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: September 13, 2000
Exact Name of
Commission Registrant State or other IRS Employer
File as specified Jurisdiction of Identification
Number in its charter Incorporation Number
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1-12609 PG&E Corporation California 94-3234914
1-2348 Pacific Gas and California 94-0742640
Electric Company
Pacific Gas and Electric Company PG&E Corporation
77 Beale Street, P.O. Box 770000 One Market, Spear Tower, Suite 2400
San Francisco, California 94177 San Francisco, California 94105
(Address of principal executive offices) (Zip Code)
Pacific Gas and Electric Company PG&E Corporation
(415) 973-7000 (415) 267-7000
(Registrant's telephone number, including area code)
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Item 5. Other Events
On September 7, 2000, the California Public Utilities Commission (CPUC)
issued an order expanding an existing investigation into the wholesale
electric market and associated impact on electric rates to include the
issues identified in California Assembly Joint Resolution No. 77 (AJR No.
77) adopted by the California Legislature on August 30, 2000. AJR No. 77
required the CPUC to initiate an investigation to review the impact of the
current electricity crisis on consumers and California investor owned
utilities, such as Pacific Gas and Electric Company (Utility), a subsidiary
of PG&E Corporation, with emphasis on the options for correcting the
electricity market, methods to eliminate price volatility for consumers,
and methods for cost recovery and cost allocation. The CPUC's decision
specifically expanded the scope of its pending investigative proceeding to
cover the matters required to be considered by AJR No. 77.
As previously disclosed, due to the high wholesale power prices at which
the Utility purchases power for its electric distribution customers from
the California Power Exchange (CalPX) and the California Independent System
Operator (CAISO), the Utility has been required to defer for future
recovery the amount of its costs, primarily wholesale power purchase costs,
to serve distribution customers that exceed revenues collected from frozen
rates. The average price the Utility was charged for electric power in the
months of June, July, and August 2000, was approximately 16.3 cents per
kilowatt-hour (kWh), 11.0 cents per kWh, and 18.7 cents per kWh, compared
to 3.0, 3.9, and 4.1 for the same months in 1999. The portion of frozen
rates available for payment of wholesale electric power costs during those
same periods was approximately 5.4 cents per kWh. At August 31, 2000, the
uncollected balance of these wholesale power purchase costs recorded in the
Utility's regulatory balancing account was approximately $2.2 billion. The
deferred costs are recoverable during the transition period when and if
revenues from frozen rates exceed costs. However, if high wholesale power
prices continue throughout the transition period, costs will continue to
exceed the revenues based upon the frozen rates.
As previously disclosed, under a prior CPUC decision the Utility is
prohibited from collecting after the transition period certain electric
costs incurred during the transition period but not recovered from frozen
rates during that period, including under-collected account balances
relating to wholesale power purchases, such as power purchased from the
CalPX and CAISO. The CPUC decision prohibits offsetting these specific
under-collected amounts against over-collected transition costs. The
Utility appealed this decision but on September 6, 2000, the California
Court of Appeal denied the Utility's petition for review. The Utility is
assessing further appeals and challenges to reverse or modify the decision.
If the CPUC does not modify its decision or the decision is not modified or
invalidated by judicial action, and if the Utility determines that its
uncollected wholesale power purchase costs are not probable of recovery,
then the Utility would be required to write off the unrecoverable portion
as a one-time charge against earnings. In addition, the Utility would be
unable to continue deferring these costs incurred prior to the end of the
transition period and such expenses would reduce the Utility's future
earnings accordingly. With respect to wholesale power purchase costs
incurred after the end of the transition period and prior to any adjustment
in rates, the Utility may be able to defer these costs if it determines
that they are probable of recovery.
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The Utility has largely utilized its existing $1 billion revolving credit
facility to support the Utility's commercial paper program and other
liquidity requirements. The facility expires in 2002, although the Utility
may extend the facility annually for additional one-year periods upon
agreement with the banks. The Utility currently has authority from the
CPUC to issue up to $1.7 billion of short-term financing, and on September
8, 2000, the Utility filed an application with the CPUC seeking an
additional $1.4 billion short-term financing authority. The Utility is
also considering the issuance of additional long-term debt to finance
wholesale power purchase costs and its other capital requirements.
Although there can be no assurance, the Utility believes that it will be
able to obtain additional financing on acceptable terms and conditions.
In remarks to energy industry analysts on September 11, 2000, Robert D.
Glynn, Jr., Chairman of the Board, Chief Executive Officer, and President
of PG&E Corporation, responded to questions concerning the Utility's
ability to recover its utility generation-related transition costs
(transition costs) and the uncollected wholesale power purchase costs, in
light of the continuing high wholesale power prices in California.
Mr. Glynn noted that before the high wholesale power prices began to be
experienced in June 2000, revenues from frozen rates were sufficient to
recover transition costs because revenues at frozen rates exceeded costs,
including wholesale power purchase costs. Reacting to some media
commentary that the Utility could waive the recovery of a material amount
of transition costs, with an associated material write-off of the foregone
transition costs, such that transition costs would have been recovered as
of a date when there were no deferred wholesale power purchase costs, Mr.
Glynn indicated that was one of several possible approaches for the Utility
to assess. Mr. Glynn indicated that, if the value of the Utility's
hydroelectric generating assets, as reflected in the settlement agreement
filed by the Utility and other parties on August 9, 2000, were to be
credited to the transition costs, then such costs would have been fully
recovered during August 2000. Mr. Glynn based his statement on the
following facts: Without considering the value of the Utility's
hydroelectric assets, at August 31, 2000, the Utility's estimated remaining
uncollected transition costs that must be collected during the transition
period were approximately $1.6 billion. As previously disclosed, the
settlement agreement filed by the Utility and others on August 9, 2000,
regarding the valuation and disposition of the Utility's hydroelectric
assets, specifies that the value of those assets for purpose of transition
cost calculation is $2.8 billion, which would be reduced by its book value
of approximately $700 million. Testimony taken to date in the CPUC
proceeding where valuation is to be established put the range of market
values from $2.4 billion to in excess of $3 billion under operating and
market conditions prior to June 2000. Under the electric industry
restructuring law, when the Utility completes recovery of its uneconomic
utility generation-related assets and obligations it will satisfy the
conditions that permit the CPUC to determine that the rate freeze and
transition period are over.
Mr. Glynn stated that the Utility will work with parties involved in the
California energy market with the intent to resolve the transition in a way
that would help shield customers from the type of unexpected volatility
experienced during the summer of 2000, while providing the assurance that
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the Utility would fully recover its reasonable wholesale power purchase
costs.
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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
By CHRISTOPHER P. JOHNS
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CHRISTOPHER P. JOHNS
Vice President and Controller
PACIFIC GAS AND ELECTRIC COMPANY
By ROGER J. PETERS
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ROGER J. PETERS
Senior Vice President and General
Counsel
Dated: September 13, 2000
