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UNITED STATES
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 (Date of earliest event reported) April 28, 1997
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Pacific Enterprises
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(Exact name of registrant as specified in its charter)
California
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(State or other jurisdiction of incorporation
1-40 94-0743670
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Commission File Number (I.R.S. Employer Identification No.)
555 West Fifth Street, Los Angeles, California 90013-1011
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(Address of principal executive offices)
(Zip Code)
(213) 895-5000
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
The information set forth and incorporated by reference below
supplements the information contained in Pacific Enterprises' 1996 Annual
Report to Shareholders under the caption "Management's Discussion and
Analysis - SoCalGas Operations - Factors Influencing Future Performance -
Performance Based Regulation." Such information has been incorporated by
reference in Pacific Enterprises' Annual Report on Form 10-K for the year
December 31, 1996.
On April 21, 1997, an Administrative Law Judge (ALJ) issued a
proposed decision on Southern California Gas Company's application to the
California Public Utilities Commission (CPUC) for performance based
regulation (PBR). The proposed decision will be reviewed by the CPUC which
may accept, reject or modify it in rendering a final decision on the
application. Southern California Gas Company (SoCalGas) is Pacific
Enterprises' principal subsidiary.
A summary of the principal elements of SoCalGas' PBR application
and the ALJ's proposed decision is set forth in a Reply to Media Inquiry to
be used by SoCalGas in responding to media and other inquiries concerning
the proposed decision. The text of the Reply to Media Inquiry is attached
to this Current Report as Exhibit 99.1 and incorporated herein by reference.
Item 7. - Financial Statements and Exhibits.
(c) Exhibits
99.1 Reply to Media Inquiry of Southern California Gas
Company.
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACIFIC ENTERPRISES
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(Registrant)
Ralph Todaro
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Ralph Todaro
Vice President and Controller
(Chief Accounting Officer and
duly authorized signatory)
Date: April 28, 1997
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For Reply to Media Inquiry
(The ALJ's Proposed Decision on SoCalGas' "Performance Based Regulation"
application was released on Monday, April 21. The Proposed Decision
maintains that SoCalGas' plan is flawed and that several key elements must
be modified to be acceptable. The following statement may be used to
respond to inquiries concerning the ALJ's Proposed Decision.)
SoCalGas is disappointed with the ALJ's Proposed Decision (PD) on our
PBR application. While it departs from our proposed PBR application in many
respects, the Proposed Decision should not be mistaken as a final CPUC
decision in this case.
Following are some of the key differences between SoCalGas' plan and
the PD.
Indexing
SoCalGas' Proposal. Our proposal calls for rate indexing which will
ensure that base rates grow at less than the rate of inflation (inflation
minus a productivity factor). We are suggesting a "productivity factor"
that will reduce real rates (after adjusting for inflation) annually by 1%.
This is twice the industry average for productivity improvements by U.S. gas
distribution companies over the last 10 years. Base rates in 1995 would
have been 13% lower than actual rates had this type and level of indexing
been in place from 1985 to 1995.
PD. The PD rejects rate indexing and adopts revenue or margin
indexing. The major difference is that margin indexing removes the
risk/reward potential for shareholders arising from higher or lower gas
throughput to core customers. Additionally, the PD recommends a higher
productivity factor of 1.5%, and instead of the common "inflation minus x"
indexing formula where "x" is the productivity factor, the decision adopts a
more complicated formula. In general, using this formula produces a
substantially higher value for "x" compared with simply using the
productivity factor alone.
Pricing Issues
SoCalGas' Proposal. We are requesting an increase in the customer
charge from roughly $5 to $12.50 -- the actual cost of serving residential
customers -- over the five-year period covered by PBR. We want to reduce
(volumetric) rates for gas, and narrow the rate increase paid when customers
exceed the monthly baseline amount from 35% to 10%. The net result: no
increase in the average residential customer bill. Finally, we're seeking
the flexibility for optional tariffs to provide customers with more pricing
choices for utility service.
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PD. The PD claims that issues such as residential rate design and
pricing flexibility are inappropriate for consideration in a PBR
application. The PD defers action to a future proceeding.
New Products and Services
SoCalGas' Proposal. Our proposal seeks authorization to offer on a
competitive basis products and services that we have not previously offered.
They would be offered entirely at shareholder risk, and would not be funded
by rates charged for utility services.
PD. The PD rejects any decision on new product and service flexibility
and defers the issue to future regulatory proceedings.
Sharing Mechanism
SoCalGas' Proposal. SoCalGas proposes no earnings sharing, for either
profits or losses, since SoCalGas believes that absence of a sharing
mechanism is more compatible with the competitive environment the industry
is rapidly moving toward.
PD. The PD imposes a "sharing mechanism" for earnings that exceed a
specified rate of return to ensure that some of the profits above certain
levels be shared with ratepayers rather than going solely to the Company.
While the PD adopts sharing on earnings above the authorized rate of return,
it does not propose any similar "downside" sharing.
Base Margin
SoCalGas' Proposal. SoCalGas' initial application reflected a base
margin reduction of $61.2 million as compared to its authorized 1995 level.
After reaching various stipulations with the Commission's staff, our final
position was a reduction of $110 million.
PD. The PD adopts a starting base margin level that reflects a net
reduction of $182 million. The ALJ's Proposed Decision provides SoCalGas
with the option of implementing PBR now, retroactive to Jan. 1, 1997, or on
Jan. 1, 1998.