ML13329A109

Annual Rept,San Diego Gas & Electric,1983

ML13329A109
Person / Time
Site:	San Onofre
Issue date:	12/31/1983
From:	Page T SAN DIEGO GAS & ELECTRIC CO.
To:
Shared Package
ML13310B354	List: ML13310B353 ML13329A109 ML13329A110
References
NUDOCS 8404200250
Download: ML13329A109 (52)

Text

..........

PDRADQCK

sjgh

• 44" SAO4 9-*,.

Pmjwv.

~h Amaudalla s

owarw mal gas s WIMO

/I Ai n l e t o S h u e.dk h a s 0--------.

nayOnakaMosl awsop a wg means anaeanm sTope duea man eam i~ox'-44 UO FW&C%

OAAW4

'.49' dAhwhdyaA tol Odhy dpa 0Madd cog pnts canourandyea tense ex aW hd* shi samee

Mbvt, CGnwomOaOayura

,j 4-<

.4.'--~

iwd

• e ad p<ar who th and twAd hadbse omua nmamsto la en 0

aa

'.cmffeao gra.ms otdh Pr.mwat sewerorn aresad Ahnxo 4444

-n mda 44 0

Ma'4'4 ciatearol Una chan and n-apants d.msdk 4-

.4any-,9444>49444$4'

-~~

~,

an man~

4j'9

94.

.9.-

94'.

~

0 0

..4~"-an oness.

e p44~

44~44 44warnat4.

4 do p

rt anu4fosrane 4444

1. 4-4~4.~-4

.44.4.

a-ac-stee4e 44x4g-ahun 4to adam ann th 4

n'9n u

'y sanMagp U,

Bh4ok lah

-'-'.4.4, 4<

44~~~4amo'o mou aXIl431.l 0

d~~ cashana ata Sm m

mM4~'

useda2 nc amany r

onAs

Financial Highlights of 1983 (DOLL4RS IN THOUSAVDS, EXCEPT PER SHARE AMOUNTS) 1983 1982

% CHANGE Operating revenues

$1,530,207

$1,430,948

+ 6.9 Operating expenses

$1,356,052

$1,261,087

+ 7.5 Net income (before preferred dividend requirements)

$ 187,370

$ 157,303

+ 19.1 Earnings applicable to common shares

$ 159,921

$ 131,235

+ 21.9 Average common shares outstanding (thousands)_

49,994 45,306

+10.3 Earnings per common share 3.20 2.90

+ 10.3 Dividends declared per common share 1.925 1.785

+

7.8 Utility plant additions and replacements

$ 370,109

$ 323,729

+14.3 Total investment in utility plant at year-end

$2,906,164

$2,567,767

+ 13.2 Number of customers at year-end Electric department 823,221 804,546

+ 2.3 Gas department 530,256 520136

+

1.9 Total energy sales Electric (in billions of kwhrs) 10.50 10.53 0.3 Gas (in millions of therms) 444 478 7.1 San Diego Gas & Electric Company is an investor-owned utility. It generates, purchases, and distributes electricity to nearly 825,000 customers in San Diego County and the southwestern section of Orange Coun ty. It also purchases and distributes natural gas to more than 530,000 customers in San Diego County.

The company's service territory covers 4,400 square miles. It includes San Diego, now the eighth largest city in the United States.

Population of the area exceeds two million.

The company headquarters is located at 101 Ash Street, San Diego, California. Its common stock is listed on the New York and Pacific stock exchanges. Its ticker symbol is SDO.

To Our an Diego. It's a very special area, a build any new central station generating very attractive area, that appeals to plants. I believe the risks of building plants fat people in many different ways. Social exceed any potential reward to the company or forecaster John Naisbitt understands its customers.

this attraction and he calls San Diego Instead, we have a flexible energy re

[I Ja city of "great opportunity." In fact, source plan for the future. We are supple he predicts in his book, Megatrends, that in menting our own electric generating capabil the next couple of decades many people and ities with increased purchases of energy, as companies will select San Diego as a primary necessary. We are taking advantage of excess relocation destination.

energy that is available elsewhere and we are Forecasters here in San Diego are also encouraging others to build plants and sell predicting that there will be accelerated energy to uS.

growth-an average increase of 42,000 people each year until the year 2000-for a 2.2 per-What progress has been made?

cent annual population increase. This is We have promised our customers that we will double the expected national growth rate.

stabilize rates and have pledged to our share These predictions are of great interest to holders that we will work to be financially me, since a high rate of growth will affect strong. To fulfill our promises, we must SDG&E, the provider of energy to the region.

achieve the goals that we set for ourselves several years ago: regaining our financial How will this trend affect SDG&E?

health, satisfyig our customers' service ex We already have begun preparing to meet this pectations, and diversifying our electric growth in demand for energy and, equally im-energy resource mix. We are well on our way.

portant, for our services, but there's a catch

- In 1983, we achieved our major financial in these population growth predictions.

goal: regaining an A bond rating, which al SDG&E has had to cope with a high rate of lows us to borrow funds at lower rates. The growth in population and energy use before, upgrading, plus our subsequent debt refund most recently in the late 1970s. This time, ing efforts, actually decreased our cost of though, because energy use patterns are long-term debt, after eight years of increases, changing, the rate of growth in energy de-to 10.45 percent in 1983 from 10.58 percent mand is not likely to follow an upward curve in 1982.

that parallels population growth.

The bond upgrading by all three rating We expect, for example, that many of the agencies in the spring of 1983 was recogni new businesses that will come to San Diego tion, by the financial community, that we have will be in the service and high-tech industries, successfully improved our financial and op which have low energy use. Meanwhile, we erations performance. Since it came earlier are helping established companies become than we had hoped, it was also a vote of con more energy efficient.

fidence by them that we will continue to Homes will use less energy in the future.

reach our goals.

I've toured some of the new homes going up With the improvement in our financial in San Diego and they are designed to be ex-conlition, we will be able to pay for the ex tremely energy efficient. High energy costs pansion of our distribution and transmission have led our residential customers to look for system to a far greater extent from our own ways to trim their energy use and they have funds. While borrowed funds will continue to succeeded in doing so. They are becoming be part of the financing program, they will be better informed about how to use energy less important than before. We will also seek wisely, with the help of SDG&E's general to share construction costs with new users.

communications programs and through our

• In 1983, we continued our efforts to in individual energy management counselling crease customer satisfaction. Since growth in services.

energy sales may continue to be moderate, as So, while there will be growth in demand, in recent years, we are concentrating on find the rate of increase is uncertain. We are plan-ing ways to become more productive and ning our response accordingly.

more efficient in the delivery of energy and In the past, we responded to population service to keep costs down and rates stable.

growth in the traditional way, by planning

- In 1983, we were able to stabilize our large, costly central station electric energy natural gas prices and this year rates charged generating plants. This time, however, we are to our gas utility customers should increase taking an untraditional route. We will not below the level of the inflation rate. In 1985, 2

we expect to stabilize electric rates. It is our clear Generating Station completed, the per odbjective to limit future rate increases to the centage of nuclear energy in our resource mix annual rate of inflation.

should increase considerably.

• In 1983, we made major strides in By mid-1984, the Southwest PowerLink, our achieving our goal of diversifying our electric 280-mile-long transmission line to Phoenix, energy resource mix, which will give us great-will be completed. The powerlink will give us er flexibility. We completed and put into ser-access to lower cost coal and geothermal vice Unit 2 at San Onofre. Unit 3 is in its final energy, some of which already is under con testing stages.

tract for delivery to us from various sources, Our computerized Energy Management giving us greater fuel resource flexibility. The Center, completed in 1983, has given us ac-completion of this transmission line will be a cess to the information we need to make our major turning point for SDG&E.

flexible resource plan work. Already we are In the not-too-distant future, transmission locating and assessing available sources of of energy will become far more important to electric power throughout the West, South-SDG&E and, I believe, to other utilities around west, and Northwest to find the most reliable the country. The Southwest Powerlink will be and least expensive sources.

a part of a cooperative effort by utilities that

• In 1983, the company's average fuel cost will ultimately produce an integrated nation declined after 10 years of increases to 5.53 wide grid.

cents per kilowatt hour from 5.64 cents in Energy will move around the country in 1982, due to the company's aggressive search far greater amounts than it does now. It will for the lowest-cost energy available for pur-move from regions where there is excess chase as well as to a switch from fuel oil to generating capacity and lower-priced fuel re natural gas in our own generating plants.

sources to regions, such as ours, that have The result of our diversification of re-few fuel resources and, therefore, find it is sources effort was an increase in purchases of more economical to purchase energy than to electric energy in 1983 to 44 percent, primarily build plants, buy fuel, and generate electricity.

coal and hydroelectric. Use of fuel oil in our own generating plants dropped to 24 percent Where do we go from here?

of our resource mix.

Now that we are within a stone's throw of Natural gas, which declined in price and achieving all of our major goals, we recognize was readily available, was 30 percent. In 1984, that we are becoming a different type of util with both Unit 2 and Unit 3 at San Onofre Nu-ity, really an energy management company.

It was with this changing corporate charac ter and the developing uncertainties about the future in mind, that in 1983 your management team began to develop a fully integrated corporate strategic plan. We intend for this

-I plan to serve as a flexible guide for us in pre paring for the anticipated increase in energy and service demands by our customers, in assessing new opportunities in the energy marketplace, and in assuring that the company remains an attractive financial investment for our shareholders.

Our plan will be completed this year and we will report to you about it and about our new corporate objectives. We think the growth of San Diego, which is a "destination city" for many people around the country, provides SDG&E a challenge and a great opportunity.

Twomas A. Page Chairman, President and Chief Executive Officer February 16, 1984 3

San Diego: Destination City Four civic and business leaders, who came to San Diego from other places, were asked to

,Z Ernest W Hahn is discuss the area's future-its problems and chirman ofErnest W its prospects. Their comments:

Hahn, Inc., which de velops, manages, and owns regional shopping Stve L Bezo s cess stories of urban centers throughout the Steven. L Brezzo is A

director of the San regeneration have in-United States. Horton Diego Museum ofArt.

evitably begun and Plaza is the pivotal He moved to San Diego have sometimes con-project in the redevelop from New York City in cluded. For cities ment of downtown San 1972 and four years across the nation Diego. It is planned to later became the mu-have recognized that be an "urban market seum's director The the arts express, place" and will include museum,foundedin more effectively than the traditional shop 1925, has one of the the bustling mall or ping components and largest art collections the shining skyscrap-i ne i

n some non-traditional on the West Coast.

er, the diversification components, such as and richness of life our local endowments will plan our future two small theaters, pro A

long with dis-in any area.

are perilously low

-civic leaders, crit-duce stands, and a mil courses on Here, in San Diego, Federal support has ics, and citizens-lion dollars in art and redevelop-we are the fortunate diminished drasti must strengthen the architectural embellish ment, tourism, growth heirs of a unique aes-cally. The absence of cultural institutions ments. Hahn moved his management, and dy-thetic environment, major corporate while arts leaders companyfrom El namic new leadership, But the financial sup-headquarters from must provide con-Segundo, California to the discussion of the port for our arts re-which the arts tradi-tinued inspiration San Diego in 1982.

future quality of liv-mains the lowest in tionally derive high and development of ing in San Diego must the state on a per levels of support, cou-their audiences. The th immediate encompass an inte-capita basis. Local pled with rising costs cost for San Diego's fture, an Dieg gral component: cul-government contrib-in our operations, future excellence tlans have the ture. It is here in the utes less to the arts threaten the contin-will continue to be unique opportunity to realm of the visual, than any other com-uity of a viable arts great, but the future guide the vigorous performing, and liter-parable urban center program for our com-is San Diego's most growth of their county.

ary arts that the suc-and, concomitantly, munity. Those who precious asset.

The hindsight gained

-he residents of Whtwoeou San Diego are predecessors is to fortunate to ensure that the ex have inherited a vi-isting quality of life brant and exciting in San Diego con community. Coi-tinues. It is essen munity leaders who tial that San Diego's preceded us have environment remain planned, organized economically safe and managed San and sound. We must Diego's community ensure that the resources well, mak-amenities San Di ing San Diego truly egans enjoy keep a city of great pace with the growth opportunity.

of the community.

This legacy places We at Signal, who a real responsibility have recently moved on the community to San Diego, are leaders of today.

well aware of the Growth must be quality of life and Forrest Np Shumway fs aerospace, electronics, planned and orga-opportunities that chairman and ciefe comm nications, ener-nized to provide exist here. We be ecutive officer of The gy service, transporta-jobs, housing and lieve that each citi Signal Companies, tion, and construction recreation for the zen plays a pivotal Inc., a high-tech and industries. Signal remainder of the role in formulating engineering gr oup of moved its corporate century. But, growth our community's companies that oper headquarters to San for growth's sake is future and its ates world-wide i t

the Diego in 1980.

unacceptable.

opportunities.

4

by observing the fail-Severe loss of rev ure of other large enue under Propo metro areas to modify ion1iitae and upgrade their major policy changes planning ordinances to counteract the fis to conform with cal shortfall. Many of changing economics these changes are 9

and demographics counterproductive in should be invaluable the creation of a bal in the determination anced economy and a of future guidelines.

quality of growth jT As an example, eco-matrix.

nomic mass transit The social and eco can only be achieved nomic benefits de by the proper delinea-rived from a diverse tion of urbanized and balanced growth modes, allowing in-are of far greater in creased densities portance long term within their perim-than stopgap short eters and preserva-range solutions.

tion of large natural I'n heartened by open land masses the constructive elsewhere.

approach taken by the Existing resources City of San Diego in such as roads, utilities addressing the many and public infra-problems facing this structure should be conuunity. Con utilized to their full-tinned emphasis on est to help restore public and private fiscal stability to the partnerships will re cities. This is particu-suit in many oppor larly true of the older tuities that are downtown areas.

mutually beneficial.

Kazni Yotsuuoto is he Nissan De-is developing, toward president ofiNissan Dt-sign nterna-an era of new values sign Internatooal, Niot tional staff is

-the 21st century.

san's only auto design most happy to be a There are many center outside foJapan.

part of San Diego's talented leaders The centers responsi-business commeity.

working hard in San bility is to develop auto-While we and our Diego in every walk of motive concepts and families enjoy the ife-in adinistra lesigns with yera-city's clear sky, mod-won, industry, busi tional 'market appeal.

erate climate, beau-ness, research, edu San Diego was selected tiful scenery, and cation, and art. I have as the siteTfor the cente; wonderful people, I been in San Diego in pnf because of its think the important only a short while, but quality of life and be-point is that San I am already proud of cause it is one of the Diego is not like the it because of these centers of high tech-established cities reasons. My hope is to nology activity in the which were based on see "America's Finest United States. The $4.7 the old values. It is a City" become re million center was promising city which nowned also for its opened in 1980.

is being planned, and cultural activities.

Achieving here were broad smiles, calls of con-To cut financing costs, the company Con Our Goals gratulations, and some laudatory sidered many alternatives, including the inno a major achievement at San Diego development bonds rather than conventional Gas & Electric.

mortgage bonds to provide funds for certain The news was that the company construction projects.

had regained an A bond rating, the fruition of In addition, the company successfully per four and one-half years of work.

suaded the California Public Utilities Com-mis This involved a company-wide effort to turn sion (CPUC) that the company needed a higher SDG&E's fortunes around, beginning with the rate of return, plus faster fuel cost reimburse development, by the management team, of a ments, in order to return to financial health and, new corporate philosophy. As part of this effort, ultimately, to stabilize its rates.

a financial improvement program was designed By the end of 1982, the fourth year of the by the financial management staff under the financial recovery plan, three of five targeted direction of Dick Korpan, group vice president financial objectives were reached. SDG&E had of finance. Five key financial objectives were improved earnings, before income taxes and in targeted that would help the company gain a terest charges, to three times interest charges; financial profile that would merit an upgraded increased the common stock portion of the bond rating. These objectives were announced company's total capitalization to 40 percent; and in 1979 to shareholders and to utility analysts.

increased its dividend each year.

"It was a It was an unusual approach and some The trend of improvement was clear. The observers doubted the company could reach its company in early 1983 increased its dividend on grea d*71Y target on time. Others said that SDG&E was the common stock for the seventh consecutive for us!"

going out on a limb to publicize its objectives.

year to $1.96 per share on an annual basis.

Dick Korpan, This concern was understandable because in Group Vice President-1979 things were not going well for SDG&E.

Recognizing the progress Finance Construction costs at San Onofre Nuclear The price of SDG&E's common stock began to Generating Station had escalated far beyond rise steadily.

estimates. Customers, sturmed by sharply high-In March 1983, Duff & Phelps announced it er bills because of higher gas and oil prices, was raising the bond rating; in May, Moody's were demanding lower rates. Interest rates made its announcement, and in June, Standard were soaring to record levels at the time and Poor's made it unanimous when it gave an SDG&E needed to borrow funds at record upcoming bond offering an A-rating, up from levels. The price of SDG&E stock was low and the BBB it had been giving SDG&E bonds for several new common stock offerings had to be the past eight years.

made at well below book value.

The local news media, which had been both Turning this situation around was a tall skeptical and critical of SDG&E's efforts, also order.

were finally convinced that things had turned around. For example, an editorial in the San Accomplishing the turnaround Diego Tribune said, The magic that did so was a combination of A healthy public utility that is coping qffectively up-to-date management methods by the new with itsfinancial problems can serve its custom management team and old-fashioned rolling-ers with more efficiency and economy than one up-the-sleeves and burning-the-candle-until-that is wallowing, decks awash, in a sea offiscal midnight efforts by both management and staff.

troubles... ThmPage... is running a tight Many things needed to be done, so coopera-ship. He is weathering the storm. Me benefits are tion was vital. To help the company meet its five beginning to show up all down the line, for own financial improvement goals, several interde-ens, crew and passengers alike.

partmental committees were formed to assure Financial improvement continues. By year that activities were coordinated.

end 1983, SDG&E achieved its fourth financial To limit capital expenses while meeting objective: to increase internal generation of its present and future service responsibilities, the capital requirements to 40 percent, or more.

company began a major maintenance program In 1984, the company expects to reach its on generating, distribution, and other facilities key financial target, and the last of the original as the least expensive means of increasing five, with the limitation of construction expen capacity and service reliability.

ditures to 10 percent of capitalization.

Susan Abbott: Goals help us

• measure management.

Susan Abbott is a formulated. The result utilities analystJo?

should be that man Moody's Investors agement will have a Service in New York better concept of what City. She was asked for needs to be done to her opinion on the improve the company's value of setting fiscal conditions.

corporate goals.

Because the difficul ties encountered today etting goals pro-in running an electric vides a utility's utility are far more management complex than they with a positive frame-were 15 year ago, the work for strategic quality of management planning. In addition, is considerably more a well-defined set of important than ever basic objectives com-before. It is unlikely municated to the in-that the average inves vestment community tor will have the acts as a standard opportunity to ade against which the in-quately gauge manage vestor can measure ment's ability by any management's per-standards other than formance.

historical financial re Goal-setting forces sults.

utility executives to Clearly commui focus clearly on short-cated goals allow i comings in the com-vestors to evaluate the pany's financial condi-reasonableness of the tion. Once manage-objectives and to track ment recognizes weak-progress toward suc nesses and determines cess. Consequently, the level of financial goals give the investor strength desired, a the opportunity to precise program for measure management's improvement can be capabilities more fully.

Review of financial events

$1.26 billion, a 7.5 percent increase.

In 1983, earnings available for common shares The company's many successful financings, increased to $159.9 million, or $3.20 a share, plus other financial events, in 1983 have helped compared with $131.2 million, or $2.90 a share, the company cut costs.

in 1982, for a 10.3 percent increase in earnings

• In early 1983, after two years of negotia per share.

tions with various governmental bodies, Of this increase, 29 cents per share was due SDG&E's plan to issue up to $300 million in to the sale of a subsidiary company, Applied tax-exempt industrial development bonds Energy, Inc.

(IDIs) received final approval. Subsequently, Net income befor-e preferred dividends was two $150 million IDB3 issues were sold, both up 19.1 percent to $187.4 million in 1983 com-with a low 10 percent coupon rate. The use of pared with $157.3 million in 1982.

Ds to finance certain construction programs Operating revenues for the year were $1.53 is resulting in major savings to customers be billion, compared with $1.43 billion in 1982 cause the tax-free bonds have a lower interest which represents a 6.9 percent increase. Opei'-

rate compared with the traditional taxable ating expenses increased to $1.36 billion from bonds normally issued.

7

SDG&E's Common offered me the chance Stock Investment Plan to buy stock easily, was offered to custom-through the mail.

ers in mid-1983 as a That means I can in convenient and eco-vest without taking nomical way for cus-time to go to a broker.

tomers to invest in the Q. Did you research company. The initial the company's fman cash investment can be cial performance be as little as $25 or as much as $5,000. Sev-fore you decided to eral thousand custom-take advantage of the ers were enrolled in the offer?

erswer enoled fl he A. I read the prospec plan at the end of 1983, including Frederick Nicastro, who lives in a few people about the northeast suburb of San company. I found that Diego. He is a consul-it has been paying a tantforJosten's, a good dividend and it marketer of recognition g

awardsopportunity for me. I incentive programs.

like it, too, because it

%ncetwe

? ogams.

gives the folks who Mr. Nicastro, pay the bills a chance have you to become part of the J ever owned company.

SDG&E stock before?Q.

Have you lived in stoc befre'the San Diego area Frederick Nicastro: It gives the A. I've owned other long?

stocks, but not folks who pay the bills a chance SDG&E's stock.

A. My w an i to be part of the company.

Q. Why did you join about two years ago the Common Stock after living in differ Investment Plan?

ent cities around the A. I liked the way the country. We really plan was put together.

like it here and we in For one thing, it tend to stay here.

tobysoc8aiy

• In May, SDG&E sold 14 percent of its million of its preference stock for $30 million.

• share of the Southwest Powerlink transmission This included all of the shares of the $7.325 line section between Phoenix and Imperial Val-series and half of the $8.25 series. Savings to ley to Imperial Irrigation District. This helped customers will be about $43 million.

fund construction costs of the line.

• In June, SDG&E issued 1.5 million shares Common Stock Investment Plan of common stock for $19.75 a share, more than Of particular interest to common stock share

$2 above book value. It may be the last public holders and customers, SDG&E in 1983 updated common stock offering for several years.

its dividend reinvestment plan, now called the

• In July, SDG&E purchased $70 million of Common Stock Investment Plan. It was offered its 16 percent and 17/s percent bonds, as part of by mail to all common stock shareholders of its cost-trimming effort. The purchase was record and to SDG&E customers in enclosures funded primarily through the issuance of $65 with their bills. Benefits for the customers are million of 12/8 percent first mortgage bonds the same as for common stock shareholders of with a 13 percent yield.

record. (For details of the Common Stock In

• In October, Applied Energy, Inc., a sub-vestment Plan and to request the prospectus, sidiary, was sold. As a result of a public offer see page 24.)

made by its purchaser, Energy Factors, Inc., of Common stock shareholders invested more San Diego, a subsidiary of SDG&E received than $17.4 million during 1983 through the Coi common stock and convertible debentures mon Stock Investment Plan and its predecessor equivalent to 19.9 percent of the total capitaliza-plan.

tion of the new company in addition to $35.7 In addition, over 4,800 customers purchased million in cash. The new company intends to 229,000 shares of stock, raising $4.5 million. This pursue cogeneration marketing opportunities exceeded company expectations and was an on a nationwide basis.

other confirmation that opinion about SDG&E cIn December, SDG&E bought back $42.5 has turned around.

Net Income 1983 e

menNet income 1982 rose 19 percent in 1983 1981 1980 of dollars)

Co~mm mm mmmonStckInesmnt Pan I wsfred EDEarnings 1983tur Per Share 1982 rDividends d

l tC Per Share 11 1

to t

(declared) 1980 (in dollars)-

-I Revenues 1a983dditionover4,800customerspurc 1980 (in millions 1979 I

of dollars)

E Earing 1983 9

The he ratemaking process is subject takes the place of competition in the market Ratemaking matter that many people avoid and place.

it's no wonder. The terminology is dif-It ensures that a utility, which has the exclu Process ficult and the process is confusing. It sive right to serve a specified geographical area, hasn't always been so bewildering-charges fair and reasonable rates for the serv or so important for shareholders to ices it provides to its customers. The agency understand-as it is today.

also is charged with ensuring that the utility is Between 1958 and 1972, for example, able to recover its cost of doing business and is SDG&E didn't have a single general rate in-permitted to earn enough profit to attract the crease for electricity. Also, fuel cost increases investment capital it needs to serve customers.

were small. Proceedings, generally, were brief. How the agency interprets its responsibility can During those years, SDG&E's appearances be-add or subtract risk.

fore the California Public Utilities Commis-Changes in the 1970s were caused by infla sion (CPUC) were infrequent.

tion, the effects of the Arab oil embargo and, Today, at any one time, there are likely to very important, the growth of third-party in be several complex SDG&E rate proceedings volvement in the regulatory process. Special under way and being reported upon by the interest groups, concerned about the environ media. The 1984 General Rate Case, which be-ment, safety, or escalating utility bills, became gan with an application filing in December 1982, more active participants in the regulatory pro was decided in December 1983. It involved for-cess. As a result of these changes, issues be mal appearances by SDG&E executives, came more numerous and proceedings more accountants, lawyers, and financial planners.

involved.

And there were numerous informal working New laws were enacted that require regula meetings with the CPUC staff.

tory agencies, such as the Nuclear Regulatory A computer now is essential to keep track Commission, to give greater consideration to of rate proceeding developments and a small the effects 6f projects. Lengthier regulatory pickup truck could be filled with the written processes meant construction projects were transcripts of a single year's SDG&E regulatory delayed or prolonged for years. Costs were proceedings.

pushed upward by an inflationary spiral, some times rising far above project estimates be The function of the CPUC cause of regulatory delays.

The essential relationship between a regulatory Furthermore, rising Mel costs, resulting agency and a utility remains the same as it has from actions by OPEC in the 1970s, caused always been: the government agency partially cash flow problems for many utilities. To com 1983 Rate Case Calendar January February March April May June July August September October November December chargs faeir anr million esatsohee s

U SNG 2none ceae A

icras EACe ieae es millt prvieto it utoes heaec Eable to v li coese of Solar:Aresidential waterheatingdemostrtaon pro ectstra Heber: Heber Geothermal Research Project SONGS 2 & 3:San vle muceear ieneran thetion Regulaoryip s

S ieSWPL:

Southwest Powergunk 500-ckilovolt trans issithe e

CAM: Consolidated Adjustme nt Mecha__ifi

-f rntoevi-ewdots of p -br~~d-gabs G MAI 5 r

ilni ECAC: -Energy. Cost Adjustment Clause =-tol'review electric fuel costs~

- SON GS-3 MAAC$.05, r mlion (equest)i Offset: To request partial, or full, recovery of costs of-a-proiect, SONGS 2 &3 Reasonablenes sReview MAAC: Major Additions Adjustment Clause -to review construction expenses SWPL MAAC $47r.e3 million (request) b of large projectsng 10

pensate, utilities won the right to more fre quent reviews of their costs.

Rate proceedings and reviews In California, the Energy Cost Adjustment Clause, or ECAC, proceedings may be held twice a year to review the fuel costs to the company for generating electricity. One of the reviews involves the CPUC's assessment of our fuel management decisions. Rates may go up or down as a result of these proceedings. And there are two annual Consolidated Adjustment Mechanism (CAM) proceedings that allow SDG&E to recover from its customers any changes in the cost of gas purchased from its supplier.

While this frequent reassessment of costs has been extremely important to SDG&E in re cent years because of the increasing prices for purchased gas and fuel oil, CAM and ECAC pro-intervenors, as they are legally called, including Chairman Tom Page ceedings may be of lesser importance in the the City of San Diego, a welfare rights group, an a Pbi Utlis years ahead because prices are more stable.

insulation contractors association, the Sierra Commission in Octo Licensing proceedings are also extensive.

Club, and the Association of California Utility ber 1983 in the final The licensing for the Southwest Powerlink was Shareholders.

proceedings of the a one and one-half year process and involved In 1983, yet another development in Califor-1984 General Rate Case.

not only necessity and cost but an assessment nia regulatory affairs was initiated. Its effect of the effects on the environment along the en-will begin to be felt in 1984. The Utility Consum tire route and on farming in Imperial Valley.

ers Action Network (UCAN) was formed Offset proceedings, allowing the company specifically to intervene in SDG&E ratemaking to recover costs incurred by such things as con-procedures and represent customer interests.

struction or fuel, may last for many months.

The organization is allowed by the CPUC to A Major Additions Adjustment Clause solicit membership and discuss issues in enclo (MAAC) proceeding was added to help Califor-sures with SDG&E bills up to four times a year nia utilities recover construction expenses for during a two-year experimental period. By the large projects, such as San Onofre Nuclear end of January 1984, UCAN membership was Generating Station (SONGS), in between gen-52,000, or 2.5 percent of the population of eral rate cases.

SDG&E's service territory.

These can be lengthy proceedings, too. The With the considerable fids it has raised, SONGS 2 application was filed in March 1982 UCAN plans to hire a permanent staff of attor and the commission's decision on this matter neys and financial experts who may begin ac was issued in September 1983 and modified in tive involvement in SDG&E regulatory affairs in November 1983. Since then, the company has early 1984.

filed an update for 1984.

The ratemaking process is, indeed, com Reasonableness Reviews for construction plex. For SDG&E staff in 1984, and in the years projects are another recent addition to the reg-ahead, there won't be a dull moment.

ulatory process. In these reviews, the CPUC 1984 General Rate Case assesses the prudency of decisions made by The California Public Utilities Commission in management during the construction period.

December 1983 granted SDG&E a $14.3 million general rate increase for 1984. The increase Growth of third-party involvement allows a rate of return of 12.82 percent, incor The General Rate Case sets the allowed rate of porating a return on equity of 16 percent. The return, debt service, and profit that your com-company had requested $65.3 million.

pany is permitted to earn for the two following However, the commission deferred a deci years, plus an attrition adjustment, which is a sion on whether it would continue to allow compensation for inflation in the second year. It the company to keep in its rate base $45 mil also assesses expense levels for all non-fuel lion for the Blythe Site, 16,500 acres of farm costs as well as interest rates.

lands and a licensed power plant site, in south Third-party involvement in the 1984 Gen-eastern California. Hearings were held in Janu eral Rate Case was extensive. There were 22 ary and a decision is expected in March.

th1 iyo1a Deo efr rgt rua

growing cities in the United States buting it to North Coast customers.

(luring the next two hecades, with many people expected to migrate to Assuring better service the city as part of a general north-to-Assuring the reliable delivery of energy and

[11south shift in population in the United prompt service, plus providing information to States and because of the specific attractions customers, is a labor-intensive business.

of the region. Meanwhile, SDG&E's present Customer Service workers account for over customners expect better service as a result of half of SDG&E's 5,000 employees. To respond the higher energy bills they pay along with to customers' demands that the company keep cost-cutting measures by SDG&E so their bills its costs down while improving service, the will stop going up.

company accelerated its preventive mainte Preparing the distribution system for the nance program for the 11,600-mile electric inevitable population growth and, at the same distribution system, improved workers' produc time, increasing present customers' satisfac-tivity in many departments, and tapped the tion for service is a dual challenge for Cus-ideas of employees for cost-saving suggestions.

tomer Service, which is under the direction of The company's preventive maintenance Jack Thomas, group vice president.

program on its underground system began in 1979 and in 1982 on the overhead system. Today Preparing the system for the future there is a formal preventive maintenance pro "We aveSDG&E will spend hundreds of millions of dol-gram on every piece of distribution equipment.

lars in the remaining years of this century to In 1983, the company tested an infra-red detec a dual expand its distribution system to accommodate tion device to help spot deteriorating connec challenge the increased demand for energy by customers.

tions in overhead and underground lines. The befobreu. '9 Planning for this expansion is well under way.

device proved it could spot problems before Jack Thomas, Customer Service's Centre City District they are visible to the human eye and its use will Group Vice President-office, for example, has been working closely be expanded this year.

Customer Service with companies that are redeveloping down town San Diego. The largest of the projects Improving productivity under way is Horton Plaza, a shopping center.

As part of the effort to improve productivity, Although SDG&E's electric and gas meters computers are being used more widely and at the plaza will not begin turning until early more effectively by Customer Service.

1985, Centre City planning has spent many After several years of planning, a sophisti hours over the past two years studying project cated computerized Distribution Facilities In plans, designing a new underground cable sys-formation System will be completed, in stages, tem to run to the center, and constructing fa-between 1984 and 1987. The new system will.

cillties to accommodate the Horton Plaza's help drafters to update maps up to four times complex energy needs.

faster than by drawing them by hand, engineers The South Bay District office is assessing a to save time when preparing data for distribu plan that may mean a major expansion of elec-tion system analysis, and inspectors to optimize tic and gas service to Otay Mesa in the next inspection and preventive maintenance few years. The City of San Diego in 1984 will schedules.

annex 3,000 acres in this border region and has Computers have been used by Customer In announced it would encourage development of formation for 10 years to provide speedy and it as part of a proposed international commer-accurate answers to customers' inquiries. In cial and business center that will be linked to 1983, Customer Information representatives' Mexico by a new border crossing.

level of skill in using computers increased and, Customer Service's North Coast District accordingly, so did their productivity. During office serves some of the fastest-growing com-the year they answered 1.65 million calls, up munities in the service territory. In 1983, in seven percent from 1982. Each representative preparation for continuing population growth served about 84 customers a day, or more than and to improve service reliability to existing 21,000 customers in 1983. That is an increase of customers, SDG&E built a $2 million substation 15 percent in two years' time.

in Carlsbad. The substation receives its energy 1983 also was the first full year of extended from the nearby Encina power plant and steps hours service, which was begun by Customer 12

Joe Torres: I like the idea that management wants to hear personally about our ideas.

Joe lbrres is a working one takes several foreman it overhead months to complete.

construction at the Two more are under A Ll North Coast Operating way.

%InI?

Center He has worked Since most of our for SDG&E for 15 projects involve work years. He joined the efficiency, we make Hi-Liners, one of on-the-job time stu SDG&E's pilot dies to show us just temokgroups, teamworkgous how much time can be when it was formed a saved.

year and one-half ago.

As part of each pro 7brres explains what ject, we prepare a the group does.

cost-benefit analysis.

The analysis helps us T

hose of us whoidentify potential say work in the ings compared to the field see the one-time cost the problems and know company might have the answers. While fraycagsta there was a process may have to be made.

for getting our ideas In the last project heard, it was indirect alone, we identified and slow. When I potential savings of Overhead construction heard about the

$100,000.

workers meet weekly at Teamwork Group pro-When we finish a Ramwork Group ses gram, I saw it as a study, we make a sion. In 1984, there will a chance to let man-presentation to man-be 14 such quality circle agement know direct-agement on a com-ups at SDG&E.

ly about my ideas.

plete plan for the pro Our group meets ject. I really like the once a week and idea that manage we concentrate on ment wants to hear solving problems that personally about our affect overhead con-problems and wants struction work. We've our ideas on how to finished three pro-solve them. It's a big jects so far and each morale booster for us.

13

Information to give working customers im-utility bill since SDG&E's audit identified a num proved access to the information system. This ber of ways to cut its usage.

new service is very popular and in 1983 about The company has worked with the owners 104,000 customers called during the extended of about 150 cogeneration and small power pro hours time periods.

duction projects and more than 40 of these Even when computers cannot help, ways projects are in operation.

to increase productivity are being found.

The Hotel del Coronado, one of the larger

• Residential energy audit methodology projects, is using a cogeneration plant to pro was streamlined in mid-1982 and it increased vide electricity for general use and steam for the auditors' productivity from 2.5 to 6 audits per laundry and kitchen. In 1983, in the plant's first (lay. This made SDG&E's cost per audit the year of operation, the hotel saved an estimated lowest of all the utilities under California's plan

$538,000 in fuel costs.

to encourage utilities to teach customers about energy conservation in their own homes.

Providing special programs

• The Distribution Construction Group be-Low-income San Diegans received special help gan using a fiberglass retaining wall, or "hill in several ways in 1983. The low-income weath holder," to protect dirt-sensitive equipment. The enization program was continued, resulting in 50-pound fiberglass wall can be installed by a free insulation to 4,590 homes. In addition, single worker and is used in many locations SDG&E funded the installation of solar systems instead of a block-type wall, which requires a at several low-income projects, the largest of crew of two or three to install.

which was a $500,000 system at Villa Nueva

• About two years ago, a pilot Teamwork Apartments. Villa Nueva is a 46-building com Group, or quality circle, program was designed plex, home to 384 families, owned by the Cali that is tapping employees' ideas about ways to fornia Province of Augustinians. These projects trim costs through better work methods. More are part of programs mandated by the California than $1 million in cost savings were identified Public Utilities Commission.

from the six pilot groups' work so far.

Seniors in Trouble Referral is the name of a As a result of the pilot program's cost-new program to identify older customers who cutting success, and with many other employees may have serious health problems. Many of eager to join the program, SDG&E will form SDG&E's employees are in the community on a eight more groups in 1984.

regular basis, so they often are the first to notice when something is wrong with an older person.

Helping customers manage energy use To take advantage of this knowledge, and to Customer Energy Management is helping assure prompt hell to the seniors who may be SDG&E customers understand energy use and in trouble, 400 SDG&E service workers are par trim their bills in a variety of ways.

ticipating in a joint effort with the Area Agency For residential customers, incentives to con-on Aging. When alerted, the agency will arrange serve were offered in the form of low-cost for help needed by the senior. This may include financing of insulation projects and information finding someone who can help keep track of on energy-efficient appliances. And 27,000 resi-utility and other bills for the elderly person who dences were audited on the request of cus-may be no longer able to do so for himself.

tomers by energy management auditors.

Future customers are getting attention from Commercial and industrial customers re-SDG&E, too. The company has been a leader in ceive special help through audits and in the de-the development of energy education programs velopment of cogeneration and small power for children for the past eight years. In 1983, production planning assistance. The cost say-these programs were expanded to the high ings sometimes are substantial.

school level. SDG&E made an additional com Between 1982 and 1983, the National City mitment to these future customers when it School District saved $26,000 as a result of sug-

"adopted" Memorial Junior High School. Under gestions by an SDG&E auditor. And Cubic Cor-this program, twenty-nine company volunteers poration, one of San Diego's largest companies, tutor and counsel students on a weekly basis has saved an average of $250,000 a year on its and arrange visits to SDG&E facilties.

14

Ella Tooks: Communicating with customers about energy issues is vital.

Mrs. Ellae oks, an see many low in SDG&E custoee sec-come people ordinates eaerhea t each week who seiat fo N hbor-have very high utility hood House, aaulti-bills and are having Elalooks is convinced herenergy bill is too high.

service social agency difficulty paying So are we.

In, that capatcity, she them. The staff at Ella lives in East San Diego. And, like many SDG&E works with people on SDG&E has helped customers, shie's seen her bill go up dramatically.

fkr'ed 'n comes and on me with several Ella has a right to be upset. But we want her to know that welffare, somne of whoin clients by extending many things are being done.

have occasional prob-the time for them to For example, SDG&E is building a special powerline to lnsahU hiui-py link San Diego with cheaper energy sources. So well be able to buy the least expensive electricity available. We're also finding ity bills. And, like Mrs.

I appeared in the new ways to maintain our power plants so theyll cost less boAs herseU they are ad hoping for a better to run.

having troubleunder-understanding of the Of course, there are no overnight solutions. But we're stamligwhy energy rate increases we listening carefully to customers like Ella, and working to hold costs so muchvmore have had in the past down bills. And we're asking you to conserve energy and understand it. Because these days, energy is everybody's business.

Mrs.

oks

,greed to stated in the ad that appeam iv the SDG&E they are doing several ad series or enegy iv-things to stabilize the Enei~y IhoodvHouse, abumiltss iervnato becase she cost of energy. We are believes the cmpany all eagerly looking needs to communicate forward to the time

'mie etfectively'with its when that statement cfustoIe s

is a reality.

Commnunicating about energy gual newspapers. Many of the community pub While some programs are provided to help lications used the articles during the year.

selected groups of indlividuals either to manage In 1982, the company began a corporate energy b~etter or to understand issues, other issues advertising program to discuss manage Communications efforts are designed to reach ment's plans to stabilize rates. The format was broader audaiences.

altered in 1983 to feature SDG&E customers and The company i 1983 providled article-length employees talkirig about issues. The theme of features to 40 commuanity publications that gave the series, that continues this year, is "Energy.

many energy conservation tips. And, because a It's everybody's biusnesse' It underscores the number of SDG&E's older Customers speak idea that boeth Customers and company must only Spanish, these fe~atures were sent i both work together to solve the problem of high Spanish and in English to the area's two bilin-energy cost.

di1cut5pyn

SDG&E has promised its customers that In the 1984 General Rate Case decision, 1983, major steps toward this goal were pany's gas rate design was changed. This meant reached with the achievement of price that beginning in January 1984 residential cus stabilization in the company's gas util-tomers' rates increased 2.5 percent, small com ity an of a diversified resource mix for mercial customers' rates increased 2.2 percent, its electric utility, the latter through generation and industrial and agricultural customers' rates of nuclear energy and increased purchases of stayed about the same as 1983 rates. The in energy from many sourc essoreases are below the expected rate of inflation When the Natural Gas Policy Act (NGPA) for 1984, which is the company's target.

was passed by Congress in late 1978, the whole sale cost per therm to SDG&E began to rise, Diversifying energy resources:

increasing from 18.3 cents to 39.4 cents in 1982.

another primary goal achieved To halt these large increases, SDG&E assumed Through the efforts of the operations and en a leadership role in the gas utility industry.

gineering departments, which are headed by Al SDG&E forcefully opposed efforts either to Davis, Group Vice President-Operations, the decontrol or to speed up the schedule for de-company achieved its goal of diversifying its control of the price of various categories of gas, electric energy resource mix in 1983. This will which was set by the NGPA. The act, intended help the company stabilize its electric rates to stimulate exploration for new gas resources throughout the years ahead even though spe "ie achieved through gradual price decontrol, has been suc-cific fuels may become more expensive or cer cessful. Supplies of gas are plentiful today and tain sources of purchased energy may become ou g alo are likely to continue to be so for the next unavailable.

diverSifiqjing decade. Price changes will parallel fuel oil price With the computerized assistance of its energy changes.

new Energy Management Center, completed in The concern of the gas utility industry and 1983, SDG&E has the capability to determine resources its customers succeeded in getting Congress' whether it is cheaper to generate or to pur a year attention. The administration's effort to acceler-chase its energy needs and to select between ahead of ate the decontrol schedule, which actually various available sources. Spot purchases are would extend controls and might more accu-made on daily and hourly bases to supplement rately be characterized as a short-term recontrol the company's long-term contracts for pur Grp Ddviecontl bill, has been stalled in Congress.

chased energy.

conro fceresieSan Onofre Unit 2 began supplying 220 Operations Continuing efforts in 1984 megawatts of electricity to SDG&E's system in to keep gas prices stable August 1983. The company owns 20 percent of SDG&E is continuing in 1984 to work to keep each of the three nuclear units at San Onofre gas prices from rising, while Southern California Edison owns the The company made its concerns on decon-majority share of the units. Unit 3, a twin of trolrecontrol known to congressional repre-Unit 2, received its operating license in 1983 sentatives. It is also looking for an additional and testing began during the sumer, reaching short-term supplier in order to have greater the full power testing level in November 1983.

supply flexibility and lower prices. It is partici-Unit 3 is scheduled to begin full production in pating actively in all utility proceedings in-March 1984. The two units are the last large volving gas rates before the California Public generating units SDG&E intends to build.

Utilities Commission and the Federal Energy The energy provided by Units 2 and 3 will Regulatory Commission. And it is providing allow the company to remove from service legislators with position papers that will help some of its older, fossil-fuel generating units. It them understand the issues and how changes has already closed 60-year-old Station B and in gas supplies and prices will affect their con-the 40-year-old Silver Gate plant has been stituents' energy bills.

placed in storage. Employees formerly assigned San Diego supplyflexiility nd loerHerbes.GIeishpetici CALIFORNIA Imperial Valley utiit prcedigsin Substation MEXICO Tijuana 16 Cerro Prieto Geothermal

-Electric System 1983 Energy Sources (by percent of P

kwhr output)

Projected 1984 3817315 Purchased I

Power (net) 1985 Geothermal 198662231 Nuclear Natural Gas 1988 Fuel Oil Fue o20 4

0 20 o

0 50 60 70 0

910 to the closed plants have been reassigned and Prior to achieving stabilization, however, the operations staff has been reduced through construction costs of San Onofre Nuclear retirements and normal employee attrition.

Generating Station's Units 2 and 3 and the Unit 1 at San Onofre has been out of service Southwest Powerlink transmission line are since February 1982 while awaiting resolution scheduled to be added to the company's of regulatory requirements concerning the rate base.

unit's ability to resist earthquakes. In October SDG&E is trying to shield its customers 1983, the CPUC began investigating whether from a large increase in rates in 1984 by re Unit 1 should be removed from the company's questing the CPUC to adopt a rate policy that rate base, because of uncertainty about the tim-would match increases in general rates with ing of the unit's return to power and about the decreases in fuel-related rates. The company possible cost of plant modifications required by hopes that this matching policy will allow a the Nuclear Regulatory Commission.

gradual rate adjustment over a two-year period In 1980 and 1981, the unit was removed while reimbursing the company promptly for from service for 14 months to repair corrosion its investment.

damage to its steam generators. The loss of use of Unit 1 plus the cost of repairs are the sub-Adding energy links to Mexico jects of lawsuits filed during 1983 against Wes-Early in 1983, a 13-mile-long 230-kilovolt trans tinghouse Electric Corporation by Southern mission line was completed, connecting California Edison and SDG&E. Both suits SDG&E's system to that of Comisidn Federal charge negligence and breach of contract in the de Electricidad (CFE), Mexico's national utility.

design and manufacture of steam generators The San Diego-to-Tijuana line is being used to and related equipment in Unit 1. SDG&E's suit make spot purchases of economy energy from asks for damages of $65 million plus presently CFE and to sell energy to CFE during system unknown amounts for future losses of generat-emergencies.

ing capacity.

A second 230-kilovolt link between the two systems is Phoenix Moving closer to electric rate being built between the new stabilization Imperial Valley substation, Rate stabilization in the company's electric divi-which is along the route sion is expected to be achieved in 1985 follow ing the completion of all the company's major construction projects in 1984.

ARIZONA Southwest Powerlink Mexican interconnections 17

of the Southwest Powerlink, and Mexicali, a a gas regulator valve that lowers the pressure large city on the border in Mexico. This line of the transported gas. This reduction in pres was approved by the California Public Utilities sure and flow turns the turbine that drives a Commission in 1983 and will be in service in generator.

1984. Initially it will transmit 110 megawatts of The turboexpander began operating un geothermal-fueled energy from Mexico's Cerro attended in April 1983. It is the fist energy con Prieto plant to San Diego. In 1985, this will in-version project of its type to be put in operation crease to 220 megawatts. Of this total amount, by a utility in the United States.

SDG&E has a contract to purchase 150 mega-The company will begin testing two fuel watts and will transmit the other 70 megawatts cell plants in its service territory in 1984. Fuel to Southern California Edison's system.

cells work like batteries, generating direct cur SDG&E has had a long and cooperative re-rent electricity by an electrochemical process.

lationship with CFE, which is a world leader in Since no combustion occurs, a fuel cell power the development of geothermal energy. The plant has minimal environmental impact.

completion of the line linking the company's One fuel cell plant will produce enough system with Cerro Prieto will provide the first electricity to meet the needs of 20 households continuous export of electricity from Mexico to and produce enough waste heat to provide hot the United States.

water for 40 families.

The test will last several years and will de Geothermal research project termine whether fuel cells are practical and in the desert reliable as well as what the cost of operating Construction on the Heber project, a geo-them will be.

thermal research plant, began in June 1983 in California's Imperial Valley. When completed in Southwest Powerlink: Constructing early 1985, Heber will be the first commercial, a link to the future large-scale plant of its kind. It will produce The 280-mile-long Southwest Powerlink trans enough electricity to serve the needs of about mission line is expected to cost $215 million 45,000 residential customers.

substantially less than the $326 million esti SDG&E has been a leader in planning the mated, and to be in service in June 1984, two Heber project and will own more than 80 per-months ahead of schedule.

cent of it. It will cost approximately $188 mil-The lower cost is due primarily to good lion. Of this amount, $61 million will be con-project management, economic factors that tributed by the U.S. Department of Energy, $11 trimmed costs, and the sale of a portion of the million by the Electric Power Research Insti-line to Imperial Irrigation District.

tute, and the remainder by SDG&E and several Construction on the 160-mile California seg cosponsors. SDG&E's share of the energy ment began in December 1982 and was 75 per from Heber will be delivered by the Southwest cent complete by the end of 1983. Nearly all of Powerlink transmission line to SDG&E's the 623 towers and steel poles are now erected system.

and more than half of the cable has been strung. As of early 1984, the 120-mile segment SDG&E is seeking cost-effective built for SDG&E by Arizona Public Service alternative energy sources Company, a partner in the Arizona segment, has During 1983, SDG&E agreed to purchase en-been completed.

ergy from a new alternative energy producer, The logistics of construction for SDG&E in developed a new energy resource of its own, the California segment have been complex.

and made plans to put in place two fuel cells.

Helicopters were used in many operations

• Solar collectors that follow the sun will where tower sites were in remote locations or be used by LaJet Energy Company to provide where special access roads might have harmed steam to generate electricity. SDG&E has a the environment. Construction techniques long-term contract to purchase up to three varied depending upon whether the tower loca megawatts of electricity from the LaJet plant tion was in populated foothills, rugged moun beginning in 1984.

tains, productive agricultural lands, or sandy

• Natural gas pressure reduction in the desert.

transmission pipeline that serves the company Some examples.

is used to power an innovative turboexpander While drilling rigs and dynamiting could be power plant in place of a pressure-reducing used in some mountain locations for digging valve.

foundation holes, others had to be dug manu SDG&E engineers discovered a method to ally by workers who were transported by heli use a turboexpander to use this pressure reduc-copter to the location.

tion. The turboexpander is located parallel to In the desert, where the temperature often 18

.Susan Vergne: Golden eagles, bighorn sheep, and desert tortoises are among the animals SDG&E is protecting.

Biologist Susan Veryne desert tortoise and to is in charye ofSDG&E's prevent damaging enfxnmental protec-their habitat.

tion program along the Washes, creeks, constrction outefr and riparian areasfor the Southwest Power-along waterways were link. The description qf given special atten her work, below, pro-tion. These areas pro vides a behind-the-vide important habi scenes look at the project. tat for plants and ani mals and frequently usan Vergne contain such cultural helps to assure resources as rock art, that rare and stone tools, and ce endangered plants ramics because Na and animals and their tive Americans lived habitats, and near water sources.

archeological, Native As a result of the American, and histor-surveys' findings, ic sites will be safe as proposed access work is carried on.

roads and tower sites "My job," says Vergne, were adjusted, when "is to see that the im-possible, to avoid dis pact of the Southwest turbing the rare and 777 Powerlink on the en-endangered plants vironment is insigni-and animals or histor-Bighom sheep wildlife would not be ficant.'

ically and prehistor disturbed by con Her environmental ically important sites struction work.

work began well in Helicopters trans-She prepared a advance of construc-ported workers and conservation booklet tion. Environmental materials in certain for the construction surveys were con-areas to minimize the crews a ducted of the pro-impact on the en-construction begins posed route and its vironment.

in an area, she indi access roads and Vergne also con-cates sensitive sites tower sitesto avoid with wooden archeologists and bighorn sheep, and stakes with bright biologists who assist nesting birds of prey yellow flags. As con Susan Vergne as con-like golden eagles and struction moves from sultants to SDG&E.

prairie falcons, along site to site, she noni Those surveys were the proposed trans-tors the workers to to locate rare and mission line's route.

makesuretheyare endangered species These surveys as-following SDG&E'S such as the Andrews sured that breeding environmental pro scarab beetle an d

the seasons of protected tection requirements.

rises to 110 degrees, a special method had to be single-pole structures cost substantially more, dlevised to ensure the concrete met construc-only one acre of agricultur al land was displaced tion standards, by all the tower bases.

.In agricultural areas of Imperial Valley, The Southwest Powerlink is the lar-gest landowners' concerns about the amount of land construction project ever managed lby SDG&E.

that would be taken from prodcuction led to the Completing it ahead of time and under budget use of single shaft steel poles, rather than four-reflects the years of careful planning as well as legged lattice-steel towers, so different assem-close supervision of evey phase of construc ly methods were needed. Although these 99 tion. For more on the project, turn the page.

19

Z I

5 C

r.

m

-4 CA Z)

= C0 Cd-- $. -j =Z Z

Z Ld

~

~

0 W k

mw

-AIP Skz< ri-M,

-n

Southwest PowerUnk lbwer assembly begins on the ground in strategically-located staging areas.

Concrete bases are ready for a four-legged lattice-steel tower

V4, WN 171 Looking toward the California side of the Colorado River.

SDG&E's easternmost tower is readyi or hookup with the Ari zona segment qf the transmission line.

A wire puller installs one and three-quarter inch diameter cable through the towers.

23

Shareholder Executive offices the stock. The agent will need to know the ex Reference San Diego Gas & Electric Company act name(s) in which the stock certificate was' 101 Ash Street issued, the certificate number, the number of Guide Post Office Box 1831 shares, and the date the certificate was issued.

San Diego, California 92112 To avoid loss or theft, keep certificates in a safe (619) 232-4252 place, such as a safe deposit box. Shareholders should also keep in a separate place a record of Annual meeting for 1984 the above information for each certificate.

The annual meeting will be held at 11 a.m. April 24,1984 in the auditorium of the company's Transfer agents and registrars principal office, 101 Ash Street, San Diego, The transfer agents for the company's common California.

stock are California First Bank, 8155 Mercury Court, P O. Box 2529, San Diego, California Proxies are important 92112 and First Interstate Bank of California, Although you may attend the annual meeting

% Schroder Trust Company, One State Street, and vote your shares in person, proxies are New York, New York 10015. First Interstate used to allow you to vote without attending. If Bank of California is also the registrar for the you cannot attend the annual meeting, it is im-common stock.

portant that you mail in your proxy because it The transfer agent and registrar for all pre is needed to achieve the required amount of ferred stocks is California First Bank.

participation for proposals to be passed or de-The transfer agent and registrar for the feated. Apathy by the shareholders of com-preference stock (except the $8.25 and $9125 panies has been increasing generally and so has series) is First Interstate Bank of California.

the expense to companies of "getting out the vote." Returning your proxy will help SDG&E to The transfer agent's role keep proxy solicitation costs down.

The transfer agent has primary responsibility for stock transfers and the cancellation and To find SDG&E stock listing issuance of stock certificates.

SDG&E stock trades under the ticker symbol of SDO. The common stock is listed on the New Conmon Stock Investment Plan York and Pacific stock exchanges. Preferred SDG&E offers its common stock shareholders and preference stocks are traded on the Amer-and customers a Common Stock Investment ican and Pacific stock exchanges (except the Plan that allows them to invest automatically 4.60% preferred series and the $8.25, $9.125 and all or a portion of their quarterly dividends to

$15.44 preference series, which are not listed).

purchase additional shares without paying brokerage fees. This plan formerly was called If certificates are lost or stolen the Dividend Reinvestment Plan.

If a stock certificate is lost or stolen, write im-More than 30,000 SDG&E shareholders and mediately to the appropriate transfer agent for almost 5,000 customers have found dividend F

Shareholder 1983 plce_

schasasfedeostox.Shreoler In Common Stock 1982h2r frehctiae Investment Plan 1981 a

1979 8---.

C P

Box 2

C---i-fo NwMarket 1983 18 i19625 Price of Common Stock 1982s siBook 1981i I

B (in dollars) 1979forstocktransfersandthecance (at December 31)s1tic 24

OI-I am a common stock (If your annual report has a peel-off label on the back cover, it may be used, or print clearly) shareholder of record and/or Name(s) (as registered, if shareholder) customer of the company.

I would like a prospectus for the Common Stock Investment Plan.

Street Address City SaeZpCd 0 I received more than one State Zip Code annual report. Remove from your mailing list the name(s) noted to the right.

I have a question:*

F] Enroll me as a member of The Share Forum.

l Send me the 36" X 20" poster of the Southwest Powerlink with illustrations of the birds, animals, and fauna of the area.

• We will answer as many questions as possible in shareholder publications or by letter.

Do you want to request information about SDG&E or have a conunent or question? Please fill out the attached card.

Classes and Location of Shareholders of Record as little as $25 per payment up to a maximum of AS OF DECEMBER 31, 1983 Common Preferred

$5,000 may be made each calendar quarter.

Total Shareholders 88,969 14,009

- Thx benefits: Eligible participants can Class of Investor elect to exclude up to $750 of their reinvested Women 26,891 4,365 dividends (or up to $1,500 for individuals fiing a Men 19,024 2,520 joint return) from taxable income through 1985.

Joint accounts 32,674 4,979

• Recordkeeping and security: Simplilled Fiduciaries 9,096 1,418 recordkeeping is provided through a regular Securities dealers 40 41 statement of an account. Stock certificates are Nominees 275 165 held in safekeeping by the plan agent, First In Other domestic 758 495 terstate Bank of California.

Foreign 211 26 Enrollment in the plan is entirely voluntary.

Amounts Owned Shareholders or customers may join or with 1 to 99 shares 14,797 3,886 draw from the plan at any time.

100-300 shares 51,672 7,868 301-500 shares 11,560 1,296 The Share Forum 501-1000 shares 7,743 621 The Share Forum is a new organization whose Over 1000 shares 3,197 338 membership consists of shareholders of San Location Service area 15,479 3,151 Diego Gas & Electric. The Share Forum will Othvie mafna 27,055 4,633 offer its members opportunities to know their Others an company better and learn about issues that Other states and foreign countries 46,435 6,225 may affect their investment. There are no dues.

Members of The Share Forum will receive reinvestment to be a simple and economical information about SDG&E in periodic mailings, way to build their shareholdings. Any SDG&E be invited to attend special tours of SDG&E common stock shareholder of record or cus-plants and facilities, and have the opportunity tomer is eligible to join the plan. Customers to talk with members of SDG&E management who are not shareholders may enroll by making at meetings to be held in the service territory.

an initial investment of as little as $25 up to a To join The Share Forum, please fill out the maximum of $5,000.

attached card and check the appropriate box.

Major features include:

• Three percent discount: All reinvested Additional information about SDG&E dividends will be used to purchase additional Interim reports are sent to shareholders in May, shares of SDG&E common stock at a three per-August, and November providing updated cent discount from the market price at the time financial information and news of the company.

of purchase.

In addition, Newsfor Shareholders is issued

• Partial dividend reinvestment: All or a with quarterly dividend checks.

portion of dividends paid on shares registered A Statistical Report and Financial Forecast in a shareholder's name outside the plan and Form 10-K, the annual report to the Secur account may be reinvested. All dividends on ities and Exchange Commission, are available shares in the plan account will be reinvested free of charge by writing to:

automatically.

• No brokerage fees: Participants do not Office of the Secretary pay a brokerage commission or service charge San Diego Gas & Electric Company for shares purchased through the plan.

Post Office Box 1831

• Optional cash investment: After enroll-San Diego, California 92112 ment ini the plan, additional investments from or by calling (619) 2324252 25

Selected Financial Data (IV THOUSAVDS EXCEPT PER SHARE AMOUNTS)

FOR THE YEARS ENDED DECEMBER 31 1983 1982 1981 1980 1979 Operating revenues

$1,530,207

$1,430,948

$1,159,662

$ 960,444

$ 745,232 Operating income 174,155 _

169,861 142,123 100,336 97 233 Net income (before preferred dividend requirements) 187,370 157,303 110)156 52,046 70,166 Earnings per common share 3.20 2.90 2.34 1.01 1.80 Dividends declared per comirnon share 1.925 1.785 1.64 1.56 1.48 Funds provided by operations 267,429 196,084 135,131 90,268 93,352 Funds provided by long-term financing 284,265 141,173 138,455_

155,621 68,482 Additions to utility plant (excluding allowance for funds used during construction) 291,999 252,790 209,729 178,141 200 126 AT DECEMBER 31 Total assets 2,840,195_

2,411,676 2,165,951 1,969,563 1,756,921 Long-term debt and preferred stock subject to mandatory redemption (excludes current portion) 1,099,903 893,043 812,238 817,321 725,078 The above selected financial data and management's discussion and analysis of financial condition and results 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 Financial Condition and Results of Operations Liquidity and capital resources The degree of the company's liquidity is a function are approximately $305 million for 1984 and $1.1 of its ability to internally generate cash from opera-billion for the period 1985-1988. Assuming adequate tions, to avail itself of short-term debt credit facili-rate relief reflecting the inclusion of the Southwest ties, and to access long-term financing in sufficient Powerlink transmission system and the San Onofre amounts to meet its current requirements for con-Nuclear Generating Station (SONGS) units in rate struction and retirements of long-term financing.

base, the company estimates that internally gener The company continues to expand its facilities ated funds will provide more than 70% of its capital both to meet the increased demand on its system needs during 1984 through 1988. The company's and to reduce its reliance on oil-fueled generation.

capital structure is shown on page 46 and the effect The 1983 construction program was the largest ever of off-balance sheet financing is discussed in Note 6.

undertaken by the company. This program is ex-To provide funds in excess of the amount held by pected to decrease in 1984 as current major con-the trustee and those internally generated, and also struction projects are completed and, as a result, the to assist in satisfying short-term liquidity needs, the company's long-term liquidity is expected to im-company maintains unsecured lines of credit which prove if the California Public Utilities Commission aggregate $150 million (see Note 3). These lines of (CPUC) provides adequate and timely rate relief.

credit are available to support commercial paper During 1983, a significant portion of construction that the company issues. In addition, to finance the expenditures were paid for by the drawdown of purchase of any fuel, including natural gas and other construction funds held by a trustee. The construc-goods or commodities, the company may borrow up tion funds were made available to the company as a to $150 million through bankers' acceptances. The loan from the proceeds of industrial development company also maintains a'uclear fuel lease arrange revenue bonds issued by the city of San Diego in ment to finance up to $150 million of nuclear fuel. As June and September 1983. At December 31, 1983, a of December 31, 1983, the company had a total of total of $154.8 million was still on deposit with the

$193.6 million outstanding under its short-term debt trustee and will be disbursed through 1984 as qual-lines and the nuclear fuel lease.

ified construction expenditures are made.

The company continually reviews its financing The estimated cash requirements for the construc-program and evaluates the possibilities for potential tion program and retirements of long-term financing savings through the replacement of debt and equity 26

-securities. During 1983, $65 million in first mortgage company intends to contest both the basis for the bonds were issued at 12/s% to purchase portions of disallowance and the amount which is expected to previously issued 16% Series S and 17%/% Series V be ordered. The company, however, cannot predict bonds. In addition, the company purchased from a the ultimate amount of the disallowance and the private investor and retired all of the $7.325 Series effect on its future results of operations.

and one-half of the $8.25 Series preference stock, The nuclear industry, and the company, are facing which resulted in an increase in premium on capital major uncertainties concerning the future of nuclear stock of $12.5 million. The company expects, in the power in this country. The level of regulation has second quarter of 1984, to avail itself of approxi-increased substantially in recent years and the costs mately $45 million in pollution control revenue bond of compliance with these new regulations have been financing and has no plans to issue any of its pre-substantial. There are several issues to be resolved ferred stock in 1984. The company has no current by the CPUC relating to the SONGS units (see Note plans for issues of common stock other than through

6) and the Southwest Powerlink that may impact the the Savings Plan, Common Stock Investment Plan company's liquidity.

and Tax Reduction Employee Stock Ownership SONGS Unit 1 is currently shut down in connec Plan.

tion with Nuclear Regulatory Commission required The company's ability to internally generate funds inspections and plant modifications. Effective Janu from operations continues to be dependent upon my 1,1984, all costs for the support of Unit 1 facilities obtaining timely and adequate rate relief from the are subject to refund pending the outcome of the CPUC. Under the rate case processing plan adopted CPUC's investigation to consider when, if ever,Unit 1 by the CPUC, general rate relief is granted in two-will resume normal commercial operation. The 1984 year intervals and adjusted in the interim by an estimated annual revenue requirement for the unit attrition mechanism. This plan is also supplemented approximates $36 million. In addition, if required by various regulatory balancing accounts. The com-plant modifications are determined not to be cost pany experiences fluctuations in cash flows as a effective, it may be necessary to write off plant and result of CPUC actions and the regulatory balancing fuel costs of $89.4 millon and to accrue estimated accounts.

dismantling expenses of $16.5 million. A recent The 1984 General Rate Case (GRC) decision, ef-CPUC staff motion, if adopted by the commission fective January 1, 1984, increased annual revenues could result in the loss of the return component by $14.3 million and authorized a 12.82% return on which would negatively impact the company's rate base and a 16.00% return on common equity.

liquidity.

This decision also provides for an attrition allow-In 1983, SONGS Unit 2 was released for cor ance, effective January 1, 1985, to increase rates to mercial operation and completion of all precom offset expected increases in inflation and authorizes mercial testing for Unit 3 is currently expected in a 12.93% return on rate base. In 1983, the company's early 1984. The initial CPUC decision on Unit 2 was ratemaking return on common equity using the issued, authorizing a Major Additions Adjustment CPUC method was 15.90% (authorized 16.25%) and Clause (MAAC) and providing an increase in rates to its return on rate base was 12.70% (authorized recover the costs of constructing, own, operating 13.25%). The 1984 GRC decision is expected to help and maintaining the company's share of SONGS Unit the company increase funds provided by operations.

2 with an equal and offsetting Energy Cost Adjust However, as described in the following para-ment Clause (ECAC) rate decrease. The initial rate graphs, there are several major uncertainties related rellef was limited to $61.7 million, an amount equal to to CPUC decisions which are currently pending.

the estimated fuel savings. The unrecovered invest As more fully described in Note 7, the CPUC ap-ment-related costs for Unit 2 were deferred to an proved increased rates, effective January 1, 1983, to interest-bearing balancing account pending the final recover certain underlift costs incurred to suspend a outcome of Phase 2 of the MAAC proceedings.

contract for the purchase of fuel oil. These higher The CPUC issued another decision, effective danu rates are being collected subject to refund, pending ary 1,1984, which modified the previous decision by fluther review by the CPUC of the reasonableness of allowing an additional $38.9 million in rate relief with the negotiated price for the underlift charge. On offsetting ECAC rate decreases. The CPUC also February 1, 1984, the CPUC found the company ordered a performance incentive plan for Unit 2 unreasonable in entering into the 1979 restated con-which set a target capacity factor range of 55 to SO tract, which was the basis of the suspension agree-percent of maximum potential utilization for the ment, and has scheduled further hearings for March unit. If the unit operates below the range, the deci 1984 to determine an amount of disallowance.

sion states that a penalty will be assessed. Further The company believes that its actions have been hearings on implementing the target capacity factor reasonable and that there is no justification for are scheduled. In addition, the CPUC ordered anal reevaluating circumstances in the distant past. The ysis and testimony, during 1984, on the issue of alter 27

native ratemaking treatments which, if adopted, may December 31, 1984. The effective date of rate relief defer recovery of costs and produce lower cash will follow achievement of the CPUC's commercial flows in the early years of operation and require operating criteria.

higher cash flows in later years.

The Southwest Powerlink, which will also be sub In Phase 2 of the MAAC proceedings, hearings will ject to MAAC proceedings and is scheduled for cor be held on the reasonableness of the construction pletion in 1984, will provide access to lower-cost costs incurred for Units 2 and 3. The company's purchased energy from New Mexico, Arizona and current estimate of its share of total construction Mexico. The company has filed an application to costs for Units 2 and 3 is approximately $865 million.

recover the costs of constructing, owning, operating A CPUC consultant's preliminary report has iden-and maintaining the transmission system through tified certain items totaling about $200 million 1984. The total amount of rate relief requested is requiring further investigation. The final decision on

$47.3 million, if rates become effective June 1,1984.

the reasonableness of the costs is expected in 1985.

Management is unable to predict the final out As with Unit 2, the company filed an application to come of the CPUC's actions concerning Unit 1 and recover the additional costs of constructing, own-the MAAC proceedings. Although the outcome may ing, operating and maintaining its share of Unit 3 negatively affect the company's liquidity, manage through 1984. The total amount of rate relief re-ment does not expect that the ultimate impact result quested (net of expected annual fuel savings of $42 ing from the CPUC's actions will have a material million) is $105.4 million, if rates become effective effect on the company's financial position.

Results of operations The following table sets forth the amounts of changes in the company's electric expected to be offset by additional revenues through and gas revenues, together with the approximate amounts of increases and the CPUC balancing accounts.

decreases attributable to certain factors.

The rise in non-fuel operating expenses reflects increased costs related to the company's energy con (IN MILLIONS OFDOLLARS) servation programs andl Heber Binary Project, in FOR THE YEARS ENDED DE~CEMBER? 31 1983 1982 1981 creased depreciation expense, the need to maintain Electric Revenues the reliability and efficiency of the company's oper Fuel cost rate chanes

$27.8

_$(33.8)

$ 91.3 ating facilities, increased franchise payments due to General rat changes

-176.5 139.2 77.5 higher revenues, and the impact of inflation and Regulatory balancing customer growth. Income tax expenses increased as account adjustments:

a result of higher taxable operating income.

--,Fuel cost

__(49.1) 77.8 (2.6)

The allowance for funds used during construction Electric revenue adjustment (AFUDC), which is not an item of current cash in

_mechanismand other (16.9) 10.5 come, has increased for the past three years as a Sales volume and other changes 30.9 (4.5) 13.2 result of the larger investment in construction work Net increases

$ 69.2

$189.2

$177.8 in progress, primarily the Southwest Powerlink and SONGS Units 2 and 3. When the remainder of these Gas Revenues projects is placed into commercial operation in Rate increases

$57.6

$ 49.8

$ 322 1984, the amount of AFUDC will decrease.

Regulatory balancing Other income-net increased in 1983 largely as a account adjustments:

result of recording an after tax gain of $14.5 million Consolidated adjustment on the sale of a subsidiary.

mechanRsm

_(-4 24.2 _____(20.6)

The additional long-term debt issued in 1983 to Other __ ______

4.

_3.2

_(0.4) finance the company's construction program in Interdepatmental aes (net of ost.

(8) 20.4 creased long-term debt interest expense by $9.4 Sales volume and other changes (16.5) 16.1 (10.2) million. The reduction of $9.6 milion in short-term Net increases

$ 30.1

$ 82.1

$ 21.4 interest expense was due to a decrease in short-term borrowings and lower interest rates.

It is expected that inflation will continue to impact The cost of electric fuel and purchased energy de-the company's operations. Successful achevement creased in 1983. Less expensive purchased energy of the company's goals relating to its construction now accounts for 44% of the company's total energy program and its overall financial stability is based, in sources compared to 35% in 1982. When the South-part, upon receipt of timely arnd adequate rate relief west Powernk is completed in June 1984, it is ex-which reflects this impact. The company has pre pected that purchased power will become a larger pared information on the effects of inflation and portion of the company's energy sources. The in-changing prices in accordance with the Financial creased cost of gas reflects rising costs from the Accounting Standards Board's Statement No. 33.

company's supplier. However such increases are Such information is contained on pages 44 and 45.

28

Responsibility Report for the Financial Statements The company is responsible for the financial policies and procedures.

statements and other data in this annual report.

The company's independent public account To meet its responsibility for the reliability of the ants, Deloitte Haskins & Sells, are engaged to financial statements, the company has developed examine the company's financial statements in a system of internal accounting controls and en-accordance with generally accepted auditing gages a firm of independent public accountants.

standards for the purpose of expressing their opin The board of directors of the company carries out ion as to whether the company's financial state its responsibility for the financial statements ments are presented fairly in accordance with through its audit committee, composed of direc-generally accepted accounting principles applied tors who are not officers or employees of the on a consistent basis.

company.

The audit committee of the board of directors Management maintains the system of internal meets periodically with management, the inde accounting controls which it believes is adequate pendent public accountants and the internal au to provide reasonable, but not absolute, assurance ditors to ensure that each is carrying out its re that its assets are safeguarded, transactions are sponsibilities, and to discuss auditing, financial executed in accordance with its objectives, and the reporting and internal control matters. The in financial records and reports are reliable for pre-dependent public accountants and the internal paring the financial statements in accordance auditors have full and free access to the audit with generally accepted accounting principles.

committee throughout the year.

The concept of reasonable assurance recognizes The management of the company has prepared that the cost of a system of internal accounting the financial statements and other data in this controls should not exceed the benefits derived annual report. In the opinion of the company, the and that management makes estimates and judg-financial statements, which include amounts ments of these cost/benefit factors. The system of based on estimates and judgments of manage internal accounting controls is supported by an ment, have been prepared in conformity with extensive program of internal audits, selection generally accepted accounting principles.

and training of qualified personnel, and written Auditors' Opinion Deloitte Haskins & Sells Certified Public Accountants 701 "B" Street 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 31 to 45) for the years ended December 31, 1983,1982 and 1981. 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.

As discussed in Note 7 to the financial statements, certain fuel costs and revenues subject to refund are pending further review by the California Public Utilities Commission (CPUC). The ultimate outcome of the CPUC actions cannot presently be determined, however, a disallowance of fuel costs or refund of revenues could result in an adjustment of subsequent rinancial statements.

In our opinion, subject to the effects on the 1983 fibancial statements of such adjustments, if any, as right have been required had the outcome of the uncertainty refemed to in the preceding paragraph been known, such fiiancial statements and schedules present fairly the financial position of the company at December 31, 1983 and 1982 and the results of its operations and its sources of funds for construction for each of the three years in the period ended December 31,1983, in conformity with generally accepted accounting principles applied on a consistent basis.

February 10, 1984 29

Financial Statements of Income 31 Statements Balance Sheets

_32 and Data Statements of Sources of Funds for Construction 33 Statements of Changes in Capital Stock and Retained Earnings 34 Statements of Capital Stock 35 Statements of Long-Term Debt

_36 Schedules of Financial Information by Segments of Business 37 Notes to Financial Statements 38 Supplementary Information to Disclose the Effects of Changing Prices 44 Financial Data 46 Stock Prices, Dividends, and 4th Quarter Results 47 I

f 4 I7 1

1

1 11 1

r !I

1 1I 1

'1 P

Electric Sales 1983

1.

1982 1981 1840 1980 (in billions 1979 of kwhrs)

Gas Sales 1983 1982 19814 (excluding 1980 interdepartmental sales, in millions 1979 of therms)

Electric 1983 Customers 1982 Gas Customers 1981 914 1980 (in thousands) 1979 30

Statements of Income (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

FOR THE YEARS ENDED DECEMBER 31 1983 1982 1981 Operating Revenues Electric

$1,207,078

$1 137,896

$ 948,677 Gas 323,129 293,052 210,985 Total operating revenues 1,530,207 1,430,948 1,159,662 Operating Expenses Electric fuel and purchased energy 622,422 635,033 580,743 Gas purchased for resale 209,912 197,383 135,455 Transmissio distribution and storage 43,658 36,807 24,806 Franchise payments 30,586 26,337 23,189 Other operating 164,714 136,412 107,630 Maintenance 59,595 50,535 38,368 Depreciation and amortization 79,280 70,915 58,751 Property and other taxes 21,420 18,502 16,331 Income taxes (Note 4) 124,465 89,163 32,266 Total operating expenses 1,356,052 1,261,087 1,017,539 Operating Income 174,155 169,861 142,123 Other Income and (Deductions)

Allowance for other funds used during construction 55,904

- 51,204 30,926 Taxes on non-operating income (Note 4 25,137 28,142 24,406 Other-net 17,755 (3,655) 5,784 Total other income 98,796 75,691 61,116 Income Before Interest Charges 272,951 245,552 203,239 Interest Charges Long-term debt 86,268 76,898 72 659 Short-term debt and other 21,519 31,086 39,200 Allowance for borrowed funds used during construction (22,206)

(19,735)

(18,776)

Net interest charges 85,581 88,249 93,083 Net Income (before preferred dividend requirements) 187,370 157,303 110,156 Preferred Dividend Requirements 27,449 26,068 18,718 Earnings Applicable to Common Shares

$ 159,921

$ 131,235 91,438 Average Common Shares Outstanding 49,994 45,306 39,091 Earnings Per Common Share 3.20 2.90 2.34 Dividends Declared Per Common Share 1.925 1.785 1.64 See notes to financial statements.

1983 Revenue Dollar Source Disposition 78.9' Electric Sales 54.4' Fuel and Purchased Energy 21.1' Gas Sales 10.4' Other Operating Expenses 8.1 Dividends to Shareholders 1

8 O Salaries and Benefits 7.9' Total Taxes 5.2' Depreciation 4.1 Reinvested in Business 1.9' Cost of Money-net of AFUDC 31

Balance Sheets (IN THOUSANDS OF DOLLARS)

BALANCE AT DECEMBER 31 1983 1982 Assets Utility plant-at original cost In service Electric

$1,918,177

$1,343,416 Gas

_295,552 278,464 Common 38,172 31,673 Total plant in service 2 251,901 1,653,553 Plant held for future use (Note 6) 48,747 49,389 Construction work in progress 605,516 864,825 Total utility plant-2,906-,164 2,567,767 Accumulated depreciation

-(577,933)

(513,704)

Utility plant-net (Note 2) 2,328,231 2,054,063 Investments and other property 45,822 31,897 Construction funds held by trustee (Note 6) 154,780 Current assets Cash and temporary investments 4,877 1,490 Receivables (less allowance for doubtful accounts:

1983, $1,453; 1982, $1,180)

Customer 119,393 103,036 Other 13,954 19,861 Materials and supplies-at average cost 30,154 30,856 Fuel inventory-at average cost (Note 3) 76,088 111,939 Regulatory balancing accounts undercollected-net 21,322 31,649 Other 1,468 5,031 Total current assets 267,256 303,862 Deferred charges and other assets 44,106 21,854 Total

$2,840,195

$2,411,676 Capitalization and Liabilities Capitalization (see Statements of Capital Stock and Long-Term Debt)

Common equity

$ 957,607

$ 817,441 Preferred stock (Note 5)

Not subject to mandatory redemption 161,000 161,000 Subject to mandatory redemption 63,500 108,000 Long-term debt (Note 2) 1,036,403 785,043 Total capitalization 2,218,510 1,871,484 Current liabilities Short-term borrowings (Note 3) 85,000 176,000 Current portion of long-term debt (Note 2) 42,297 17,395 Accounts payable 159,631 126,020

-Dividends payable 32,168 28,846 Taxes accrued 34,147 23,013 Interest accrued 32_876 27,173 Other 40,329 42,082 Total current liabilities 426,448 440,529 Customer advances for construction 35,797 30,335 Accumulated deferred income taxes-net (Note 4) 46,112 13,564 Accumulated deferred investment tax credits (Note 4)

-78,568 25,388 Reserves and deferred credits 34,760 30,376 Contingencies and commitments (Notes 6 and 7)

Total

$2,840,195

$2,411,676 See notes to financial statements.

32

Statements of Sources of Funds for Construction LT THOUSANDS OF DOLLARS)

POR THE YEARS ENDED DECEMBER 31 1983 1982 1981 Funds Provided by Operations Net income

$187,370

_$157,303

$110156 Non-cash items in net income Depreciation and amortization 79,280 70,915 58,751 Deferred income taxes and investment tax credits-net 85,728 33,116 9,526 Allowance for funds used during construction (78,110)

___(70,939)___

(49,702)

Gain on sale of subsidiary (14,533)

Other-net 7,694 5,689 6,400 Funds provided by operations 267,429 196,084 135,131 Dividends (124,542)

(108,119)

(83,712)

Funds reinvested 142,887 87,965 51,419 Funds Provided by Long-Term Financing Sale of common stock 64,789 96,276 58,559 Sale of preference stock 24,602 34,090 Sale of first mortgage bonds 288,177 74,603 48,688 Retirement of long-term financing (17,124)

(54,308)

(2,882)

Retirement of preference stock (29,963)

Refunding of long-term financing Issued 63,262 Refunded (70,023)_

Call premium (14,853)

Funds provided by long-term financing 284,265 141,173 138,455 Other Funds Provided (Used)

Regulatory balancing accounts-net 10,327

-- (54,562) 49,968 Construction funds held by trustee (154,780)

Receivables (10,450)

(21,216) 5,669 Fuel inventory 35,851 49,387 (25,576)

Accounts payable 33,611 28,436 7,463 Taxes accrued 11,134 5,577 2,068 Short-term borrowings (91,000)

(2,500)

(6,500)

Investments and other property 1,067 (645)

(9,441)

Other-net 29,087 19,175 (3,796)

Other funds provided (used)

(135,153) 23,652 19,855 Total additions to utility plant (excluding allowance for funds used during construction)

$291,999

$252,790

$209,729 See notes to financial statements.

33

Statements of Changes in Capital Stock and Retained Earnings Preferred Stock (IN THOUSANDS OF DOLLARS)

Not Subject to Subject to Premium FOR THE YEARS ENDED Mandatory Mandatory Common (Less Retained DECEMBER 31, 1981, 1982 AND 1983 Redemption Redemption Stock Expense)

Earnings Balance, December 31, 1980

$128,500

$ 85,000

$182,347

$256,183

$147,256 Net income-for year 110,156 Common stock sold (5,029,551 shares) 25,148 33,411 Preference stock sold (1,300,000 shares) 32,500 1,590 Dividends declared Preferred stock (18,718)

Common stock (64,994)

Balance, December 31, 1981 161,000 85,000 207,495 291,184 173,700 Net income-for year 157,303 Common stock sold (6,767,110 shares) 33,836 62,440 Preference stock sold (250,000 shares) 25,000 (398)

Current sinking fund requirement (2,000)

Dividends declared Preferred stock (26,229)

Common stock (81,890)

Balance, December 31, 1982 161,000 108,000 241,331 353,226 222,884 Net income-for year 187,370 Common stock sold (3,427,518 shares) 17,137 47,652 Preference stock retired (425,000 shares)

(42,500) 12,537 Current sinking fund requirement (2,000) 12 Dividends declared Preferred stock (27,441)

Common stocl, (97,101)

Balance, December 31, 1983

$161,000

$ 63,500

$258,468

$413,427

$285,712 See notes to financial statements.

34

Statements of Capital Stock (IN THOUSANVDS OF DOLLARS)

BALANCE AT DECEMBER 31 1983 1982 Common Equity Common stock, $5 par value, authorized 80,000,000 shares, outstanding: 1983, 51,693,662 shares; 1982 48 266 144 shares

_$258_468

$241 331 Premium on capital stock (less expense) 413,427 353,226 Retained earnings 285,712 222,884 Total common equity

$957,607

$817,441 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 4V% 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

$4.65 Series, 1,300,000 shares outstanding 32,500 32,500 Total not subject to mandatory redemption

$161,000

$161,000 Subject to mandatory redemption Preference stock (cumulative) without par value*

$7.325 Series, 300,000 shares outstanding

$ 30,000

$8.25 Series, 1983, 125,000 shares; 1982, 250,000 shares outstanding 12,500 25,000

$9.125 Series, 1983, 280,000 shares; 1982, 300,000 shares outstanding 28,000 30,000

$15.44 Series, 250,000 shares outstanding 25,000 25,000 Current sinking fund requirement (2,000)

(2,000)

Total subject to mandatory redemption

$ 63,500

$108,000

• Authorized 10,000,000 shares total (both subject to and not subject to mandatory redemption).

See notes to financial statements.

35

Statements of Long-Term Debt (IN THOUSANDS OF DOLLARS)

BALANCE AT DECEMBER 31 1983 1982 First mortgage bonds (Note 2) 2/s% Series E, due April 1, 1984 17,000

$ 17,000 3/% Series F, due October 1, 1985 18,000 18,000 47/S% Series G, due October 1, 1987 12,000 12,000 4s% Series H, due October 1, 1990 30,000 30,000 5/% Series I, due March 1, 1997 25,000_

25,000 7% Series J, due December 1, 1998 35,000 35,000 83/4% Series K, due February 1, 2000 40,000 40,000 8% Series L, due September 1, 2001 45,000 45,000 8/8% Series M, due January 15, 2004 75,000 75,000 10% Series P, due July 15, 2006 45,000 45,000 8%% Series Q, due March 15, 2007 50,000 50,000 9/% Series R, due May 1, 2008 50,000 50,000 16% Series S, due March 15, 2010 13,163 50,000 13/s% Series T, due August 1, 2010 75,000 75,000 55/% Series U-1, due January 15, 1984 6,192 6,567 5

% Series U-2, due September 1, 1994 12,468 12,868 17%% Series V, due July 15, 2011 16,814 50,000 16.70% Series W, due November 3,1987 and 1988 40,000 40,000 16.65% Series X, due September 1, 1986 and 1987 20,000 20,000 16.65% Series Y, due September 1, 1986 and 1987 15,000 15,000 12/8% Series Z, due July 15, 2013 65,000 10% Series AA, due June 1, 2018 150,000 10% Series BB, due September 1, 2018 150,000 Total 1,005,637 711,435 Sinking fund debentures 45/s%, due January 15, 1984 1,275 1,308 4 %, due September 1, 1994 1,471 1,501 Total 2,746 2,809 Other long-term debt Foreign term loans, variable rates (10.9% to 11.1% at December 31, 1983; 10.3% to 11.2% at December 31, 1982),

due April 25, 1984-April 26, 1986 35,000 35,000 Term loan, 8%%, due May 1, 1983-1985 26,667 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 5,700 5,700 Other 7,844 2,663 Total 84,786 92,938 Unamortized discount on long-term debt (14,469)

(4,744)

Current portion of long-term debt (Note 2)

(42,297)

(17,395)

Total

$1,036,403

$785,043 See notes to financial statements.

36

Schedules of Financial Information by Segments of Business The company is an operating public utility engaged principally in the generation, purchase, distribution and sale of electric 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 (IN THOUSANDS OF DOLLARS)

Electric Gas and FOR THE YEAR ENDED DECEMBER 31, 1983 Operations Operations Eliminations Total Operating revenues Unaffiliated customers

$1,207,078

$283,553

$1,490,631 Intersegment sales 204,673

$(165,097) 39 576*

Total operating revenues

$1,207,078

$488,226

$(165,097)

$1,530,207 Operating income

$ 149,082

$ 25,073

$ 174,155 Depreciation and amortization 68,377

$ 10,903 79,280 Utility plant additions*

$ 273,436

$ 18,563

$ 291,999 Identifiable assets Utility plant-net

$2,142 303

$185,928

$2,328,231 Materials and supplies 27,017 3,137 __-

30,154 Fuel inventory 74,027 2,061 76,088 Other assets 405,722 Total assets

$2,840,195 FOR THE YEAR ENDED DECEMBER 31, 1982 Operating revenues Unaffiliated customers

$1,137,896

$253,877

$1,391,773 Intersegment sales 182,575

$(143,400) 39,175*

Total operating revenues

$1,137,896

$436,452

$(143,400)

$1,430,948 Operating income

$ 147,565

$ 22,296

$ 169,861 Depreciation and amortization 60,715

$ 10,200 70,915 Utility plant additions*

$ 233,050

$ 19,740

$ 252,790 Identifiable assets Utility plant-net

$1,877,231

$176,832

$2,054,063 Materials and supplies 27,617 3,239 30,856 Fuel inventory 108,582 3,357 111,939 Other assets 214,818 Total assets

$2,411,676 FOR THE YEAR ENDED DECEMBER 31, 1981 Operating revenues Unaffiliated customers

$ 948,677

$167,052

$1,115,729 Intersegment sales 167,188

$(123,255) 43,933*

Total operating revenues

$ 948,677

$334,240

$(123,255)

$1,159,662 Operating income

$ 124,365

$ 17,758

$ 142,123 Depreciation and amortization 50,075

$ 8,676 58,751 Utility plant additions**

$ 192,847

$ 16,882

$ 209,729 Identifiable assets Utility plant-net

$1,625,806

$167857

$1,793,663 Materials and supplies 27,337 3,058 30,395 Fuel inventory 158,910 2,416 161,326 Other assets 180,567 Total assets

$2,165,951

• Revenue from interdepartmental sales of gas allowed by the CPUC in tariff rates.

• • Excluding allowance for funds used during construction.

See notes to financial statements.

37

Notes to Financial Statements

1. Summary of Accounting Policies other related items. The company capitalizes an System of accounts allowance for funds used during construction The accounting records of the company are main-(AFUDC) based on the net cost of capital devoted tained in accordance with the Uniform System of to plant under construction. Costs of depreciable Accounts prescribed by the Federal Energy Reg-units of plant retired are eliminated from utility ulatory Commission and adopted by the Califor-plant accounts and such costs, plus removal ex nia Public Utilities Commission (CPUC).

penses less salvage value, are charged to accumu lated depreciation.

Subsidiaries Provisions for depreciation of property, plant The company accounts for the investments in its and equipment for financial statement purposes operating subsidiaries by the equity method. The are generally based on the estimated service lives assets and revenues of the subsidiaries are not of the respective properties using the straight-line significant in relation to those of the company.

remaining life method of computation. The provi The accounts of the company's non-operating sions for depreciation for 1983, 1982 and 1981 subsidiaries are consolidated in the accompany-were 3.97%, 3.98% and 3.32%, respectively, of the ing financial statements.

related aggregate depreciable asset balances.

In October 1983, a subsidiary, Applied Energy, The company has joint ownership interests in Incorporated, was sold for $45.0 million to Ener-the San Onofre Nuclear Generating Station gy Factors, Incorporated (EFI), which resulted in (SONGS) units and the Southwest Powerlink an after tax gain of $14.5 million. Cash proceeds transmission system. Each participant in the of $35.7 million were received and the balance of jointly-owned projects must provide its own the payment was made with common stock and financing. The company's share of operating ex debentures of EFI. The cost method of account-penses is included in the results of operations.

ing is used for the investment in EFI.

The company estimates its share of future dis mantling and decontamination costs for SONGS Utility plant and depreciation Units 1 and 2 to approximate $16.5 million and The cost of additions to utility plant and replace-

$22.7 million, respectively. It is expected that ments of retirement units of property is capital-these estimates will be revised upward, and that ized. The cost of utility plant includes labor, mate-these costs will be recovered in rates over the rial and similar items as well as indirect charges estimated life of the plant, under procedures to for engineering, supervision, transportation and be implemented by the CPUC.

(IN THOUSANDS OF DOLLARS)

December 31, 1983 utility Construction rci Ownership Plant in Accumulated Work in Projects IPterest Senice Depreciation Progress Southwest Powerlink 90.1s

$ 12,736

$148,547 SONGS-Unit 1 20.0 60,759 20,003 29,008 SONGS-Unit 2 20.0 480,102 6,984 SONGS -Unit 3 20.0 377,575 SONGS commpton facilities 20.0 5,086 835 14,226 Total

$558,683

$27,822

$569,356 rRepresents a comeoosite rate.

Research, development and demonstration ulatory balancing accounts. Billings to customers Research, development and demonstration costs are based on meters read on a cycle basis are charged to expense as incurred or deferred throughout each month. As required by the and amortized in accordance with requirements CPUC, the company maintains regulatory balanc of the CPUC. The company incurred research, de-ing accounts. These balancing accounts are used ve(opment and demonstration costs of approxi-to record the undercollection of revenue for mately $12.4 million, $9.2 million and $6.4 million SONGS Unit 2 investment-related costs and the during 1983, 1982 and 1981, respectively.

overcollections or undercollections of revenue resulting from changes in sales volumes and Revenues costs of electric energy, gas purchases, conserva Revenues as recorded in the financial statements tion programs and certain research, development include billings to customers and changes in reg-and demonstration projects.

38

Employee benefit plans

$42.3 million for 1984, $49.9 million for 1985, $31.0 The company provides a non-contributory funded million for 1986, $50.0 million for 1987 and $20.5 pension plan for substantially all employees and million for 1988.

makes annual contributions to this plan equal to Debt premium or discount and related ex its pension expense. It also maintains an un-penses are amortized over the lives of the issues funded non-contributory pension plan for certain to which they pertain. As required by the CPUC, officers. A comparison of accumulated benefits the gain or loss on reacquisition of first mortgage and net assets for these plans as of the latest bonds is amortized to future periods.

valuation date is presented below:

Additional first mortgage bonds may be issued July upon compliance with the provisions of the bond (IN MILLIONS OF DOLLARS) 1983 1982 indenture. Substantially all utility plant is subject Actuarial present value of to the lien of the bond indenture.

accumulated plan benefits Vested

$109.3

$ 92.1

3. Short-Term Borrowings Non-vested 5.0 4.7 The company issues commercial paper at various Total

$114.3

$ 96.8 discount rates and the paper usually matures Net assets available for benefits

$174.9

$117.7 within Ito 45 days. As of December 31, 1983, the company had various bank lines aggregating $150 The rate of return used in determining the actua-million, all of which are available to support com rial present value of accumulated pension plan mercial paper. Borrowings tnder these bank lines benefits was 8.0% in 1983 and 1982.

of credit bear interest at various short-term rate Under the company's savings plan, eligible em-options. A commitment fee of up to a maximum ployees may make a contribution from 1% to 11%

of 0.375% is paid on the unused portion of the of their base pay depending upon their age. The lines. There are no requirements for compensat company's contribution cannot, within specified ing balances.

limits, exceed 3% of the participant's basic corn-The company may also borrow up to $150 mil pensation. All amounts contributed to the plan lion through bankers' acceptances to finance the are paid to a trustee who invests company contri-purchase of any fuel, including natural gas and butions in common stock of the company and other goods or commodities. The bankers' ac employee contributions in United States Treasury ceptances are issued at the prevailing acceptance Obligations, common stock or a combination of rate plus a placement fee and usually mature the two as the participant directs.

within 30 to 180 days. Warehouse receipts for the The company's contributions to these plans fuel in inventory are pledged as collateral for this charged to expense and utility plant for the years credit.

1983, 1982 and 1981 were $16.6 million, $15.5 mil-At December 31, the short-term borrowings and lion and $14.3 million, respectively.

weighted-average interest rates for the balances The company also maintains a Tax Reduction outstanding were as follows:

Employee Stock Ownership Plan. Eligible em-(I MILLIONS OF ployees automatically acquire shares of the com1-DOLLARS) 1983 1982 pany's common stock purchased as a result of Debt Rate Debt Rate additional federal income tax credits not other-Bank loans

$ 78.0 10.5%

$ 79.0 11.1%

wise available to the company. The company in-Commercial paper 3.0 9.3 curs only minor administrative costs associated Bankers' with the plan.

acceptances 7.0 10.2 94.0 9.2 Short-termi Other borrowings

$ 85.0

$176.0 Certain prior year amounts have been reclassified for comparability.

4. Income Taxes See Note 4 regarding accounting for income The CPUC requires the company to include the taxes and Note 6 regarding accounting for leases.

Current tax reductions of certain timing differ ences in net income. Therefore, no provision has

2. Long-Term Debt been made for deferred taxes relating to these The mandatory payments to retire the company's timing differences. The company provides de long-term debt during the next five years are ferred taxes for all other differences.

39

The company's accounting for taxes has

5. Preferred Stock changed over the years to reflect the revisions in General the law. In 1975, the company elected to provide The company, at its option, may redeem the whole or deferred taxes on the additional available invest-any part of its cumulative preferred stock outstand ment tax credits. In 1982, the company began to ing upon payment of the redemption price together record deferred taxes on both the excess of tax with accrued dividends. At December 31, 1983, the over book depreciation for new property and for redemption premiums per share ranged up to $4, substantially all investment tax credits. The com-depending upon the series and the dates for redemp pany amortizes deferred investment tax credits to tion. If unpaid dividends on the outstanding pre income ratably over the book lives of the prop-ferred stock equal or exceed eight full quarterly erty. As of December 31, 1983, the unused invest-dividends, then until all dividends in default have ment tax credits that may be carried forward and been paid, the holders of the preferred stock are applied against future years' taxes are estimated entitled to elect a majority of the board of directors.

at $50.3 million, expiring in 1997 and 1998.

The company's preference stock (cumulative)

Compnent of ncoe ta expnsemay be redeemed at the option of the company upon Components of income tax expense (IN THOUSANDS OF DOLLARS) 1983 1982 1981 payment of the redemption price together with Currentaccrued dividends provided that prior to certain spe Currnt edeal icom ta

$23126

$,135

$12334 cified dates through June 1, 1987, no redemption may Current state franchise tax 19,314 6,760 8,334 be made at an effective cost of money to the com Total current taxes 42,440 8,895 20,668 pany per annum at less than the respective dividend Total taxes allocated to rates. Depending upon the series and the dates for subsidiaries (16,362)

(5,948)

(6,881) redemption, the redemption prices range from Deferred-federal and state taxes

$100.00 to $115.44 per share for the $9.84, $7.80, $7.20, Regulatory balancing accounts-net (6,615) 25,000 (15,453)

$8.25, $9125 and $15.44 Series, and from $27.75 to

___setupeso 2,85 (43__

(,35

$32.15 for the $2.68, $2.475 and $4.65 Series.

Sundesert suspension

___(2,685)

(4,351)

_(2,335)

Encina East sale 1,682 Subject to mandatory redemption Tax over book depreciation 33,071

_14,835 The company is required to set aside $2.0 million in Nuclear fuel financing 5,927 12 343 sinking funds each year to be used for the annual Capitahzed nuclear revenue_

(23,090)

(1,379) redemption of the $9125 Series preference stock Call premium on refunded debt 8,775

-(cumulative) subject to mandatory redemption. In 1985 and 1987, additional sinking funds will be re Capitalized operating and maintenance 7,720 quired in the amounts of $1.0 million and $1.25 mil State franchise tax (7,623)__

lion for the $8.25 and $15.44 Series, respectively.

Other-net 27 (2,209) 41 Total deferred taxes 15,507 44,239 (16,065)

6. Contingencies and Commitments Deferred investment tax credits -net 57,743 13,835 10,138 San Onofre Nuclear Generating Station Unit 1 Total income tax expense

$99,328

$61,021

$ 7,860 San Onofre Nuclear Generating Station Unit 1 has been out of service since February 1982 for inspec Federal and state taxes on income are allocated between operating tion and plant modifications required by the Nuclear income and other income.

Regulatory Commission (NRC). The return to ser The following table reconciles the differences between the statutory vice date of Unit 1 is currently under evaluation and federal income tax rate and the company's effective federal income is chiefly contingent upon reaching an agreement tax rate:

with the NRC on specific seismic modifications to (IN HOUSNDSOF DLLAS) 183 982 981 prove earthquake resistance and other long-range (IN THOUSANDS OF DOLLARS) 1983 1982 1981 NRreuemn.

Income before federal income taxes

$272,220

$207,020

$115,636 n Octobr18tha Statutory federal income tax rate 46.0%

46.0%

46.0%

thatthere isconsiderableuncertaintywithrespectto Excess tax over book depreciation 0.2 (5.0) when, if ever, Unit 1 will resume normal commercial Reguatoy baancng ccouts-et -

._(.3)

(2.5 0.7 operation because modifications may not be cost Regulatory_ balancing accounts_-net

_(0.3)_

_(25)_

10.

_____effective.

Hearings to consider this issue have been AFUDC (13.2)

(1(18 AFUDC__(15.8)

___(19:8)(1-8)scheduled. In connection with these hearings, the Construction costs capitalized (4.0)

(4.4)

(8.0)

CPUC staff is recommending removal of the return Nuclear fuel financing

-(0.3) 2.1 (3.9) component for Unit 1 from customer rates.

Fuel-moving average to FIFO 1.0 (3.0)

If required modifications are determined not to be Investment tax credits (1.2)

_(3.8)

(15.4) costeffective, the plant maybe placed in storage and Other-net 4.2 1.2 3.1 ultimately dismantled. Such an eventuality may dic tate the write-off of the undepreciated cost of the Effective federal income tax rate 31.2%

24.0%

4 plant and unrecovered fuel costs, totaling $89.4 mil 40

lion as of December 31, 1983. In addition, the com-that its investigation has not advanced to the point pany's estimated share of the future dismantling and where affirmative recommendations as to unreason decontamination costs for Unit 1 is approximately ableness or imprudence can be made.

$16.5 million.

The 1983 decision also ordered a performance Effective January 1, 1984, all costs for the support incentive plan for Unit 2 which set a target capacity of Unit 1 facilities are subject to refund pending the factor range of 55 to 80 percent of maximum poten outcome of the CPUC's investigation. The 1984 esti-tial utilization of the unit. If the unit operates below mated annual revenue requirement for the unit in-the range, the decision states that a penalty wil be cluded in the 1984 General Rate Case decision ap-assessed. Further hearings on implementing the proximates $36 million.

target capacity factor are scheduled. In additicn, the In another matter relating to Unit 1, the company CPUC has ordered analysis and testimony, during incurred $14.8 million for resleeving expenses plus 1984, on the issue of alternative ratemaking treat related costs for replacement power. Recovery of the ments which, if adopted, may defer recovery of resleeving expenses is also subject to refund pend-costs.

ing the outcome of CPUC investigations and the The ultimate outcome as a result of the CPUC's company's litigation against the contractor allegedly review of the reasonableness of the construction responsible for the construction defects. The results costs for the units, the adoption of the target ca of this litigation for damages, claiming the resleeving pacity factor, and consideration of other deferred expenses and more than $50 million in replacement capital recovery mechanisms is not presently deter power costs, may be subject to CPUC review.

minable. Management is unable to predict the final The ultimate effect on the company's financial outcome of these matters, but does not expect that position as a result of CPUC investigations into these the ultimate impact resulting from CPUC actions will matters is not presently determinable; however, have a material effect on the company's financial management does not expect that the ultimate im-position.

pact resulting from CPUC actions will have a mate rial effect on the company's financial position.

Plant held for future use Plant held for future use includes $45 million of San Onofre Nuclear Generating Station site-related costs for the suspended Sundesert Nu Units 2 and 3 clear Project near Blythe, California. The CPUC is In a rate decision during 1983, the CPUC granted permitting these costs to remain in rate base pending partial recovery, effective October 9, 1983, of the its review of the company's plans for the proposed addition of Unit 2 to rate base and approved a use or disposition of the property. In the 1984 Gener balancing account for the unrecovered investment-al Rate Case hearings, the CPUC reviewed this mat related costs. The revenues associated with this de-ter, but postponed a decision until after further hear cision totaled $25.0 million through December 31, ings. The realization of the value of this asset de 1983, of which $9.9 million has been recovered in pends upon the rate decision expected in March rates subject to refund. The ultimate recoverability 1984. It is management's opinion that the ultimate of the $25.0 million in revenues depends upon Phase decision will not have a material effect on the fian 2 of this decision, which will be issued after a review cial position of the company.

by the CPUC of the reasonableness of the construc tion costs incurred for Units 2 and 3. The company's Legal matters current estimate of its share of total construction The company has commenced litigation in federal costs for Units 2 and 3 is approximately $865 million.

courts in an effort to collect a $31.2 million claim The final decision on the reasonableness of the costs relating to a prior fuel oil exchange. The corporate is expected in 1985.

defendants and related entities have filed Chapter 11 Pending hearings on the reasonableness issue bankruptcy cases, and the company has filed an which are now expected to commence in late 1984, involuntary bankruptcy petition against the defend the CPUC has commissioned a consultant to identify ants' principal officer.

items where investigation may be required and to Various defendants have filed counterclaims provide estimates as to the range of amounts in-against the company and four officers for damages.

volved. A second-stage preliminary report has now The counterclaims in their present form seek dam been issued by the consultant. In the report, 30 issues ages in excess of $85 million. The company will have been identified. With respect to 13 of the issues, vigorously oppose these counterclaims and, in any the consultant indicated a range of dollar amounts.

case, believes that the ultimate outcome will not With respect to the remaining issues, the consultant have a material effect on its financial position.

indicated an inability to estimate the amounts in volved. The company's share of amounts identified Nuclear insurance by the consultant for further investigation is about The Price-Anderson Act currently limits the public

$200 million. The consultant has indicated, however, liability claims that could arise from a nuclear poin 41

dent to a maximum amount of $580 million for each trustee at year end, of $154.8 million, are available for licensed nuclear facility. The company and the co-qualified expenditures.

owners of the SONGS units have purchased primary insurance for this exposure in the maximum avail-Leases able amount, presently $160 million, with the balance The nuclear fuel lease and certain other leased prop to be provided by secondary financial protection erty would meet the criteria requiring capitalization required by the NRC. Under the agreement with the under an accounting standard issued by the Finan NRC, the company could be assessed a retrospective cial Accounting Standards Board. However, since premium adjustment, of up to $6 million, in the event these leases are treated as operating leases for rate of a nuclear incident involving any licensed reactor making purposes, they have been accounted for in in the United States, if the amount of the loss ex-the same manner. The amounts of assets and liabii ceeds $160 million.

ties that would have been included in the accom Property damage coverage is provided for losses panying balance sheets for such capital leases up to $500 million at SONGS. The company has also approximated $270 million and $240 million, at De purchased decontamination liability and property cember 31, 1983 and 1982, respectively. Had such damage insurance in excess of the primary $500 leases been capitalized, there would have been no million layer. Insurance to cover a portion of the effect on expenses as recorded.

additional expense of replacement power resulting At December 31, 1983, the minimum rental pay from an accident-related outage of a nuclear unit is ments of the company under all noncancellable also provided. A maximum weekly indemnity in the leases were $48.1 million, $42.4 million, $40.3 million, amount of $2.5 million for a single unit for 52 weeks

$36.6 million and $29.7 million for the years 1984 commences after the first 26 weeks. An additional through 1988, respectively. The aggregate amount of

$1.25 million per week is provided for the next noncancellable rental commitments at December 31, 52 weeks. These policies are primarily provided 1983 was $417.5 million.

through mutual insurance companies owned by the In 1978, in connection with the sale and leaseback utilities with nuclear facilities. If losses at any nu-of a generating facility, with minimum annual rentals clear facility covered by the risk-sharing arrange-of $10.2 million, a gain of $23.4 million was deferred ment were to exceed the accumulated funds avail-and is being amortized as a reduction of rental ex able for these insurance programs, the company pense over the initial term of the lease. The company could be assessed a retrospective premium adjust-has the option to extend the term of the lease for 15 ment of up to $23 million.

years beyond 2003 at fair market rates.

The company has no material subleases. The Nuclear Waste Policy Act amount of rents charged to operating expenses for Pursuant to the Nuclear Waste Policy Act of 1982 the years ended December 31, 1983, 1982 and 1981 (Act), Southern California Edison Company, acting was $22.0 million, $22.1 million and $20.2 million as agent for the SONGS participants, entered into a respectively.

contract in June 1983 with the U.S. Department of Energy for disposal of spent nuclear fuel for Units 1, Purchased power contracts 2 and 3. The Act provides for a one-time fee equiva-The company is committed under long-term con lent to an average charge of 1.0 mil per kilowatt hour tracts for the purchase of electric power with an of nuclear generation prior to April 7, 1983. Addi-estimated total minimum commitment of $1.2 bil tionally, for nuclear generation subsequent to April 6, lion at current prices over the lives of the contracts 1983, the Act imposes a similar fee, which will be (expiring 1988 to 1994).

payable quarterly. The company estimates that its At December 31, 1983, the minimum payments portion of the total amount of this fee would be under the contracts were $64.0 million, $166.9 mil approximately $86.0 million over the estimated lives lion, $232.3 million, $224.9 million and $191.6 million of the nuclear generating units. The company's por-for the years 1984 through 1988, respectively. The tion of this fee that was charged to income for the company is required to pay additional amounts for twelve months ended December 31, 1983 was $0.3 actual deliveries of electric power under the con million. Recovery of these expenses, and $6.1 million tracts.

for generation prior to April 7, 1983, has been re-The company's total payments, including electric quested from the CPUC.

power deliveries, under these contracts for the years ended December 31,1983,1982 and 1981 were $100.7 Construction million, $87.6 million and $25.8 million, respectively.

The company is engaged in a construction program under which estimated expenditures of $248 million Fuel oil contracts are planned for 1984, excluding AFUDC and other At December 31, 1983, there were approximately 7.3 non-cash items. The construction funds held by a million barrels of fuel oil, scheduled to be delivered, 42

that are covered by contract. The company esti-lift payments, under the 1979 restated contract and mates that commitments under this contract aggre-estimated costs of fuel using the most beneficial gate $281.8 million through June 1986 at current economic fuel resources from 1979 to 1983. The contract prices determined by a formula which is company has prepared a preliminary estimate which based on the supplier's crude oil costs. In addition, totaled $97 million. This estimate, and other esti the company has contracted to purchase 9.9 million mates to be presented at the hearings, involve barrels of fuel oil from July 1986 through December numerous speculative assumptions. The company 1990 at prices to be determined in the future.

does not in any event believe an assumption of the use of most beneficial fuel resources is justified.

7. Disallowance of Fuel Oil Costs In February 1984, the administrative law judge, In the 1970s, when future shortages of fuel oil were who may preside over the hearings, made public expected, the company entered into long-term con-statements reported by San Diego newspapers in tracts for the purchase of minimum amounts of fuel dicating that the disallowance would be $45 million oil under take-or-pay contracts. In 1979, in an effort or more. In light of these public statements and the to reduce a short-term oversupply of fuel oil, the February 1984 CPUC order, the company expects a company renegotiated a contract to reduce the 1979 recommendation by the administrative law judge to and 1980 minimum annual commitments and in-the CPUC of a substantial disallowance. The com crease the total commitment for later years when the pany continues to believe that its actions have been additional fuel oil was expected to be needed. In reasonable and that there is no justification for 1982, due to the unpredicted availability of less ex-reevaluating circumstances in the distnt past. The pensive natural gas, which under revised forecasts company intends to contest both the basis for the was expected to continue through the expiration of disallowance and the amount which is expected to the 1979 restated contract, the company entered into be ordered. The company, however, cannot predict an agreement to suspend the 1979 restated contract.

the ultimate amount of the disallowance and the Thrrms of the suspension agreement included under-effect on its results of operations.

lift payments of $46.8 million to the supplier and fuel oil transporter not to deliver 6.9 million barrels of

8. Quarterly Financial Data (Unaudited) fuel oil. The CPUC initially acknowledged a rate-The amounts below are unaudited but in the opinion payer benefit from the suspension of purchases of the company reflect all adjustments necessary for under this contract and authorized the company to a fair presentation. Such adjustments comprise only adjust rates, effective January 1, 1983, to recover normal recurring accruals except for the recogni these costs over two years. These revenues, howev-tion, in the quarter ended March 31, 1982, of a $5.9 er, were made subject to refund pending further million ($0.06 per share, net of taxes*) provision for a review by the CPUC as to the reasonableness of the class action lawsuit, the effect, on the quarter ended negotiated price for the underlift charge. Through December 31,1982, of reductions in revenues of $14.5 December 31, 1983, $27.0 million of these revenues million ($0.14 per share, net of taxes*) as a result of had been recovered in rates.

CPUC hearings on the balancing accounts, and the In November 1983, the CPUC held hearings to recognition, in the quarter ended December 31, 1983, address the reasonableness of the underlift charge.

of an after tax gain of $14.5 million ($0.29 per share*)

In the course of the hearings, arguments were pre-from the sale of a subsidiary.

sented that the underlift charges were unreasonable Earnings in light of the circumstances prevailing in 1982.

per Further, for the first time, arguments were intro-(IN THOUSANDS EXCEPT Operating Operating Net Common duced that the underlift charges were unreasonable PuarSerREnded because, in the absence of changes made in 1979, the 1982 underlift would not have been required. Based on M$40 these new arguments, on February 1, 1984, the CPUC ruled that the company had been unreasonable in Je3 entering into the 1979 restated contract. Because of tember 30 360,093 44,616 39,497 0.2 its finding, the CPUC did not address the reasonable-December31 382,592 37,811 34,192 0.58 ness of the actions in 1982, but instead found that 1983 issue to be moot.

March31 396137 46,796 4,012 0.85 The CPUC has scheduled hearings for March 1984 June30 357,041_

39561 40,603 0.69 to determine an amount of disallowance associated September30 370,922 42,551 42,673 0.71 with the 1979 restated contract. For consideration at these hearings, the CPUC directed the company to submit information concerning the amount of differ-

.Based on average common shares outstanding.

lBecause these earnings are based on average common shares outstanding ding the quarter, ence between actual costs for fuel, including under-the sum of quarterly earnings per share may not equal earnings per share for the year.

43

Supplementary Information 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 (IN THOUSANDS OF DOLLARS)

As Reported Adjusted for Adjusted for FOR THE YEAR ENDED DECEMBER 31, 1983 in the General Changes in Financial Inflation('

Specific Statements (Constant Prices' (Historical)

Dollars)

(Current Cost)

Operating revenues

$1,530,207

$1,530,207

$1,530,207 Electric fuel and purchased energy_

622,422 622,422 622 422 Gas purchased for resale 209,912 209,912 209,912 Other operating____

238,958 238,958 238 958 Maintenance 59595 959595 Depreciation and amortization 79,280 151,525 175,776 Thxes 145,885 145,885 145,885 Net interest charges 85,581 85,581 85,581 Other income-net (98,796)

(98,794)

(98,794) 1,342,837 1,415,084 1,439,335 Income from operations (excluding adjustment to net recoverable cost)

$ 187,370

$ 115,123(21 90,872 Increase in specific prices (current cost) of property, plant and equipment held during the year (3)

$ 276844 Adjustment to net recoverable cost

$ (24,987) 586)

Effect of increase in general price level (156,994)

Excess of increase in general price level over increase in specific prices after adjustment to net recoverable cost (736)

Gain from decline in purchasing power of net amounts owed 46,504 46,504 Net 21,517 45,768

(')At average 1983 price levels.

(

2Including the adjustment to net recoverable cost, the income from operations on a constant dollar basis would have been $90,136.

("At December 31, 1983, current cost of property, plant and equipment, net of accumulated depreciation, was $4,222,837, while historical cost or net recoverable cost was $2,332,848.

Constant dollar amounts represent historical costs rate different from the rate of general inflation.

stated in terms of dollars of the same general pur-The current year's provision for depreciation on chasing power, as measured by the Consumer Price the constant dollar and current cost amounts of Index for All Urban Consumers. Current cost property, plant and equipment was determined by amounts reflect the changes in specific prices of applying the company's book depreciation rates to plant from the date the plant was acquired to the the indexed plant amounts.

present. The current cost of property, plant and Fuel inventories, the cost of fuel used in genera equipment, which includes land, land rights, intangi, tion, and gas purchased for resale have not been ble plant, plant held for future use and construction restated from their historical cost in nominal dollars.

work in progress, represents the estimated cost of Regulation limits the recovery of fuel and purchased replacing existing plant assets and was determined gas costs through the operation of adjustment primarily by indexing surviving plant by the Handy-clauses or adjustments in basic rate schedules to Whitman Index of Public Utility Construction Costs.

actual costs. For this reason, fuel inventories are The difference between these two methods of effectively monetary assets. In addition, since only measuring the effects of inflation results from cur-historical costs are deductible for income tax pur rentcostsofutilityplantassetshavingtincreasedata poses, no adjustments have been made to tax expense.

44

TFive-Year Comparison of Selected Supplementary Financial Data Adjusted for Effect of Changing Prices (IV THOUSANDS EXCEPT PER SHARE AMOUNTS)")

FOR THE YEARS ENDED DECEMBER 31 1983 1982 1981 1980 1979 Operating Revenues

$ 1,530,207

$ 1,477,475

$ 1,270,775

$1,161,639

$1,023,237 Historical Cost Information Adjusted for General Inflation (Constant Dollar)

Income from operations (excluding adjustment to net recoverable cost) 115,123

$ 112,408 63,173 9,927 49,419 Income (loss) per common share (after preferred dividend requirements and excluding adjustment to net recoverable cost) 1.75 1.89 1.08 (0.34) 0.86 Net assets at year-end at net recoverable cost

$ 1,098,009

$ 992,754

$ 882,752

$ 825,385

$ 871,304 Historical Cost Information Adjusted for Changes in Specific Prices (Current Cost)

Income (loss) from operations (excluding adjustment to net recoverable cost) 90,872 93,028 47,179 (5,014) 30,112 Income (loss) per common share (after preferred dividend requirements and excluding adjustment to net recoverable cost) 1.27 1.46 0.68 (0.

0.21 Excess of increase in general price level over increase in specific prices after adjustment to net recoverable cost (736)

(22,930)

(191572)

$ (149,874)

$ (165,116)

Net assets at year-end at net recoverable cost

$ 1,098,009 992,754 882,752 825,385

$ 871,304 General Information Gain from decline in purchasing power of net amounts owed&

46,504 48,446 90,255

$ 117,351

$ 118,921 Cash dividends declared per common share 1.925 1.84 1.80 1.89 2.03 Market price per common share at year-end") $

19.26 17.61 13.25 13.57 17.04 Average Consumer Price Index 298.5m1 3 289.1 272.4 246.8 217.4 m)Average 1983 dollars m

2'In constant dollars

)1983 Average Consumer Price Index estimated.

Under the ratemaking prescribed by the CPUC, gain. To properly reflect the economics of rate reg only the historical cost of plant is recoverable in ulation in the Statement of Income from Operations, revenues as depreciation. Therefore, the cost of the adjustment to net property, plant and equipment plant stated in terms of constant dollars or current should be offset by or combined with, as appropri cost differing from the historical cost of plant is not ate, the gain from the decline in purchasing power of presently recoverable in rates as depreciation, and is net amounts owed. The gain from the decline in reflected as an adjustment to net recoverable cost.

purchasing power of net amounts owed is primarily While the ratemaking process gives no recognition attributable to the substantial amount of debt which to the current cost of replacing property, plant and has leen used to finance property, plant and equip equipment, based on past practices, the company ment. Since the depreciation of this plant is limited believes it will be allowed to earn on the increased to the recovery of historical costs, the company does cost of its net investment when replacement of facili-not have the opportunity to realize a holding gain on ties actually occurs.

debt and is limited to recovery only of the embedded During a period of inflation, holders of monetary cost of debt capital.

assets suffer a loss of general purchasing power while holders of monetary liabilities experience a 45

Financial Data (IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

FOR THE YEARS ENDED DECEMBER 31 1983 1982 1981 1980 1979 1978 1973 Common Stock Financial return on equity 18.2%

17.5%

14.5%

6.0%

10.4%

11.4%

10.1%

Market to book ratio*

.106.0%

101.8%

77.2%

73.2%

75.6%

84.7%

85.8%

Book value per share*

18.52 16.94 16.20 16.06 17.35 17.41 17.05 Earnings per common share 3.20 2.90 2.34 1.01 1.80 2.02 1.78 Dividends per share Paid 1.89 1.75 1.62 1.54 1.46 1.38 1.20 Declared 1.925 1.785 1.64 1.56 1.48 1.40 1.20 Dividend payout ratio (declared) _ 60.7%

62.4%

71.1%

156.8%

83.1%

71.5%

69.6%

Dividend yield (declared 9.8%

10.3%

13.1%

13.3%

11.3%

9.5%

8.2%

Price/Earnings ratio*

6.1 5.9 5.3 11.6 7.3 7.3 8.2 Capitalization*

Common equity-__

$ 957.6

$ 817.4

$ 672.4

$ 585.8

$ 541.2

$ 480.4

$ 230.3 Preferred stock Not subject to mandatory redemption 161.0 161.0 161.0 128.5 128.5 128.5 78.5 Subject to mandatory redemption 63.5 108.0 85.0 85.0 85.0 85.0 30.0 Long-term debt First mortgage bonds 967.9 706.3 612.4 615.2 491.2 490.9 243.5 Debentures 1.4 2.7 22.2 23.0 23.7 24.5-28.4 Other 67.1 76.1 92.6 94.1 125.2 57.7 56.8 Total long-term debt 1,036.4 785.1 727.2 732.3 640.1 573.1 328.7 Total capitalization

$2,218.5

$1,871.5

$1,645.6

$1,531.6

$1,394.8

$1,267.0

$ 667.5 Capitalization ratios(%)

Common equity 43.2 43.7 40.9 38.2 38.8 37.9 34.5 Preferred stock Not subject to mandatory redemption 7.3 8.6 9.8 8.4 9.2

___10.2 11.8 Subject to mandatory redemption 2____2.9 5.8 5.2 5.6__

6.1 6.7 4.5 Long-term debt First mortgage bonds 43.6 37.7 37.2 40.2 35.2 38.7 36.5 Debentures 0.1 1.3 1.5 1.7 1.9 4.2 Other 3.0 4.1 5.6 6.1 9.0 4.6 8.5 Total long-term debt 46.6 41.9 44.1 47.8 45.9 45.2 49.2 Total capitalization 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Times Earned Interest on debt before income taxes 3.66 3.02 2.06 1.47 2.18 2.25 2.09 Interest and preferred dividends after income taxes 2.18 1.98 1.70 1.31 1.65 1.67 1.67 Utility Plant*

Electric

$2,566.1

$2,253.6

$1,960.5

$1 735.9

$1 547.4

$1,343.3

$ 695.9 Gas 298.4 281.0 262.2 246.1 228.0 212.9 158.3 Common 41.6 33.2 29.0 27.4 25.8 23.4 39.0 Total 2,906.1 2,567.8 2,251.7 2,009.4 1,801.2 1,579.6 893.2 Accumulated depreciation (577.9)

(513.7)

(458.0)

(418.6)

(381.4)

(344.9)

(212.7)

Utility plant-net

$2,328.2

$2,054.1

$1,793.7

$1,590.8

$1,419.8

$1,234.7

$ 680.5

• At December 31 46

Stock Prices

-1983 QUARTERS First Second Third Fourth High Low High Low High Low High Low Common 19%

17 19/s 17 /

20 17 22 19 4.40% Preferred 7_

7%

6%

7/s 7

7%

6 7

6 4 ;% Preferred 8/

6/s 81/s 7

7 7/s 7

7%

6 5% Preferred 87/

7 8%

7%

8%

77/

8 75/

$9.84 Preference 81 71 80 74 79 71 78/

73

$7.80 Preference 62%

57 65 59 63 58 64%

57

$7.20 Preference 57,

52 59 54 58 54 58 52

$2.68 Preference 22%

20 24 207/s 22 1 97/s 22 /

20

$2.475 Preference 21 18%

21 19Vs 21 187/

20%

19s

$4.65 Preference 37 34 Vs 37%

34%

37%

34 37%

34 1982 QUARTERS First Second Third Fourth High Low High Low High Low High Low Common 14/

11%

15 13 16/4 14%

17/s 15%

4.40% Preferred 6/

5%5/s 6%

5 /2 67/s

/5%

7%

6 4

% Preferred 6%

5%

6%

5%

7/

5%

7 6

5% Preferred 71/s 6/8 7

6 /4 7%

6%

8%

7

$9.84 Preference 63 50 67 60 69%

59%

76 69

$7.80 Preference 51 46 51%

47 55/

48 62 54

$7.20 Preference 47 43 48 44 50 44 56%

49

$2.68 Preference 18 15 18i/s 16 /4 19/s 16%

21%

18

$2475 Preference 16/9 15 17 151/s 18 15 20 17Vs

$4.65 Preference 30A 27?

31/s 28 34 29 36 31%

Quarterly Dividends Paid in 1982-1983 (Publicly sold issues only) 4.40%

4V,%

5%

$9.84

$7.80

$7.20

$2.68

$2.475

$4.65

$15.44 Common Preferred Preferred Preferred Preference Preference Preference Preference Preference Preference Preference 49'*

22' 22/

25,

$2.46

$1.95

$1.80 67' 61/8,

$1.1625

$3.86

• Rate paid since July 15, 1983. Prior rates were 45.5', paid from July 15, 1982, and 42,, paid from October 15, 1981.

The company has paid dividends on its common stock in each year since 1909.

4th Quarter Results-Statements of Income Three Months Ended Years Ended December 31 December 31 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1983 1982 1983 1982 Operating revenues

$ 406,107

$ 382 592

$1 530,207

$1,430,948 Operating expenses 360,860 344,781 1,356,052 1,261,087 Operating income 45,247 37,811 174,155 169,861 Other income 34,044 17,763 98,796 75,691 Net interest charges 23,209 21,382 85,581 88,249 Net income (before preferred dividend requirements) _____56,082 34,192 187,370

_157,303 Preferred dividend requirements 6,841 6,887 27,449 26,068 Earnings applicable to common shares 49,241 27,305

$ 159,921

$ 131,235 Average common shares outstanding 51,505 47,074 49,994 45,306 Earnings per common share 0.96 0.58 3.20 2.90 Dividends declared per common share 0.49 0.455 1.925 1.785 See management's discussion and analysis of financial condition and results of operations and Note 8 of notes to financial statements.

47

Corporate ix new vice presidents were elected in 1983 Board of Directors Information and the consolidation of four of the com S pany's divisions into two divisions resulted in Thomas A. Page*

new assignments for two vice presidents.

Chairman, President, and Chief Executive Officer of SDG&E Donald E. Felsinger, 36, was elected in April to vice president-gas division from division manager.

Clair W. Burgener Later in the year, as part of the consolidation of President of Burgener Properties, Inc. (a real divisions and as a result of the retirement of A. J.

estate investment and property development firm)

McCutcheon, Felsinger moved to the post of vice president-customer service administration. He Main Burnham*

joined the company in 1972.

Chairman of John Burnham & Company (a mortgage loan, real estate, and insurance firm)

Ronald K. Fuller, 46, was elected vice president-David M. DeMotte regulatory services, from director of regulatory President of Rough Country, Inc. (manufacturer affairs, a post he assumed earlier in the year. Be-and distributor of specialty equipment for the tween 1975 and 1983, Fuller was manager of the automotive aftermarket) company's governmental relations operations in Washington, D.C.

Daniel W. Derbes President of Signal Advanced Technology Group R. Lee Haney, 44, treasurer of SDG&E, was elected and Executive Vice President and a director of The a vice president. Haney joined SDG&E in 1972 and Signal Companies, Inc.

Six new vice was manager of financial services and assistant treasurer prior to his promotion to the post of Bruce R. Hazard treasurer in 1981.

President of R. E. Hazard Contracting Company elected in (an engineering contracting firm)

James C. Holcombe, 38, was promoted to vice 1983 president-power supply from division manager, William D. McElroy the position to which he had been appointed in Professor of Biology at University of California at 1982. Earlier, he was manager of the company's San Diego electric operations for seven years. Holcombe Ralph R. Ocampo joined the company in 1967.

San Diego physician and surgeon Harold A. Monsor, 62, joined the company as vice Burt F. Raynes*

president-consultant to the president, from H. & J.

President of Raynes Engineering Corporation Monsor & Associates, his own general business (a mechanical engineering and product consulting firm that specialized in helping com-development firm) panies realize their growth potential. Prior to form ing his own company in 1981, he was a senior vice Charles R. Scott president of Amcord and a group vice president and President and Chief Executive Officer of board member of Chemetron Corporation. He has Intermark, Inc. (a La Jolla-based operating and been on the board of directors of several other holding company) domestic and international companies.

Ronald W. Watkins, 42, assumed the additional Private investor; former president of Oil Field responliy Manufacturing Service and Supply Division of respnsiiliy fo ga opratinsengneerngand Nucorp Energy, Inc. (an oil and gas exploration planning in the consolidation effort, becoming vice and oil field manufacturing, service, and supply president-gas and resource management. Watkins company) has been a company vice president since 1979. He joined the company in 1964.

Fred C. Stalder*

President, Chairman, and Chief Executive Officer of Central Savings and Loan Association George A. F. Weida, 47, joined the company as a vice president in the personnel division after leav-Catherine T. Wiggs ing Xerox and Loral Corporations, where he was Executive Vice President, Personnel and a member vice president of human resources. Earlier, he was of the Management Executive Committee of The corporate director of employee relations at AM In-Broadway Stores, Inc., Division of Carter Hawley ternational, Inc. (formerly Addressograph-Hale Stores, Inc. (retail department stores)

Multigraph Corporation), and vice president of in dustrial relations for Republic Corporation.

• Member of the Executive Committee 48

O'.fficers Thomas A.

Page President, Chief Executive Officer, and Chairman of the Board Alton T. Davis a

Group Vice President-Operations S

n n

Richard Korpan Group Vice President-Finance Jack E. Thomas Group Vice President-Customer Service Gary D. Cotton Vice President-Engineering Frank W. DeVore Vice President-Governmental Affairs Donald E. Felsinger Vice President-Customer Service Administration Silve Gate Powe Ronald K. Fuller Vice President-Regulatory Services G

distribuion are John E.

Hamrick iuii Vice President-Customer Service R. Lee Haney Customer Ser ce Centers Vice President and Treasurer Beach Cities Chris HarlowT Imrie, Director Chris arlow4901 Morena Boulevard, Suite 210 Vice President-Information Services San Diego, CA 92117 James C. Holcombe Centre City Vice President-Power Supply L. Clark Siebrand, Director James J. HolleyStreet JamesJ. HlleySan Diego, CA 92102 Vice President-Personnel Eastern William J. Karnes Paul J. Oberhaus, Director Secretary 104 North Johnson Avenue El Cajon, CA 92020 Richard L. Manning Vice President-Public Relations North Coast R. Bruce Liska, Director Harold A. Monsor 5315 Avenida Encinas Vice President-Consultant to the President Carlsbad, CA 92008 Robert E. Parsley Northeast Controller R. Keith Hutchens, Director 750 North Citracado Parkway Gordon Pearce Escondido, CA 92025 Vice President and General Counsel Orange County Ronald W. Watkins William S. Webb, Director Vice President-Gas and Resource Management 101 West El Portal San Clemente, CA 92672 George A. F. Weida Vice President South Bay H. John Van der Linde, Director 436 "H" Street Chula Vista, CA 92010 49