ML13302A217

Annual Report 1973

ML13302A217
Person / Time
Site:	San Onofre
Issue date:	12/31/1973
From:	San Diego Gas & Electric Co
To:
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NUDOCS 027219
Download: ML13302A217 (32)

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Contents Page Page Highlights of 1973.............................

1 Statement of Retained Earnings...............18 President's Report.............................2-3 Statement of Changes in Financial Position......18 Report on 1973 Operations 4-13 Statement of Capitalization.....................

19 Service Territory............................

4-5 Notes to Financial Statements............... 20-22 Company Operations........................5-8 A uditors' O pinion............................22 Finance.................................8-9 Electric Construction Projects................

9-10 Revenues and Expenses.......................

23 Emission Control..........................

10 Operating Statistics..........................

24 G as D ivision.............................

10-11 Plant and Capitalization......................

25 Energy for the Future......................11-13 1973 Revenue Dollar.........................25 M anagem ent Changes........................13 Directors and Officers..........................

26 Financial Section............................

14-25 Stock Listing, Transfer Agents, Registrars.......... 27 Statement of Income.......................

15 Distribution of Shareholdings..................

27 Balance Sheet..........................

16-17 Service Territory Map............ Inside Back Cover Cover picture-Sunset casts a rosy glow on the buildings that make up the city skyline of San Diego.

Highlights of 1973 1973 1972

% Change Operating revenues-Gross (000).............................

.$227,763

$197,069 up 15.6 Operating expenses (000)

. $182,716

$157,838 up 15.8 Net income* (000)........................................

$ 27,686

$ 24,386 up 13.5 Earnings per share of common stock*..........................

1.78 1.90 down 6.3 Common stock dividend rate at year-end........................

1.20 1.20 unchanged Taxes on operations (000)...................................

$ 14,740

$ 14,951 down L4 Utility plant additions and replacements (000)...................

$101,709

$106,116 down 4.2 Total investment in utility plant at year-end (000)................

$916,027

$819,716 up 11.7 Number of customers at year-end Electric department.......................................

569,302 536,367 up 6.1 Gas department..........................................

409,393 395,052 up 3.6 Total energy sales Electric (1,000 M whr)....................................

7,903 7,402 up 6.8 Gas (1,000 Therms)......................................

560,499 529,427 up 5.9

• See notes to financial statements on pages 20-22.

SDO is the symbolfor the Company's stock.

an estimated $42.3 million annually. On the surface, this President's Report Presdents Re ortmay sound like a bonanza, but even if the higher rates had been in effect all year long, the financial results Fellow Shareholders:

would not have been more than modestly successful.

The facts and figures I must recognize in bringing you Most of the increases, in fact, only recovered the higher this report are not the least bit pleasing to me. I believe, costs we were paying for natural gas and power plant however, that you must be fully aware of the forces at fuel.

work which have prevented us from enjoying a very As already mentioned, the PUC decided in December profitable year in 1973, and which, in turn, continue to to grant our petition for interim rate relief, pending com burden our operations in 1974.

pletion of our general rate case. This action demonstra We were totally displeased with the financial results for ted the Commission's concern regarding the need to 1973. We had every right to expect much better earnings preserve the Company's financial integrity. The $6.6 mil than those experienced. The severe effects of high oper-lion interim increase will be included in the decision on ating expenses and greatly increased capital costs were the general rate case.

only multiplied by the impact of the energy crisis. The The Company's $25.8 million general rate applications year did produce the second highest net gain in electric were filed in April, 1973. Since then, in order to offset customers and a good net gain in gas customers. There-anticipated revenue losses from the PUC's mandatory fore, it was not altogether a year of gloom.

conservation program, and the increased cost of capital, With respect to rates, the latter part of the year was a the Company has revised its applications to request $42.8 bit more encouraging. We were granted an interim rate million, including the $6.6 million interim increase. To increase that was greatly needed, but hardly large date, 24 days of hearings have been held in our general enough to meet the total needs.

rate case, and another 12 days of hearings are scheduled The problem of greatest concern was common stock in April and May. A decision is expected by mid-1974.

earnings. On a weighted average number of shares out-During the early part of 1973, we were not able to re standing, the Company earned $1.78 a share, a decline of cover the rapidly rising costs of fueling the Company's 12 cents from the $1.90 earned the previous year. While power plants. We were most pleased, therefore, when our the per share earnings were down 6 percent, operating application for a fuel cost adjustment clause was ap revenues rose nearly 16 percent to a record high of $227.8 proved, effective August 15. This put a stop to a serious million. These revenues were $30.7 million higher than drain of the Company's resources. (Increases in the cost in 1972, but 81 percent or nearly $25 million of that gain of purchased natural gas are recouped by means of track was eroded by increased operating costs. On top of this, ing and offset increases.)

the costly financing required for the Company's major Other rising costs, however, continue to make general construction program cut into the balance available for rate relief necessary. The strong growth of your Coi common shareholders.

pany's service territory always has been a positive factor.

Clearly, rate relief was needed and the Company's For the present, though, with construction expenditures management did not hesitate to seek the necessary in-rsing faster than revenues and earnings, it places a heavy creases. During the year, we made approximately 20 cost burden on your Company. In addition, like the en electric, gas, and steam filings which were approved by tire utility industry, SDO&E must contend with in the California Public Utilities Commission. The net re-flation, increased costs of capital and labor, and sult was to raise rates by an amount that would produce nonrevenue-producing environmental expenses. These OPERATING REVENUES OPERATING EXPENSES.

(MILLIONS OF DOLLARS) 165 (MILLIONS OF DOLLARS)

ELECTRIC M

GAS 10ELECTRIC

=

GAS 129 120 90 100 94 90m 83 75 67 6

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factors have combined to create massive capital require-and a willingness to innovate. Consider some of ments, much of which must be met from outside sources.

SDG&E's current projects and programs:

Our construction expenditures in 1973 were $101.7 mil-We are prospecting for natural gas and oil in the San lion. The 1974 budget for new plant and equipment is 69 Joaquin Valley.

percent higher. It will total $171.4 million, including al-We are studying plans for the importation of lique most $30 million for environmental expenditures.

fled natural gas from overseas.

To finance the 1973 construction program, we issued We are involved in the development of vast coal re 300,000 shares of preferred and 2 million shares of com-sources in southern Utah, and also are underwriting re mon stock. Then, shortly after 1974 began, we sold a $75 search into coal gasification.

million bond issue. Financing plans for the balance of We are attempting to harness the geothermal fluids 1974 include $25 million in preference stock in April. In of the Imperial Valley as an energy source for electric the fourth quarter of the year, current plans call for the generation.

sale of approximately $65 million in first mortgage bonds We are successfully marketing energy-related serv and possibly another offering of common stock. Natu-ices through a subsidiary company, Applied Energy, Inc.

rally, the interest and dividend requirements of these We are supporting a research program into the de securities will exert even greater pressure for increased velopment of the gas-cooled fast breeder reactor.

earnings.

We are supporting research and development in the Concern over the Company's declining interest cov-field of solar energy.

erage caused Standard & Poor's to derate our first mort-The management of changing conditions in our in gage bonds from AA to A on December 21. The action dustry offers what is at once a great challenge and a tre came despite the PUC's authorization of interim rate re-mendous opportunity. Financial returns from some of lief a few days earlier that same month. The other major the activities I have outlined are well in the future, but rating service, Moody's, continued its AA rating.

the potential rewards are great enough to merit your Meanwhile, we must continue to push ahead with con-Company's interest in these programs.

struction of new generating capacity to meet anticipated Our primary goal for 1974 is to improve earnings. We load growth. One fossil-fueled steam turbine-generator intend to continue to strive for a rate structure that will was completed during 1973. Encina 4, a 300,000-kilowatt provide common shareholders with a more attractive re unit, went into service November 1. Work on a fifth unit turn on their investment. To this end, we in your Coi of,similar size at the plant is expected to start in May, pany's management pledge the most determined efforts 1974, if approval is received from all the applicable gov-of which we are capable.

ernment agencies. Construction of two proposed nuclear units, San Onofre 2 and 3, was delayed, pending the reso lution of lengthy proceedings before the California Coastal Zone Conservation Commission. (See page 9.)

alter A. Zitlau The largest project in the Gas Division was construc-President and tion of the first phase of a 16-inch gas transmission line Chief Executive Officer between San Marcos and Escondido. This project is con-February 21, 1974 tinuing in 1974.

No review of 1973 would be complete without mention of the energy crisis, which had a profound impact on the utility industry. San Diego Gas & Electric Company be gan the year in a favorable position relative to fuel sup plies. We estimated that long-term contracts with our suppliers 'would provide sufficient power plant fuel to satisfy our needs through 1975. This was further insured by management through the expansion of fuel storage facilities. What could not be anticipated, unfortunately, was the Federal Government's decision in December, 1973, to allocate oil supplies, thus negating, to a minor degree, SDG&E's foresighted actions. (The fuel situation is discussed in detail on pages 6-7.)

Today, the entire utility industry operates in a chang ing environment. It is not enough to merely react to the new conditions. SDG&E has tried to anticipate changes and has moved from traditional thinking toward a broader concept of the Company's role in the energy in dustry. Our management style is marked by flexibility 3

Report on 1973 Operatbns Service Territory Despite uncertainties that cloud the national outlook, the San Diego economy is expected to continue to ad vance in 1974, but at a slower rate than in 1973. In the latter part of the past year, fuel shortages developed, the pace of new construction slackened, and unemployment rose. These trends are likely to continue well into the first half of 1974, but economists see a good probability of re newed economic expansion in the second half of the year.

A major bank predicted that San Diego's growth will continue to be "significantly above the state average."

Industrial development in San Diego during 1973 was accompanied by increasing diversification. New plants that went into production manufacture such diverse Steel and Shipbuilding Company of San Diego, is shown products as photopolymer printing plates and enzymes.

about half completed in December, 1973. The 688-foot ves Another plant, announced near the end of the year, will sel is 38,300 tons deadweight.

produce engine seals and o-rings.

A major tuna cannery will be constructed in San Diego Tourism, the third largest source of revenue in San during 1974 by Van Camp Seafood Company, once the Diego County, might be hurt by a severe and prolonged necessary governmental approvals are obtained. The gasoline shortage. Attendance at San Diego tourist at proposed plant will have 1,400 employees, with a pro-tractions, however, was off only moderately in the closing jected annual payroll of $7 million.

months of 1973. The visitor industry has been bringing Additional sites are being prepared for light industry, close to $400 million annually into San Diego County in as three industrial parks, totalling 700 acres, are under recent years.

construction. This will bring the number of industrial Housing demand continued strong due to the rapid parks in San Diego County to 21.

population growth, but demand was somewhat damp Three large electronics firms are in the midst of expan-ened by high construction costs, rising interest rates and sion programs. The television assembly plant of Sony buyer uncertainty about the direction of the economy.

Corporation of America will be doubled in size to Dollar volume of construction in San Diego County de 300,000 square feet when construction of an addition is dined from the 1972 record pace of more than $1 billion completed. Others planning to enlarge their facilities are to $766.2 million in 1973. The 24,000 dwelling units Kearfott-Singer and Hewlett-Packard.

In the heavy industrial sector, National Steel and Ship building had a busy year in 1973, launching three vessels, NUMBER OF CUSTOMERS delivering two more, and signing contracts to build 13 (THOUSANDS) others. The firm reported at year-end that its $500 mil-ELECTRICjEGAS 569 lion in orders will keep the San Diego shipyard active 536 through 1977.

503 One of the hedges the local economy has against an 430 50 economic slowdown in 1974 is the Navy. Military cut-59 367 30 backs elsewhere in the nation are causing an expansion of personnel and capital projects in the San Diego area.

This was made clear in mid-1973, when the Navy an nounced that it planned to transfer 31 ships and approx imately 12,000 Naval personnel to San Diego during the next 12 months. (The present payroll of the Navy and the Marine Corps in San Diego County amounts to approx imately $730 million a year.)

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started in 1973 represented a decline of more than 14,000 from the previous all-time record year.

EARNINGS PER SHARE OF COMMON STOCK High rise construction continued to change the down town skyline of the city. A 24-story office building and 1.85 1.82 1.89 1.90 1.78 the massive Federal Courthouse and Office Building 1.64 complex were among the new buildings being erected in the business district during 1973.

$1.06 Company Operations_

It might be expected from the somewhat diminished

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'73 level of building activity that customer gains would be lower. Actually, the rate of customer growth was only a expenses. Consequently, management pushed ahead ag fraction of a percent less than in 1972. The gain remained gressively for rate relief in 20 electric, gas, and steam rate above 6 percent for the electric customers and above 3.5 filings, and attempted to cut internal costs as much as percent for gas customers, as has been the case since possible. In all, the resulting rate increases should pro 1971. During 1973, SDG&E added 32,935 electric and duce an estimated $42.3 million on an annual basis.

14,341 gas customers. Electric customers totalled 569,302 More than 84 percent of this added revenue, however, and gas customers, 409,393 at the end of the year.

will simply offset the higher costs the Company incurs for Electric sales for the year reached 7.9 billion kilowatt purchased natural gas and power plant fuel. It also hours, a 6.8 percent increase over the previous year. By should be noted that most of the new rates were in effect contrast, 1972 had shown an 11.1 percent gain over 1971.

much less than the full year.

The slower growth rate in 1973 reflects a combination of energy conservation efforts and adverse weather for energy sales. That is, the summer was too cool to create much electric load from air conditioning and the winter was relatively mild. Nevertheless, gas sales of 560.5 mil lion therms showed a moderate 5.9 percent growth over the year before.

The healthy 15.6 percent rise in operating revenue out paced energy sales because of rate increases, much of which simply recovered the higher costs of purchased natural gas and power plant fuel. Revenues were $227.8 million, topping the year-earlier figure ($197.1 million) by $30.7 million.

Operating expenses climbed by $24.9 million to $182.7 million, an increase of 15.8 percent. A component of these expenses, power plant fuel and purchased energy,

-S shot up 27.1 percent, from $48.6 million to $61.8 million.

Interest charges for the year 1973 were $23.8 million, an increase of $4.2 million or 21.5 percent over 1972.

SDG&E, like othercorporate borrowers, had to contend with a prime rate that spiraled upward from the 5.5 per cent level of 1972 to a peak of 10 percent late in 1973.

Net income, nevertheless, showed a 13.5 percent year to-year gain, rising by $3.3 million to $27.7 million. After preferred dividends, which rose by 33 percent, or $1.7 million, and taking into account the 15 percent greater number of common shares outstanding, earnings per common share declined. Based on the weighted average number of shares outstanding, the Company earned Demandfor new housing in San Diego County continued

$L78 per share, vs. $1.90 in 1972. The decline amounts to strong in 1973, although not at the record pace of the pre 12 cents a share, or 6.3 percent.

vious year. This community is Rancho Bernardo, within the What the Company experienced in 1973 was the im-City of San Diego.

pact of inflation on practically every aspect of operating 5

The preceding should not be construed as down Less natural gas is available for our power plants.

grading the importance of these rate increases. The re covery of high fuel costs does much to halt a long 74

% Gas level of service standing drag on earnings. As early as August, 1971, the 66 Company had sought PUC permission to institute a fuel cost adjustment clause for electric rates. The PUC held 57 this application in abeyance for a year until August, 1972, when the Commission reached a decision on the Company's then current general rate case. SDG&E reac tivated the application, and public hearings were held 38 during April of 1973.

The fuel clause was approved in June, but because of the Federal Government's price freeze, no fuel cost ad justment could be made until August 15. Since then, elec 18 tric rates have been adjusted at least quarterly by advice letter, as the cost of power plant fuel fluctuated. This procedure eliminates the need for.frequent rate increase I t applications and attendant delays in recovering the

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higher fuel costs. The concept is similar to tracking and offset increases, which permit purchased natural gas costs to be adjusted in line with price changes by the Therefore, much more of the growing customer demand Company's supplier.

must be met by costly, low-sulfur fuel oil...

The Company filed applications for general rate relief on April 10, 1973, seeking electric, gas and steam rate in 12.3 creases totalling $25.8 million. Although the case is still pending, there have been two significant developments.

Power plant fuel oil consumption The first was in December, when the PUC granted the standings dra onrel eanigs Aserlesauut,171)h (milion obCompany's application for interim rate relief of $6.6 mil lion. This amount will be included in the final settlement of the general rate case. Second, the remaining amount in the general rate applications was increased to $36.2 million in March, 1974, when the Company filed a re 5.0 vised showing, based on revenue losses expected to result from the PUC's order to reduce energy consumption, and 3.3 the increased cost of capital. A decision is expected in the 2.2 general rate case by mid-1974.

Among the most critical problems facing your Com pany today is the fuel oil shortage. At present, approx imately 80 percent of the electric energy generated on the

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... andthe amount ofieach revenue dollar spentforfuel continues to increase.

Composition of electric revenue dollar Fuel Fuel Fuel Fuel Fuel 18.20 18.50 24.40 37.50 44.20 Non-Fuel Non-Fuel Non-Fuel Non-Fuel Non-Fuel 81c.8r 81t.5o 75.6 62.5 55.8 1950 1960 1970 1973 1975 (EST.)

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system is from oil-fired power plants. As early as 1970, part of the decrease in revenues. With a 15 percent cur SDG&E confronted the possibility of an oil shortage de-tailment of sales, we estimate that electric rates would veloping. Management went ahead with construction of have to increase 7.3 percent to offset lost revenues.

additional oil storage facilities and obtained contracts A key aspect of the fuel supply problem in the United that could be expected to assure an adequate supply of States (besides the scarcity of feedstock) has been the fuel oil through 1975.

growing inadequacy of refinery facilities. SDG&E at This picture changed when the Federal Energy Office tacked this situation head-on in October, 1973, when assumed the power to allocate fuel oil for all electric utili-plans were announced to investigate the feasibility of lo ties under the Emergency Petroleum Act of 1973. The cating a refinery near the Encina Power Plant in Carls rules, first issued December 27, became effective a month bad, California later. Fuel allocations are expected to fluctuate from Your Company hasjoined with Pacific Resources, Inc.,

month to month, depending on the shortfall in the na-of Hawaii in the study of a facility that would process tion's oil supply. Your Company has met with Federal 100,000 barrels of crude oil a day. One of the con Energy Office representatives to explain SDG&E's fuel figurations being studied would refine the crude to pro requirements and supply arrangements. Thus far, power duce 40,000 barrels of low-sulfur power plant fuel oil, plant fuel under the allocation program has been ade quate. We have been benefitted in this respect by cus tomer conservation, warm weather, and a good supply of purchased hydroelectric power.

The PUC has said that the fuel supply in California will not be sufficient to meet anticipated 1974 generation requirements. It has told electric utilities and their cus tomers to reduce electric use by 15 percent, compared with the same period a year earlier. Bans or restrictions were placed on outdoor advertising, decorative lighting, floodlighting of outdoor commercial areas and interior business lighting. The Commission also urged con servation of natural gas.

During the last two years, SDG&E had been asking its customers to use gas and electricity wisely. These con servation efforts were stepped up in the latter part of 1973, as the Company's marketing division personnel complied with the PUC's order.

More than 600 of the largest commercial and indus trial customers were contacted personally. Television messages, newspaper advertising, and direct mail were used in efforts to obtain broader public cooperation. By December, energy demand had begun to ease off enough to offer hope that voluntary curtailments may be suf ficient to get through the crisis.

January, 1974, billings for electric sales confirmed the effectiveness of conservation efforts. Comparing kilowatt hour sales with estimates based on projected growth, and Model of proposed refinery, which would be located near adjusting KWH sales for weather variations, we find the the Company's Enema Power Plant in Carlsbad Califor following reductions:

nia. SDG&E would be a customerfor thefuelproducts of All Classes of Customers........... -17.9%

the refinery.

Residential........................

-15.0%

Commercial30,000 barrels of low-sulfur diesel oil and kerosene for Commrcia...................-1.1%gas turbine fuel, and 100 million cubic feet of synthetic Large Industrial.......................

-15.5%

natural gas daily. The other configuration would produce gasoline instead of the synthetic natural gas. Although SDG&E has pointed out to the Public Utilities Com-SDG&E favors the synthetic natural gas configuration, mission that curtailment of demand for energy means a the decision also is dependent upon other factors which loss of revenue that could result in the need for rate in-probably will not be clarified until late in 1974.

creases. Decreases in fuel consumption and reduction of At this time, SDG&E is seen primarilyas a customerof other expenses because of lower sales would only offset the refinery, which would supply low-sulfur oil for the 7

Company's power plants and supplement the dwindling Finance supply of natural gas with synthetic gas, if that con figuration is elected. Pacific Resources, Inc., would be the Being an attractive area, our service territory has expe operator and majority owner of the $150 million facility.

rienced a population growth rate approximately twice In-depth environmental studies are being prepared to the national average in recent years. For our Company, support applications for needed permits from govern-this rapidly growing number of customers to serve has re ment agencies concerned with air and water quality, quired the expenditure of hundreds of millions of dollars planning, and construction. Approvals to construct the to build new facilities. Major gas and electric construc plant are expected to take until the end of 1974. Con-ton projects cost $101.7 million in 1973. The 1974 budget struction could be started by January, 1975.

for new plant and equipment is $171.4 million, including It is estimated that the refinery could be in production environmental expenditures of almost $30 million.

by 1977, the year in which the continuing shortage of nat ural gas might cause interruptions in service to residen tial heating customers. If synthetic natural gas is CAPITAL EXPENDITURES produced by the refinery, it would be highly important as (MILLIONS OF DOLLARS) 106 102 a supplementary source of home heating fuel in the event 97 no other new supplies of gas are acquired by that time.

Another major project, still in an early stage, is a pro posed 65-mile fuel oil pipeline system which would link 54 the Encina Power Plant to our other fossil-fueled power 42 plants and gas turbine installations. In addition, the 24 pipeline system would connect the proposed inland com bined cycle generating plant with the proposed refinery.

Preliminary engineering and design of the system has be-

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'73 gun, along with preparation of an environmental impact report and acquisition of necessary government approv als. The pipeline would provide improved flexibility, reli ability, and efficiency in transporting fuel oil to In com o w ith t l mai ese relyton Company facilities. Construction of the pipeline system outsi could begin in 1976.

outlays. The Company had two issues of securities during

.The Company's natural gas supply contract could be the year 1973.

affected by two current cases. One is pending before the The first issue was a private placement of 300,000 California Supreme Court,'and the other before the shares of preference stock at $100 a share. The stock, PUC.

which carried a dividend rate of $7.325 per share, was The Supreme Court case arose from a complaint the sold on April 26 to the Prudential Insurance Company of Company filed with the PUC to prevent the Company's America. This sale to an institutional investor provided supplier from reducing deliveries of gas. In August, 1973, the Company with significant economies in commissions the PUC-issued an adverse decision, which the Company and other expenses of issuing the stock.

has appealed to the court. Approximately one billion cu-The second issue was 2 million shares of common bic feet of gas could be involved in 1974 under average stock, which was sold December 11. The negotiated pub weather conditions.

lic offering through a group of underwriters netted the The other case dates back to our supplier's 1971 gen-Company $26.7 million. The Company's previous offer eral rate case, when the Company successfully prevented ing of common stock was an issue of 1.5 million shares in the diversion of its gas to retail interruptible customers in December, 1972.

other parts of Southern California. Some of these cus-Standard & Poor's derated the Company's first mort tomers have raised the issue again, and the PUC has gage bonds on December 21 from AA to A. The action scheduled hearings for April, 1974..As much as 10 billion came just four days after the Company's application for cubic feet of gas could be involved in 1974 under average interim rate relief of $6.6 million was granted by the weather conditions.

PUC. Moody's, the other major rating service, continued Deliveries to firm gas customers in San Diego would its AA rating of SDG&E's bonds.

not be affected by either of these two cases. Electric cus-On January 7, 1974, the Company sold $75 million in tomers' rates, however, could be increased by about $15 first mortgage bonds at an annual net cost of 8.47 per million annually, through the Company's fuel clause, be-cent. SDG&E realized $74.2 million from the sale of the cause of the need to substitute higher priced fuel oil for bonds. A portion of the proceeds was used to retire a $55 the gas which otherwise would have been burned in the million bank loan, and the balance was used to retire power plants. We fully intend to fight to preserve our short-term bank notes used as temporary financing for

rights, additions to the utility properties of the Company.

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On April 3, 1974, another private placement of prefer-In 1972, when some slippage in the San Onofre shed ence stock is planned. SDG&E is negotiating the sale of ule already was apparent, the Company filed application approximately $25 million worth of stock to a group of 14 with the PUC for permission to construct a fifth fossil companies.

fueled steam-electric generating unit at Encina Power Financing plans for later in 1974 include the sale of ap-Plant. We expected to obtain the needed construction proximately $65 million in first mortgage bonds, and the certificate by mid-1973 and have the unit in commercial issuance of additional common stock in the fourth quar-operation by mid-1975. An unexpected one-year delay, ter of the year.

caused by environmental demands and requirements, in obtaining the PUC certificate has pushed the projected Electric Construction operating date for Encina 5 ahead to mid-1976. In addi tion to the PUC approval, the project also must be ap Major construction projects in the Company's electric proved by the Coastal Commission before construction division in 1973 were headed by Encina 4, a steam-elec-can begin.

tric generating unit of approximately 300,000 kilowatts The Company expects to use the existing across-the gross capability. It began commercial operation on No-beach warm water discharge channel for Encina 5, and vember 1. This new unit is designed to operate contin-studies are continuing into the effects of thermal dis uously but has the capability for cycling operation as charge into the coastal waters. The San Diego Regional required by system demand. The unit has advanced Water Quality Control Board is preparing waste dis emission control features which enable it to meet strin-charge requirements for the entire plant. It is possible, gent air pollution control standards.

depending on the findings of the board, that the Coi The scheduled commercial operation of two additional pany could be required to construct a costly ocean outfall units proposed for San Onofre Nuclear Generating Sta-for Units 4 and 5, and possibly for all five units. Such tion has been delayed four years beyond the original findings, however, may not be made until after Unit 5 is dates. The nuclear power plant is owned 20 percent by placed in operation.

SDG&E and 80 percent by Southern California Edison Company. An existing 450,000-kilowatt unit has been in operation since 1967. San Onofre 2 and 3, each of which will generate 1,140,000 kilowatts, are now expected to be in operation by the years 1980 and 1981 respectively. For the most part, the delays were caused by the unreason able demands of nuclear power plant foes.

The San Onofre plant expansion plans were reviewed by more than 30 national, state and local agencies over a three-year period and a total of 17 permits was issued. By December of 1973, the last remaining barrier was the California Coastal Zone Conservation Commission. Af ter an earlier approval by the San Diego Regional Coastal Commission, environmentalist groups appealed.

The state board voted 6-5 to uphold the regional deci sion, but failed to give the needed two-thirds approval.

Subsequently, on February 20, 1974, the State Com mission reconsidered and voted to approve the plant ex pansion, based on a compromise worked out with the two utility companies. The compromise involves retention of some sand bluffs, public access to the beach area during the construction period, and a program of monitoring the marine environment.

Opponents of the plant have indicated their intention to test the Coastal Commission's decision in the courts.

This could subject the project to additional delays. If the two proposed units are not constructed, the Edison Com pany and SDG&E will have to replace the lost power by The reactor core of San Onofre Nuclear Generating Sta burning an additional 30 million barrels of oil a year in tion is shown during refueling operations in June, 1973. Ev fossil-fueled power plants. Shifting the proposed San ery 15 to 18 months, one-third of the plant's uranium Onofre units to another site would delay the project by dioxidefuel is replaced. Thefuel assemblies are lowered by another four years or more, and, in our opinion, is not a a crane into the reactorpit under the water.

feasible alternative.

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In conjunction with the construction of Unit 5, the service to await the replacement of experimental new Company will be required to replace the existing four burners. Procedural changes in firing brought Encina 1,2 190-foot stacks with a single 400-foot stack. The tall stack and 3, and South Bay 1 and 2 into compliance.

would improve the dispersal of plant emissions and

-South Bay 3 presented the most challenging problem.

would reduce the effect of plant operations on ambient At year-end it was operating at reduced capability, using air quality.

water injection as a temporary measure for emission con Approval for the construction of three gas turbines trol Major modifications are planned for the unit over a with 160,000 kilowatts total capacity was granted during three-month period, starting in April, 1974, with minor 1973 by the San Diego County Air Pollution Control Dis-modifications to follow on Units 1 and 2. During 1973, trict and the Coastal Commission. PUC hearings have modifications to the Company's 18 gas turbines were been completed and a permit, now long overdue, is completed, enabling these units to meet the stringent expected to be issued soon. These units are scheduled 1974 standards for nitrogen oxide emissions.

to be placed in service at the South Bay Power Plant late in 1974.

The southern half of an inland 230,000-volt (230 kv) t he otak foe save vab geneatgwapac transmission system was completed as 1973 drew to a close. This 38-mile line runs from Escondido to Mission Substation in San Diego. Still to be built is a 53-mile link Cost per Kilowatt of Installed Capacity between Escondido and San Onofre Nuclear Generating Station. When completed, the San Onofre-Escondido (to modify existing units) 230 kv line, in conjunction with the previously installed San Onofre-Mission 230 kv line on the coastal corridor, will improve the reliability of the transmission system from the San Onofre Plant and the California Power Pool to the north.

There are now approximately 100 miles of 230 kv lines The Company's emissions task force estimates that to in the Company's electric system. These lines make more tal loss of system generating capability due to the emis efficient use of transmission rights-of-way because they sion control will be 7 percent when South Bay 3 is back in can carry at least 65 percent more power than an equiva-service. Without the elaborate and costly equipment lent 138 kv line and do not require any additional right-modifications that were made, the system's loss would of-way. Also, based on the cost of energy transmitted, a have grown to 27 percent. In dollar terms, ihe 20 percent 230 kv transmission line can be constructed for less than capacity that will be saved is valued at approximately a 138 kv line.

$22 per kilowatt-a real bargain, considering that a new More than one-third of the 172 structures in the 1973 fossil-fueled steam unit such as Encina 5 will cost well transmission line construction were the new aesthetic over $200 per installed kilowatt.

poles, which greatly improve the appearance of the line in areas visible to the public. Upon completion of the Gas Division construction, cleared-off areas were reseeded with grass and wildflowers to restore the land.

One of the largest Gas Division projects in recent years Some 48 miles of 230 kv construction are planned for began during the summer of 1973. Construction is now 1974. These lines will be associated with the construction progressing on 12.8 miles of 16-inch transmission line in of Encina Unit 5.

the northern part of San Diego County. The $3.9 million project will form an east-west tie between the Company's Emission Control two north-south gas transmission lines when the final phase is completed in the latter part of 1975.

The Company's $7 million air pollution control pro-This new line will replace a smaller one that was built gram continued through 1973. At the end of the year, all prior to World War 11. The greater capacity will enable four fossil-fueled power plants were operating in com-the Company to serve the fast-growing areas of Escon pliance with the stringent new standards that took effect dido and San Marcos. In addition, the line will provide January 1, 1974. The affected units were reduced in effi-an alternative route to serve the metropolitan San Diego ciency and capability. Therefore, the plants are now area, thus improving system reliability.

burning more fuel as the result of the clean air program.

Additional natural gas beyond that purchased from The newest units, South Bay 4 and Encina 4, required our supplier's pipeline is expected to become available only minor procedural changes. The older units at Silver soon under the terms of a 15-year contract between the Gate Power Plant had to have fairly major boiler modifi-Company and the Tioga Wells Corporation. The gas is cations. Two of the three large boilers at Station B were located in the Chowehilla gas field near Merced in the brought into compliance and the third was taken out of San Joaquin Valley of California. Under the terms of the 1.0

contract, 25,000 gallons of liquefied natural gas a day Energy for the Future (9,125,000 gallons per year) will be transported 435 miles by tanker truck to SDG&E's Chula Vista LNG plant for It is significant that no major power plant construction storage. The fuel will be used primarily to meet the peak was under way as 1973 drew to a close, although the demands of our firm gas customers.

300,000-kilowatt Encina Unit 4 went into service in the Gas in the Chowchilla field in its natural state is not latter part of the year. All of the Company's proposed usable nor is it compatible with pipeline gas. By means of projects for adding new generating capacity were await a sophisticated new technique utilizing the high wellhead ing regulatory approvals or permits of various kinds.

pressure to perform refrigeration work, the gas can be Siting problems raised doubts for a time about the pro stripped of its undesirable components (primarily nitro-posed $1.3 billion Kaiparowits Power Plant in South gen) and brought up to pipeline gas quality standards.

western Utah. Your Company is participating in the Thus, it is economically practical to improve formerly project with Southern California Edison Company and unusable supplies in quality and bring them to market, Arizona Public Service Company. The three companies even from remote sites, in the form of LNG.

plan to utilize vast deposits of low-sulfur coal in the area Renewal of older sections of the low-pressure gas dis-to fuel a 3 million-kilowatt mine-mouth power plant, tribution system, a continuing project, gathered momen-starting in the early 1980s.

tum during 1973. The renewal program utilizes a Secretary of the Interior Rogers C. B. Morton in June, relatively new technique of inserting polyethylene pipe 1973, disapproved of the power plant site, which already into existing cast iron pipe. This method enables the had been changed several times for environmental rea Company to complete a project in about one-third the sons. Subsequent to Mr. Morton's action, the three com time and at about one-half the cost of former methods.

panies met with a federal task force on criteria for Increased capacity and reliability are gained with the poly-alternate sites. The resulting studies of five sites in South ethylene, which is noncorrosive and will result in de-em Utah have been submitted to Mr. Morton. He has di creased maintenance costs.

rected the Bureau of Land Management to expedite the processing of the companies' application and to start on Southern California an environmental impact statement, which will be filed Gas Company Line with the President's Council on Environmental Quality.

Riverside County It is likely that public hearings will be scheduled some San Diego County time in 1974. If no other serious problems develop, a site for the plant could be conveyed to the utility companies early in 1975, thus permitting construction to start. It is important to mention that the government's insistence on the site change would add millions to the cost of the 30-inch Line-..- 16-inch Line plant over its life. We are making every effort to preserve the most economical site.

In seeking out environmentally acceptable on-system power plant sites, the Company has turned to conisid San eration of areas away from the usual seacoast locations.

Carlsbad Vista Marcos Because of federal legislation, state regulations and the Escondido emotionally charged opposition by power plant foes, it is New N

all but impossible to develop coastal sites in the time Transmission span available to us. Early in 1973, SDG&E began stud Tie-Line ies of inland sites in San Diego County as locations for a Thcombined cycle (gasturbine-steam turbine) power plant of 800,000 kilowatts total capacity.

Because of the inland location, cooling towers will be required to remove the heat exhausted by the steam tur bines. These will be the first cooling towers on the Cin pany's electric system. As planned, the plant will be constructed in increments, with units coming into service during the period from 1977 to 1979.

-S-30-inch Tie-Line Final environmental studies are now being completed, and a site for the combined cycle plant will be selected SAN DIEGO before the end of the first quarter of 1974. The services of Tecolote Regulator Station-.-

-p-Mission Regulator Station a citizens' Ad Hoc Site Evaluation Committee were uti lized in assessing the environmental aspects of possible sites. Members of environmental and civic organizations sons Subequnt t Mr Moron'sacton, he hreecom

Oceanside Borreg Salton Geothermal EscodidoSea Research Escod doProgram Niland Imperial Valley El Centro El Cajon Heber

• Calexico San Diego

-Mexicali served on this committee at the Company's request as a San Diego County will construct a plant that will use a means of gaining citizen input at an early stage in the flash pyrolitic process to turn solid waste into a synthetic planning process. It should be noted that the Ad Hoc liquid fuel which may be suitable for use in the furnaces Committee performed in a most responsible and efficient of your Company's boilers. The plant is scheduled to be manner. We are indebted to them for a public service completed by mid-1975. It will convert 200 tons-of waste well done.

into about 200 barrels of synthetic fuel daily when it is in Concern over the uncertainties of coastal siting for nu-production. SDG&E has agreed to purchase the output clear power plants also was a factor in the Company's de-of the plant and field test it in one of the power plants to cision to seek a site in desert country for a multi-unit demonstrate its commercial feasibility.

nuclear power plant, scheduled for initial operation in The Company's subsidiary, New Albion Resources 1984. Following a screening study that included all of Company, has been engaged in exploration for gas and Southern California, three promising areas along the oil in three areas. Two of these are in northwestern Col Colorado River near Blythe were selected for further orado, where six wells were drilled. Results thus far have consideration. At present, geologic and seismic studies been disappointing, since none of the wells have pro are being conducted at three candidate sites, and the duced sufficient quantities of-gas or oil for commercial Company is negotiating with the Metropolitan Water production. Additional testing of some of these wells will District to acquire a water allocation for the plant.

be carried out, and further drilling of exploration wells In addition, SDG&E is a participant in a feasibility in the area is under study.

study being conducted by major California utilities of a In the San Joaquin Valley of California at a place nuclear power plant in the San Joaquin Valley. Four nu-called Buttonwillow North Prospect, the Company par clear units totalling up to 4,800,000 kilowatts of capacity ticipated in deepening an existing well to 21,640 feet, the may be constructed in the 1981-85 period. Precise partici-deepest well ever drilled in the state. Mechanical prob pation shares have not yet been agreed upon. Your Com-lems prevented putting the well into production, but the pany's obligation for feasibility study costs is 3 percent.

area has sufficient promise to justify drilling a second The Company also is sponsoring research into a better well nearby. This well will be started in the second quar method of converting coal into clean fuels. SDG&E has ter of 1974. New Albion Resources Company has the invested $100,000 in the first phase of a new Stone &

right to purchase 50 percent of any natural gas that is dis Webster-General Atomic research venture which will use covered, plus the opportunity to obtain an ownership in nuclear energy to convert coal into pipeline-quality gas terest in the well.

and clean liquid fuels. The two-year research program As the Company's geothermal research and devel will integrate the S&W Solution/Gasification Process opment program complelted its second year, testing was with General Atomic's high temperature gas-cooled nu-continuing at Niland and Heber in the Imperial Valley of clear reactor. Potentially, the combined process could California. Operation of a small scale heat exchanger at convert almost all of the coal feedstock into pipeline Niland confirmed that the geothermal brine would be a quality synthetic natural gas.

major problem in the operation of any power plant. The Solid municipal waste is another source of fuel the brine, which has about six times the mineral content of Company plans to use as part of a project funded by the seawater, causes serious scaling of the equipment. Test Environmental Protection Agency. Under an EPA grant, ing is scheduled to determine the feasibility of utilizing 12

only the flashed steam from the geothermal fluid.

gas division, and in 1966 was elected vice president-gas.

The program was stepped up to become a three-com-Under his direction, SDG&E pioneered in the field of liq pany venture during the summer of 1973. Involved in the uefied natural gas (LNG) and built thefirst LNG plant in effort at Heber are New Albion Resources Company, the West. The Company utilizes LNG in serving custom Magma Energy, Incorporated, and Chevron Oil Com-ers beyond the mains at remote locations. In 1969, Mr.

pany. Testing in this area is scheduled for early 1974. The Engler was elected vice president-operations services, a Heber reservoir conditions are different from Niland, post in which he put into effect construction cost control being lower in temperature and much lower in mineral programs that saved the Company $800,000 a year. He content.

became senior vice president in 1971.

Best estimates are that successful development of the Succeeding Mr. Engler as senior vice president is Da geothermal resources could result in construction of a vid W. Gilman. He Joined the Company in 1970 after 23 50,000 kilowatt power plant four to five years from now.

years with Commonwealth Edison Company in Chicago, This assumes that the present research and development Illinois. Mr. Gilman had been vice president of effort is successful, although there is no assurance that SDG&E's operations services division prior to his pro this goal can be reached. Thus, geothermal energy in the motion. He has a Bachelor of Science Degree in Elec Imperial Valley must be considered as a speculative trical Engineering from Carnegie Mellon University.

source of electric power generation at this time. The ben-A new vice president-finance Joined the Company in efits that could be derived by a successful development, June. He is Ralph L. Meyer, formerly financial vice presi however, merit the effort to determine its feasibility.

dent of Iowa Power and Light Company. Mr. Meyer has degrees from the University of Wisconsin and Drake University, and was with Iowa Power for 23 years. He Management Changes succeeds Will B. Johnstone, Jr., who retired.

Jack H. Morse was appointed manager-operations The management structure established in 1971, when services division. Mr. Morse has a Bachelor's Degree and Walter A. Zitlau became president of the Company, was a Master's Degree from San Diego State University. He altered in October, 1973. Martin R. Engler, Jr., one of the has spent his entire working career with SDG&E, and three senior vice presidents, was elected executive vice most recently was a district operating superintendent. He president. This post had been vacant since Mr. Zitlau, joined the Company in 1947.

who formerly held it, assumed the duties of chief execu-In other management changes earlier in the year, John tive officer.

E. Hamrick, formerly manager of the marketing division, Mr. Englerjoined the Company in 1950 after receiving was elected vice president-marketing. James Hamilton, an engineering degree from California Polytechnic In-an economic analyst for the Company, was elected assist stitute. He held a series of executive posts in SDG&E's ant secretary.

Budget review session is conducted by Executive Vice President Martin R. Engler Jr., at left. Ralph L. Meyer, Vice Presi dent-Finance, is standing, and David Wb Gilman, Senior Vice President, is at right.

13

FRnncd Secton Page Statement of Income 15 Balance Sheet....

16-17 Statement of Retained Earnings................ 18 Statement of Changes in Financial Position......

18 Statement of Capitalization.................

19 Notes to Financial Statements............20-22 Auditors' Opinion......................

22 Revenues and Expenses......................

23 Operating Statistics..........................

24 Plant and Capitalization..................

25 1973 Revenue Dollar 25 14

Statement of Income (Thousands of Dollars)

For the Years Ended December 31 1973 1972 OPERATING REVENUES:

Electric..

S......

$164,865

$140,707 G as.................................

62,462 55,978 Steam........................................

436 384 Total Operating Revenues..........................................

227,763 197,069 OPERATING EXPENSES:

Fuel and Purchased Energy:

Electric................

61,822 48,630 Gas...........

27,122 23,475 Transmission, Distribution and Storage................................

12,310 11,360 O ther O perating...................................................

25,689 23,083 Maintenance...............

12,811 11,092 Franchise Payments 4,856 4,236 Depreciation...............

23,366 21,011 Taxes:

Property.................

13,268 12,870 Federal Income (Note 4).....

(201) 488 State Franchise..............

428 599 Other 1,245 994 Total Operating Expenses........................

182,716 157,838 OPERATING INCOME............................

45,047 39,231 OTHER INCOME CREDITS:

Allowance for Funds Used During Construction..........................

3,964 2,242 O ther (N et)..............

2,510 2,533 Total Other Income Credits.........................................

6,474 4,775 INCOME BEFORE INTEREST CHARGES-__.

51,521 44,006 INTEREST CHARGES:

Long-Term Debt...............

20,841 17,840 Short-Term Debt and Other.

2,994 1,780 Total Interest Charges...........................................

23,835 19,620 NET INCOM E (Note 2) 27,686 24,386 PREFERRED DIVIDEND REQUIREMENTS............

6,986 5,253 EARNINGS APPLICABLE TO COMMON SHARES (Note 2).

$ 20,700 19,133 AVERAGE COMMON SHARES OUTSTANDING 11,615 10,078 EARNINGS PER COMMON SHARE (Note 2)....

S................

S 1.78 1.90 DIVIDENDS DECLARED PER COMMON SHARE S

1.20 1.14 See notes to financial statements.

15

Balance Sheet (Thousands of Dollars)

ASSETS Balance at December 31 1973 1972 UTILITY PLANT-At Original Cost:

In Service:

Electric........................................................

$660,967

$561,886 G as..........................................................

157,393 147,725 Comm on and Steam.............................................

39,099 38,072 Total Plant in Service.........................................

857,459 747,683 Plant Held for Future Use..........................................

9,868 8,351 Construction in Progress...........................................

48,700 63,682 Total Utility Plant.............................................

916,027 819,716 Less Accumulated Depreciation.......................................

212,717 192,413 Net Utility Plant (Note 3)......................................

703,310 627,303 INVESTMENTS IN AND ADVANCES TO SUBSIDIARIES (Note 2)......

13,182 11,900 CURRENT ASSETS:

C ash............................................................

3,858 2,290 Receivables (Less Allowance for Doubtful Accounts:

1973, $138,000; 1972, $125,000):

Custom er (N ote 3)..............................................

18,856 17,905 O ther..

3,739 5,824 Materials and Supplies-At Average Cost:

Plant Materials and Operating Supplies.............................

.11,670 13,395 Fuel Stock.....................................................

19,597 10,709 Other 713 1,954 Total Current A ssets...........................................

58,433 52,077 DEFERRED CHARGES.............................................

6,454 3,921 TOTAL...........................................................

$781,379

$695,201 See notes to financial statements.

16

Balance Sheet (Thousands of Dollars)

LIABILITIES AND STOCKHOLDERS' EQUITY Balance at December 31 1973 1972 CAPITALIZATION (See Statement of Capitalization):

Common Equity (Note 6)..........................................

$230,236

$198,519 Preferred Stock (Note 6)............................................

108,500 78,500 Total Stockholders' Equity.......................................

338,736 277,019 Loig-Term Debt (Note 3)...........................................

329,290 330,248 Total Capitalization............................................

668,026 607,267 CURRENT LIABILITIES:

Bank Loans...........

10,500 4,000 Commercial Paper..........................................

25,000 17,350 Accounts Payable.......................

16,940 11,220 Dividends Payable.................................................

5,972 4823 Taxes Accrued (Note 4)...

2,264 1,880 Interest Accrued................

6,441 5,698 Other..............................................................

6,145 5875 Total Current Liabilities........................................

73,262 50,846 CUSTOMER ADVANCES FOR CONSTRUCTION 11,466 9,358 RESERVES AND DEFERRED CREDITS 5,828 7,545 CONTRIBUTIONS IN AID OF CONSTRUCTION.......................

22,797 20,185 COMMITMENTS AND CONTINGENCIES (Note 7)

TOTAL...................

$695,201 See notes to financial statements.

17

Statement of Retained Earnings (Thousands of Dollars)

For the Years Ended December 31 1973 1972 Balance at Beginning of Year..........................................

.S 93,746 S 86,463 Adjustment for Change to Equity Accounting for Subsidiaries (Note 2).......

(1,092)

N et Incom e (N ote 2)................................................

27,686 24,386 T otal.............................

120,340 1 10,849 Cash Dividends:

Preferred Stock...................................................

7,077 5,253 C om m on Stock...................................................

14,400 11,850 T otal.........................................................

2 1,4 7 7 17,10 3 Balance at End of Year...............................................

98,863

$ 93,746 Statement of Changes in Financial Position (Thousands of Dollars)

For the Years Ended December 31 1973 1972 FUNDS PROVIDED:

OPERATIONS:

Net Income....................................................

$ 27,686 S 24,386 Charges (Credits) to Income Not Affecting Funds:

Depreciation.................................................

23,366 21,011 Allowance for Funds Used During Construction......................

(3,964)

(2,242)

Other-Net....................................................

561 415 Funds Provided from Operations................................

47,649 43,570 FINANCING:

Proceeds from Sale of Common Stock................................

26,717 29,684 Proceeds from Sale of Preference Stock...............................

29,884 14,777 Increase (Decrease) in Other Long-Term Debt........................

(183) 54,967 Increase (Decrease) in Short-Term Debt..............................

14,150 (11,150)

Sinking Fund Requirements on Long-Term Debt......................

(775)

(775)

Funds Provided from Financing................................

69,793 87,503 OTHER SOURCES:

Contributions in Aid of Construction and Customer Advances for Construction...........................

4,720 4,965 Decrease (Increase) in Plant Materials and Operating Supplies............

1,725 (3.474)

Decrease (Increase) in Receivables.................................

1,134 (8,369)

Increase (Decrease) in Accounts Payable............................

5,720 (1,163)

Other Changes in Working Capital.................................

2,219 2,345 Funds Provided from Other Sources.............................

15,518 (5,696)

Total.................................................

$132,960

$125,377 FUNDS APPLIED:

Additions to Utility Plant (Excluding Allowance for Funds Used During Construction).............................

$ 97,745

$103,541 Dividends on Preferred Stock.......................................

7,077 5,253 Dividends on Common Stock.......................................

14,400 11,850 Investments in and Advances to Subsidiaries...........................

3,290 3,455 Increase in Fuel Stock............................................

8,888 1,345 Other Uses-Net.................................................

1,560 (67)

Total................................................

$132,960 S125,377 18 See notes to financial statements.

Statement of Capitalization (Thousands of Dollars)

Balance at December 31 1973 1972 COMMON EQUITY (Note 6):

Common Stock, $5 Par Value, Authorized 26,000,000 Shares, Outstanding 1973, 13,500,000 Shares; 1972, 11,500,000 Shares..........

$ 67,500

$ 57,500 Premium on Capital Stock (Less Expense)...............................63,873 47,273 Retained Earnings.................................................98,863 93,746 Total Common Equity...........................................

230,236 198,519 PREFERRED STOCK (Note 6):

CUMULATIVE PREFERRED STOCK, $20 PAR VALUE, AUTHORIZED 1,375,000 SHARES:

5% Series, 375,000 Shares Outstanding...............................

7,500 7,500 42 % Series, 300,000 Shares Outstanding............................

6,000 6,000 4.40% Series, 325,000 Shares Outstanding...................

6,500 6,500 4.60% Series, 375,000 Shares Outstanding............................

7,500 7,500 PREFERENCE STOCK (CUMULATIVE)

WITHOUT PAR VALUE, AUTHORIZED 2,000,000 SHARES:

$9.84 Series, 160,000 Shares Outstanding............................

.16,000 16,000

$7.80 Series, 200,000 Shares Outstanding.............................

20,000 20,000

$7.20 Series, 150,000 Shares Outstanding....................

15,000 15,000

$7.325 Series, 300,000 Shares Outstanding..............................

30,000 Total Preferred Stock.....................

108,500 78,500 LONG-TERM DEBT (Note 3):

FIRST MORTGAGE BONDS:

3% Series C, Due March 1, 1978........................

10,000 10,000 3

% Series D, Due April 1, 1982...................................

12,000 12,000 2Vs% Series E, Due April 1, 1984...............................

17,000 17,000 3%% Series F, Due October 1, 1985...........................

18,000 18,000 4V % Series G, Due October 1, 1987.................................

12,000 12,000 4s% Series H, Due October 1, 1990................................

30,000 30,000 52% Series I, Due March 1, 1997..................................

25,000 25,000 7% Series J, Due December 1, 1998.................................

35,000 35,000 8% % Series K, Due February 1, 2000................................

40,000 40,000 8% Series L, Due September 1, 2001.................................

45,000 45,000 Total........................................................

244,000 244,000 SINKING FUND DEBENTURES:

45/%, Due January 15, 1984......................................

11,250 11,625 42%, Due September 1, 1994.....................................

18,000 18,400 Total.........................................................

29,250 30,025 Sinking Fund Requirements Included in Other Current Liabilities...........

(775)

(775)

Total.........................................................

28,475 29,250 OTHER LONG-TERM DEBT:

Bank Credit Agreement...........................................55,000 55,000 Other.....................

1,815 1,998 Total...............

56,815 56,998 Total Long-Term Debt...........................................329,290 330,248 TOTAL...........

$668,026

$607,267

'See notes to financial statements.

1 7,500

Notes to Financial Statements life method of computation. For Federal income tax December 31, 1973 and 1972 purposes the Company computes depreciation using the most liberalized methods and lives allowed by the

1.

SUMMARY

OF ACCOUNTING POLICIES Treasury Department, which lives are generally shorter than the service lives used for financial state System of Accounts ment purposes. Depreciation claimed for Federal in The accounting records of the Company are main-come tax purposes was approximately $36,400,000 for tained in accordance with the uniform system of ac-1973 and $31,900,000 for 1972.

counts prescribed by the Federal Power Commission (FPC) and adopted by the California Public Utilities IncoTae CommissionCompany includes in net income the current tax re Utility Plant ductions resulting from timing differences which are The cost of additions to utility plant and replace-principally depreciation, allowance for funds used ments of retirement units of property is capitalized.

during construction, overhead costs of construction, Renewals and betterments of units of property, plant, removal costs associated with plant retirement, re and equipment are charged to the appropriate plant search and development, and amortization of the accounts. Cost includes labor, material, and similar property tax credit explained below. In addition the items and indirect charges for engineering, super-Company files a consolidated Federal income tax re vision, transportation, and other related items. The turn with its subsidiaries in which certain items (which Company capitalizes an allowance for funds used are capitalized in the accounts of the subsidiaries) are during construction based on the cost of capital de-deducted for tax purposes. The resultant tax reduc voted to plant under construction. Costs of depreci-tions are applied to benefit the parent Company's in able units of plant retired are eliminated from utility come. No provision is made for deferred taxes relating plant accounts and such costs plus removal expenses to these timing differences. Investment tax credits are and less salvage are charged to accumulated depreci-recorded by the Company as reductions in income tax ation.inte n

ation.

expense inteyear inwhich they are allowable for tax Research and Development purposes.

The Company's share of research and devel-Federal and State taxes on income are allocated opment costs related to industry-wide research ef-between operating income and other income credits.

forts is charged to expense as incurred. Costs related Subsidiaries to Company-controlled research and development The assets, revenues, and losses of subsidiaries are projects are deferred: costs related to specific con-not material in relation to those of the Company. See struction projects and a portion of general engineer-Note 2 for methods of accounting used for 1973 and ing research are capitalized upon completion; costs 1972.

not related to specific construction projects which are significant are amortized over a period not to exceed roperty Taxes five years; minor costs are charged to expense as in-cordance with the taxing authorities' fiscal year since curred.

curred.197

1. A deferred credit relating to a previous account A wholly-owned subsidiary of the Company is en-ing method is being credited to income at $1,400,000 gaged in exploration for coal, geothermal energy, oil and natural gas. Costs incident to exploration for coal or to the drilling and development of geothermal, oil Other and gas wells are deferred and capitalized as incurred Revenues are recognized on the basis of cycle bil by the subsidiary. If exploration or drilling projects lings rendered monthly. The Company does not are determined to be nonproductive or otherwise un-record unbilled revenues.

usable, all costs of that project are charged to opera-Certain 1972 amounts have been reclassified in the tions of the subsidiary in the period this becomes accompanying financial statements to conform to known. Costs deferred by the subsidiary at December 1973 classifications.

31, 1973 and 1972 aggregated $3,900,000 and

$2,500,000, respectively (see Note 2 for method of

2. ACCOUNTING FOR SUBSIDIARIES accounting for subsidiaries).

In accordance with an FPC order which became ef Depreciation:

fective January 1, 1973, the Company changed from Provisions for depreciation of property, plant, and the "cost" method to the "equity" method of account equipment for financial statement purposes are gen-ing for its subsidiaries. Accordingly, the Company has erally based on the estimated service lives of the re-charged $1,092,000'to retained earnings for losses of spective properties using the straight-line remaining subsidiaries prior to 1973. The change in method of 20

accounting reduced net income $916,000 ($.08 per Current Federal Income taxes included in the State share) in 1973.

ment of Income are summarized below:

The financial statements for 1972 reflect the "cost" method of accounting for investments in subsidiaries.

If such financial statements had been on the "equity" 1973 1972 method, net income per share would have been re-Tax (credit before duced by $.06.

investment credit

$(1,089)*$

455

3. LONG-TERM DEBT Investment credit (704)

(1,904)

Net credit................

$(1,793) $(1,449)

Additional First Mortgage Bonds may be issued under the terms of the Bond Indenture upon com-Alloatd to:

pliance with the provisions thereof and subject to the Operaincome......

(201)

(1488 Indenture for Sinking Fund Debentures. Substan tially all utility plant is subject to the lien of the Bond Net credit..........$(1,793) $(1,449)

Indenture.

During January of 1974, the Company sold

• Resultingfrom carryback of tax operating loss.

$75,000,000 First Mortgage Bonds, 88%, due 2004.

As of Dember 31, 1973, the Company's unused The approximate net proceeds of $74,200,000 were investment tax credit which may be carried forward used to repay, a bank credit agreement totaling and applied against future years' Federal

$55,000,000 and the remaining proceeds were used to taxes is estimated at $4,350,000 (expiring in 1982 and reduce short-term debt. Such bank credit agreement 1983).

required interest payments quarterly at approx-The Federal income tax returns of the Company imately 114% of the prime rate charged by the bank; have been examined by the Internal Revenue Service the interest rate was 11.65% and 6.27% at December through 1968. The Company's 1969 return is cur 31, 1973 and 1972, respectively. The agreement pro-rently being examined.

vided that property additions otherwise available for the issuance of additional First Mortgage Bonds be

5. PENSION AND SAVINGS PLANS maintained at 166 2/% of the aggregate amount of out standing indebtedness under,the agreement.,

The Company provides pension and savings plans The Company has entered into an agreement with for substantially all employees. The cost of the plans an English lending syndicate providing for issuance of charged to expense and utility plant for the years 1973 promissory notes as required to finance the construc-and 1972 were $3,840,000 and $3,397,000 respec tion of two nuclear turbine-generators. The notes are tively. It is the policy of the Company to fund pension not to exceed an aggregate principal amount of costs accrued; there is no liability for past or prior E 2,958,406 ($6,871,000). Such notes are collateralized services undr the actuarial method in use.

by substantially all of the Company's customer ac counts receivable.The notes, maturing in ten semi-ann-

6. CAPITAL STOCK ual installments commencing February 1979, are pay-During 1973, 300,000 shares of $7.325 Series of able in pounds sterling and bear interest at 52% per Preference Stock (Cumulative) and 2,000,000 shares annum payable semi-annually. At December 31,1973 of common stock were sold. During 1972, 150,000 and 1972, the principal balance of notes outstanding shares of $7.20 Series Preference Stock (Cumulative) under this agreement amounted to E704,180 and and 1,500,000 shares of common stock were sold. The

£ 239,590, respectively. These amounts have been excess of the net proceeds of these sales over the par or translated into United-States dollars ($1,718,000 and stated value of the stock sold ($16,600,000 in 1973 and

$578,000, respectively) based upon the rate of ex-

$21,962,000 in 1972) has been credited to premium on change prevailing when the notes were originally is-capital stock.

sued.

The Company is negotiating a private placement of

4. FEDERAL INCOME TAXsharesof a new Series of Preference Stock

4.

FDERL INOMETAX(Cumulative) to be issued during April 1974 for ap Provisions for income tax are below normal statu-proximately $25,000,000.

tory rates in relation to pre-tax income, principally be-The Company, at its option, may redeem the whole cause of differences between book and taxable or any part of its Cumulative Preferred Stock out income as explained in Note 1. In addition, the impact standing upon payment of the redemption price to of investment credit varies from year to year because gether with accrued dividends. At December 31, 1973 of the incidence of completion of construction projects and 1972, the redemption premiums per share ranged and the effect of carryback provisions of the Internal from $1.00 to $4.00, depending upon the series and Revenue Code.

the date fixed for redemption.

21

The Company's Preference Stock (Cumulative) is tion of two additional nuclear units at San Onofre, redeemable upon payment of the redemption price California has been delayed. See page 9 for a dis together with accrued dividends, provided that prior cussion of this matter.

to certain specified dates through April 1980, no re-The Company is committed under certain leases demption may be made through refunding at an ef-which are not significant to the Company's oper fective cost of money to the Company per annum at ations.

less than the respective dividend rates. The redemp-The Company has entered into long-term contracts tion prices subsequent to April of 1980 range from with suppliers for the purchase of low sulfur fuel oil

$112.00 to $100.00 per share, depending upon the for various periods through June 1977. The Company series and the date for redemption.

estimates that commitments under these contracts ag Beginning April 15, 1984, the Company is required gregate $252,817,000. In addition, the Company has to set aside annually $1,200,000 as a sinking fund for contracted to purchase a minimum of 2,850,000 bar redemption of 12,000 shares of the $7.325 Series Pref-rels of fuel oil annually during the period from July erence Stock (Cumulative) at $100 per share plus ac-1977 to June 1982 at a price which is to be negotiated crued dividends.

at a future date. However, the right to receive such oil is subject to the Federal government fuel allocation

7. COMMITMENTS AND CONTINGENCIES(see page 7).

7. CMMITENTSANDCONTNGENIESThe CPUC has ordered utilities and their customers The Company's capital expenditures are estimated to reduce electric and gas consumption. See pages 6-7 at $171,400,000 for 1974; commitments for future for information on how this may affect the operations projects are approximately $177,025,000. Construc-of the Company.

Auditors' Opinion Haskins & Sells Certified Public Accountants 625 Broadway San Diego, California 92101 To the Shareholders and Board of Directors of San Diego Gas & Electric Company:

We have examined the financial statements of San In our opinion, such financial statements present Diego Gas & Electric Company (pages 15 to 22) for fairly, on the basis described in Note 2, the financial thegyears ended December 31, 1973 and 1972. Our position of the Company at December 31, 1973 and examination was made,in accordance with generally 1972 and the results of its operations and the changes accepted auditing standards, and accordingly included in its financial position for the years then ended, in con such tests of the accounting records and such other formity with generally accepted accounting principles auditing procedures as we considered necessary in the consistently applied during the periods except for the circumstances.

change in 1973, with which we concur, in the method of accounting for investments in subsidiaries as ex plained in Note 2 touthe financial statements.

HASKINS & SELLS February 15, 1974 22

Comparative Statistics (Thousands of Dollars)

REVENUES AND EXPENSES 1973 1972 1971 1970 1969 1963 Operating Revenues Electric Department Residential..................

$ 70,354

$ 59,139

$ 50,733

$ 45,276

$ 41,922

$ 28,156 Commercial and Industrial...

88,113 75,462 64,392 58,589 53,463 33,331 Agricultural...............

2,463 2,242 1,968 1,992 1,730 1,768 Street and Highway Lighting....

2,497 2,165 1,875 1,708 1,554 1,169 Other Sales................

405 718 207 282 188 2,194 Miscellaneous Revenues.....

1,033 981 803 663 630 288 Total Electric Revenues...

164,865 140,707 119,978 108,510 99,487 66,906 Gas Department Residential.............

42,016

.'38,386 38,26.8 31,474 30,188 23,131 Commercial..................

14,911 12,847 12,236 9,588 8,689 5,546 Industrial-Firm............

754 683 627 573 558 403 Interruptible................

4,464 3,779 3,418 3,063 2,771 1,824 Other Sales........

'......1 18 8

10 10 Miscellaneous Revenues.......

299 275 265 239 202 153 Total Gas Revenues......

62,462 55,978 54,824 44,937 42,418 31,057 Steam Department............

436 384 373 339 355 271 Total Operating Revenues.........

227,763 197,069 175,175 153,786 142,260 98,234 Rebates to Customers...........

327 1,821 Net Operating Revenues..........

j. 227,763 197,069 175,175 153,459 140,439 98,234 Operating Expenses Fuel and Purchased Energy Electric....................

61,822 48,630 35,868 26,381 21,259 13,042 Gas......................

27,122 23,475 22,759 17,820.

15,302 12,974 Other Operating..............

42,855 38,679 34,840 28,792 26,600 16,893 Maintenance..................

12,811 11,092 9,831 9,028 8,517 4,694 Depreciation..................

23,366 21,011

_18,812 16,743 15,457 10,538 Taxes Property..........

13,268 12,870 12,439 14,022 12,447 10,641 Federal Income.....

(201) 488 4,930 7,230 10,344 10,890 State Franchise............

428 599 1,120 1,341 1,605 1,270 Other....................

1,245 994 780 635 578 412 Total Operating Expenses..........I.82,716 157,838 141,379 121,992 112,109 81,354 Operating Income................

45,047 39,231 33,796 31,467 28,330 16,880 Other Income Credits Allowance for Funds Used During Construction.........

3,964 2,242 2,264 899 691 299 Other (Net) 2,510 2,533 1,644 682 837 (104)

Total Other Income Credits 6,474 4,775 3,908 1,581 1,528 195 Income Before Interest Charges....

51,521 44,006 37,704 33,048 29,858 17,075 Interest Charges Long-Term Debt..............

20,841 17,840 13,419 12,276 9,549 4,970 Short-Term Debt and Other.....

2,994 1,780 1,472 438 505 195 Total Interest Charges......

23,835 19,620 14,891 12,714 10,054 5,165 Net Income......................

27,686 24,386 22,813 20,334 19,804 11,910 Preferred Stock Dividend Requirements............

6,986 5,253 3,875 2,128 1,276 1,279 Earnings Applicable to Common Shares...........

20,700 19,133 18,938 18,206 18,528 10,631 Common Stock Dividends Declared 14,400 11,850 10,800 10,800 10,200 6,400 Earnings Reinvested..............

6,300 7,283

$ 8,138

$ 7,406

$ 8,328 4,231 Common Stock Shares Average Outstanding..........

11,615 10,078 10,000 10,000 10,000 10,000 Outstanding End of Year........

13,500 11,500 10,000 10,000 10,000 10,000 Earnings PerShare............

1.78 1.90 1.89' 1.82 1.85 1.06 Dividends Declared per Share....

S 1.20 1.14 1.08 1.08 1.02

.64 23

Comparative Statistics OPERATING STATISTICS 1973 1972 1971 1970 1969 1963 Population Served (Thousands)....

1,625 1,575 1,507 1,465 1,445 1,188 Regular Employees...............

4,007 3,874 3,660 3,525 3,333 ELECTRIC DEPARTMENT Gross System Generating Capability-Mw...............

2,005 1,900 1,778 1,569 1,565 951 Firm Contracts-Mw...............

184 138 118 130 64 Additional Capability Interconnections-Mw.........

418 464 484 90 156 110 Total Capability-Mw.......

2,607 2,502 2,380 1,789 1,785 1,061 Peak Load-Mw...............

1,600 1,649 1,533 1,388 1,260 806 Sales-Mwhr (Thousands)

Residential.................

2,880 2,661 2,429 2,113 1,933 1,089 Commercial and Industrial.....

4,720 4,413 4,043 3,683 3,347 1,867 Agricultural.................

118 123 112 114 94 91 Street and Highway Lighting....

60 55 49 45 40 37 Other Sales...................

125 150 27 28 40 173 Total Sales.................

7,903 7,402 6,660 5,983 5,454 3,257 Customers (end of year)

Residential.................

508,914 478,579 448,258 421,946 399,682 310,971 Commercial and Industrial.....

56,657 54,078 51,471 48,978 46,978 44,176 Agricultural..........

3,114 3,141 3,144 3,176 3,175 3,822 Street and Highway Lighting....

612 560 492 461 429 113 Other Sales.................

5 9

9 9

10 8

Total Customers...........

569,302 536,367 503,374 474,570 450,274 359,090 Average Residential Usage Kilowatt-hours................

5,822 5,731 5,590 5,146 4,952 3,552 Plant Investment per Customer.......

1,305 1,224 S 1,130 1,027 S

• 980 S

809 Plant Investment per Thousand Kilowatt-hours Sold............

94 $

89 S 85 81 S 81 89 Plant Investment per Revenue Dollar..

4.51 $

4.67 S 4.74 $

4.49 $

4.44 4.34 GAS DEPARTMENT Natural Gas Supply Line Capacity M Therms per day..............

3,812 3,801 3,823 3,841 3,856 3,878 Maximum Daily Firm Sendout M Therms..................

3,065 2,992 3,097 2,462 2,418 1,998 Sales-M Therms Residential.................

312,343 299,391 309,962 262,552 259,993 192,031 Commercial 153,824 139,860 136,682 115,729 107,866 65,348 Industrial-Firm.............

9,975 9,607 9,122 9,052 9,031 6,360 Interruptible................

84,097 80,437 77,168 75,658 69,888 43,817 Other'Sales.................

260 132 161 3

71 Total Sales...............

560,499 529,427 533,095 462,994 446,849 307,556 Customers (end of year)........

Residential.................

375,380 362,470 349,299 337,140 326,648 267,452 Commercial 33,769 32,337 30,865 29,541 28,500 24,136 Industrial-Firm.............

79 80 72 70 67 69 Interruptible................

164 164 163 166 170 156 Other Sales..................

1 1

1 I

Total Customers............

.409,393 395,052 380,400 366,917 355,386 291,813 Average Residential Usage-Therms..

847 841 905 792 810 729 Plant Investment per Customer......

419 409 $

394 S 379 $

353 296 Plant Investment per M Therms Sold..

S 306 $

305 $

280 $

300 $

281 280 Plant Investment per Revenue Dollar..

2.75 2.89 $

2.72 $

3.09 2.96 2.78 STEAM DEPARTMENT Sales-thousands of pounds Commercial.................

331,297 349,252 366,793 332,877 348,980 257,248 Customers (end of year)

Commercial.................

71 74 72 71 69 78 24

Comparative Statistics (Thousands of Dollars)

DECEMBER 31 1973 1972 1971 1970 1969 1963 PLANT AND CAPITALIZATION Utility Plant Electric..........

$715,532

$630,689

$544,012

$463,791

$419,845

$281,444 Gas.........................

160,227 149,511 137,530 127,867 115,425 80,900 Common and Steam..........

40,268 39,516 38,561 36,125 32,412 14,988 Total......

916,027 819,716 720,103 627,783 567,682 377,332 Accumulated Depreciation.......

212,717 192,413 174,373 158,148 144,005 86,063 Utility Plant-Net.......

...$703,310

$627,303

$545,730

$469,635

$423,677

$291,269 Capitalization Long-Term Debt:

First Mortgage Bonds..........$244,000

$244,000

$244,000

$199,000

$175,000

$115,000 Sinking Fund Debentures.........

28,475 29,250 30,025 30,800 31,575 14,625 Other Long-Term Debt.........

56,815 56,998 1,998 109 Total Long-Term Debt........329,290 330,248 276,023 229,909 206,575 129,625 Preferred Stock............

108,500 78,500 63,500 43,500 27,500 27,500 Common Equity...............

230,236 198,519 161,775 153,959 146,867 108,856 Total.....................

$668,026

$607,267

$501,298

$427,368

$380,942

$265,981 Capitalization Ratios (per cent)

Long-Term Debt:

First Mortgage Bonds...........

36.53 40.18 48.67 46.56 45.94 43.23 Sinking Fund Debentures...

4.26 4.82 5.99 7.21 8.29 5.50 Other Long-Term Debt........

8.50 9.38 0.40 0.03 Total Long-Term Debt 49.29 54.38 55.06 53.80 54.23 48.73 Preferred Stock.................

16.24 12.93 12.67 10.18 7.22 10.34 Common Equity:.'.,.............

34.47 32.69 32.27 36.02 38.55 40.93 Total......

100.00 1QO.00 100.00 100.00 100.00 100.00 The 1973 Revenue DoHar SOURCE DISPOSITION Materials, Supplies and r00110N 1OU@

Other Expenses Reinvested Wear and Tear in Business

-on Equipment 2.770 10.260 Dividends to Shareholders 9.394 Salaries and Cost of /

Benefits Borrowed 14.500 Steam Sales Money Taxes: State, 0.19t 8.720 Federal, City, County 5.710 25

Board of Directors Walter A. Zitlau*

Sherman Chickering*

Adm. U. S. Grant Sharp, San Diego. President and San Francisco. Vice President of the USN (Ret.) San Diego.

Chief Executive Officer of the Company (without salary); partner Consultant to the President of Company; Chairman of the in firm of Chickering & Gregory, Teledyne Ryan Aeronautical Executive Committee General Counsel of the Company Company (a manufacturer of J. Floyd Andrews Carl E. Hartnack*

electronics and unmanned aircraft)

San Diego. Chairman of the Board Los Angeles. President of Joseph F. Sinnott*

and Chief Executive Officer of Security Pacific National Bank San Diego. Retired, former PSA, Incorporated Leland D. Pratt President of the Company Robert H. Biron San Diego. President of Kelco Fred C. Stalder*

San Diego. President,.Rancho Company (a manufacturer of kelp San Diego. President and Chief La Jolla, Incorporated; Vice products and biochemical Executive Officer of Central President, La Jolla Village colloids)

Federal Savings and Loan Association (hotel and land development Burt F.Raynes corporations)

Chula Vista. Chairman of the Malin Burnham Board and Chief Executive San Diego. President and Chief Officer of Rohr Industries, Executive Officer of John Burnham &

Incorporated (a diversified

• Member of the Executive Committee Company (a mortgage loan, transportation systems manufacturer) real estate, and insurance firm)

O Cffhicers Walter A. Zitlau John E. Hamrick Jack E. Thomas President Vice President-Marketing Vice President-Electric Martin R. Engler, Jr.

Paul L. Hathaway, Jr.

John H. Woy Executive Vice President Vice President-Gas Vice President-Rates and Valuation David W. Gilman James J. Holley Jack A. Graham Senior Vice President Vice President-Personnel Secretary Carthrae M. Laffoon Philip M. Klauber William J. Karnes Senior Vice President Vice President-Customer Services Treasurer Robert E. Morris Ralph L. Meyer Senior Vice President Vice President-Finance DIVISION MANAGER J. Robert Belt Gordon Pearce Jack H. Morse Vice President-Administrative Services Vice President-General Attorney Manager-Operations Services District Managers Otis L. Pemberton Kenneth M. Brown B. L. Roy Caylor, Jr.

Mack H. Curl William S. Webb Chula Vista Eastern Mountain Empire National City Orange County Mildred J. Reading R. Keith Hutchens Herman D. Gibson Alvin A. Sugg',

Alan J. McCutcheon, Jr.

Coronado Escondido La Jolla Oceanside San Diego 26

Listing of Stock The Common Stock is listed on the New York and STOCK TRANSFER AGENTS AND REGISTRARS Pacific Stock Exchanges (Symbol: SDO)

Southern California First National Bank The Preferred Stocks (except 4.60% Series and $7.325 1201 Fifth Avenue Preference Series) are listed on the American and San Diego, California 92112 Pacific Stock Exchanges (Symbol: SDO)

Transfer agent for common SAN DIEGO GAS & ELECTRIC COMPANY Transfer agent and registrar for all preferred (Incorporated in California)

Morgan Guaranty Trust Company of New York P.O. Address: Box 1831, San Diego, California 92112 30 West Broadway Principal Office: 101 Ash Street, San Diego, California New York, New York 10015 Telephone (714) 232-4252 Transfer agent and registrar for common Transfer agent and registrar for preference only ANNUAL MEETING OF SHAREHOLDERS (except $7.325 preference)

In accordance with the bylaws of the Company, the Bank of America Annual Meeting of Shareholders is held on the 625 Broadway fourth Tuesday in April of each year, at 11 a.m.

San Diego, California 92112 at the principal office of the Company.

Registrar for common Distribution of Shareholders As of December 31, 1973 Preferred Common Total Shareholders 7,422 34,070 CLASS OF Women 2,458 12165 INVESTOR Men 1,418 7,626 Joint Accounts 2,277 9,944 Fiduciaries 433 2,971 Securities Dealers 131 97 Nominees 294 656 Other Domestic 386 464 Foreign 25 147 AMOUNTS 1 to 99 shares 4,033 9,700 OWNED 100-300 shares 2,694 17,283 301-500 shares 289 3,784 501 - 1000 shares 207 2,230 Over 1000 shares 199 1,073 LOCATION Service Area 2,406 9,058 Rest of California 2,594 10,976 Other States & Foreign 2,422 14,036 A statistical supplement to the annual report is available. Requests should be directed to the Corporate Secretary, San Diego Gas & Electric Company, Post Office Box 1831, San Diego, California 92112.

27

%#A Julian, a village in the mountainous country of eastern San Diego County, is blanketed by snow on this chilly winter day.

28

ORANGE COUNTY

• San Juan Capistrano RV RSi

@bUTY San iemente *

• Rainbow

• Fallbrook San Onofre N ear

• Camp Pendleton

• Pala 0 Palomar Mountain

$ O'Neill Lake

• Pauma

• Bonsall

• Rincon

• Warner Springs LakeHensaw

• Borrego Springs Lake Henshaw

• Valley Center Twin Oaks Mesa Grande

• Buena Lake Wohlford 0rsbad

• San Marcos Encina Power Plant a Escondido

• Santa Ysabel La Sesta

• Lake San Marcos

• San Pasqual Sutherland Reservoir *Julian Lucadia

• Olhike Hodges Eneinitas o

• ivenain

• Ramona ardiff *

'San Dieguito Reservoir Selana Beach *

• Rancho Santa Fe Cuyamaca Lake

• Del Mar

• Poway

• Agua Caliente Springs Sa i

eEl Capitan Reservoir San Vicente Reservoir

• Lakeside

• Descanso Lakeid*Guatay t

• La Jolla Santee e Alpine

• Pine Valley oGrantvilleePieVly P A C I F I C Pacific Beach *

• Clairemont Lake Murray *El Cajon

@CEAN SAN DIEGO

• La Mesa Loveland Reservoir Ocean Beach geSpring Valley Station B Po er PnLemon Grove

• Jamul Paint Lame

• C ado Sweetwater Reservoir Lake Morena gSilver Gate Power Plant Lake Barrett

• National City Lk art South Bay Power n mmChula Vista

• Dulzura

• Jacumba m B §1' Otay Reservoir

• Barrett Potrero

• Campo Liquefied Natural Gas Plant an Ysidro ii g

• ecate

• ijuan a San Diego Gas & Electric Company Service Territory San Diego Gas & Electric Company serves of Imperial County to the east. A population of a 4,105-square-mile area that includes most of 1,625,200 persons resided in the service territory San Diego County, an adjoining portion of as of year-end 1973. Some of the more than 90 Orange County to the north, and a small section communities SDG&E serves are shown on the map.

SAl DIEGO GAS & ELECTRIC COMPANY P.O.

Box 1831 San Diego, Calif. 92112 f z C=)

The $40 million Federal Office Building and Courthouse in downtown San Diego will occupy three city blocks when it is completed in mid-1975. Six stories high, it contains 810,000 square feet of space. The 21-story tower under construction in the background also is being built for the Federal Government. It is the Metropolitan Correctional Center. Both build ings are situated at the western end of a 15-block redevelopment area, which is planned as a pedestrian-oriented urban center. In addition to supplying electricity and steam for the two federal facilities, SDG&E will furnish chilled water for air conditioning, through its wholly-owned subsidiary, Applied Energy Incorporated.