ML13311A238
| ML13311A238 | |
| Person / Time | |
|---|---|
| Site: | San Onofre  |
| Issue date: | 02/22/1980 |
| From: | SAN DIEGO GAS & ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML13308B705 | List: |
| References | |
| NUDOCS 8005280662 | |
| Download: ML13311A238 (31) | |
Text
"..by meeting the challenge of these transitional times, SDG&E will emerge a stronger company.
1979 Annual Report San Diego Gas & Electric 8oo52so 6Z WEmutat O
Table of Contents Financial Highlights......................
1 President's Message.....................
2-4 Reporton 1979........................
5-11 Financial Section.......................
12-26 Summary of Operations................
12 Management's Analysis of Operations......12-13 Auditors' Opinion.....................
13 Financial Statements...................
14-19 Notes to Financial Statements
. 20-23 Information on Effects of Changing Prices.. 24-25 Financial Data........................
26 Stock Prices and Dividends...............
27 Officers and Directors...................
28 Stock Transfer Agents.,..........
Inside Back Cover Financial Highlights of 1979 (Dollars in thousands except per share amounts) 1979 1978
% Change Total operating revenues..........................
$ 745,232
$ 613,623
+21.4 Total operating expenses..........................
$ 647,999
$ 522,214
+24.1 Net income (before preferred dividend requirements)....
70,166 66,802
+ 5.0 Average common shares outstanding (thousands).......
29,230 24,588
+18.9 Earnings per share of common stock..................
1.80 2.02
- 10.9 Common stock dividend rate for the year..............
1.48 1.40
+ 5.7 Utility plant additions and replacements................
$ 225,361
$ 222,037
+ 1.5 Total investment in utility plant at year-end..............
$1,801,225
$1,579,657
+14.0 Number of customers at year-end Electric department.............................
750,902 716,927
+ 4.7 Gas department................................
492,584 477,383
+ 3.2 Total energy sales Electric (1,000 Mwhr) 10,034 9,463
+ 6.0 Gas (1,000 Therms)..............................
530,758 485,918
+ 9.2 Certain 1978 amounts have been reclassified for comparability.
1979 Revenue Dollar Fuel & Purchased Energy Source 1
Disposition F10.cDepreciation/Maintenance 79.5 1,
FSalaries
& Benefits 1.2 Reinvested in Business Steamn Sales 0.1 8:t Total Taxes Gas Saes k20.4cM Cost of Money L
Other Expenses Dividends to Shareholders 1
President's Message As the 1970s ended, man-SDG&E is striving to purchase agement was moving SDG&E power wherever possible. By so toward solutions of the problems doing, the need for capital invest involved in meeting the expanding ment is minimized, along with the energy needs of customers in the high cost of obtaining new funds.
decade ahead. We must determine At the present time, the com where the required generating ca-pany is involved in only one large pacity will come from, how to fi-generation project, the addition of nance it, and what new sources of two units at San Onofre Nuclear energy can be developed to reduce Generating Station near San Cle the company's dependence on cost-mente, California. SDG&E's 20 ly fuel oil for electric generation.
percent share of these 1,100 mega The coming era is one of watt units will make a major contri uncertainty for our industry. Avail-bution to our non-oil-fired sources ability of the imported low-sulfur oil of electricity after 1983.
used in power plants is open to The company's purchased question, its cost continues to rise power strategy is aimed at power rapidly and its use under any cir-acquisitions from out of state. This cumstances is a matter of national is an interim solution for the 1980s.
policy. Environmental and other Another consideration with During the coming decade, the constraints make the siting and con-respect to new baseload generation company's financial condition rela struction of new generating capacity was the combined effect of rampant tive to the total financial environ in California extremely difficult. In-inflation on construction costs and ment is expected to improve, and flation, large capital costs and con-the company's limited ability to gen-during that time, it is hoped that the flicting governmental policies add erate internally the funds needed for construction of new power plants in further burdens to the industry. De-new facilities. Improved earnings California will not only be allowed spite these constraints, ways must and strengthened financial condi-but will be encouraged.
be found to deliver energy to our tion are needed if the company is to A proposed 500-kilovolt customers as required, and at a raise capital at competitive costs.
transmission line is central to our price they can afford to pay.
This situation has led the plans for bringing purchased power SDG&E's rapid customer company to adopt a hedging strat-into the service area. The line will growth in recent years has made it egy toward future energy resources.
provide an interconnection with util imperative that we move ahead We are attempting to develop as ities to the east of us when it is sooner than most utilities in working many varied resource options as completed in 1984. In addition to out ways of dealing with the condi-possible, and to maintain these op-providing a path for the interchange tions anticipated in the 1980s. But tions until it becomes clear which of power, the line is expected to the plans pursued in the early '70s path has the greatest probability of enhance the reliability of all the did not result in new generation achieving success.
interconnected utilities in the South being brought on line. Projects like Two principles are at the west.
Kaiparowits in Utah and Sundesert heart of our resource plan for the Specifically, we have con in Southern California never 1980s: First, every effort is being tracted for reasonably priced, base reached the stage at which construc-directed at gaining access to genera-load energy from Tucson Electric tion could begin. The threat of tion that does not require oil as a Power Company and Public Service environmental lawsuits and the real-fuel. The goal is to improve the Company of New Mexico. The con ities of governmental actions pre-company's fuel mix, so that the loss tractual arrangements are for pur cluded going forward with these or diminished supply of any one fuel chases from new coal-fired capacity proposed power plants.
would not be crippling. Second, in Arizona and New Mexico as it 2
comes on line in the 1980s. Besides replace this purchased power with 5 and the licensing costs of Sun offering access to this coal-fired generation on its own system.
desert. With Encina 5 completed in generation, the proposed transmis-SDG&E's conservation and October 1978 and Sundesert sus sion line will provide an opportunity load management programs will pended, there has been some for the company to develop geo-have an important role in meeting easing in the need for funds.
thermal resources in the Imperial customer needs during the 1980s.
However, work on San Onofre and Valley of California. The eastern The economics of the utility industry the eastern transmission line will interconnection will provide a have changed. Rising costs of new preclude achieving large-scale re means of bringing geothermal generation and lagging rates now ductions in capital expenditures power to San Diego.
make it a more attractive investment much before 1984.
It must be stressed that to save a unit of energy rather than Our goal is to improve the power purchases are not a perma-to generate one. By taking steps to results of operations. SDG&E expe nent alternative to the eventual addi-reduce the rate of growth in energy rienced a poor year in 1979, with tion of on-system generation. Aside sales-and especially by slowing the earnings per share of common from the increasing number of cus-growth in peak demand-the stock at $1.80, down from $2.02 in tomers, there are other considera-company can accommodate cus-1978.
tions. Older, less efficient plants on tomer needs while adding new ca-During the first two quarters, our system will need to be replaced pacity at a slower, more manage-SDG&E's earnings per share lagged with new plants that use less oil.
able rate.
behind the 1978 pace. The Califor And, the purchased power contracts The recent past has been nia Public Utilities Commission will expire in the late 1980s and early difficult for SDG&E because of (PUC) had granted partial rate relief 1990s, because Arizona and New heavy capital requirements. Con-in an interim general rate case deci Mexico utilities will require the elec-struction work on San Onofre Units sion in January1979. The amount of tricity to serve their own customers.
2 and 3 was proceeding simul-the increase, however, was not suffi Therefore, SDG&E will have to taneously with work on Encina Unit cient to offset the impact inflation h Powrea (by po ilowatt-Hour Output) 100%
90%/
80%/
70/
60%
50%
40%
30%
20%
10%/
0%
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987198 1989 1990 lodmngmn pro gramtwil Fuel Ol/Natura Gas M Purchased Power Nucear Geothemal 3
was having on operating expenses.
proved cash flow for SDG&E.
utilization by the power plants.
Final disposition of the case came at The ECAC is of great impor-Finally, and very important, midyear. The company's earnings in tance in recovering fuel costs. As our resource development plans the third and fourth quarters of the 1979 ended, the low-sulfur oil our have moved the company toward a year, as a consequence, were much power plants must use was selling more diversified mix of fuels and improved.
for about $27 a barrel, an increase energy sources for the years ahead.
But, partly because of the of $10 during the year. The soaring Both on-system electric generation timing of the decision, halfway price of this imported oil has forced and purchased power will be much through the year, the company the company to seek the largest more broadly based resources in could not earn the newly authorized ECAC increase in its history, $152 the future.
rates of return in 1979: 10.59 per-million. If further increases in fuel This, then, is the course we cent on rate base and 14.5 percent prices occur during the first half of have set for our company in the ratemaking return on equity.
1980, the company will have to file 1980s. It will not be an easy road.
SDG&E's actual 1979 return on for additional ECAC increases.
New approaches to the way in which equity was 10.4 percent.
The sheer size of recent rate we conduct our business have There were, however, highly adjustments is burdensome to our started the company on a transition positive aspects to the PUC's deci-customers. It is difficult for them to from traditional modes of running a sion. Of major importance was that accept that the increases they are utility company.
it was issued slightly more than a experiencing in their utility bills are If we deal wisely with the year after our filing. This was about related in large measure to rising challenges of these transitional half the time it took to resolve our fuel costs and do not increase times and the era of uncertainty previous general rate case. The ex-SDG&E's earnings. Clearly, we will they bring, SDG&E will emerge a pedited schedule was made possi-have a sizable communication task stronger, more resilient company.
ble by the PUC's plan for reducing in explaining to our customers the To that end, management pledges regulatory lag. Our case was the first reasons for rising energy costs in its utmost efforts.
to be processed under this plan.
the 1980s.
Barron's Financial Weekly At the start of a new decade, recently took note of California's we are optimistic about improving "gradually improving regulatory cli-the financial condition of the com mate that augers well for the years pany. Rate mechanisms for re immediately ahead." The publi-sponding to the major inflationary cation went on to comment, "That pressures are in place and a timeta better climate, moreover, is not only ble has been developed for dealing R. E. Morris one of more enlightened political with the complexities of general rate attitudes, but also of improved ad-cases more expeditiously than in the ministrative and other procedures past. The PUC has authorized gen designed to help the state's utili-eral rate increase filings in both 1981 ties accommodate more readily to and 1982, which should foster a inflation."
better earnings outlook for the near One such procedure is the term future.
energy cost adjustment clause Our physical plants have (ECAC). Previously, the lagging op-benefited by an intensive and im eration of this rate mechanism had proved maintenance program, been adding a burden to the com-aimed at keeping existing units relia pany's cash flow. The commission ble and extending their service lives.
has authorized changes (described Another program of plant modifica on page 6 ) which mitigate this tions has brought about measurable problem and should result in im-improvement in the efficiency of fuel 4
Report on 1979 Energy Sales Continue Revenues(n millions)
To Show Strong Growth Energy sales in San Diego Gas & Electric's service area continued to grow during 1979.
Sales of electricity rose 6 percent to more than 10 billion kilowatt hours, while gas sales were up 9.2 percent to 531 million therms, partly be cause 1979 was cooler than the previous year.
1975 1976 1977 1978 1979 Conservation, the impact of NetIncome(inmion) higher rates and excellent weather slowed the increase in per customer usage of energy, but the number of customers continued to increase. In all, 33,975 electric and 15,201 gas customers were added to the sys tem, representing growth rates of 4.7 percent for electric and 3.2 per cent for gas.
Total operating revenues of 1975 1976 1977 1978 1979
$745 million were 21.4 percent Dividends(dcared) higher than the previous year. Reve nues from electric sales totaled nearly $593 million, a 26.5 percent increase, while gas sales revenues reached $152 million, up 5.2 per cent. Operating expenses were up 24.1 percent to $648 million. The company's net income, before pre ferred dividend requirements, was
$70 million, a 5 percent gain over 197 1976 1977 1978 1979 1978. Earnings per share of $1.80 Earnings Per Share were down from the $2.02 earned the previous year, because the num ber of common shares outstanding (on a weighted average) increased 18.9 percent to 29.2 million shares.
The board of directors raised the quarterly common stock dividend rate to 38 cents per share from the previous level of 36 cents, effective with the October dividend 1976 1977 1978 1979 payment. This increase marked the third consecutive year in which the dividend has been raised.
5
Regulatory Climate IsM or Favo a e Recent and prospective SDG&E rate proceedings indicate the large volume of regulatory activity Is M re avorbleinvolving the company. Management expects that advance planning wAIl improve the handling of Regulation has a major rate cases.
effect on the company's earnings. In General Rate Cases this respect, despite the earnings Case Filed Decision Amount decline recorded in 1979, a number 1979 Test Year 5/78 1/79
$ 33.7 Million of favorable regulatory develop-6/79
$ 37.2 Mlion ments took place during the year.
1981 Test Year 7/80' 1181' Unknown The California Public Util-1982 Test Year 12/80*
1/82*
Unknown ities Commission (PUC) granted EergCostAdjstentCause(ECAC)
CaeFiled Decision Amount San Diego Gas & Electric an interim Cs SnDeoGs&Eetian ini 1979 Spring 2/79 10/79
$ 0.5 Million rate increase of $33.7 million in 1979 Fall 8/79 1279
$ 41.5 Million January 1979, and an additional 1980 Spring 1/80 3/90*
$152.3 Million
$37.2 million increase in June. In 1980 Summer 5/80 7/80' Unknown the final decision, the PUC autho-Phased Gas Adjustment/Supply Adjustment Mechanism (PGA/SAM) rized a return on common equity of Case Filed Decision Amount 14.5 percent and an overall rate of 1979 Spring 3/79 6/79
$18.1 Million return of 10.59 percent. This was the 1979 Fall 10/79 1/80
$ 21.8 Million first general rate case the PUC han-1980 Extraordinary 12/79 4/80'
$ 9.5 Milion dIed under a new procedure de-1980 Spring signed to reduce regulatory lag by Special Rate Proceedings CaseFiled Decision Aon processing such cases within 12 Heber Geothermal 12/79 1/80
$ 37.6 Million months of filing. Consequently, the Load Management 12/79 5/80,
$ 4.1 Million case was completed in about half the time SDG&E's previous rate with construction and case had required.
demonstration phases over 6/ years.
An important aspect of the general rate case was that the final decision authorized the company to recover most of the costs associ ated with the suspended Sundesertfacilities.
project near Blythe, California, ei-1 SDG&E Financing Progr ther through rate base treatment or Q
Date Issued Cost to Company by amortization. (For a discussion of
$57 nillion in polion control bonds March 15 73%
the expenses connected with Sun-
$65 million, 7-year term loan from April 26 Floating rate based on several desert, see page 22.) The PUC 3 European banks pricing options: 12.2% for 1979.
recognized the value of the Blythe 3 million shares of common stock July24 Sold at $15 per share; company's site and SDG&E is holding it for n
proceeds were $433 million future use in energy development.
Proposed 1980 Financing Program The PUC also has au-QuiandIssue DateIssued CosttoCompany thorized important changes in the Up to 2 million shares of common stock March To be negotiated energy cost adjustment clause Upto$65millioninfirstmortgagebonds March Tobenegotiated (ECAC) that should help to improve Up to 2 million shares of common stock October To be negotiated cash flow in 1980. The ECAC is a Up to $50 million in first mortgage bonds October To be negotiated mechanism for offsetting increases In addition, the company is authorized bythe PUC to issue up to $200 million in bank loans and or decreases in purchased power commercialpaper. SDG&E also makes use of bankers' acceptances, with a limit of $150 million, and power plant fuel costs. If actual costs differ from fuel revenues, the differences are recorded in a bal ancing account and do not directly shortages, which are met by increas-to recover more fully the balancing affect earnings. Then, the rates are ing short-term debt. This, of course, account interest costs in the future.
adjusted to "zero out" the amount increases interest expenses. The The commission also short in the balancing account.
ECAC changes referred to in the ened the interval for ECAC filings By the end of 1979, SDG&E previous paragraph raised the inter-from six months to four months and had an ECAC undercollection of est rate on the balancing account allowed the use of forecast data
$45.8 million, because actual costs from 7 percent to a variable level rather than historical data. The PUC exceeded fuel revenues. Such tied to the cost of short-term debt.
indicated that it would consider a undercollections create cash flow Thus, the company should be able shorter amortization time for under 6
collections and overcollections than Elechic Sales the one-year time frame that had (in bilhons of KWHR) been in effect. The company antici-(l K
pates that the new ECAC procedure will significantly reduce current un dercollections and improve cash flow.
Construction Budget 1975 1976 1977 1978 1979 Is $31 Million Lower Gas Sales (in millions of therms)
The 1979 cash construction budget was $205 million. Despite inflation, the company has managed to reduce its projected 1980 construction budget to $174 million, a decrease of $31 million.
The company is trying to limit con-1975 1976 1977 1978 1979 struction expenditures in order to Electric Custoners lessen the need for capital.
(in thousands)
Only one major generating project, San Onofre Units 2 and 3, is under construction. The company's 20 percent share of the San Onofre construction is the largest single item in the 1980 capital budget.
Transmission, distribution and re-1975 1976 1977 1978 1979 lated facilities needed to serve new Gas Customers customers account for most of the (in thousands) balance of the construction budget.
SDG&E estimates that its 440 megawatt share of the two San Onofre units will cost a total of $586 million. Through 1979, the company has spent $379 million on this project.
Outlook for Gas Supply Continues to Improve provided for phased price deregula-purchasing gas from Pacific Gas &
SDG&E continued to tion of domestic gas from new Electric Company under a 3-year receive a plentiful supply of natural sources and brought the intrastate agreement. As an interim source gas during 1979, resulting in high market under the same pricing since 1977, SoCal also has been levels of service to its customers.
mechanism as interstate supplies, receiving up to 200 million cubic High priority customers with no al-The promise of higher prices for feet per day of Canadian gas on an ternate fuel supplies received un-new gas has stimulated drilling pro-
"as available" basis from Northwest interrupted service, and the com-grams throughout the country, and Pipeline Corporation.
mercial and industrial customers re-reserve additions are at highest lev-The company expects that ceived minimal curtailments. The els since the late 1960s. Moreover, throughout the 1980s gas will be in company's power plants received now interstate suppliers are able to good supply to serve the require natural gas to provide 24 percent of bid for gas that was previously avail-ments of the company's commercial total system requirements. This was able only to the higher priced intra-and industrial customers, and to the highest level of power plant gas state market.
help meet a substantial portion of since 1974.
These factors have im-SDG&E power plant fuel require Supplies of gas are expected proved deliveries to Southern ments. The use of natural gas in to remain near the 1979 level for California from Texas, New Mexi-electric generation is expected to several years, primarily as a conse-co, and Oklahoma. In addition, help hold down fuel costs and re quence of the Natural Gas Policy SDG&E's supplier, Southern duce the company's dependence on Act of 1978. This federal act California Gas Company (SoCal), is fuel oil.
7
Electric Demand 1,100-megawatt generators are 1981 tional electric utility, has responded, Reaches New Highs for Unit 2 and 1983 for Unit 3.
and the three utilities currently are negotiating the terms of a final Two heat waves in 1979, one Other Energy Sources power purchase contract.
in June and one in September, sent Sought to Replace Oil temperatures in SDG&E's service area soaring. Customers sought re-Nearly 58 percent of the lief through air conditioning, which electricity SDG&E supplied in 1979 drove the electric system to set new was generated from oil. The com production highs.
pany's power plants consumed A peak demand record of about 11 million barrels of costly fuel 2,019 megawatts was set on Sep-oil during the year, most of it im tember 19. The new peak was just ported from overseas. As a conse 1.9 percent above the September quence, the direction of the 1978 peak of 1,981 megawatts, re-resource development program is flecting conservation, load manage-to move the company toward new ment and the impact of higher rates.
sources of energy production and away from dependence on expen Nuclear Power Essential sive petroleum products.
ToAt the beginning of the As contemplated, the ar To nery Nedsof B~s 1970s, SDG&E was paying about $2 rangement would provide SDG&E San Onofre Nuclear Gener-per barrel for oil. Prices surged with with 150 megawatts, starting in late ating Station, located south of San the Arab oil embargo of 1973, rose 1983, and SCE with 70 megawatts Clemente, California, is a vital ele-for the balance of the decade and by early 1984. Negotiations will con ment in the company's resource soared 60 percent during 1979. By tinue on subsequent phases and, if plan for the 1980s. When com-the time the year ended, a barrel of successful, by 1986 SDG&E and pleted, the station will supply oil cost about $27 SCE would be receiving 300 mega SDG&E customers with over 20 Environmental constraints watts each. These sales would per percent of their electricity.
require low-sulfur residual fuel oil to mit CFE to accelerate development The existing 436-megawatt be used in the power plant boilers.
of Cerro Prieto. After a 10-year pen unit is owned 80 percent by South-Most of this type of oil is imported.
od, CFE would begin to use the ern California Edison Company and Consequently, interruptions in for-energy to serve its own customers.
20 percent by SDG&E. Since it eign oil supplies affect the avail-An agreement for a 230-ky began operation in 1968, it has gen-ability and price of oil for SDG&E. A interconnection between SDG&E erated 32 billion kilowatt hours of further complication was the lower and CFE is being negotiated so that electricity, which is equivalent to than normal precipitation in the Pa-the two utilities can exchange power more than 53 million barrels of fuel cific Northwest, which reduced the on a mutually advantageous basis.
oil. One significant advantage of this amount of hydroelectric power As proposed, the line would run nuclear power is its fuel cost-about available for purchase by the com-from a point east of Chula Vista, one-tenth the price of oil at the end pany. The reduced supplies of oil California, to Tijuana, Mexico. Per of 1979.
and hydropower were offset some-mits for the construction are being During 1979, Unit 1 pro-what by the receipt of higher than sought from the U.S. Department of duced3bin kilowatt ho expected quantities of natural gas Energy and the PU.
Target date duce 3. bilio kiowat horsas or owe plnt felespcialy ur-for operation of the 13-mile line is the plant operated at 88 percent of for poe patfel esp June 1982.
capacity. This is one of the best A contract was signed in Oc operating records for a nuclear opating thecoation. It isbettra Mexico Seen as New tober 1979 for CFE to sell SDG&E plant in the nation. It is better thanexisting 69-k most coal-fired and oil-fired plants.
Source of Electricity interconnection between San San Onofre Unit 1 supplied SDG&E In its quest for new energy Ysidro, California, and Tijuana. This with about 6 percent of total system sources, SDG&E has turned to marks the first time Mexico has requirements in 1979.
Mexico. Discussions that started in agreed to sell electricity to a U.S.
Units 2 and 3 are currently early 1978 led to a proposal for utility on a non-exchange basis. The under construction. At the end of SDG&E and Southern California power will supply the electrical 1979, Unit 2 was about 86 percent Edison Company (SCE) each to needs of approximately 20,000 cus complete and Unit 3 about 64 per-purchase energy from the Cerro tomers at the southern end of the cent. SDG&E will have a 20 percent Prieto geothermal fields near Mex-company's system. By purchasing ownership of the expanded plant.
icali, Mexico. The Comisi6n Federal this energy instead of generating it, Planned operating dates for the two de Electricidad (CFE), Mexico's na-SDG&E will save an estimated 1,000 8
barrels of oil per day. The transmis-coal-fired plants in Arizona and New Diego to the Imperial County sub sion line was placed in operation in Mexico, and possibly, for geother-station is late 1983. The balance of February 1980.
mal generation from Mexico.
the line through Arizona is sched The proposed transmission uled to be completed in 1984.
Transmission Link Will line offers SDG&E the opportunity Bring Purchased Power to obtain increased capacity for the t
Bring Purchased Power needs of the middle to late 1980s at etrmlCudB The proposed 500-kilovolt competitive costs. Other benefits of Alternative to Fuel Oil transmission line connecting theprojectincludeimprovedsystem In addition to the possible SDG&E and Arizona Public Service reliability, access to a broader-based purchase of geothermal energy Company is a key project in the mix of resources, and a reduction in from Cerro Prieto, SDG&E moved company's program to supply cus-the company's reliance on expen-ahead during 1979 with its own geo tomers with adequate energy in the sive fuel oil.
thermal research and development.
1980s. This 280-mile line will link Selection of the company's The goal of the program, which SDG&E with the electric systems of preferred route for the interconnec-began in 1971, is to establish the utilities to the east. (See map.) Cur-tion was based on a detailed consid-technical and economic feasibility of rently, the Arizona grid is connected eration of environmental, engineer-generating electricity in the Imperial to California only with power lines ing and economic factors. The en-Valley of California. There are four through Nevada.
vironmental aspects of the route liquid-dominated geothermal reser Suspension of the Sun-currently are under review by the voirs in the valley. None of them, desert nuclear project in 1978 set PUC and the U.S. Bureau of Land unfortunately, has the optimum the company's resource planners Management. Following public combination of high temperature on a search to replace the power hearings and the issuance of a final and low dissolved salt content, mak Sundesert would have generated environmental statement, a decision ing commercial development more beginning in the mid-1980s. SDG&E on SDG&E's appIication is difficult than at Cerro Prieto.
has turned to out-of-state sources, expected early in 1981.
Research at the company's purchasing surplus capacity and en-Cost of the line is estimated geothermal loop experimental facil ergy wherever it becomes available.
at approximately $300 million.
ity near Niland, California, was suc This is an interim solution, designed SDG&E will pay the construction cessfully concluded in September to answer the needs of the 1980s, costs between San Diego and a 1979. In 13,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> of operation after which it is hoped that new substation to be located near Yuma, over a 3'/2-year period, the facility generating facilities can be financed Arizona. Between Yuma and the provided the opportunity for and constructed in California.
Palo Verde Switchyard, 45 miles SDG&E engineers to identify Specifically, the interconnec-west of Phoenix, SDG&E will pay problems involved in handling geo tion project will provide a transmis-for and own 89 percent of the line, thermal fluid and to develop solu sion path to San Diego for geother-with Arizona Public Service paying tions that could be applied to an mal power being developed in the the remaining 11 percent. Estimated operating facility. This brings the Imperial Valley, for energy from completion for the line from San company to the next step, the oper ation of a demonstration power plant. SDG&E is involved in several le such facilities in the valley.
tofere obtain inrae aaiyfor the At East Mesa, construction Internesotonha of an 11-megawatt plant has been completed by Magma Electric, and the plant was in the start-up phase lia aas this report went to press. Full scale operation is expected early in Salto Sea1980.
This will be the first geother mal power plant in the Imperial Valley. SDG&E expects to purchase ethe output of this plant and to gain geothermal operating experience.
Meanwhile, the company is continuing to negotiate with geo thermal resource development companies for the purchase of ap proximately 120 megawatts from geothermal plants proposed to be constructed in the valley.
9
The U.S. Department of En-December 1979, the company filed realized by AEI customers through ergy (DOE) is studying SDG&E's a rate application, requesting $3.8 the efficiencies of cogeneration and proposal for the DOE to participate million to carry out load manage-central station chilled water service.
in funding construction of an experi-ment programs mandated by the Cogeneration is a principal mental binary process geothermal California Energy Commission.
focus of AEI's activities. The firm plant at Heber. The uncertainties Hearings are scheduled on this ap-operates four cogeneration plants, associated with this project make plication in March 1980.
three at U.S. Navy facilities in the federal participation essential. With Currently, the company is San Diego area and one (coi DOE funding, the proposed 45-engaged in a two-year load manage-pleted in February 1979) at Rohr megawatt plant could be in opera-ment program designed to shift Industries in nearby Chula Vista.
tion by 1984. PUC approval for fi-electric load off peak. The assis-Altogether, these facilities are capa nancing and operation of the plant tance of 740 volunteer SDG&E ble of producing nearly 61 mega was received in January 1980.
customers was enlisted, and watts of electric generation while Geothermal energy offers an interesting alternative to oil-fired electric generation. During the late 1980s, if the cost of oil continues to rise as it has in recent years, there is a potential for geothermal energy to become more economical than oil.
Geothermal energy constitutes a significant new resource option that could broaden the company's total generation mix.
Conservation Becomes A New Energy Resource The companyts manage ment recognizes that energy fre quently can be conserved at less cost than new energy can be de veloped. Consequently, SDG&E monitoring equipment was installed furnishing 510,000 pounds of steam conducts aggressive and expanding to gather data on their usage. De-per hour for industrial purposes.
programs of conservation and load vices also were installed, so that AE1 is reviewing possibilities for management, aimed at helping the electric operations personnel could adding other cogeneration facilities company deal with the energy turn appliances off and on to regul-in the SDG&E service area.
needs of an increasing population.
ate demand at peak times. The Normally, when fuel is By encouraging customer study is funded by SDG&E, the U.S.
burned to generate electricity, only conservation, the company saves Department of Energy and the Elec-about one-third of the heat value is fuel. By taking steps to shave peak tric Power Research Institute.
utilized. Through the use of heat demand through load management As a next step, the company recovery equipment, AEI is able to programs, the company defers the will test radio controlled switches on make use of up to another one-third necessity for adding new generating approximately 7,500 residential air of the heat value of the fuel. The capacity. These measures rank high, conditioners and electric water heat-potential to sell heat energy that along with other energy resources in ers. The test will explore alternative otherwise would be wasted makes meeting customer needs.
technologies for cycling appliances cogeneration attractive in this con Energy conservation pro-to achieve peak reduction, and will servation-minded era. A 1979 U.S.
grams aimed at reducing or shifting measure customer acceptance of Department of Energy ruling recog demand are developed and put into load management.
nized this by granting cogeneration practice by the company's market-facilities higher natural gas pri ing division. During 1979, there were Cogeneration Facilities orities, thus making additional vol 40 such programs, each intended umes of gas available to them.
for a specific segment of the cus-HAnother aspect of AEI's tomer market and each designed to The company's wholly business is a central chiller plant it assist in preventing demand from owned subsidiary, Applied Energy, operates in downtown San Diego.
outstripping the available supply.
Inc. (AE, had its most successful The plant serves the air condition Load management has as-year since it was created in 1968. In ing needs of seven major buildings sumed increasing importance. In addition, substantial savings were with 4,800 tons of cooling capacity.
10
Three planned downtown re-about when Director Robert H.
common stock. Plan participants development projects offer pos-Biron did not stand for re-election also can make cash payments of up sibilities for expanding the service because of ill health. The board to $5,000 per quarter to buy still by as many as eight additional large conferred "director emeritus" status more shares if they choose. The office buildings.
on Mr. Biron in recognition of his 14 new limit becomes effective in years of service to SDG&E. It is with March 1980, an increase from the sorrow that we report his death on previous limit of $3,000.
4 Elected to Positions September 23,1979.
Participants incur no out-of As Company Officers pocket expenses when reinvesting Management changes dur-dividends or when purchasing addi ing 1979 included the election of tional stock with supplemental cash iong wofcr.Todprmn Receives U.S. Approval payments. There are no brokerage four new officers. Two department heads were promoted to the vice The Office of Federal Con-fees and the company pays bank presidential level. They are Gary D.
tract Compliance Programs of the charges and other issue costs.
Cotton, vice president-engineering, U.S. Department of Labor reported The prospectus and an au and Ronald W Watkins, vice presi-in November that a review of thorization form may be obtained dent-resource planning. Robert E.
SDG&E's equal employment op-from the shareholders' agent:
Parsley, who has served as the com-portunity policies had been com-United California Bank, Dividend pany's controller for 13 years, also pleted and that the company's affir-Reinvestment Service, P.O. Box was elected an officer of the corpo-mative action program had been 60975, Los Angeles, CA 90060. Or, ration. In addition, Richard Korpan, accepted. This finding emphasizes if you, prefer, you may write to the formerly with Public Service Com-management's commitment to the Corporate Secretary, San Diego pany of Colorado, joined the com-principle that every qualified person Gas & Electric Company, PO. Box pany as treasurer.
is entitled to full consideration in the 1831, San Diego, CA 92112.
Another officer, Ralph L.
hiring and promotion process.
The dividend reinvestment Meyer,became vice president of an During 1979, SDG&E plan has been in operation since expanded regulatory services divi-continued to make substantial prog-October 1976. Participants now sion. The growing volume of PUC ress in employing and promoting number about 9,000 shareholders.
rate filings has required the com-minority group members and pany to improve its response to women. Considerable efforts also regulation. A regulatory programs were directed at hiring and advanc-Lines of Business department within the company was ing handicapped persons, veterans The approximate percentages formed in February 1979, with the of the Vietnam era and disabled of Operating Revenues and primary objective of bringing about veterans.
Operating Income (exclusive of better understanding and commu-At the end of 1979, minor-taxes on income, other income nication between the company and ities represented over 25 percent of the commission.
the company's work force, com-attributable to each principal line pared with just under 24 percent a
,of business were as follows:
year earlier. Women held more than Board of Directors 21 percent of the jobs on the Operating Revenues AdsNwM mesSDG&E payroll, an increase of 1.2 Electric Gas Adds New Members 1979........79.5%
20.4%
The company's share-pecet for calnda year 1 D
1978......76.3%
23.5%
holders elected three new members 1977........78.1%
21.8%
to the board of directors at the minorities and women were placed 1976.......79.1%
20.7%
annual meeting April 24, 197 in professional and managerial posi-1975.......76.1%
23.7%
Those elected were: Catherine T.
Oeai Income Fitzgerald Wiggs,. executive vice eetico Ga president-personnel for The Broad-Shareholders Can 1979.......88.6%
11.4%
way Stores; Thomas A. Page, SDG&E's executive vice president; Rines.ivded.17771%
25.9%
and Dr. William D. McElroy, chan-A plan that permits the auto-1976 85.3%
14.7%
cellor of the University of California, matic reinvestment of dividends is 1975.......74.0%
26.0%
San Diego. Two of the new directors available to the company's share-Operating Revenues for 1978, 1977 and filled vacancies created by the retire-compara filld vcanies reaed y te reire hoderson equst.bility.
See Note 1 of Notes to Financial ments from the board of Joseph F.
The plan offers common Statements.
Sinnott, former company president, shareholders of record a convenient See also Schedules of Financial Informa and Adm. U.S. Grant Sharp, USN means of automatically reinvesting tion by Segments of Business for the years Biron~~97,17 did no1tadfo7e-lcto (Ret.). The third vacancy came dividends in additional shares of yersofseic t SG&. t s1it
Sunmary of Operations (In thousands except per share amounts)
For the Years Ended December 31 1979 1978 1977 1976 1975 Operating Revenues.................
$745,232
$613,623
$540,794
$452,744
$374,252 Operating Expenses.................
647,999 522,214 457,721 381,528 326,990 Operating Income...................
97,233 91,409 83,073 71,216 47,262 Other Income Credits................
29,158 24,544 20,773 19,525 12,513 Interest Charges....................
56,225 49,151 43,598 40,284 34,055 Net Income (before preferred dividend requirements).....
70,166 66,802 60,248 50,457 25,720 Preferred Dividend Requirements......
17,643 17,230 13,761 11,863 9,751 Earnings Applicable to Common Shares.
$ 52,523
$ 49,572
$ 46,487
$ 38,594
$ 15,969 Average Common Shares Outstanding.
J 29,230 24,588 20,033 18,035 16,458 Earnings Per Common Share...........
1.80 2.02 2.32 2.14 0.97 Dividends Declared Per Common Share.
1.48 1.40 1.28 1.20 1.20 The above summary of operations and the following management's discussion and analysis of the summary of operations should be read in conjunction with the financial statements, notes to financial statements and statistical data contained elsewhere in this report.
Management's Discussion and Analysis of the Summary of Operations Operating Revenues prices of fuel oil, natural gas and purchased power. The (Millions of Dollars) company expects these costs to continue to rise, although For the Years Ended such cost increases are expected to be offset by additional December 31 1979 1978 1977 1976 1975 revenue through the energy cost adjustment clause.
Electric Revenues:
The cost of gas purchased for resale increased primarily Fuel cost rate increases 6.7
$58.6
$ 0.6
$43.7
$28.2 Net revenues deferred:
Energy cost adjustment company expects these costs to continue to rise, although clause 38.2 (44.3) 42.2 (8.5) such cost increases are expected to be offset by increased Property taxes 0.8 (0.8) revenue through the purchased gas adjustment clause.
General rate increases 39.2 10.9 4.2 24.8 15.3 Other operating expenses increased both in 1979 and Sales volume changes
- 39.
_21.9
_16.9
_13.5
_18.8 Sales~~~~ voum chne 92 2.9
- 1.
35
- 1.
1978 as a result of generally rising costs and an increased Net increase
$124.1
$46.3
$63.9
$73.5
$62.3 number of customers. Also, in 1979 and 1978, other Gas Revenues:
operating expenses reflect $10.6 million and $3.2 million Purchased gas rate of the rent on Encina 5 (see Note 7 of Notes to Financial increases
$ 13.6
$ 6.5
$17.4
$ 5.2
$ 9.9 General rate increases 2.8 0.4 6.1 2.7 Statements) and the amortization in 1979 of $5.4 million of Net revenues deferred:
Sundesert project costs (see Note 8 of Notes to Financial Interdepartmental sales 3.1 (3.1)
Statements).
Purchased gas and See Notes 1 and 4 of Notes to Financial Statements for supply adjustment clauses (23.9) 12.4 (2.9) 1.1 details regarding income taxes.
Property taxes 0.5 (0.3)
Property tax expense decreased in 1979 and 1978 as a Interdepartmental sales result of the passage of a tax relief initiative by California Sales volume changes 9.9 1.5 (6.6)
_(6.7) 9.4 Net increase 7.5
$26.4
$24.0
$ 4.9
$22.0 Other Income Credits The table above sets forth the amount of increases in the Effective January 1977, the Federal Power Commission company's electric and gas revenues, together with the adopted certain revisions to the Uniform System of approximate amounts of increases and decreases Accounts relating to allowance for funds used during attributable to certain factors.
construction (AFUDC). The revisions, among other things, Operating revenues and fuel expenses for 1978, 1977 specify a procedure for the determination of the borrowed and 1976 have been reclassified from amounts previously funds and other funds components of the AFUDC rate and reported to reflect balancing account reclassifications. See the maximum rate for computing AFUDC Note 1 of Notes to Financial Statements.
The AFUDC (borrowed funds component included in Operating Expenses Interest Charges and other funds component included in Other Income Credits) increased in total for 1979 as a Significant increases in the cost of electric fuel have result of the use of a higher rate and increased occurred in recent years primarily because of increasing construction activity, primarily related to San Onofre Units 12
2 and 3. This increase occurred despite the write-off of Net Income
$3.1 million of AFUDC associated with the Sundesert project (see Note 8 of Notes to Financial Statements). The increase in total AFUDC for 1978 compared to 1977 was the general rate decisions which increased revenues by the result of increased construction activity only.
$42.0 million. This increase was partially offset by higher During 1979, earnings from the company's subsidiaries expenses (other than fuel costs), the write-off of $3.6 increased other income credits. During 1978, income tax8 of icreisaedaet other income eisDuingrae 1978 ino mea Notes to Financial Statements), the write-off of approx credits allocated to other income increased due to more interest expense applicable to property not included in rate imately $3.2 million of the purchased gas adjustment base see Note 4 of Notes to Financial Statementsof Notes base(se Noe 4 f Ntesto FnanialStatmens).to Financial Statements) and elimination through the gas Interest Charges supply adjustment mechanism procedure of $24.5 million in revenues from interdepartmental gas sales (net of cost).
Interest charges increased in 1979 and 1978 as a result The increase in average common shares outstanding of increases in debt issued for expansion of the company's during 1979 diluted earnings $0.34 per share.
operating system and higher average interest rates on the Net income in 1978 increased as compared to 1977 company's borrowings. Interest charges for 1979, 1978 and primarily due to a $5.9 million increase in revenues from 1977 include reductions of $7.2, $7.9 and $5.8 million, interdepartmental gas sales (net of cost). In addition respectively, for allowance for borrowed funds used during general rate increases raised revenues by $11.3 million, construction, which are not included in interest charges for which were partially offset by increased expenses (other prior years.
than fuel costs).
Audfitors' Opinion Deloitte Haskins & Sells Certified Public Accountants 1010 Second Avenue San Diego, California 92101 To the Shareholders and Board of Directors of San Diego Gas & Electric Company.
We have examined the financial statements and schedules of San Diego Gas & Electric Company (pages 14 to 25) for the years ended December 31, 1979 and 1978. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our report dated February 9,1979, our opinion on the 1978 financial statements was qualified as being subject to the resolution of the Company's request for rate relief from the California Public Utilities Commission (CPUC) to the extent that expenditures and commitments (aggregating approximately $90 million) on its suspended Sundesert nuclear project were not otherwise recoverable. As explained in Note 8, the CPUC has authorized new electric rates which permit the Company to realize $39.2 million of non-site costs over a five-year period and to include substantially all site-related costs in rate base; the unrecoverable portion ($3.6 million) of remaining costs was charged to operations in May 1979 as required by generally accepted accounting principles.
Accordingly, our present opinion on the 1978 financial statements, as presented herein, is no longer qualified.
In our opinion, such financial statements and schedules present fairly the financial position of the Company at December 31,1979 and 1978, and the results of its operations and changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
DELOI'fFE HASKINS & SELLS February 8, 1980 13
Statements of Income (In thousands except per share amounts)
For the Years Ended December 31 1979 1978 OPERATING REVENUES (Note 1):
Electric...
$592,549
$468,400 Gas 151,700 144,210 Steam.......................
983 1,013 Total Operating Revenues.......................................
745,232 613,623 OPERATING EXPENSES (Note 1):
Fuel and Purchased Energy:
Electric..........
.331,499 262,012 Gas............................
98,847 78,643.
Transmission, Distribution and Storage.................................
20,575 17,158 Other Operating...................................................
75,968 58,437 Maintenance 31,218 23,839 Franchise Payments.................
13,953 11,936 Depreciation and Amortization...................................
47,592 37,980 Taxes:
Property.......................
13,159 16,551 Federal Income (Note 4).................
9,304 10,134 State Franchise (Note 4)......................................
2,857 3,176 Other.........................................................
3,027 2,348 Total Operating Expenses......................
647,999 522,214 OPERATING INCOME............................................
97,233 91,409 OTHER INCOME CREDITS:
Allowance for Other Funds Used During Construction.....................
18,033 13,900 O ther-N et......................................................
11,125 10,644 Total Other Income Credits.........................................
29,158 24,544 INCOME BEFORE INTEREST CHARGES...
126,391 115,953 INTEREST CHARGES:
Long-Term Debt..................................
54,657 47,390 Short-Term Debt and Other..............................................
8,770 9,624 Allowance for Borrowed Funds Used During Construction (7,202)
(7,863)
Total Interest Charges................
56,225 49,151 NET INCOME (before preferred dividend requirements).....
70,166 66,802 PREFERRED DIVIDEND REQUIREMENTS..............................
17,643 17,230 EARNINGS APPLICABLE TO COMMON SHARES.......................
$ 52,523
$ 49,572 AVERAGE COMMON SHARES OUTSTANDING 29,230 24,588 EARNINGS PER COMMON SHARE..
1.80 2.02 DIVIDENDS DECLARED PER COMMON SHARE.......................
1.48 1.40 See notes to financial statements.
Certain 1978 amounts have been reclassified for comparability.
14
Balance Sheets (In thousands of dollars)
Balance at December 31 1979 1978 ASSETS UTILITY PLANT-At Original Cost:
In Service:
Electric.......................................................
$1,035,66 7
$ 955,937 G as..........................................................
2 2 7,0 9 7 2 11,804 Common and Steam............................................
24,980 23,113 Total Plant in Service..........................................
1,287,744 1,190,854 Plant Held for Future Use (Note 8)...................................
65,600 63,573 Construction in Progress............................................
447,881 325,230 Total Utility Plant..........................................
1,801,225 1,579,657 Less Accumulated Depreciation.....................................
381,437 344,945 Net Utility Plant (Notes 1 and 3)..................
1,419,788 1,234,712 NON-UTILITY PLANT-At Cost (Less Accumulated Depreciation:
1979,$79;1978,$77) 5,196 5,529 INVESTMENTS IN AND ADVANCES TO SUBSIDIARIES (Note 1)...........
25,835 25,975 CURRENT ASSETS:
Cash (Including U.S. Treasury Notes: 1979, $14,500; 1978, $3,500).........
15,819 4,268 Receivables (Less Allowance for Doubtful Accounts:
1979, $486; 1978, $370):
Customer (Note 3)..............................................
56,645 49,731 Other (Note 9) 8.................................................
8,656 32,728 Materials and Supplies-At Average Cost:
Plant Materials and Operating Supplies..............................
22,222 22,555 Fuel Inventory (Note 2)...........................................
72,577 44,638 Regulatory Balancing Accounts-Undercollected (Note 1).................
67,909 25,898 Other.........................
1,144 957 Total Current Assets...........................................
244,972 180,775 DEFERRED CHARGES AND OTHER ASSETS (Notes 1, 8 and 9)...........
86,774 93,522 TOTAL........................................................
$1,782,565
$1,540,513 CAPITALIZATION AND LIABILITIES CAPITALIZATION (See Statements of Capital Stock and Long-Term Debt):
Common Equity.........................
$ 541,225
$ 480,454 Preferred Stock (Note 5):
Not Subject to Mandatory Redemption.............................
128,500 128,500 Subject to Mandatory Redemption...............................
85,000 85,000 Long-Term Debt (Note 3)...........................................
640,078 573,065 Total Capitalization...........................................
1,394,803 1,267,019 CURRENT LIABILITIES:
Commercial Paper (Note 2)........................................
95,420 21,295 Bankers' Acceptances (Note 2)......................................
60,000 23,600 Accounts Payable.................................................
73,817 55,252 Dividends Payable................................................
16,261 14,344 Taxes Accrued (Note 4).............
19,472 12,311 Interest Accrued..................................................
14,510 13,808 Regulatory Balancing Accounts-Overcollected (Note 1)................
26,853 1,225 Current Portion of Long-Term Debt......
3,058 53,037 Other..........................................................
22,041 22,099 Total Current Liabilities......................................
331,432 216,971 CUSTOMER ADVANCES FOR CONSTRUCTION..........................
24,577 21,291 RESERVES AND DEFERRED CREDITS (Note 7).........................
31,753 35,232 COMMITMENTS AND CONTINGENCIES (Note 6)
TO TAL.
$1,782,565
$1,540,513 See notes to financial statements.
Certain 1978 amounts have been reclassified for comparability.
15
Statements of Changes in Financial Position (In thousands of dollars)
For the Years Ended December 31 1979 1978 FUNDS PROVIDED:
OPERATIONS:
Net Income (before preferred dividend requirements)...................
$ 70,166
$ 66,802 Charges (Credits) to Income Not Affecting Funds:
Depreciation and Amortization..................................
47,592 37,980 Allowance for Funds Used During Construction.....................
(25,235)
(21,763)
Regulatory Revenue Adjustments-Net............................
(16,383)
(185)
O ther-N et..................................................
(2,595) 2,193 Funds Provided From Operations.............................
73,545 85,027 LONG-TERM FINANCING:
Proceeds From:
Sale of Common Stock........................
.51,891 71,829 Sale of Preference Stock.................
26,359 Sale of First Mortgage Bonds.
49,377 Sale of Encina5............................................
131,620 Other Long-Term Debt 69,617 4,741 Retirement of Long-Term Debt....................................
(53,026)
(13,033)
Funds Provided From Long-Term Financing......................
68,482 270,893 OTHER SOURCES:
Customer Advances for Construction 3,286 2,085 Decrease in Working Capital......................................
116,626 Decrease (Increase) in Advances to Subsidiaries-Net...................
1,085 (3,135)
Other........................................................
2,348 388 Funds Provided From Other Sources 123,345 (662)
Total..................................................
265,372
$ 355,258 FUNDS APPLIED:
Additions to Utility Plant (Excluding Allowance for Funds Used During Construction)............
$ 200,126
$ 200,274 Net Increase in Deferred Charges And Other Assets......................
3,960 44,093*
Dividends on Preferred Stock........................................
17,643 17,230 Dividends on Common Stock.........................................43,643 35,457 Increase in Working Capital.......................................
58,204 Total..............
265,372
$ 355,258 WORKING CAPITAL CHANGES (Other Than Current Portion of Long-Term Debt and Regulatory Revenue Adjustments):
Receivables..................................................
$ (17,158)
$ 30,301 Plant Materials and Operating Supplies.....
(333) 2,218 Fuel Inventory.................................................
27,939 (25,715)
Short-Term Debt......................
(110,525) 68,065 Accounts Payable...............................................
(18,565)
(940)
Taxes, Interest Accrued and Other....................
2,016 (15,725)
Increase (Decrease) in Working Capital...............................
$(116,626)
$ 58,204
'Excludes prior years' expenditures on Sundesert project transferred from Construction Work in Progress to Deferred Charges.
See notes to financial statements.
Certain 1978 amounts have been reclassified for comparability.
16
Statements of Changes in Capital Stock and Retained Earnings (In thousands of dollars)
Preferred Stock Not Subject to Subject to Mandatory Mandatory Common Premium Retained For the Years Ended December 31, 1978 and 1979 Redemption Redemption Stock (Less Expense)
Earnings Balance, January 1,1978............
$103,500
$85,000
$113,245
$136,093
$143,813 Net Income-for year'...
66,802 Preference Stock Sold (1,000,000 Shares)....
25,000 1,359 Common Stock Sold (4,943,817 Shares).....
24,719 47,110 Dividends Declared:
Preferred Stock............
(17,230)
Common Stock.......................
(35,457)
Balance, December 31, 1978.................
128,500 85,000 137,964 184,562 157,928 Net Income-for year...
70,166 Common Stock Sold (3,595,428 Shares).....
17,977 33,914 Dividends Declared:
Preferred Stock.....
(17,643)
Common Stock (43,643)
Balance, December 31, 1979.................
$128,500
$85,000
$155,941
$218,476
$166,808 Statements of Capital Stock (In thousands of dollars)
Balance at December 31 1979 1978 COMMON EQUITY:
Common Stock, $5 Par Value, Authorized 40,000,000 Shares, Outstanding: 1979, 31,188,237 Shares; 1978, 27,592,809 Shares
$155,941
$137,964 Premium on Capital Stock (Less Expense) 218,476 184,562 Retained Earnings.................................................
166,808 157,928 Total Common Equity
$541,225
$480,454 PREFERRED STOCK (NOTE 5):
NOT SUBJECT TO MANDATORY REDEMPTION:
CUMULATIVE PREFERRED STOCK, $20 PAR VALUE, AUTHORIZED 1,375,000 SHARES:
5% Series, 375,000 Shares Outstanding.........................
7,500 7,500 4 % 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:*
$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
$2.68 Series, 1,000,000 Shares Outstanding 25,000 25,000
$2.475 Series, 1,000,000 Shares Outstanding 25,000 25,000 Total Not Subject to Mandatory Redemption
$128,500
$128,500 SUBJECT TO MANDATORY REDEMPTION:
PREFERENCE STOCK (CUMULATIVE) WITHOUT PAR VALUE:*
$7.325 Series, 300,000 Shares Outstanding.$
30,000
$ 30,000
$8.25 Series, 250,000 SharesOutstanding....................25,000 25,000
$9.125 Series, 300,000 Shares Outstanding......................
30,000 30,000 Total Subject to Mandatory Redemption 0$
85,000
- Authorized 5,000,000 shares total (both subject to and not subject to mandatory redemption).
See notes to financial statements.
17
Statements of Long-Term Debt (In thousands of dollars)
Balance at December 31 1979 1978 FIRST MORTGAGE BONDS:
3%% Series D, Due April 1, 1982
$ 12,000
$12,000 27A% Series E, Due April 1,1984................................
17,000 17,000 3%% Series F, Due October 1, 1985.....
18,000 18,000 47/8% Series G, Due October 1, 1987....... I......................
12,000 12,000 4%% Series H, Due October 1,1990.................................
30,000 30,000 51/2% Series 1, Due March 1, 1997........ I..........
25,000 25,000 7% Series J, Due December 1,1998............................
35,000 35,000 83/% Series K, Due February 1, 2000................................
40,000 40,000 8% Series L, Due September 1, 2001.......
45,000 45,000 8%% Series M, Due January 15, 2004.................................
75,000 75,000 9.30% Series N, Due December 15, 1979..........
50,000 10.7% Series ODue May 1, 1982..............
40,000 40,000 10% Series P, Due July 15, 2006....................................
45,000 45,000 8%% Series Q, Due March 15, 2007 50,000 50,000 93 % Series R, Due May 1, 2008........................
50,000 50,000 Total...........
494,000 544,000 SINKING FUND DEBENTURES:
4%%, Due January 15, 1984..............
9,000 9,375 4/2%, Due September 1, 1994.... I...............................
15,600 16,000 Total......................................................
24,600 25,375 OTHER LONG-TERM DEBT:
Foreign Term Loans, Variable Rates (14.8% at December 31, 1979),
Due October 25, 1983-April 26, 1986 65,000 Term Loan, 8%%, Due May 1, 1983-1985.............................
40,000 40,000 Pollution Control Bonds, 6%% 1977 Series A, Due April 1, 2007.9,575 9,575 Pollution Control Bonds, 7.20% 1979 Series A, Due April 1, 2009 4,692 Other 8,555 10,560 Total 127,822 60,135 UNAMORTIZED DISCOUNT ON LONG-TERM DEBT.....................
(3,286)
(3,408)
CURRENT PORTION OF LONG-TERM DEBT (3,058)
(53,037 TO TA L
$573,065 See Note 3 of Notes to Tinancial Statements.
18
Schedules of Financial Information by Segments of Business (In thousands of dollars)
The company is an operating public utility company engaged in the generation, purchase, distribution and sale of electric and steam energy and the purchase, distribution and sale of natural gas. Income taxes and corporate expenses are allocated to departments in accordance with regulatory accounting requirements.
Adjustments For the Year Ended December 31. 1979 Electric Gas Other and Operations Operations Operations Eliminations Total Operating Revenues:
Unaffiliated Customers..............
$592,549
$122,772
$ 983
$ 716,304 Intersegment Sales.................
85,516
$(56,588) 28,928 Total Operating Revenues..............
592,549 208,288 983 (56,588) 745,232 Operating Income 89,305 7,912 16 97,233 Depreciation and Amortization..........
40,018 7,539 35 47,592 Capital Expenditures................
186,021 15,743 3,277 205,041 Identifiable Assets:
Net Utility Plant....................
1,259,382 143,564 16,842 1,419,788 Plant Materials and Operating Supplies 18,161 1,666 2,395 22,222 Fuel Inventory....................
69,268 3,309 72,577 Other Corporate Assets...............
'267,978 Total Assets........................
$1,782,565 For the Year Ended December 31, 1978 Operating Revenues:
Unaffiliated Customers..............
$468,400
$119,892
$1,013
$ 589,305 Intersegment Sales................
55,688
$(31,370) 24,318*
Total Operating Revenues..............
468,400 175,580 1,013 (31,370) 613,623 Operating Income.....................
68,026 23,412 (29) 91,409 Depreciation and Amortization 30,923 7,023 34 37,980 Capital Expenditures.............
192,929 12,898 1,587 207,414 Identifiable Assets:
Net Utility Plant................
1,084,669 135,169 14,874 1,234,712 Plant Materials and Operating Supplies 19,386 1,739 1,430 22,555 Fuel Inventory..................
41,981 2,657 44,638 Other Corporate Assets.
238,608 Total Assets
$1,540,513 For the Year Ended December 31,1977 Operating Revenues:
Unaffiliated Customers-............
$422,099
$ 99,395
$ 923
$ 522,417 Intersegment Sales 41,678
$(23,301) 18,377' Total Operating Revenues.............
422,099 141,073 923 (23,301) 540,794 Operating Income..............
67,778 15,328 (33) 83,073 Depreciation and Amortization 27,116 6,593 31 33,740 Capital Expenditures..................
185,160 12,402 1,326 198,888 Identifiable Assets:
Net Utility Plant.....................
1,046,576 129,187 13,417 1,189,180 Plant Materials and Operating Supplies 17,483 1,556 1,298 20,337 Fuel Inventory......................
67,765 2,523 65 70,353 Other Corporate Assets 133,299 Total Assets
.......$1,413,169
- Revenue from interdepartmental sales of gas allowed by the CPUC in tariff rates. See Note 1 of Notes to Financial Statements and Management's Discussion and Analysis of the Summary of Operations.
- See Note 1 of Notes to Financial Statements for explanation of reclassification affecting these amounts. Certain other 1978 and 1977 amounts have been reclassified for comparability.
19
Notes to Financial Statements properties using the straight-line remaining life method of December 31, 1979 and 1978 computation. The provisions for depreciation for 1979 and 1978 were 3.32% and 3.27%, respectively, of the related aggregate depreciable asset balances for these periods.
- 1.
SUMMARY
OF ACCOUNTING POLICIES For federal income tax purposes, the company computes System of Accounts depreciation using the most liberal methods and lives permitted by the Treasury Department. Service lives for The accounting records of the company are maintained federal income tax purposes are generally shorter than the in accordance with the Uniform System of Accounts service lives used for financial statement purposes.
prescribed by the Federal Energy Regulatory Commission (FERC) and adopted by the California Public Utilities Income Taxes Commission (CPUC).
The company, in accordance with requirements of the Utility Plant CPUC, includes in net income the current tax reductions that result from timing differences and certain investment The cost of additions to utility plant and of replacements tax credits, summarized in Note 4 below. No provision is of retirement units of property is capitalized. The cost of made for deferred taxes relating to these timing differences, utility plant includes labor, material and similar items as well except for deferred energy costs and certain plant sales and as indirect charges for engineering, supervision, abandonments. In addition, the company files consolidated transportation and other related items. The company federal and state tax returns with its subsidiaries in which capitalizes an allowance for funds used during construction certain items (a portion of which are capitalized in the (AFUDC) based on the cost of capital devoted to plant accounts of the subsidiaries) are deducted for tax purposes.
under construction. Costs of depreciable units of plant The resultant tax reductions are applied to benefit the retired are eliminated from utility plant accounts and such parent company's income.
costs, plus removal expenses less salvage value, are The company elected to amortize the additional charged to accumulated depreciation.
investment tax credits, made available to the company Research, Development and Demonstration under the Tax Reduction Act of 1975, to income ratably over the book lives of the respective properties.
Research, development and demonstration costs related Federal and state taxes on income are allocated between to specific construction projects and a portion of general operating income and other income credits.
engineering research costs are capitalized. Other such costs are either charged to expense as incurred or deferred and Pension and Savings;Plans amortized in accordance with requirements of the CPUC.
The company provides a noncontributory pension plan The company incurred research, development and and a savings plan for -substantially all employees. The demonstration costs of approximately $4.8 million and savings plan provides for a company contribution equal to
$6.0 million during 1979 and 1978, of which amounts 50% of the amount a participant elects to set aside. The approximately $1.7 million and $2.8 million were deferred company's contributionicannot, within specified limits, as of the end of the respective years.
exceed 3% of the participant's basic compensation. The company's contributions to the plans charged to expense Depreciation and utility plant for the ears 1979 and 1978 were $10.4 Provisions for depreciation of property, plant and million and $9.2 million, respectively. It is the policy of the equipment for financial statement purposes are generally company to fund pension costs accrued; the company is based on the estimated service lives of the respective fully funded for past and ior ere 20
Subsidiaries The maximum amounts of aggregate short-term The company accounts for investments in subsidiaries by borrowings outstanding at any month-end during the years the quiy mtho.
Te asetsandrevnue ofthe1979 and 1978 were $155.4 million and $161.1 million, the equity method. The assets and revenues of the subsidiaries are not significant in relation to those of the respectively. During the years 1979 and 1978, the weighted company.
daily average interest rates for short-term borrowings were 13.5% and 9.1%, respectively, and the daily average short Revenues term borrowings outstanding were $52.5 million and $99.0 million, respectively. As of December 31,1979 and 1978, Revenues are recognized on the basis of cycle billings there were $95.4 million and $21.3 million of commercial rendered monthly. The company does not record unbilled paper outstanding at weighted average interest rates of revenues. As required by the CPUC, the company has been 15.1% and 11.2%, respectively. Additionally, at December 31, instructed to defer any over or undercollections as a result 1979 and 1978 there were $60.0 million and $23.6 million of (1) total fuel costs experienced differing from those used of bankers' acceptances outstanding at weighted average to set rates and (2) total gas revenues experienced differing interest rates of 15.3% and 12.2%, respectively.
from the gas margin allowed in the last general rate case.
During January of 1980, the company increased both its Net overcollections were previously recorded as deferred authorized bank lines and bankers' acceptances limit to fuel revenues; net undercollections were previously
$150 million each. The additional $50 million of bank lines recorded as deferred energy costs. Beginning January 1, was utilized for a 360-day credit agreement bearing interest 1979, net overcollections were recorded as deferred at various short-term rate options.
revenues; net undercollections were recorded as accrued revenues. Prior years' statements of income were revised to reflect this reclassification, which had no effect on operating
- 3. LONGTERM DEBT income. The company expects to be able to recover the net undercollections, which totaled $41.1 million at December Additional first mortgage bonds may be issued under the 31, 1979, through rate adjustments.
terms of the bond indenture upon compliance with the In January 1980, the CPUC indicated that a portion of provisions thereof and subject to the provisions of the the April 1978 general rate decision should have been indentures for sinking fund debentures. Substantially all classified as a purchased gas adjustment decision. This utility plant is subject to the lien of the bond indenture.
decision required the write-off in 1979 of $3.2 million ($2.2 The company has $3.1 million of promissory notes, million net of taxes) which had been recognized in 1978.
payable in pounds sterling, with an English lending The previous recognition and subsequent write-off had the syndicate which are collateralized by substantially all of the effect of decreasing earnings per share for 1979 by $0.07 company's customer accounts receivable. Pursuant to a and increasing earnings per share for 1978 by $0.09.
CPUC decision in July 1978, construction work in progress was credited for a $2.8 million foreign exchange gain realized on such notes.
Other The mandatory payments to retire the company's long The company has deferred original costs of approximately term debt during the next five years are $3.1 million for
$48.7 million relating to cancellation charges and other 1980, $2.9 million for 1981, $54.3 million for 1982, $20.1 costs incurred in connection with the cancellation of certain million for 1983 and $55.0 million for 1984.
power projects. The CPUC authorized electric rates which permit the company to realize these deferred charges over
- 4. INCOME TAXES five-year periods. See Note 6 regarding accounting for Total income tax expense was less than the amount leases.
leases.computed by applying the federal and state statutory rates to income before income tax. The reasons for this difference are as follows:
- 2. SHORT-TERM BORROWINGS (Thousands of Dollars)
The company maintains lines of credit with various banks For the Years Ended December 31 f1979 1978 in addition to issuing commercial paper. Borrowings under Tax expense at statutory rates......
$38,089
$37,686 the lines of credit bear interest up to 108% of the prevailing Reductions in taxes resulting from:
prime rate and a commitment fee of 1/2 of 1% per annum is Excess of tax over book depreciation 12,454 11,099 payable on the entire line of credit. There are no Regulatory revenue adjustments...
7,440 7,439 requirements for compensating balances. Commercial Allowance for funds used during construction...............
28 5 1,6 paper is issued at various discount rates and usually Gain on sale of Encina Unit 5..
469 (22,407) matures within 7 to 125 days. Effective December 1979, the Sundesert suspension (2,732) 19,925 company had lines of credit of $100 million, all of which are Other-net.............................5,930 10,751 available to support commercial paper.
Total tax reductions 36,396 38,272 During 1979, the company renewed its credit agreement Current tax expense (credit) 1,693.
(636) for the use of up to $60 million of bankers' acceptances to Deferred taxes..........................j 3,030 5,276 finance the purchase of fuel inventory. The bankers' Total income tax expense.
4,723
$ 4,640 acceptances are issued at the prevailing acceptance rate Allocation of income tax expense:
plus a placement fee and usually mature within 30 to 125 Operating expenses-federal and state
$12,161
$13,310 days. Warehouse receipts for fuel inventory are pledged as Other income credits-other-net (7,438) 18,670) collateral for this credit.
Total income tax expense for short-term$ 4,723
$ 4,640 21
As of December 31, 1979, the company's unused December 31,1979 is $348.0 million. The company has no investment tax credit, which may be carried forward and material subleases. The amount of rents charged to applied against future years' federal income taxes, is operating expenses for the years ended December 31, 1979 estimated at $39.7 million (expiring 1980 through 1986).
and 1978 was $16.8 million and $8.7 million, respectively.
Also, the company has an operating loss carryforward of The company has entered into contracts with suppliers approximately $14.7 million which expires in 1984. The for the purchase of a minimum of 37.8 million barrels of federal tax effect of the operating loss and $7.1 million of low-sulfur residual and diesel fuel oil through December of the investment tax credit carryforwards has been reflected 1982. The company estimates that commitments under in the accompanying financial statements as a reduction of these contracts aggregate $1.0 billion at current contract deferred taxes.
prices determined by a formula, which is based upon the suppliers' crude oil costs. In addition, the company has contracted to purchase 11.7 million barrels of residual and
- 5. PREFERRED STOCK diesel fuel oil from January 1983 through June 1984 at prices to be negotiated in the future.
General The company, at its option, may redeem the whole or any part of its cumulative preferred stock outstanding upon
- 7. SALE AND LEASEBACK payment of the redemption price together with accrued In August 1978, the company consummated a sale and dividends. At December 31, 1979, the redemption leaseback of Unit 5 of its Encina generating facility at premiums per share ranged up to $4, depending upon the Carlsbad, California. Terms of the lease provide for series and the dates for redemption.
minimum annual rentals of $10.2 million for a period of 25 The company's preference stock (cumulative) may be years commencing January 1, 1979, and include renewal redeemed at the option of the company upon payment of options of up to 15 years at fair market value rentals to be the redemption price together with accrued dividends, determined at the time of renewal. The company will pay all provided that prior to certain specified dates through June normal operating, maintenance and property tax expenses.
15, 1984, no redemption may be made through refunding The gain on the sale of approximately $23.0 million has at an effective cost of money to the company per annum at been deferred and is being amortized as a reduction of less than the respective dividend rates. Depending upon the rental expense over the term of the lease.
series and the dates for redemption, the redemption prices range from $113.50 to $100 per share for the $9.84, $7.80,
$7.20, $7.325, $8.25 and $9.125 series, and from $30 to
- 8. SUSPENSION OF SUNDESERT
$27.75 for the $2.68 and $2.475 series.
On May 3, 1978, the company suspended its proposed Subject to Mandatory Redemption Sundesert nuclear project and terminated certain contracts The company is required to set aside annually in sinking relating thereto as a result of regulatory and legislative funds $2.0 million beginning in the year 1983, an additional developments. In a June 5, 1979 rate decision, the CPUC
$1.2 million beginning in 1984 and an additional $1.0 authorized new electric rates which permit the company to million beginning in 1985 for the repurchase of its $7.325, realize $39.2 million of non-site costs, included in deferred
$8.25 and $9.125 series preference stock (cumulative).
charges, over a five-year period and to include $45.3 million of site-related costs in rate base. Unrecovered site and non site costs of $3.6 million ($0.12 per share) were charged to
- 6. COMMITMENTS AND CONTINGENCIES operations in May 1979. All site-related costs, including $2.0 million excluded from rate base by the CPUC until the The company is engaged in a construction program completion of construction of a plant on the Sundesert site, under which expenditures of $174 million are planned for will remain in plant held for future use.
1980, excluding AFUDC and other non-cash items.
The company is committed under certain leases which are accounted for as operating leases in accordance with the Addendum to Accounting Principles Board Opinion No.
At December 31,1979 and 1978, the company had 2 but which meet the criteria of Statement of Financial placed on exchange approximately 2.11 million barrels of Accounting Standards No. 13 for capital leases. The fuel oil (cost, $34.4 million) and 3.50 million barrels (cost, amounts of assets and liabilities that would have been
$56.3 million), respectively. Oil to be received by the included in the accompanying balance sheets for such company within one year is recorded in accounts receivable capital leases (including the lease discussed in Note 7)
($5.4 million and $30.5 million at December 31, 1979 and approximated $191 million and $196 million, respectively, at 1978, respectively) while oil due after one year is included December 31, 1979; and $174 million for each category at in deferred charges and other assets ($29.0 million and December 31, 1978. The effect on expenses, had such
$25.8 million at December 31, 1979 and 1978, respectively).
leases been capitalized, would not be material.
No gain or loss is recognized on these nonmonetary At December 31, 1979, the minimum rental payments of exchanges.
the company under all noncancellable leases are $18.6 Of the total on exchange at December 31,1979, 2.09 million, $18.3 million, $20.1 million, $21.5 million and $20.9 million barrels (cost, $33.9 million) is due from a closely million for the years 1980 through 1984, respectively. The held distributor not previously used by the company. The aggregate amount of noncancellable rental commitments at original 1978 exchange agreement required the distributor 22
to return all the oil during 1979 and 1980. During 1979, during 1983 through 1985.
308,000 barrels of oil were returned to the company. In The magnitude of this transaction relative to the size of December 1979, the company extended the return period the distributor caused the company to obtain the right to to 1985 in exchange for the distributor absorbing any certain assets which partially collateralize its receivable.
fluctuations in oil prices under an amended agreement Repayment of the company's receivable depends on the which also provides an option to pay cash at $16.50 per ability of the distributor to achieve profitable operations, or barrel. The barrels of oil are now scheduled to be returned realization of the assets pledged as collateral. In the in minimum annual quantities of 300,000 barrels per year opinion of management, as of.December 31,1979 no during 1980 through 1982 and 400,000 barrels per year provision for loss is necessary.
- 10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Thousands of Dollars Earnings Per Operating Operating Net Common Revenues Income Income Share Quarter Ended.
1978 March 31.........................
f
$149,322
$24,244
$17,964
$0.61 June 30.............................
141,381 21,227 16,142 0.49 September 30........................
153,762 25,508 20,390 0.63 December 31......................
169,158 20,430 12,306 0.30 1979 March 31............................
177,229 20,872 15,763 0.41 June 30.............................
161,838 19,179 9,264 0.17 September 30........................
193,580 31,284 25,918 0.71 December 31.........................
212,585 25,898 19,221 0.48 These amounts are unaudited but in the opinion of the company reflect all adjustments necessary for a fair presentation. Such adjustments comprise only normal recurring accruals except for the write-off of costs related to Sundesert (see Note 8), which reduced net income for the quarter ended June 30, 1979 by $3.6 million ($0.13 per share*)
and the write-off of previously recognized revenues (see Note 1 under "Revenues"), which reduced net income for the quarter ended December 31,1979 by $2.2 million ($0.07 per shar)
- Based on average common shares outstanding during the quarter.
23
Supplementary Inrormation to Disclose The Effects of Changing Prices (Unaudited)
The following supplementary information is supplied in accordance with the requirements of Statement of Financial Accounting Standards No. 33 for the purpose of providing certain information about the effects of changing prices.
It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.
Statement of Income from Operations Adjusted for Changing Prices Constant Current (I
hosns fdllr)Dollar Cost (In thousands of dollars)
Conventional Average Average Historical 1979 1979 For the Year Ended December 31,1979 CstDollars Dollars Cost Dollars Dollars Operating Revenues..........................................
$ 745,232
$ 745,232
$ 745,232 Electric Fuel and Purchased Energy................................331,499 331,499 331,499 Gas Fuel.....................
a P
E 98,847 98,847 98,847 Other Operating..............................................110,496 110,496 110,496 Maintenance................................................
31,218 31,218 31,218 Depreciation and Amortization.................................
47,592 81,786 95,838 Taxes......................................................
28,347 28,347 28,347 Interest Charges...............
.3,427 63,427 3,
Other Income and Deductions-Net................................
(36,360)
(36,356)
(36,355),
675,066 709,264 723,317 Income from Operations (Excluding Reduction to Net Recoverable Cost)
$ 70,166
$ 35,968)
$ 21,915 Increase in Specific Prices (Current Cost) of Property, Plant and Equipm ent Held During the Year I.........
,225).60237,917 Reduction to Net Recoverable Cost...............................
$0-4,225)
(60,865)
Effect of Increase in General Price Level.......
(297,224)
Excess of Increase in General Price Level Over Increase in Specific Prices After Reduction to Net Recoverable Cost................
(120,172)
Gain From Decline in Purchasing Power of Net Amounts Owed.86,551 86,551 Difference........................................................
.$ (47,674)
$ (33,621)
(1) Including the reduction to net recoverable cost, the income (loss) from operations on a constant dollar basis would have been $(98,257) for 1979.
- 12) At December 31, 1979, current cost of property, plant and equipment, net of accumulated depreciation, was $2,611,092, while historical cost or net recoverable cost was $1,424,984.
24
Five-Year Comparison of Selected Supplementary Financial Data Adjusted for Effect of Changing Prices (In thousands, except per share amounts, of Average 1979 Dollars)
For the Years Ended December 31 1979 1978 1977 1976 1975 Operating revenues..................
$ 745,232
$682,711 $647,761 $577,282 $504,729 Historical cost information adjusted for general inflation (constant dollar)
Income from operations (excluding reduction to net recoverable cost).
$ 35,968 Income per common share (after preferred dividend requirements and excluding reduction to net recoverable cost)..................................
0.63 Net assets at year-end at net recoverable cost...............
$ 634,139 Current cost information Income from operations (excluding reduction to net recoverable cost)...
$ 21,915 Income per common share (after preferred dividend requirements and excluding reduction to net recoverable cost)....
0.15 Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost...................................
$(120,172)
Net assets at year-end at net recoverable cost..............
$ 634,139 General information Gain from decline in purchasing power of net amounts owed..........................
$ 86,551 Cash dividends declared per common share...............
1.48 $
1.56 $
1.53 $
1.53 $
1.62 Market price per common share at year-end...............
12.43 $ 15.80 $ 18.11
$ 18.09
$ 14.38 Average Consumer Price Index.........................
.217.4*
195.4 181.5 170.5 161.2
- 1979 average Consumer Price Index estimated Constant dollar amounts represent historical costs Under the rate-making prescribed by the CPUC, only stated in terms of dollars of equal purchasing power, as the historical cost of plant is recoverable in revenues as measured by the Consumer Price Index for All Urban depreciation. Therefore, the excess of the cost of plant Consumers (CPI-U). Current cost amounts reflect the stated in terms of constant dollars or current cost that changes in specific prices of plant from the date the plant exceeds the historical cost of plant is not presently re was acquired to the present, and differ from constant dollar coverable in rates as depreciation, and is reflected as a amounts to the extent that specific prices have increased reduction to net recoverable cost. While the rate-making more or less rapidly than prices in general.
process gives no recognition to the current cost of replac The current cost of property, plant and equipment, ing property, plant and equipment, based on past practices which includes land, land rights, intangible plant, plant held the company believes it will be allowed to earn on the for future use and construction work in progress, repre-increased cost of its net investment when replacement of sents the estimated cost of replacing existing plant assets facilities actually occurs.
and was determined primarily by indexing surviving plant To properly reflect the economics of rate regulation in by the Handy-Whitman Index of Public Utility Construction the Statement of Income from Operations, the reduction of Costs. The current year's provision for depreciation on the net property, plant and equipment should be offset by the constant dollar and current cost amounts of property, plant gain from the decline in purchasing power of net amounts and equipment was determined by applying the company's owed. During a period of inflation, holders of monetary depreciation rates to the indexed plant amounts.
assets suffer a loss of general purchasing power while Fuel inventories, the cost of fuel used in generation holders of monetary liabilities experience a gain. The gain and gas purchased for resale have not been restated from from the decline in purchasing power of net amounts owed their historical cost in nominal dollars. Regulation limits the is primarily attributable to the substantial amount of debt recovery of fuel and purchased gas costs through the which has been used to finance property, plant and operation of adjustment clauses or adjustments in basic equipment. Since the depreciation on this plant is limited to rate schedules to actual costs. For this reason, fuel invento-the recovery of historical costs, the company does not have ries are effectively monetary assets.
the opportunity to realize a holding gain on debt and is As prescribed in -Statement of Financial Accounting limited to recovery only of the embedded cost of debt Standards No. 33, income taxes were not adjusted.
capital.
25
Financial Data (In millions except per share amounts) 1979 1978 1977 1976 1975 1974 1969 COMMON STOCK Market to Book Ratio*.........
75.6%
84.7%
89.3%
86.7%
68.0%
59.6%
155.1%
Book Value Per Share.....
I..... $ 17.35
$ 17.41
$ 17.36
$ 16.72
$ 16.17
$ 16.99
$ 14.67 Earnings Per Weighted Average Share............
1.80 2.02 2.32 2.14 0.97 2.09 1.85 Dividends Per Share:
Paid........................
1.46 1.38 1.24 1.20 1.20 1.20 0.99 Declared................
1.48 1.40 1.28 1.20 1.20 1.20 1.02 Payout Ratio..................
83.1%
71.5%
55.9%
56.5%
124.9%
58.7%
55.1%
Dividend Yield................
11.3%1 9.5%
8.3%
8.3%-
10.9%
11.9%
4.5%
Price/Earnings Ratio*..........
7.3 7.3 6.7 6.8 11.3 4.8 12.3 CAPITALIZATION Common Equity..............
$ 541.2
$ 480.4
$ 393.2
$ 322.5
$ 274.8
$ 263.4
$ 146.7 Preferred Stock:
Not Subject to Mandatory Redemption..................
128.5 128.5 103.5 103.5 78.5 78.5 27.5 Subject to Mandatory Redemption.................
85.0 85.0 85.0 55.0 55.0 55.0 Long-Term Debt:
First Mortgage Bonds.........
491.2 490.9 491.1 451.8 407.1 367.3 158.8 Debentures....................
23.7 24.5 25.3 26.0 26.8 27.6 31.4 Other Long-Term Debt........
125.2 57.7 56.2 11.8 6.6 3.7 Total Long-Term Debt.........
640.1 573.1 572.6 489.6 440.5 398.6 190.2 Total Capitalization.............
$1,394.8
$1,267.0
$1,154.3
$ 970.6
$ 848.8
$ 795.5
$ 364.4 Capitalization Ratios:
Common Equity...............
38.8%1 37.9%
34.1%
33.2%
32.4%
33.1%
40.3%
Preferred Stock:
Not Subject to Mandatory Redemption.................
9.2 10.2 9.0 10.7 9.2 9.9 7.5 Subject to Mandatory Redemption............
6.1 6.7 7.3 5.7 6.5 6.9 Long-Term Debt:
First Mortgage Bonds.......
35.2 38.7 42.5 46.5 48.0 46.2 43.6 Debentures...............
.1.7 1.9 2.2 2.7 3.2 3.5 8.6 Other Long-Term Debt......
9.0 4.6 4.9 1.2 0.7 0.4 Total Long-Term Debt.......
45.9 45.2 49.6 50.4 51.9 50.1 Total Capitalization.................
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Times Earned:
Interest on Debt Before Income Taxes...........
2.18 2.25 2.20 2.38 1.66 2.51 4.18 Interest and Preferred Dividends After Income Taxes.........
1.65 1.67 1.74 1.74 1.37 1.76 2.64 UTILITY PLANT Electric.....................
$1,547.4
$1,343.3
$1,281.7
$1,076.9
$ 918.0
$ 803.3
$ 409.2 Gas.......................
228.0 212.9 201.2 188.3 179.7 169.8 114.4 Common and Steam.........
25.8 23.4 21.9 26.2 27.0 40.3 32.4 Total......................
1,801.2 1,579.6 1,504.8 1,291.4 1,124.7 1,013.4 556.0 Accumulated Depreciation......
381.4 344.9 315.6 283.8 257.0 235.3 144.6 Net Utility Plant..........
$1,419.8
$1,234.7
$1,189.2
$1,007.6
$ 867.7
$ 778.1
$ 411.4
- At December 31 26
Stock Prices 1978-1979 4.40%
4%/%
5%
$9.84
$7.80
$7.20
$2.68
$2.475 1978 Common Preferred Preferred Preferred, Preference Preference Preference Preference Preference Qtrs.
High Low High Low High Low High Low High Low High Low High Low High Low High Low 1st 16%
14%
10/8 95/
101/2 9%
111/2 10%
107 101 89 81/2 84/2 76 291/2 27%
2nd 15%
14% 10% 91/2 10/4 9%
121 11 106 97 85 74 80 73 28/8 26/4 26 24 3rd 16 14Y 101/2 91/4 10% 91/2 11Y 10%
105 97 86 75 81 71/2 291/4 26/8 26%
24%
4th 15%
14%
9 81/2 101/2 8% 111/s 95/
103 91%
82 71 80 67 27/2 25 25/2 22 4.40%
4/2%
5%
$9.84
$7.80
$7.20
$2.68
$2.475 1979 Common Preferred Preferred Preferred Preference Preference Preference Preference Preference Qtrs.
High Low High Low High Low High Low High Low High Low High Low High Low High Low 1st 15%
14%
9% 8/2 10 8% 11 9
97 90 79 71%
73 65 26%
24%
25 22/4 2nd 15%
14 9
8 9%
8%
101/2 8%
95 90 77/4 70%
70 64/2 25 23%
23%
221/8 3rd 15%
14 9% 8/8 9% 8% 10% 9/8 945/
88 77 70 72 64/2 26 23 24 21 4th 14%
12%
91/8 6% 9% 6 9%
71 90 72/2 70 56 671/2 54 231/
18%
211/2 171/2 Quarterly Dividends Paid in 1978-1979 (Publicly sold issues only) 4.40%
41%
5%
$9.84
$7.80
$7.20
$2.68
$2.475 Common Preferred Preferred Preferred Preference Preference Preference Preference Preference 38C' 22C 221C 25C
$2.46
$1.95
$1.80 67C 61%C
'Rate paid since October 15, 1979. Prior rates were 34C, paid from October 15, 1977, and 36C, paid from October 15, 1978.
The company has paid dividends on its common stock in each year since 1909.
4th Quarter Results Statements of Income (In thousands except per share amounts)
Three Months Ended Years Ended December 31 December 31 1-97 9-1978 1979 1978 Operating Revenues.............................
$212585
$169,158
$745,232
$613,623 Operating Expenses..............................
186687 148,728 647,999 522,214 Operating Income...............................
25,898 20,430 97,233 91,409 Other Income Credits............................
8,983 3,920 29,158 24,544 Interest Charges................................
15,660
.12,044 56,225 49,151 Net Income (before preferred dividend requirements)..19221 12,306 70,166.
66,802 Preferred Dividend Requirements..................
4411 4,410 17,643 17,230 Earnings Applicable to Common Shares.............
$ 14,810
$ 7,896
$ 52,523
$ 49,572 Average Common Shares Outstanding................
31,132 26,137 29,230 24,588 Earnings Per Common Share......................
0.48 0.30 1.80 2.02 Dividends Declared Per Common Share...............
0.38 0.36 1.48, 1.40 See Management's Discussion and Analysis of the Summary of Operations and Note 10 of Notes to Financial Statements.
27,
Officers Board of Directors Robert E. Morris Robert E. Morris*
President and Chief Executive Officer President and Chief Executive Officer of the Company; Thomas A. Page Chairman of the Executive Committee Executive Vice President and Chief Operating Officer Main Burnham
- J. Robert Belt President of John Burnham & Company (a mortgage loan, Vice President-Administrative Services real estate, and insurance firm)
Gary D. Cotton Catherine T. Fitzgerald Wiggs Vice President-Engineering Executive Vice President-Personnel and a member of the Alton DavisManagement Executive Committee of The Broadway Vicen Presiets St ores, Inc., Division of Carter Hawley Hale Stores, Inc.
Vice(retail department stores)
Frank W. DeVore Vice President-Governmental AffairsBrcR.Hzd VicePreiden-Goernmnta AffirsPresident of R. E. Hazard Contracting Company David W. Gilman (an engineering contracting firm)
Vice President-Power Supply William D. McElroy John E. Hamrick Chancellor of the University of California at San Diego Vice President-Marketing Thomas A. Page James J. Holley Executive Vice President and Chief Operating Officer Vice President-Personnel of the Company William J. Karnes Gordon Pearce Secretary Vice President and General Counsel of the Company Philip M. Klauber Leland D. Pratt Vice President-Consultant Retired, former President of Kelco Company Richard Korpan (a manufacturer of kelp products and biochemical colloids)
Treasurer Burt F. Raynes Ralph L. Meyer President of Raynes Engineering Corporation Vice President-Regulatory Services (a mechanical engineering and product development firm)
Robert E. Parsley
- 0. Morris Sievert*
Controller President of Solar Turbines International, an Operating Gordon Pearce Group of International Harvester (a manufacturer of Vice President and General Counsel industrial gas turbine machinery)
R. Denis Richter Fred C. Stalder*
Vice President-Public Relations President of Central Federal Savings and Loan Association Jack E. Thomas
- Member of the Executive Committee Vice President-Customer and Operations Services Ronald W. Watkins Vice President-Resource Planning John H. Woy Vice President-Regulatory Consultant San Diego Gas & Electric District Offices Coronado Northeast San Diego Shirlee R. Smith, District Manager R. Keith Hutchens, District Manager Alan J. McCutcheon, Jr., District Manager 110 B Avenue 203 East 2nd Avenue 101 Ash Street Coronado, CA 92118 Escondido, CA 92025 San Diego, CA 92101 Eastern North Coast South Bay Robert H. Nelson, District Manager Alvin A. Sugg, District Manager P. J. Oberhaus, District Manager 104 North Johnson Avenue 620 Mission Avenue 436 H Street El Cajon, CA 92020 Oceanside, CA 92054 Chula Vista, CA 92010 Mountain Empire Orange County B. L. Caylor, Jr., District Manager William S. Webb, District Manager 31115 Highway 94 101 West El Portal Campo, CA 92006 San Clemente, CA 92672 28
San Diego Gas & Electric Company Distribution of (Incorporated in California)
P.O. Address: Box 1831, San Diego, California 92112 Shareholders Principal Office: 101 Ash Street, San Diego, As of December 31,1979 California 92101 Preferred Common Telephone (714) 232-4252 Total Shareholders 13,907 76,447 Annual Meeting of Shareholders Class of Investor In accordance with the bylaws of the company, the annual Women 4,353 23,622 meeting of shareholders is held on the fourth Tuesday in Men 2,537 16,932 April at 11 a.m. at the principal office of the company.
Joint Accounts 4,866 27,126 Listing of Stock Fiduciaries 1,201 7,282 The common stock is listed on the New York and Pacific Securities Dealers 79 37 Stock Exchanges (Symbol: SDO)
Nominees 352 546 The preferred stocks (except 4.60% series and $7.325, Other Domestic 491 732
$8.25 and $9.125 preference series) are listed on the Foreign 28 170 American and Pacific Stock Exchanges (Symbol: SDO)
Amounts Owned Stock Transfer Agents and Registrars 1 to 99 shares 4,552 13,194 California First Bank 100-300 shares 7,521 45,295 8155 Mercury Court 301-500 shares 1,038 9,268 P.O. Box 2529 501-1000 shares 499 6,210 San Diego, California 92112 Over 1000 shares 297 2,480 Transfer agent for common Location Transfer agent and registrar for all preferred Service Area 4,040 15,904 United California Bank Rest of California 4,743 23,932 c/o Schroder Trust Company Other States One State Street
& Foreign 5,124 36,611 New York, New York 10015 Transfer agent and registrar for common Transfer agent and registrar for preference only (except
$7.325, $8.25 and $9.125 preference)
Shareholders' Agent for Dividend Reinvestment Plan United California Bank Dividend Reinvestment Service P.O. Box 60975 Los Angeles, California 90060 SDG&E Service* Area San Diego Gas & Electric Company serves.90 communities in San Diego County, an adjoining part of Orange County to the north and a small section of Imperial County to the east.
A statistical supplement to the annu4 report is4 available. Requests for it should be directed to the Corporate Secretary, San Diego Gas & Electric, Post Office Box 1831, San Diego, CA 92112.
San Diego Gas & Electric-ULK E
P.O. Box 1831, San Diego, California 92112 P
ermit No> 13 AN DIEGO, C