UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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Commission file number 1-40
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PACIFIC ENTERPRISES
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(Exact name of registrant as specified in its charter)
California 94-0743670
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 West Fifth Street, Los Angeles, California 90013-1011
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(Address of principal executive offices)
(Zip Code)
(213) 244-1200
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
Common stock outstanding: Wholly owned by Sempra Energy
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Dollars in millions
<CAPTION>
Three Months Ended
September 30,
-----------------------
2000 1999
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<S> <C> <C>
Operating revenues $722 $561
---- ----
Expenses
Cost of natural gas distributed 349 188
Operating and maintenance 175 177
Depreciation 65 65
Income taxes 44 34
Other taxes and franchise payments 19 20
---- ----
Total 652 484
---- ----
Operating Income 70 77
---- ----
Other Income and (Deductions)
Interest income 19 10
Regulatory interest (4) (4)
Allowance for equity funds used
during construction 1 1
Taxes on non-operating income (3) (1)
Other - net (8) (13)
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Total 5 (7)
---- ----
Income Before Interest Charges 75 70
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Interest Charges
Long-term debt 17 20
Other 7 5
Allowance for borrowed funds used
during construction (1) --
---- ----
Total 23 25
---- ----
Net Income 52 45
Preferred Dividend Requirements 1 1
---- ----
Earnings Applicable to
Common Shares $ 51 $ 44
==== ====
See notes to Consolidated Financial Statements.
</table
</TABLE>
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Dollars in millions
<CAPTION>
Nine Months Ended
September 30,
------------------
2000 1999
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<S> <C> <C>
Operating revenues $2,050 $1,796
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Expenses
Cost of natural gas distributed 959 685
Operating and maintenance 493 533
Depreciation 196 195
Income taxes 132 110
Other taxes and franchise payments 69 65
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Total 1,849 1,588
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Operating Income 201 208
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Other Income and (Deductions)
Interest income 47 17
Regulatory interest (9) (12)
Allowance for equity funds used
during construction 2 2
Taxes on non-operating income (7) --
Preferred dividends of subsidiaries (1) 1
Other - net (6) (15)
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Total 26 (7)
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Income Before Interest Charges 227 201
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Interest Charges
Long-term debt 52 61
Other 24 8
Allowance for borrowed funds used
during construction (2) (1)
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Total 74 68
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Net Income 153 133
Preferred Dividend Requirements 3 3
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Earnings Applicable to
Common Shares $ 150 $ 130
===== =====
See notes to Consolidated Financial Statements.
</table
</TABLE>
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in millions
<CAPTION>
Balance at
------------------------
September 30, December 31,
2000 1999
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<S> <C> <C>
ASSETS
Property, plant and equipment $ 6,295 $ 6,190
Accumulated depreciation (3,530) (3,352)
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Property, plant and equipment - net 2,765 2,838
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Current Assets
Cash and cash equivalents 80 11
Accounts receivable 261 295
Due from affiliates 351 73
Income taxes receivable 45 34
Inventories 105 78
Other 25 9
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Total current assets 867 500
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Regulatory assets 170 258
Notes receivable - affiliates 611 482
Investments and other assets 137 89
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918 829
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Total $4,550 $4,167
====== ======
See notes to Consolidated Financial Statements.
</TABLE>
table>
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in millions
[CAPTION]
Balance at
-------------------------
September 30, December 31,
2000 1999
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[S] [C] [C]
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock $ 1,259 $ 1,282
Retained earnings 208 58
Accumulated other comprehensive income 16 6
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Total common equity 1,483 1,346
Preferred stock 80 80
Long-term debt 940 939
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Total capitalization 2,503 2,365
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Current Liabilities
Accounts payable 352 220
Regulatory balancing accounts - net 154 154
Deferred income taxes 7 8
Dividends and interest payable 31 29
Current portion of long-term debt -- 30
Due to affiliates 366 318
Other 266 206
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Total current liabilities 1,176 965
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Customer advances for construction 19 27
Post-retirement benefits other than pensions 159 158
Deferred income taxes 272 223
Deferred investment tax credits 53 56
Deferred credits and other liabilities 348 353
Preferred stock of subsidiary 20 20
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Total deferred credits and
other liabilities 871 837
------ ------
Contingencies and commitments (Note 2)
Total $4,550 $4,167
====== ======
See notes to Consolidated Financial Statements.
</table
<TABLE>
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
Dollars in millions
<CAPTION>
Nine Months Ended
September 30,
------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 153 $ 133
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation 196 195
Deferred income taxes and investment
tax credits 41 14
Other 50 (15)
Net change in other working capital components 179 372
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Net cash provided by operating
activities 619 699
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (130) (106)
Loans to affiliates (387) (418)
Other - net -- (15)
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Net cash used in investing activities (517) (539)
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CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid -- (100)
Preferred dividends paid (3) (3)
Payment on long-term debt (30) (2)
Increase(decrease) in short-term debt -- 27
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Net cash used in financing activities (33) (78)
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Increase (Decrease) in Cash and Cash Equivalents 69 82
Cash and Cash Equivalents, January 1 11 27
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Cash and Cash Equivalents, September 30 $ 80 $ 109
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amount capitalized $ 98 $ 85
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Income tax payments, net of refunds $ 105 $ 100
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SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES
Dividend of affiliates to Sempra Energy $ -- $ 413
===== =====
See notes to Consolidated Financial Statements.
</table
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
This Quarterly Report on Form 10-Q is that of Pacific Enterprises (PE
or the Company), the parent company of Southern California Gas
Company (SoCalGas). The Company's common stock is wholly owned by
Sempra Energy, a California-based Fortune 500 energy services
company. The financial statements herein are the Consolidated
Financial Statements of PE and its subsidiary, SoCalGas.
The accompanying Consolidated Financial Statements have been prepared
in accordance with the interim-period-reporting requirements of Form
10-Q. Results of operations for interim periods are not necessarily
indicative of results for the entire year. In the opinion of
management, the accompanying statements reflect all adjustments
necessary for a fair presentation. These adjustments are only of a
normal recurring nature. Certain changes in classification have been
made to prior presentations to conform to the current financial
statement presentation.
The Company's significant accounting policies are described in the
notes to Consolidated Financial Statements in the Company's 1999
Annual Report. The same accounting policies are followed for interim
reporting purposes.
Information in this Quarterly Report is unaudited and should be read
in conjunction with the Company's 1999 Annual Report.
As described in the notes to Consolidated Financial Statements in the
Company's 1999 Annual Report, SoCalGas accounts for the economic
effects of regulation on utility operations in accordance with
Statement of Financial Accounting Standards No. 71, "Accounting for
the Effects of Certain Types of Regulation" (SFAS No. 71).
2. MATERIAL CONTINGENCIES
NATURAL GAS INDUSTRY RESTRUCTURING
The natural gas industry experienced an initial phase of
restructuring during the 1980s by deregulating natural gas sales to
noncore customers. On January 21, 1998, the CPUC released a staff
report initiating a project to assess the current market and
regulatory framework for California's natural gas industry. The
general goals of the plan are to consider reforms to the current
regulatory framework emphasizing market-oriented policies benefiting
California's natural gas consumers.
In July 1999, after hearings, the CPUC issued a decision stating
which natural gas regulatory changes it found most promising,
encouraging parties to submit settlements addressing those changes,
and providing for further hearings if necessary.
In October 1999, the State of California enacted a law (AB 1421)
which requires that natural gas utilities provide "bundled basic gas
service" (including transmission, storage, distribution, purchasing,
revenue-cycle services and after-meter services) to all core
customers, unless the customer chooses to purchase natural gas from a
non-utility provider. The law prohibits the CPUC from unbundling most
distribution-related natural gas services (including meter reading)
and after-meter services (including leak investigation, inspecting
customer piping and appliances, pilot relighting and carbon monoxide
investigation) for core customers. The objective is to preserve both
customer safety and customer choice.
Between late 1999 and April 2000, several conflicting settlement
proposals were filed by various groups of parties that addressed the
changes the CPUC found promising in July 1999. Hearings were held in
May and June of 2000, and a CPUC decision is expected in 2001. The
principal issues in dispute include: whether firm, tradable rights to
capacity on SoCalGas' major gas transmission lines should be created,
with SoCalGas at risk for market demand for the recovery of the cost
of these facilities; the extent to which SoCalGas' storage services
should be further unbundled and SoCalGas be put at greater risk for
recovery of storage costs; the manner in which interstate pipeline
capacity held by SoCalGas to serve core markets should be allocated
to core customers who purchase gas from energy service providers
other than SoCalGas; and the recovery of SoCalGas' costs to implement
whatever regulatory changes are adopted. Additional proposals include
improving the access of energy service providers to sell natural gas
supply to core customers of SoCalGas and SDG&E.
Consistent with Sempra Energy's corporate policies favoring the
unbundling of commodity and nonessential services, SoCalGas and its
affiliate, San Diego Gas & Electric Company (SDG&E), are supporting
changes that they believe will provide greater customer choice in
utility services and greater access to gas supply service from energy
service providers in the core market. However, a coalition of gas-
fired electric generators and consumer groups has also proposed the
CPUC require SoCalGas to absorb 25 percent of the above-market cost
of some capacity SoCalGas has contracted for on interstate pipelines.
SoCalGas is actively opposing this proposal, contending that
regulatory changes developed after the capacity was committed should
not be considered in evaluating the propriety of the commitment.
Certain parties contend that the restructuring process is an
appropriate venue for addressing whether SoCalGas should refund
retroactively to September 1999 the cost in rates of ownership and
operation of one SoCalGas storage field. SoCalGas is also actively
opposing this proposal and the propriety of this venue for its
resolution.
QUASI-REORGANIZATION
In 1993, PE divested its merchandising operations and most of its oil
and gas exploration and production business. In connection with the
divestitures, PE effected a quasi-reorganization for financial
reporting purposes effective December 31, 1992. Unitary tax issues
and certain other liabilities established in connection with the
quasi-reorganization were favorably resolved in November 1999. Excess
reserves of $80 million resulting from the favorable resolution of
these issues were added to shareholders' equity at that time. Other
liabilities established in connection with discontinued operations
and the quasi-reorganization will be resolved in future years.
Management believes the provisions for these matters are adequate.
3. COMPREHENSIVE INCOME
Comprehensive income for the three-month periods ended September 30,
2000 and 1999 was $39 million and $45 million, respectively.
Comprehensive income for the nine-month periods ended September 30,
2000 and 1999 was $163 million and $133 million, respectively.
For the 2000 periods, the following is a reconciliation of net income
to comprehensive income.
Three-month Nine-month
period ended period ended
(Dollars in millions) September 30, 2000 September 30, 2000
--------------------------------------------------------------------
Net income $ 52 $ 153
Change in unrealized gain
on marketable securities (14) 7
Minimum pension liability adjustments 1 3
--------------------------------
Comprehensive income $ 39 $ 163
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For the 1999 periods, comprehensive income was equal to net income.
4. SEGMENT INFORMATION
Previously, the Company had two separately managed reportable
segments: SoCalGas and Sempra Energy Trading (SET). However, PE
dividended its SET holdings to Sempra Energy during the second
quarter of 1999.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements contained in this Form 10-Q and Management's
Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's 1999 Annual Report.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements that are not
historical fact and constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The
words "estimates," "believes," "expects," "anticipates," "plans,"
"intends," "may" and "should" or similar expressions, or discussions
of strategy or of plans are intended to identify forward-looking
statements that involve risks, uncertainties and assumptions. Future
results may differ materially from those expressed in the forward-
looking statements.
These statements are necessarily based upon various assumptions
involving judgments with respect to the future and other risks,
including, among others, local, regional, national and international
economic, competitive, political and regulatory conditions and
developments; technological developments; capital market conditions;
inflation rates; interest rates; energy markets, including the timing
and extent of changes in commodity prices; weather conditions;
legislative activities; business, regulatory and legal decisions; the
pace of deregulation of retail natural gas and electricity delivery;
the timing and success of business development efforts; and other
uncertainties -- all of which are difficult to predict and many of
which are beyond the control of the Company. Readers are cautioned
not to rely unduly on any forward-looking statements and are urged to
review and consider carefully the risks, uncertainties and other
factors which affect the Company's business described in this
quarterly report and other reports filed by the Company from time to
time with the Securities and Exchange Commission.
See also "Factors Influencing Future Performance" below.
CAPITAL RESOURCES AND LIQUIDITY
Working capital requirements can be met through the issuance of
short-term and long-term debt. Cash and cash equivalents at September
30, 2000 are available for investment in utility plant, the
retirement of and other corporate purposes. Major changes in cash
flows not described elsewhere are described below.
CASH FLOWS FROM OPERATING ACTIVITIES
For the nine-month period ended September 30, 2000, the decrease in
cash flows from operations compared to the corresponding period in
1999 is primarily due to lower collections on accounts receivable and
a decrease in overcollections on regulatory balancing accounts,
partially offset by the increase in accounts payable due to the
increased volume and price of natural gas purchased.
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures for property, plant and equipment are estimated
to be $200 million for the full year 2000 and are being financed
primarily by internally generated funds. Construction, investment and
financing programs are continuously reviewed and revised in response
to changes in competition, customer growth, inflation, customer
rates, the cost of capital, and environmental and regulatory
requirements.
CASH FLOWS FROM FINANCING ACTIVITIES
For the nine-month period ended September 30, 2000, the decrease in
cash flows used in financing activities compared to the corresponding
period in 1999 is primarily due to the decrease in dividends paid to
Sempra Energy compared to the corresponding period in 1999.
In July 2000, SoCalGas repaid $30 million of 8.75 percent medium-term
notes upon maturity. In September 2000, PE's $300 million credit
agreement was cancelled and SoCalGas' $400 million credit agreement
was decreased to $200 million.
RESULTS OF OPERATIONS
Consolidated earnings consist primarily of the results from SoCalGas.
SoCalGas' net income increased 10 percent and 6 percent for the
three-month and nine-month periods ended September 30, 2000,
respectively, compared to the same periods in 1999, primarily due to
reduced operating and maintenance expenses, increased income from
natural gas sales to large commercial, industrial and institutional
customers, and interest income accrued on increased affiliate
receivables.
UTILITY OPERATIONS
The table below summarizes natural gas volumes and revenues for
SoCalGas by customer class for the nine-month periods ended
September 30, 2000 and 1999.
</TABLE>
<TABLE>
Southern California Gas Company
Gas Sales, Transportation and Exchange
For the nine-month periods ended September 30
(Volumes in billion cubic feet, dollars in millions)
<CAPTION>
Gas Sales Transportation & Exchange Total
--------------------------------------------------------------
Volumes Revenue Volumes Revenue Volumes Revenue
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000:
Residential 172 $1,373 2 $ 9 174 $1,382
Commercial and industrial 62 409 241 165 303 574
Utility electric generation -- -- 230 82 230 82
Wholesale -- -- 119 39 119 39
--------------------------------------------------------------
234 $1,782 592 $295 826 2,077
Balancing accounts and other (27)
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Total $2,050
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1999:
Residential 201 $1,319 2 $ 6 203 $1,325
Commercial and industrial 63 334 227 175 290 509
Utility electric generation -- -- 128 52 128 52
Wholesale -- -- 111 43 111 43
--------------------------------------------------------------
264 $1,653 468 $276 732 1,929
Balancing accounts and other (136)
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Total $1,793
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</TABLE>
Utility natural gas revenues increased 14 percent for the nine-month
period ended September 30, 2000, compared to the corresponding period
in 1999. The increase is primarily due to higher natural gas prices.
Cost of natural gas distributed increased 40 percent for the nine-
month period ended September 30, 2000 compared to the corresponding
period in 1999. The increase is primarily due to higher natural gas
prices. Under the current regulatory framework, changes in core-
market natural gas prices do not affect net income since, as
explained more fully in the 1999 Annual Report, current or future
core customer rates normally recover the actual cost of natural gas.
Operating and maintenance expenses decreased eight percent for the
nine-month period ended September 30, 2000 compared to the
corresponding period in 1999, primarily due to reduced operating and
maintenance expenses at SoCalGas and the dividending of the Company's
nonutility subsidiaries to Sempra Energy in early 1999.
Net income at SoCalGas increased for the three-month and nine-month
periods ended September 30, 2000, respectively, compared to the same
periods in 1999, primarily due to reduced operating and maintenance
expenses.
FACTORS INFLUENCING FUTURE PERFORMANCE
The Company's performance will depend on the results of SoCalGas.
Because of the ratemaking and regulatory process, electric and
natural gas industry restructuring, and the changing energy
marketplace, there are several factors that will influence the
Company's future financial performance. These factors are discussed
in this section.
Industry Restructuring
See discussion of industry restructuring in Note 2 of the notes to
Consolidated Financial Statements.
Performance-Based Regulation (PBR)
To promote efficient operations and improved productivity and to move
away from reasonableness reviews and disallowances, the CPUC has been
directing utilities to use PBR. PBR has replaced the general rate
case and certain other regulatory proceedings for the California
utilities (SoCalGas and SDG&E). Under PBR, regulators require future
income potential to be tied to achieving or exceeding specific
performance and productivity goals, as well as cost reductions,
rather than relying solely on expanding utility plant in a market
where a utility already has a highly developed infrastructure. The
utility's PBR mechanism is scheduled to be updated at December 31,
2002, to reflect, among other things, changes in costs and volumes.
Key elements of the mechanisms include an initial reduction in base
rates, an indexing mechanism that limits future rate increases to the
inflation rate less a productivity factor, a sharing mechanism with
customers if earnings exceed the authorized rate of return on rate
base, and rate refunds to customers if service quality deteriorates.
Specifically, the key elements of the mechanisms include the
following:
-- Earnings up to 25 basis points in excess of the authorized rate of
return on rate base are retained 100 percent by shareholders.
Earnings that exceed the authorized rate of return on rate base by
greater than 25 basis points are shared between customers and
shareholders on a sliding scale that begins with 75 percent of the
additional earnings being given back to customers and declining to 0
percent as earned returns approach 300 basis points above authorized
amounts. There is no sharing if actual earnings fall below the
authorized rate of return. In 1999, SoCalGas was authorized to earn
9.49 percent on rate base. For 2000, the authorized return is again
9.49 percent.
-- Base rates are indexed based on inflation less an estimated
productivity factor.
-- The mechanism authorizes penalties of up to $4 million annually,
or more in certain, limited situations, related to performance
involving employee safety, customer satisfaction, and call-center
responsiveness.
-- A mechanism allows for pricing flexibility for residential and
small-commercial customers, with any shortfalls in revenue being
borne by shareholders and with any increase in revenue shared between
shareholders and customers.
-- Annual cost of capital proceedings are replaced by an automatic
adjustment mechanism. If changes in certain indices exceed
established tolerances, there would be an automatic adjustment of
rates for the change in the cost of capital according to a formula
which applies a percentage of the change to various capital
components.
Cost of Capital
For 2000, SoCalGas is authorized to earn a rate of return on common
equity (ROE) of 11.6 percent and a 9.49 percent return on rate base
(ROR), the same as in 1999, unless interest-rate changes are large
enough to trigger an automatic adjustment as discussed in the
Company's 1999 Annual Report.
Biennial Cost Allocation Proceeding (BCAP)
The BCAP determines how a utility's natural gas transportation costs
are allocated among various customer classes (residential,
commercial, industrial, etc.). In October 1998, the California
utilities filed 1999 BCAP applications requesting that new rates
become effective August 1, 1999, and remain in effect through
December 31, 2002. On April 20, 2000, the CPUC issued a decision
adopting overall decreases in natural gas revenues of $210 million
for SoCalGas for transportation rates effective June 1, 2000. Since
the decrease reflects anticipated changes in corresponding costs, it
has no effect on net income.
Key elements of the 1999 BCAP decision for SoCalGas include (1) the
first update to customer throughput forecasts since the Global
Settlement (the 1994 comprehensive settlement of natural gas
regulatory issues, described in the Company's 1999 Annual Report on
Form 10-K), (2) a return to the pre-Global Settlement 75%/25%
(ratepayer/shareholder) balancing treatment for noncore revenues
excluding certain transactions, and (3) 50%/50% balancing treatment
of unbundled noncore storage. The shareholder portion of noncore
transportation and storage revenues is excluded from the PBR sharing
mechanism.
Gas Cost Incentive Mechanism (GCIM)
This mechanism for evaluating SoCalGas' natural gas purchases
substantially replaced the previous process of reasonableness
reviews. GCIM compares SoCalGas' cost of natural gas with a benchmark
level, which is the average price of 30-day firm spot supplies in the
basins in which SoCalGas purchases natural gas. The mechanism permits
full recovery of all costs within a tolerance band above the
benchmark price and refunds all savings within a tolerance band below
the benchmark price. The costs or savings outside the tolerance band
are shared equally between customers and shareholders.
The CPUC approved the use of natural gas futures for managing risk
associated with the GCIM. SoCalGas enters into natural gas futures
contracts in the open market on a limited basis to mitigate risk and
better manage natural gas costs.
In June 1999, SoCalGas filed its annual GCIM application with the
CPUC, requesting an award of $8 million for the annual period ended
March 31, 1999. On June 8, 2000 the CPUC approved the $8 million
award and deferred its decision regarding extending the GCIM beyond
March 31, 2000 until an evaluation is performed by the Commission
staff. The evaluation report is expected in January 2001.
In June 2000, SoCalGas filed its annual GCIM application with the
CPUC, requesting an award of $10 million for the annual period ended
March 31, 2000. On October 30, 2000 the CPUC's Office of Ratepayer
Advocates recommended approval of the $10 million award and the
extension of the GCIM beyond March 31, 2000, with certain
modifications to the tolerance band and benchmark price. A CPUC
decision is expected during the first quarter of 2001.
INTERNATIONAL OPERATIONS
In conjunction with the 1998 business combination in which PE became
a wholly owned subsidiary of Sempra Energy, PE's ownership interests
in international subsidiaries were transferred to Sempra Energy at
book value in March 1999.
OTHER OPERATIONS
Sempra Energy Trading (SET) is a leading energy trading and marketing
firm headquartered in Stamford, Connecticut. SET engages primarily in
natural gas, petroleum and power marketing (domestic and
international). Effective April 1999, PE transferred its ownership
interest in SET to Sempra Energy. PE's interest in SET did not have a
significant effect on PE's income in 1999.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133
"Accounting for Derivative Instruments and Hedging Activities." As
amended, SFAS 133, which is effective for the company on January
1, 2001, requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial
position, measure those instruments at fair value and recognize
changes in the fair value of derivatives in earnings in the period
of change unless the derivative qualifies as an effective hedge
that offsets certain exposures. The effect of this standard on the
company's Consolidated Financial Statements has not yet been
determined.
In December 1999, the Securities Exchange Commission (SEC) staff
issued Staff Accounting Bulletin (SAB) 101 - Revenue Recognition.
SABs are not rules issued by the SEC. Rather, they represent
interpretations and practices followed by the SEC's staff in
administering the disclosure requirements of the federal
securities laws. SAB 101 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements; it
does not change the existing rules on revenue recognition. SAB 101
sets forth the basic criteria that must be met before revenue
should be recorded. Implementation of SAB 101 is required by the
fourth quarter of 2000 and will have no effect on the company's
Consolidated Financial Statements.
ITEM 3. MARKET RISK
There have been no significant changes in the risk issues affecting
the Company subsequent to those discussed in the Annual Report on
Form 10-K for 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except as otherwise described in this report, neither the Company nor
its subsidiaries are party to, nor is their property the subject of,
any material pending legal proceedings other than routine litigation
incidental to their businesses.
ITEM 5. OTHER INFORMATION
In August 2000 the California utilities announced that E.A. Guiles
was appointed to the position of group president of the regulated
business units of Sempra Energy, which was left vacant by the
retirement of Warren Mitchell. Guiles has also been named chairman of
SDG&E and of SoCalGas and continues as president of SoCalGas and its
Energy Distribution Services business unit.
In September 2000 Sempra Energy announced the appointment of Stephen
L. Baum as chairman. He succeeds former chairman Richard D. Farman,
who has retired. Baum continues as president and chief executive
officer of Sempra Energy.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedules
27.1 Financial Data Schedule for the nine-month period ended
September 30, 2000.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed after June 30, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly cause this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PACIFIC ENTERPRISES
-------------------
(Registrant)
Date: November 13, 2000 By: /s/ F. H. Ault
----------------------------
F. H. Ault
Vice President and Controller
