acquisition
was approximately $380 million, consisting of the purchase of an
intercompany note from Teco to its former corporate parent of
approximately $61 million and approximately 14.6 million shares
of PG&E Corporation's common stock.
Teco is an owner of a 500 mile Waha-to-Katy natural gas pipeline
system in Texas, including Teco's half interest in the Valero-
Teco West Texas pipeline. Teco also has investments in gas
gathering and processing facilities, and owns a gas marketing
company in Houston.
B. Electric Industry Restructuring - Cost Recovery Plan
On December 20, 1996, the California Public Utilities Commission
(CPUC) approved PG&E's cost recovery plan which was filed in
accordance with California legislation dealing with electric
industry restructuring (AB 1890). The cost recovery plan
approved by the CPUC included, among other things, an increase in
PG&E's electric base revenues for 1997 of approximately $164
million to be used to enhance transmission and distribution
system safety and reliability, as provided under AB 1890. On
January 22, 1997, The Utility Reform Network (TURN) filed an
application for rehearing of the CPUC's decision. TURN's
application for rehearing argues that the CPUC exceeded its
authority in interpreting AB 1890 to authorize a base revenue
increase for PG&E, and that the CPUC's decision requires
clarification to ensure that any such base revenue increase as is
granted is used only to fund activities which are supplemental to
those funded in the most recent General Rate Case.
PG&E's net income in 1997 would be significantly negatively
impacted if the CPUC were to grant rehearing and ultimately deny
the base revenue increase contemplated in the existing cost
recovery plan.
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
BRUCE R. WORTHINGTON
By ________________________________
BRUCE R. WORTHINGTON
General Counsel
Dated: January 31, 1997
