Text

Annual Financial Rept 1979
	ML19323A018
Person / Time
Site:	Humboldt Bay, Diablo Canyon
Issue date:	02/22/1980
From:	; PACIFIC GAS & ELECTRIC CO.
To:	;
Shared Package
ML16341B315	List: ML16341B314; ML19323A018;
References
	NUDOCS 8004100244
	Download: ML19323A018 (43)
	v • d • e

.__

O Financial Highlights i

i 1979 1978 increase i

Operating Revenues

$ 4,372,220,000

$3,569,373,000 22%

Net income 458,234,000

$ 400,451,000 14 %

Earnings Available for Common 365,943,000

$ 317,114,000 15%

Earnings Per Common Share

$3.55

$3.18 12%

Declared Dividends Per Common Share

$2.38

$2.16 10%

Total Assets

$10,310,763,000

$8,665,160,000 19%

Capital Expenditures

$ 1,149,308,000

$ 859,113,000 34 %

Sales of Electricity to Customers (KWil) 59,728,452,000 56,135,915,000 6%

Sales of Gas to Customers (MCF) 600,180,000 513,139,000 17 %

Total Customers 6,181,714 6,019,135 3%

Number of Stockholders 394,252 384,133 3%

Number of Employees 26,877 26,445 2%

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W Eantings IWhre 33)

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75 M 77 7# 79 INtMemis 3 00 Ebeclared Z40 lkdtn IthO 13)

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To Our Stockholders We are pleased to report that earnings improvement is favor.

capita consumption of electric carnings per share of common able. On December 18,1979, the energy in our service area.

stock were $3.55, an increase of CPUC granted the Company a Were it not for intensive 37 cents, or 11.6 percent, over

$201 million general rate increase conservation efforts, this demand 1978 earnings.

effectivejanuary 1,1980.

would have been still higher, This is the fourth consecutive in this decision, the Com.

and would have added greatly year ofincreased earnings per mission established rates to the Company's difficultie3 in share. During these years, we intended to enable the Company meeting the energy requirements have substantially narrowed the to earn a return on common ofits customers.

gap between acm.n carnings and equity averaging 13.5 percent those held tn ne fair and reason-over the two. year period of Electric and Gas Resources To meet the future needs of able by rh.: California Public 1980 81.

Utilities Commission (CPUC).

Although in this era of our customers, the Company has This carnings improvement rapidly accelerating costs the a diversified electric supply would not have been possible intended goal may not be plan designed to reduce depen.

without the progressive steps achieved, we do expect signif.

dence on foreign oil as a fuel taken by the CPUC to reduce icant improvement over the 11.5 for generation.

regulatory lag in responding to percent return on common Besides nuclear power from rapidly rising utility costs.

equity recorded for 1979 the Diablo Canyon plant, and in recognition of the current The Company, therefore, pumped-storage hydroelectric earnings level and the increased should be in a favorable position generation at the llelms Creek investment by common stock-to meet its challenging capital Project, we are planning major holders through reinvested requirements.

coal fired generation. additional carnings, the common stock During 1979, we raised gener:uion from geothermal stean dividend was raised twice approximately $800 million in at The Geysers, and substantial during 1979 and again early long term capital, a new high development of co generation in 1980.

for the Company. For 1980 and projects, where electricity can The first increase raised the 1981, we estimate a need for be generated in conjunction with quarterly rate by.1 cents per approximately $1.8 billion in industrial processes using heat share, or 7A percent, to 58 cents new capital.

or fuel sources that otherwise effective with the April 15,1979 We are confident that would be wasted.

payment.This was followed by California regulation will remain Small hydroelectric projects, a a 3 cent per share, or 5.2 per.

responsive to these large finan.

plant using garbage as a fuel cent, increase to 61 cents effec-cial needs.

source, and a wind powered rive with the October 15,1979 generating plant are also included Record Electric Sales in our electric resource plans.

payment.

The third increase was 1 cents During 1979, the Company To secure new gas supplies, per share, or 6.6 percent, effec-sold 59.7 billion kilowatt hours the Company is continuing its

- tive with the April 15,1980 of electricity-the highest sales aggressive programs outlined in payment.The nt w annu.il divi.

in our history.

previous reports to stockholders.

dend is $2.60. e ' -

Record peak demands, too, Planning is being actively pur.

i were met-further reflecting the sued on major projects designed Earnings Outlook expanding economy, growing to bring gas from Canada, the The outk>ok for continued population and still rising per Rocky Mountain area, and Alaska

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by pipeline, and to import lique.

new facilities at high capital fled natural gas by tanker from costs which depress earnings.

Indonesia and Alaska.

We believe the Company's j

programs to encourage conser-g Nuclear Power vation by its customers are the

'.fd f.

j President Carter's response late most advanced in the nation.

last year to the accident at Three Launched little more than five I

Mile Island was a constructive years ago, the programs have

~

f contribution toward avoiding a grown into a 50 project, $80

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serious energy problem in million a. year effort.

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America.

j The President said-and we Our Employees e

j agree-that this nation needs all As in past years, the progress sources of energy and caa lot made by the Company in 1979 shut the door on nuclear oower.

could not have been achieved 9

lie has recommended that without an industrious and licensing of new nuclear power dedicated work force.

plants go forward in as short We acknowledge with sincere a time as possible.

ppreciation the sustained efforts Zs This gives us confidence that of our employees in carrying 2

our Diablo Canyon Nuclear out the Company's public service g.g.,.g. g3f,,,,,j,

%,,, g gg.,.p;,g Power Plant-which will be obligations.

made fully compatible with the To them, we dedicate our lessons learned at Three Mile special section -Service That Island-can be licensed and Never Stops"

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generating power soon.

Early operation of Diablo Canyon is essential to assure t

reliable service to our customers

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and reduce our use of oil and

/

J gas to generate electricite;.

Frederick W. Mielke,Jr.

j Chairman of the Board and Conservation Chief Executive Officer Because new supplies of elec-L tricity and gas can be obtained only at high cost in today's a#

./

economy, slowing the growth L

4 in the need for such new m

supplies benefits both customers Barton W. Shackelford

?

and stockholders.

President and

[

Customers are a'ided by a Chief Operating Officer n

slowing in the rise 6f energy costs. And stockholders gain by a lessened need to finance February 22,1980

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_ ;wg;w.. s=x==nsw=====a=y. 4t x.x4 1 Service Taat Never Stops The forces of nature-rain, snow, wind, a lightning bolt flashing out of the night sky-can trigger the start of a workday for people at PG&E who keep gas and electricity flowing around the ch>ck. During the same dark hours that a storm-lashed crew L locates and repairs a downed power line, other employees l are on night shifts in power plants and energy dispatching i and C()mputer Centers. Company weather fi>recasters. as midnight approaches, warn gas dispatchers of an incoming cold front. Millions more i.- j cubic feet of gas must begin to flow through pipelines to cus-l. tomer.s flicing the increased chill. In summer, forecasts of a heat wave tell electric dis-patchers that more air conditioning and extra farm irrigation pumping will put high demands on the PG&E system. Every available source of generation, including purchases of elec-tricity from neighboring utilities. may be called upon to meet the coming day s peak. Should generating capacity be insufficient, arrange-ments are in place with other utility systems in California to share any shortage of capacity as equita',1y as possible. The rhvthms and routines mav varv with the seasons but the vigilafice to meet nature's ever-changing whims and consumers' ever-shifting needs is constant. ] With dawn and the start of a normal workday, service 1 [- ( ._~ '.ew 1:; f.. y_ 9 _ 4,. g: 9.. .,_ 3.gg((... - ~ ' V,.r ; R qq 4. -.. %(7 jg -c w3 y[: 4g h r., .j '[ l (( [ vy'-' y

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j ..- - ~ _ _ _... - _ _.m .._. m _ t to customers takes form in a thousand different ways Ouality service is compnsed of a mosaic of activities. a few colorful piece.s of which are presented on these pages. i.s the dav begins. experts from PG&E start their daih l round. helping to further the prosperity of California's S10 billion-a-v. ear litrm and livestock industry. Close partnership with the fitrmer date.s back to 1899 when PG&E demonstrated how electric motors driving irri-galit >n pumps Ct)uld turn arid Wasteland inii) green lleid4 l lhat yield tWu,50metimes three. crops a year. ToJ;tv. irrigation still is the most important farm chore in CalilI)Thi;t. C()mp;lnV pulDp tc5ters last year made m()rU than s.500 aills to keep pump 3 running at i< >p efticiency. Other PG&E ;tgricultural representatives make daily r( )u nd5. sh() Wing IIlrmers and rancher 3 new techniclues t< >

Iv(>id Wa< ting energy. and eno)uraging them to avoid irri-gating when high ciectric demands in summer cut int,>

rc5cTVes ()f generating Cap;lCitv. While Compant expert 3 are on farms and ranches. ~ other empl(wees are in liict(> ries and store 3 offering on-site 5urvey5 of businesses and etjuipment. This new dimension ()f5ervi. encrp). audits. helps these cust()mer3 holJ d(>wn their citery.y a>nsumptitin. All cust(>mers regardless of size. are offt-red these audits. Besides audits. Company specialists assist these com- + .;y. ) }C f. c,.,y.. * $. g p D % J '.e ;W e: - jlj - -( g,. ' Y y 4 3, a Y,-.

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_ ~. _ m.. ~ mercial and industrial customers in designing. carrying out L and monitoring their own tailor-made conservation programs. L Programs developed by PG&E last year aided nearly 5.0(K) businesses, factories stores. hospitals, schools and gov-ernment buildings to become more energy-efficient. At the same time. serving residential customers in-l volves thousands of daily contacts. ranging from reading or j-t hecking meters to responding to service requests of all i .Js. Such requests include lighting pilots. checking fuses t n conducting home energy audits. Alore than six million other customer contacts were made during 1979 over the phone or over the counter at Il local offices. 31eanwhile. as the day wears on new homes. offices. buildings-new machines. new devices of every kind-are being plugged into our ever-growing utif ty system. PGME service includes working closely with private and public agencies to assist disadvantaged customers. The Companv. for example has opened a weatherization train-ing center in Stockton. Here. more than 500 students from California community action agencies have been trained in basic weatherization and home repair. Graduates of the cen-ter put their new skills to work helping low-income. elderly and handicapped persons avoid wasting energy. (' As part of its land use policy. PG&E service has been ? extended to developing and maintaining campsites and picnic areas for public use on its hydroelectric watershed ( '.,.['~ [

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.f.&J ~ ;@ _ 4 [fi 'r- ~Y .(* n%g - ; f ' t _}p.p s -s. t er . y ^ * - - rJ; Yi Residentialcustomers ubo request Enery auditsforcommercial /Q enery auditslearn bou-customersshou managers An insulatingattics and other steps ofrestaurants, stores andofices can help them consen e. bou to cut u'aste. 9

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lands. In urban areas. the Companv has cooperated in the de\\ el(>pment of parks and plavgrounds along transmission rights ( il \\\\.' v. IlldlfUtIlv.Cusi( )lllUfs ()I.lll tvpts art sCfvUd \\\\ ilh inl},( >l I.lill illlA ) fill.1[it >ll h\\ re pi ) r t.s t( ) nt\\\\ s mUdi;t. h\\ advertising .lild h\\ UnClt )sl. ires sent \\\\ It h hills. Thn > ugh such c( >mmuni (.!!!( >lls. Cllsl( )lllUrs leillIl1)( il ( illl\\ } )( )\\\\ [( ) t( )flsUrvt. htit.lls( \\\\ ll\\ U\\Ull\\\\llUll thC\\ d() t ( )iiscr\\ U -hills stillc.itig( tii, hc ) ( J L! s t < >l l }} U il h 'I C.l s lil y ( ( )st ( )l' lll( )vidi ng g;is.Ind UlUt !!ic lb fl h lll;ll } \\ !!)U l,ipl) j' fit Us P(it\\l'illlisi j '.1 \\ IIil p.is NUI \\ it U st!l1 '!!t ^.!!lt!liifIllC}( )i! lls e d l( pt'!!UI'.!!t t }t t Ifit II' b !llC ll.Ilhl'( )l I!1U LltK k sigilill lllt Ulld ( )! il ni ) fill.l! \\\\ ( 11 lu i.t \\ 111.111\\ Ullll1l i\\ UUs C.ll f \\ J lfJdii!( in ( )f sUf\\ it U iilit l } }Ull lil ! \\.ilt lI\\ Us N >llit sCl \\ t i ill cil\\ t i 'U!)t i}s.[1 h! lltih!'1t Ih>dlUs slit li.ls % ll( H )! I h );lfd s ( )lllCfs.l! U 111\\ t )l\\ Ut! \\\\ li!' \\ t )ul!) \\\\ t it'k t } }.11'11 \\ d fi\\ Us. ()F ( ){ })CI llli )p filill s it i Ill.lkU I!iUlf C( 1111 Illt!!liliUs } TUllCT j'!;h Us Ill \\\\ })lt }} li ) llvt Alkl \\\\ hull niglit I.llls ;lp;lin stf\\ it U ;ln )lllld !!)U CI( tk i tt 'illli,U Us till!'nikUll ( >ll lhU I >( > N I s\\ stEnl. N > niU \\\\ h U rU. (llCfC s.I (17 illlllCill.lll.llt )}l.1 }l( )} U rUsl( )1 illy llt )\\\\ Cl and light it i.1 IlUig!llk irhe n )d :itilldrUds (it' nlilts a\\\\.tv. a sUrviCUilTall is ill;lking sllft Ill.lf Dalllf;ll g 1% ll()\\Vs lininlefruplUd t()il l'lfgU illdllsi fi;ll Cllsl( >lll'f f. TilU\\

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Operation Review now faced by the Company. the During 1979 the Canadian govern. Comniission determined that a fair ment raised the price ofit.s exported i Finance and Rates r.nd reasonable return on common natural gas by 60 percent from The year 1979 marks the fourth equity should be 14.1 percent in the 52.16 to 53.45 per million Bru. consect tive year ofimprovement first year of a two-year period. in On February 13.1980 the Com-in earnings per share and return contrast to the previously allowed pany was authorized to increase its i on common equity. 12.83 percent. revenues by an additional 5336 mil-These improvements were Further regulatory refinements lion annually to offset these higher made possible because of a number may be required. however, to enable gas costs. of changes in regulatory procedures the Company to actually earn its Effective February 17.1980, the put into effect by the California allowed return during this era of Canadians increased their export Public t! ilities Commission rapidly escalating costs. price by an additional 30 percent (cpl'C) under its policy to reduce During 1979 the CPCC authorized to 54.47 per million Bru. This neces. regulatory lag. rate changes. in addition to the sitated a further gas offset request in conformity with this policy. previously mentioned general rate by the Company. now pending the CPL'C in December 1979 granted decision, necessary to produce addi-before the CPt:C. to increase rates by the Company a general rate increase tional revenues of 5547 million an additional 5401 million annually. designed to increase revenues by annually. Electric rate changes during 1979 5201 million annually. The major increases, totaling included an Energy Cost Adjustment This decision was based upon 5485 million annually. were to offset Clause (ECAC) decrease of 5144 forecasted 1980 test year costs. In the high cost of purchased gas-million annually in the fuel related recognition of high financing costs primarily from Canadian sources. component of electric revenues. This l l y

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_ a..... a- -. dn rease m I chruary 10'9 resulted fuel related cost increases electncity dunng 19~0 than in 10 8 f n >m greativ impo n ed hydroelectra We forecast further growth in r indun >ns dunng U Fx I)urmg the Electric Operations electnc energy sales to be about 1 i U ro scar how es cr. fuel related uccting f in trit (, row th an aserage annual rate of a percent < >sts n >se agam. resulung m an 1)cmand hir electraity on the betw een now and the year.'000. ) i mi rease in cln tra rates under the P(,M system reached a new all ome Much of the new capacity we I(.V mn harusm sichhng si.'s peak dunng the summer of 19~o plan fiir serrmg this growth will rmlhiin annualk w hen pi >w er use cu ceded 13 niit be dependent on oil < >r gas for I hen i m I chruars I4 luxo the milhiin kilow att.s fuel. but wdl be denved from ( Pi ( authiin/cd the ( i,mpans o > A IJ pert ent resen e margin. up nuclear. hydroelectoc. geothermal .m masc as cln toi raics hs sass f n >m x pen ent at the ome < >t 10 8 - cogeneranon. and coal fueled nullo,n annualk n i < >ttx i ag.un the reu >rd peak resuhed primanly facih nes Alternate sources. such as higher ( i st i >t f uel ti, generaic f a im firm pi >w er pun based f o >m wind turbines. are planned to be cln un as iiihcr utihties added to the u impany 's resourt es li s < >tly i still ttif t her cv.ilain ill The ICo all tim ( high t ame as thev beo ime techiw >h >gically and m sut h tinsts iht ( i a n p.u n has a n despuc s igiir >us t i >nser arn in economically feasible W 4 nullo m 1( v rate adiostment efh a ts. mt ludmg "ume < >t use' rates (, cot he rmal

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( ommercal geotherm :I p4,u er plant producers m Cahfornu and the wouk! bc i >peranng n nias m the i nani states arnt the largest Pacith %,rthwest. supphed about The ic~ ins learnni.n I \\1l.inJ m the wi>rld in pert ent s it our svstem s electric the saten rn < >mmenJ.un ms ste m l he 14 unns ni >u m >peration h >ad last year m mg in m t he mi csng.u n m i it t he p r d u t c a bi,ul o pe n e n t. it P(,x t s At year s end our 11 millu m .u t idem are m tht pn.t css < >t he m g iul generanng t apat its 1-n c u mts kihiwatt Helms Pumped st(> rage apphed t< > t:ic phs su.1 pLmi i >pe: i. n,in m s arn >us stages i d i iinstrut Pn nect < u the Kings Rn er was mi >re arme pn >< cd u rcs.nn! < ipc an a ni in < a plan ning a rc si hntulnl ti, than an pcrt em complete This training.a I)ubh > ( ans,m .h h l.m a h c r i ~ s ni n i ki h > u.u t i >t Mn mdln in pn nect n due ti er o >m I )ia bh. s mi irt t h.m t u.. n u!h m .i p.n I t '. In 1%5 } his n >ul i if Mc.U h plcto in carh in 1%.! % >re t h.m kih >u atts <>tneu <ap.aut u il! r o > ( 1.! ; m il h. > n Li h > u.m s w ill t hen h.< nules < >t tunnel and a huge i nnh keep i >ur resen t nurgms in i i repr esc o t a! >< iu f x _ lico em i il undergn >und < hamber t< >r the f.dlmg dangen iush h iu m tht s cars IN Al s n it.il gl h f Jil f ly (.t j i.h li \\ l Tumps anJ generat< irs has c heen just.ibc.id. but alu u ill sas t ! >u r:ii: % ist i it r ht new n unn'.nc < an c,! thn > ugh nn >unt.un n w k. and ai nulln in b.o rels.a,oicmhser kIIi in af f s ill t l l'l ihM' al 5.h i f \\ alltl fllap il ite m s i >t t h( }TI.lfit njllipnlefit i cat Ilsa\\cs l } K t Hlf !)111c i d fi H if(' ait' i n )\\\\ } 4'llig nl< n ( (! lilla i ffle slic Illgfi < >n tllc list i t lTrilli.i! \\ llcu i IItall i sf H fill llI ii) l)J r It'ls i it t ill N li ir st >tif( cs t it Qt ilciaf!1 ili tt >r Illt' cJII\\ 61 ( a 1 c.n I)or mg U o > <,u r I )uhh > ( ans < >n IwN is <>ur po,p. w J -41,<un+ It \\th lca! Pr,u cf Pl.lflt < Ic.lf ed t he last klh M Jn((>Whu d t \\t lc u n H ai t h<' h..N 1 s h s d r,,cIn t rn pl.nus nun ir rcgulan >n hurdics poi a ti > Pi o ren > Pi in er PLu n m sa n I r.u n ist <, I Illi IM ll('a i 114 irill.l} lin1 llT!IJ t ia i I)citly giallied all iiperarl[lp lh cilse ti >f u Ilit fl slit-alyn j\\ al u as t if TtJllln! >Il tlt i r lf ic l' ) 1< igetIlcr u ti!) lTur }hittiir((le att ulc!)t at { flice \\llh' In ll) 5 h r.o < d h i t h., pi,u c t in im i nhci Island this plam m all h kch h... >d i)ur appht atn in t< >r site appn n al i k h m L.y, ~v ,, v:,, . k '..p',., v.hQ "O i ' $ 1 3.- ..e ,y tw .J.%:~O..,. . 8_ 4.r. y y ,t ,.. w , g * - f4. W,tsL " v Y j - c'%fi"%MC 7 " f ;' g '.. ,y... 9 a 'e' , -:. h .e g x - ~'1'# % J '. '. - I .p [ ' -[ '

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1 for another combined cycle power Battle Creek in Shasta and Tehama refineries, chemical plants, lumber plant-a two unit 1.6 million-kilo-counties-have been returned to mills and forest product companies, watt facility at Pittsburg in Contra service after reconstruction increased among others. Costa County-was scheduled for a their total capacity by about 15 per-The Company's resource plan l decision by the California Energy cent to approximately 35,000 contemplates the development of Ccmmission early in 1980. kilowatts. nearly 800,000 kilowatts of cogen-The latter project is planned as A fifth and entirely new plant, eration capacity by 1985 and about a contingency resource, to be used Volta No. 2, soon will be under one million kilowatts by 1990. if other planned resources are construction. Its 1.000 kilowatt These quantities are not upper l delayed or load growth is greater capacity reflects our intention to limits. If additional cogeneration than anticipated. develop small hydroelectric facilities becomes available, it will also be A federal license and state wherever possible. Several more included in the resource plan. construction approvals have been small plants are in various stages coal received for our 140.000. kilowatt of planning. The California Energy Commis-Kerckhoff No. 2 underground Cogeneration and solid waste sion in August approved two of the hydro plant on the SanJoaquin Efforts to engage in cooperative four inland sites included in our Not ce ofIntention to build a two-i River Site preparation is underway projects with a variety ofindustries I an<J construction is about to begin. to utilize waste heat and fuel sources unit 1.6 million kilowatt coal-fired Completion is scheduled for to generate electricity continued at generating plant. l late 1983 an accelerated pace during 1979. From the two we have selected Four small hydro plants-As a result, we are actively a site near Collinsville in Solano l Coleman. Inskip. South and Volta pursuing 31 of these cogeneration County to be called Montezuma, j built between 1901 and 1910 along projects, involving oil fields and after a range of nearby hills.We plan 1 laking use ofelectncity l k"'"' "l ~ 5 genemted by lumber f,' mills andotherlarge no industnes is t)picalof liditorisof PG&Es long intvimnent U'YIb C08CHCNI50H- '~ 45 .... n ~ j; i b s '}" .n ,9,4% Yt ; 30 l 15 l~ ^ ~ 'J e ot/vr O //n/m O Tivmnd 0 75 76 77 78 7) Uses of 75 Electric Energy y lidhons r.,l Kilon att floun 45 30 0 ot/vr O.gruttura!

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t .. -. - ~. terminal at Little Colo Bay near December extended the terms of to Gle an Application for Certification certain licenses for exports of gas Subject to the outcome of court Point Conception. with the Energy Commission in the to the U.S., including deliveries to appeals of the ERA and FERC deci summer of 1980 to obtain autho-Alberta and Southern Gas Co. Ltd., sions and final rulings by the CPUC. l rization to build the facility. a PG&E subsidiary. delivery of LNG from Indonesia and The Company in November While the volume of gas with Alaska could start in the mid 1980s. I Gled an application with the CPUC respect to Alberta and Southern was to participate in the construction small, an improved outlook for Since 1971. PG&E through its tw 4 w on w :<.e I and operation of six new coal fired Canadian gas gives us optimism that subsidiaries ha. ornained substantial l units at two sites in Utah and our supply from that source will be gas exploration nght< in Rocky Nevads. PG&E's share of the plants, prolonged at current levels. Mountain areas genently believed i scheduled for operation in phases 1iquefied satural <.a- (tw > to hold signi0 cant gas reserves. from 1985 through 1989, would be Approvals were granted by the Access to gas discovered in these more than one million kilowatts. Economic Regulatory Administration areas was assured when our sub-r (ERA) and the Federal Energy Reg sidiary, Natural Gas Corporation of t Gas Operations ulatory Commission (FERC) for the Cahfornia (NGC), reached agree-f t.m d i.m <, e Pacific Indonesia and Pacific Alaska ments with other pipeline com-PG&E is the nation's largest LNG projects during 1979. PG&E panies operating in the region to customer for Canadian natural gas. and Pacific Lighting Corporation are exchange and transport up to 100 We are actively seeking to extend partners in these projects and will million cubic feet a day of gas to l export permits for this gas that equally share in the 900 million California by the mid 1980s. i begin to expire in the mid 1980s. cubic feet of gas per day to be deliv-At the same time. PG&E's sub-It was welcome news. therefore, cred to the proposed receiving that the Canadian government in 1* "' Sourtes of F N t k Natural G. ..y Bdlumsof "^ t CuhtcF&t i i j r j- ,#7 e ]. '4 4 j ' '.VM) e Girueld l e Ghrwtn v 0 W e Gdijismut l 75 76 0 78 79 i IM Uses of J ~ ^ Natural / ~ Gas J' W w ? y%- Bditonsof ^ ?L.

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.. wn - -_ gas beginning in January of 1980 sidiarv. Pacific Ga.s Transmission plan for this project Company (PGT L is seekmg regu Meanwhile. 'he FERC in January represent only a modest share of latort approval from the IIRC to 1980 approved construction of the gas reachmg PG&E customers. we build its own on mile pipeline first 160 miles of the so called anticipate that gas from this source This project would minally dehver Western Leg of this pipeline. to be may become an important. addi 300 mdhon cubic feet a day from budt by PGT This pre built section tional supply dunng the 1980s the central Rockies to Cahforma will be used trunally to bnng (,as Resear h its capacity could be expanded to surplus Canadian gas to southern Over the long term. new supphe3 'no mdhon cubu. feet a day as Cahfornia if appropnate regulatory of gas must come from new tecn-addinonal gas from the region acnon is taken by the U 5 and nologies PG&E. through its suppi rt of cooperanve mdustrv research. becomes avadable Canada i, helpmg to shape a tutuw where so m h a est ucutan (,a Ab< >m 10 pen ent < >f the company's Higher pnces for "new gas ~ autho coal and biomas can be converted ti. 4a n (,as gas supply m the mid Pmos - abt >ut nzed by the federal Natural Gas Policy to subsature natural gas (SNG) 22 5 milhiin cuba teet a day -is Act have resulted in mcreased our own pdot programs include a garbage to gas demonstra pri >grammed ti > u ime from the exploranon and development m N >rth sliipe of Alaska through a the southw est El Pas < > Natural Gas non project at a sanitarv landfill pn >pi ned usnt i mile pipel.nc Company. the source of our south operated by the City of Mountain A u >nsornum of seven gas pipe w est gas (about $~ percent of our View. and a partnership venture hne and unhty (ompanies. includ current supplyL is also one of six with the Southern Cahfornia Gas mg P( M are w i rrkmg with gas l's companies now importmg gas Company. where we are producing methane gas from cattle manure from Mexico produ( crs and gi n ernment ager.ucs at a feedlot m the Impenal V: a y. tii o nu lude a : cn ate financmg Whde imnal dehvenes of Mexican [ h ' j' / h ' $' f w.'. 4. J} ^' ' '* - - J. %f GjW: D: ' l W. tY . k "'./ Y. J*. [.W '}:4 m P ' + 1 z.. ?.. >. 4 GH g.: * . f.1.. '.A 4 .? v. sl k

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.i .. - ~ - -~.- Other processes now under along with promotions to super. dent, whose service with the Com-study include recovering methane visory and management positions, pany approached 40 years. 51r. from sew:ge and from agricultural continued its upward trend. Worthington, together with 51essrs. and food processing wastes. At year's end, minority employees 51ielke. Shackelford and Executive on the payroll represented 24.4 Vice Presidents Stanley T. Skinner Our Employees percent of the total employment. andJohn A. Sproul, comprised the There were 26,877 men and women This compares with : 22.8 percent Company's newly-formed manage-employed by the Company at the minority working. age population ment committee. close of 1979. A net increase of 432 in our service area. Ellis B Langley,Jr., formerly during the year reflected not only A 22.7 percent increase in the vice president-division operations. the increasing complexity of our number of women in professional who in 51 arch was promoted to business and growing regulatory and management positions occurred senior vice president. operations. requirements, but the need to serve during 1979. 51any have started has assumed Str. Worthington's place a continually growing population technical careers in engineering. on the management committee. He and ever expanding business,indus-while others serve in areas such as has overall responsibility for the trial and agricultural activity customer relations, accounting. Company's electric gas. customer throughout our service area. computer operations and law. and division operations. About 18.000 employees are A wide range of formal and Other executive changes during represented by the International informal training programs helps 1979 saw Joseph Y. DeYoung, vice Bratherhood of Electrical Workers employees keep pace with tech. president. customer operations. suc. ( AFL CIO) and 2.000 by the Engi. nological and other changes taking ceed Str. Langley as vice president. neers and Scientists of California. place in our industry. division operations. John S. Cooper. Advancement of minority and manager of PG&E's energy conser-women employees in all job cate-Executive Changes varion and services department, gories and organizational unirs. Retirement of the Company's two was elected vice president-customer 1 most senior officers in June 1979 operations succeeding Str. DeYoung. j and the retirement in February 1980 Richard A Clarke, assistant general of four directors under an age in. counsel. was elected vice president ] service policy established several and assistant to the chairman. years ago by the Board. has brought George A. 51aneatis, manager of f' new leadership and a number of computer systems and services. was j management changes to PG&E. elected vice president with con-Directors elected Frederick W. tinued responsibility in that area. 31ielke.Jr. chairn an of the board 51alcolm 11. Furbush was elected g. and chief executive officer. Barton vice president and general counsel. W. Shackelford became president effective October 1. He succeeded 4 and chief operating officer. Both had John C. 51orrissey, who retired been executive vice presidents and after 27 years with the Company. directors. They replaced John E 51ason Willrich former director Bonner, who retired as president ofinternational relations for the and chief executive officer and Rockefeller Foundation, was elected Richard 11. Peterson, who retired as to a newly created position of vice chairman of the board. Both Str. president. corporate planning. Bonner and 51r. Peteraon continue effective November 1. w ~ as directors. Donald A. Brand, vice president. ~ The board in February 1980 general construction, was elected elected Lewis S. Eaton, Robert B. vice-president-engineering effective l Tc/epmcessors 3/a3h Ibc Hoover, Leslie L. Luttgens and on April 1,1980. lie will succeed nme it take3 nistomer Wilson C. Riles directors. All had Ferdinand E 51autz, who reaches scn ice emplo.rces to bandle been elected in 1979 to serve as retirement age at that time after 44 j requestspr mfinnation. advisory directors. They replaced years with the Company. G. Stanley orscrrice the four retired directors: Ransom Bates, manager of cini. hydro

51. Cook, James 51. Hait, Leon S.

construction, has been elected to Pete'rs and Poner Sesnon whose succeed 51r. Brand as vice president. combined service on the Board general construction. totaled 69 years. We believe the new executive With great sorrow, we report structure and appointments provide the death in December of). Dean a strong organization for the Worthington, executive vice presi-years ahead. l 18

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L Pacific Gas and Electric Company Financial Section Quarterly Common Stock Prices and Declared Dividends December 31.1979 and 1978 1979 1978 4th 3rd 2nd 1st 4th 3rd 2nd 1st Ihgh $237s $24% $24% $25% $24w $24% $243/4 $24w Low 215/s 2 23/s 215/s 22 % 21% 223/4 23w 23 Dividend 61c 61c 58c 58c 54c 54c 54c 54c Consolidated Lines of Business for the lh e Years Ended December 31.1979 The approximate percentage of operating revenues and operating income, including the allocation of taxes on income, attributable to each principal line of business was as follows: Operating Revenues operating income Electric Gas Electric Gas 1975 55% 45% 71% 29% 1976 60% 40% 72% 28% 1977 65% 35% 74 % 26% 1978 59% 41% 79% 21% 1979 56% 44% 75% 25% O O l

m _ m ._m_. _u_ [ Pacific Gas and Electric Company Consolidated Summary of Operations For the Five Years Ended December 31,1979 In Thousands (Except per share amounts) 1979 1978* 1977* 1976* 1975* Operating Revenues Electric $2,463,845 $2,096,933 $2,355,133 $1,820,948 $1,293,551 Gas 1,908,375 1,472,440 1,274,397 1,227,598 1,046,874 Total 4,372,220 3,569,373 3,629,530 3,048,546 2,340,425 Operating Expenses Operation Cost of Electric Energy 1,231,169 912,873 1,184,991 873,220 477,546 Cost of Gas sold 1,405,516 1,045,978 930,024 843,944 689,770 Transmission and Distribution 213,226 188,956 185,893 175,862 154,535 Other 405,341 324,554 294,019 258,414 224,525 Total 3,255,252 2,472,361 2,594,927 2,151,440 1,546,376 Maintenance 132,577 124,378 112,427 98,006 92,757 Depreciation 250,864 230,617 218,209 208,660 187,867 Gas Exploration 13,050 4,631 1,841 1,461 5,984 Taxes on Income 100,071 133,264 81,715 22,316 15,943 Property and Other Taxes 104,503 136,034 160,979 145,256 130,930 Total 3,856,317 3,101,285 3,170,098 2,627,139 1,979,857 Operating Income 515,903 468,088 459,432 421,407 360,568 Other Income and Income Deductions Allowance for Equity Funds Used During Construction 159,669 125,625 84,852 62,936 51,033 Other-Net 53,582 43,211 42,231 35,065 34,742 Total 213,251 168,836 127,083 98,001 85,775 Income Before Interest Charges 729,154 636,924 586,515 519,408 446,343 Interest Charges Interest on Mortgage Bonds 279,912 255,296 240,428 219,667 206,223 Short term Interest 26,137 11,201 16,170 16,911 9,654 Less Allowance for Borrowed Funds Used Durin3 Construction (35,129) (30,024) (25,760) (18,635) (19,465) Total 270,920 236,473 230,838 217,943 196,412 Net Income 458,234 400,451 355,677 301,465 249,931 Preferred Dividend Requirements 92,291 83,337 73,903 63,685 48,301 Earnings Available for Common $ 365,943 $ 317,114 $ 281,774 $ 237,780 $ 201,630 Average Comnion Shares Outsts.nding 103,225 99,580 89,728 82,138 76,265 Earnings Per Corhmon Share $3.55 $3.18 $3.14 $2.89 $2.64 Dividends Declared Per Common Share $2.38 $2.16 $2.00 $1.88 $1.88 ' Restated for consolidation with subsidiaries and for an accounting change of a consolidated subsidiary (see Management Discussion and Analysis of Consolidated summary of Operations-Earnings). 21

Management Discussion and Analysis of the Consolidated Summary of Operations Summary The earned return on common equity improved The Company's improving earnings for the past four to 11.5% in 1979 up from the 10.9% level experienced years resulted principally from regulatory procedures in 1978 and closer to the 12.83% level found fair and implemented by the California Public Utilities reasonable by the CPCC for the years 1978 and 1979 Commission (CPUC) which have substantially reduced The Company's latest general rate decision, which regulatory lag. became effectiveJanuary 1,1980, established higher These procedures include a plan adopted in 1977 rates to recover the forecasted 1980 cects and to enable to process general rate cases (which address all costs the Company to earn a return on common equity aver-other than those handled through -balancing accounts ) aging 13.5% over the two year period of 1980-81. within twelve months of the filing of an application. Additional information about the Company's rate Also. a series of'.salancing accounts have been estab-increases can be found in the-Finance and Rates-lished which insure the recovery of electric fuel and section on Page 12. purchased power costs. gas purchase costs, and costs associated with fluctuations in gas sales. Operating Revenues The improvement in earnings for 1979 resulted Operating revenues for 1979 were 54.4 billion, an primarily from a general rate increase granted by the increase of 5803 million or 22% from 1978. Electric CPUC in September 1978 and the adoption by the revenues contributed 56% of the total, and gas revenue CPUC in May 1978 of a gas rate relief mechanism. 44% The following table sets forth the amounts by which adjusts gas rates through one of the balancing which the Company's electric and gas revenues during accounts to reflect variations in volume of gas sold. cat h of the last four years increased or decreased from These rate provisions were not in effect for the full year the preceding years, together with estimated changes of 1978. but were for all of 1979. attributable to the major factors. Year Ended December.41 1979 1978 1977 1976 Electric Revenues In milions Rate Changes Cost of Energy $(354.4) 5 21.8 5630.7 5 52.3 General 4.2 67.0 88.7 146.8 Sales Volume and Other Changes 147.4 (28.6) 53.9 79.2 Subtotal (202.8) 60.2 773.3 278.3 Balancing Accounts Changes 569.7 (318.4) (239.1) 249.1 Net increase $ 366.9 s(258.2) 5534.2 5527.4 Gas Revenues Rate Changes Cost of Gas Purchased $ 183.0 5 54.6 5138.6 5166.9 General 106.2 22.8 28.8 49.7 Sales Volume and Other Changes 164.3 (92.8) (65.5) (71.5) Subro:al 453.5 (15.4) 101.9 1451 Balancing Accounts Changes (17.6) 213.4 (55.1) 35.6 $ 435.9 5 198.0 s 46.8 5180.7 Net Increase E ( ) Denmes decrede Operating Expenses power because of the limited supply of natural gas The costs of purchased gas and the costs of producing for use as boiler fuel. electric energy have continued to increase dramatically The following table shows fuel oil burned power in recent years. The Company has had to continue its purchased and natural gas delivered. with the average use of expensive low. sulfur fuel oil to generate electric prices of natural gas and fuel oil.

>a .L. ~. -...u . a.c u.w .. +. - ~.;. a =:, ' w m. & &.., w a. w - Year Ended December 31 1979 1978 1977 1976 1975 Fuel Oil Burned (Thous:nds of Barrels) 26,156 28,824 35,928 27,652 11,622 Average Cost Per Barrel of Fuel Oil Burned $18.27 515.49 $14.26 514.86 514.90 Power Purchased (Thousands of Dollars) $158,166 5142,942 5235,528 5147,455 $106,469 Power Purchased (Milhons of KWil) 11.538 15,018 9,792 13,112 16,287 Natural Gas Delivered (Thousands of MCF) 938,465 762,760 881,129 955,332 961,673 Average Cost of Gas Delivered (Per MCF) $2.03 $ 1.70 51.47 $ 1.16 5.89 Transmission and Distribution costs for gas and elec-Other operating expenses continue to increase tricity increased 524,000,000 or 13% in 1979, and principally as a result of the general inflationary trend. 521.000.000 or 14% in 1976, largely due to the higher The following table sets forth the amounts by which price of natural gas used in gas compressor stations, other operating expenses during the last four years and increased labor costs in both electric and gas increased or decreased from preceding years, together with estimated changes attributable to the major factors. distribution expense. Year Ended December 31 1979 1978 1977 1976 In Wlhons Conservation and Customer Expenses $21.1 510.9 52.2 57.8 Administrative and General Expenses Employee Wages and Benefits 18.7 8.9 20.3 6.5 City and County Franchise Taxes 7.2 9 4.8 2.1 51iscellaneous Other A&G Expenses 14.3 6.6 4.0 5.6 flydrogen Sulfide Abatement at Geysers 7.1 8.5 Fuel Oil Transportation and Storage N1iscellaneous Operation Expenses 12.4 3.2 4.3 3.4 Total $80.8 530.5 535.6 $33.9 51aintenance expense in 1978 and 1977, primarily interest income due to the interest that has been the costs of maintaining electric production and dis-allowed by the CPUC on the balancing accounts. tribution facilities, increased 512,000.000 and 514.000,000, respectively. Interest Charges and Preferred The implementation of theJarvis-Gann initiative. Dividend Requirements which limited property taxes, has resulted in a property The increased interest on mortgage bonds and pre-tax reduction in 1979 and 1978 of 535,000,000 and ferred dividend requirements over 1978 are a reflection $28,000,000, respectively. Payroll taxes for 1979 of the issuance of more long-term debt and preferred increased 54,000,000. stock at higher rates to imance the ongoing construction A discussion of the factors that contributed to program. Short. term interest in 1979 increased variations in income tax expense can be found in Note 4 approximately $15,000,000, due to the increase in of the Notes to the Consolidated Financial Statements. commercial paper outstancing. Other Income and Income Deductions Earnings The amount of allowance for funds used during con. For the years 19751978 earnings available for common struction (ADC) has increased in recent years primarily and earnings per common share have been restated from amounts previously reported to reflect an account. due to construction of Units 1 and 2 of the Company's Diablo Canyon nuclear t nerating plant.The amount ing change by a consolidated subsidiary (See Note 1). of ADC recorded in 197' which is applicable to con. The decreases by years were: struction planned for completion in 1980,1981 and Earnings Available Earnings per 1982 is $12,000,00p, $138,000,000 :md $1,000,000, Year f r common common share respectively. Substantially, all of the ADC applicable to 1978 $(1,133,000) $(.02 jobs planned for completion in 1980 and 1981 repre. 1977 $ (621,000) $(.01 sents ADC for the two nuclear units at Diablo Canyon. 1976 $ (519,000) s(.01 The increase in other-net for 1979 was due to an 1975 S(1,648,000) $(.03 - increase in gain on disposition of property and higher 23 t

Pacific Gas and Electric Company Consolidated Comparative Statistics For the Eleven Years Ended December 31,1979 1979 1978 1977 1976 Per Common Share Earnings $ 3.55 5 3.18 5 3.14 'S 2.89 Dividends Declared $ 2.38 5 2.16 5 2.00 5 1.88 Dividend Payout Ratio 67.1% 67.8 % 63.7 % 64.9% ik>ok Value (end of year) $29.83 529.69 528.72 528.10 5tarket Price-liigh 25% 24 % 25 % 24 % N1arket Price-Low 21 % 21% 22 % 20 51arket Price-Close 23 22 % 24 23 % Capital Expenditures (Thousands) Electric Department $ 943,911 5718,572 5599,126 5518,398 Gas Department 205,397 140,541 122,198 131,864 Total $1,149,308 5859,113 5721,324 5650.262 Electric Statistics ** Net System Output (Millions of Kwll) 70,355 67,669 65.428 66.416 Net System Output-Percent flydroelectric Plants 16.8% 19.9 % 9.2% 12.2 % Thermal Electric Plants 59.1 49.5 72.4 62.0 Other Producers 24.1 30.6 18.4 25.8 'lotal 100.0% 100.0 % 100.0 % 100.0 % System Capacity-KW tat annual peak) liydroelectric Plants (adverse conditions) 2,360,000 2,350,900 2,350,900 2,419,900 Thermal Electric Plants 8,612,000 8,294,000 8,294,000 8,261,000 Other Producers (aJterse conditions) 4,112,900* 2,791,100 3,302,900 3,743,400 Total 15,084,900 13,436,000 13,947,800 14,424,300 Net System Peak Demand-KW 13,215,200 12,970,600 12,191,800 12,245,800 Average Annual Residential Consumption-KWH 6,811 6,553 6,408 6,509 Total Customers (end of year) 3,365,950 3,270,302 3,179,362 3,087,300 Customers Per 51ile of Distribution Line 38.9 38.5 38.1 37.7 Gas Statistics " Gas Purchased (Thousands of MCF) 829,361 699,594 800,950 836,333 Source of Gas Purchased-Percent From California 17.1 % 16.7 % 16.4 % 16.8% From Other States 37.4 35.4 37.0 38.2 From Canada 45.5 47.9 46.6 45.0 Total 100.0 % 100.0 % 100.0 % 100.0 % Average Cost of Gas Purchased-h1CF From California 173.6c 159.4c 112.1c 96.1c From Other States (at Cahf..Ariz. border) 179.1 135.1 110.0 83.0 From Canada 278.6 239.9 218.0 192.1 Average 223.4' 189.3c 160.7c 134.2c Peak Day Sendout-51CF 3,398,281 3,243,552 3,186,229 3.348,909 Average Annual Residential Consumption-51CF 90.4 86.9 90.5 100.8 Total Customers (end of year) 2,805,4 1 2,738,767 2,674.890 2.611,551 Customers Per hiite of Distribution hiain $7.2 97.4 97.2 96.8

Includes 1.240.000 KW of short term firm capactry purchased from other utilities located outside the Company's service area.

24 g

1975 1974 1973 1972 1971 1970 1969 5 2.64 5 3.24 5 3.21 5 3.01 5 2.75 5 2.47 5 2.58 5 1.88 5 1.88 5 1.78 5 1.72 5 1.64 5 1.50 5 1.50 71.1% 58.0% 55.4% 57.2% 59.7 % 60.9% 58.2% $27.65 528.14 527.78 526.35 524.91 523.66 522.79 23 % 24 % 32 % 33 % 36 % 35 39W 18 % 17 21 % 26 % 28 % 22 % 29w 20 % 20 % 22 % 32 % 32 % 34 % 32 % $540,790 5536,931 5465,422 5458,817 5379,198 5330,559 5265,789 99.230 124,857 113,377 92,076 84,444 106,845 91,720 5640.020 5661,788 5578,799 5550,893 5463,642 5437,404 5357,509 63,402 60,932 60,572 59,124 54,665 51,277 48,885 22.6 % 25.6% 21.5% 19.8 % 25.6% 26.9% 31.4% 43.6 38.1 53.4 52.7 46.5 48.6 45.2 33 8 36.3 25.1 27.5 27.9 24.5 23.4 100.0% 100.0 % 100.0 % 100.0% 100.0 % 100.0 % 100.0 % 2,396,900 2,396,900 2,384,800 2,369,800 2,364,900 2,364,900 2,247,900 8,053.000 7,947,000 7,841,000 7,062,000 6,956,000 6,942,400 6,962,400 3,766.100 2,948,700 2,554,700 2,609,900 2,438,700 2,098,000 1,560,700 14,216,000 13,292,600 12,780,500 12,041,700 11,759,600 11,405,300 10,771,000 11,632,800 11,648,800 10,867,800 10,469,800 9,713,000 8,807,700 8,227,100 6,462 6,260 6,417 6,213 6,048 5,697 5,545 3,005,518 2,936,106 2,854,585 2,767,978 2,675,942 2,597,314 2,536,703 37.2 36.9 36.5 36.0 35.4 34.8 34.5 861,860 876,537 984,061 1,015,319 1,004,547 950,652 878,484 16.2 % 16.8% 23.6% 23.5 % 24.8 % 25.2 % 25.2 % 41.4 43.7 38.4 40.3 41.2 43.7 45.3 42.4 39.5 38.0 36.2 34.0 31.1 29.5 100.0 % 100.0 % 100.0 % 100.0% 100.0 % 100.0 % 100.0 % 56.7c 42.7c 37.0c 33.7c 31.7c 30.2c 29.9c 72.7 55.8 43.0 39.4 37.5 33.9 31A 136.8 , 65.4 44.1 36.9 32.7 30.4 28.2 97.3c 57.4c 42.0c 37.2c 34.3c 31.9c 30.le 3,352,881 3,020,215 3,423,896 3,918,844 3,798,462 3,633,341 3,445,626 111.1 104.5 113.4 115.7 121.7 107.7 116.2 2,555,216 2,503,203 2,443,889 2,383,609 2,317,686 2,258,285 2,208,046 96.4 96.1 95.9 95.6 95.0 94.1 94.0 " Operating statistics are for PG&E only. 25 ~.-- % m -~ E

-~ Pacific Gas and Electric Company Consolidated Revenues and Sales For the Years Ended December 31,1979 and 1978 In Thousands ,,,g,,,,,,, 1979 1978 Amoum Percem Electric Department Revenues Residential $ 693,368 5 720.112 s (26, 44) (3.7th Commercial 752,359 852.265 (99.906) ( l 1.7 ) Industrial ( toun Kw demand or os cr) 461,653 531,593 (69,940) ( 13.2 ) Agricultural l'ower 142,727 149,986 (7.259) (4.8) Public Street and liighway 1.ighting 30,491 34,179 (3.6S8) ( 10.8) Other Electric Utilities 67,740 69,855 (2.115) (3.0) .\\liscellaneous 50,111 43.584 6.527 15.0 Other 4,115 3,814 301 7.9 Regulatory llalancing Account Changes 261,281 (308,455) 569,736 Total $2,463,845 52.096,933 s 366.912 17.5'h. Sales-KWil' h Residential 19,605,541 18.314.721 1.200.820 7.0"o Commercial 17,891,820 17,160,973 724.847 4.2 Industnal U000 Kw demand or oser) 15,253,371 14,815,289 438,082 3.0 Agricultural Power 3,715,026 3,120,644 594,382 19.0 Public Street and liighway Lighting 455,445 485.725 (30.280) (6.2) Other Electric l'tilities 2,807,249 2,232,563 574.686 25.7 Total Sales to Customers 59,728,452 56,135.915 3,592.537 6.4% Gas Department Revenues Residential $ 555,017 5 432,865 5 122.152 28.2% Commercial 406,497 346,229 60,268 17.4 Industrial 499,242 340,546 158,696 46.6 Other Gas Utilities 85,867 18,384 67,483 367.1 Aliscellaneous 7,128 4,315 2,813 65.2 Regulatory llalancing Account Changes 176,354 193,960 (17,606) (9.1) Subsidiaries 178,270 136,141 42,129 30.9 Total $1,908,375 51,472,440 5 435,935 29.6% Sales-SICFo) Residential 234,295 220.076 14.219 6.5% Commercial 143,707 144,162 (455) (0.3) Industrial 186,165 138,975 47,190 34.0 Other Gas Utilities 36,013 9,926 26.087 262.8 Total Sales to Customers 600,180 513,139 87,041 17.0 Company Use Glectric generation) 216,062 125,636 90,426 72.0 Total 816,242 638,775 177,467 27.8% (1) PG&E enly i 26

.. u.. ~ ~m -u.- wa t.... Pacific Gas and Electric Company Consolidated Statements ofIncome For the Years Ended December 31,1979 and 1978 In Thousands (Except per share amounts) 1979 1978 Operating Revenues Electric $2,463,845 52,096,933 Gas 1,908,375 1,472,440 Total 4,372,220 3,569,373 Operating Expenses Operation Cost of Electric Energy 1,231,169 912,873 Cost of Gas Sold 1,405,516 1,045,978 Transmission 102,999 91,346 Distribution 110,227 97,610 Customer Accounts and Services 122,413 101,284 Admissistrative and General 226,016 184,975 other 56,912 38,295 Total 3,255,252 2,472,361 Maintenance 132,577 124,378 Depreciation 250,864 230,617 Gas Exploration 13,050 4,631 Taxes on Income (Note 4) 100,071 133,264 Property and Other Taxes 104,503 136,034 Total 3,856,317 3,101,285 Operating Income 515,903 468,088 Other Income and Income Deductions Allowance for Equity Funds Used During Construction 159,669 125,625 Interest income 36,016 22,736 Minority Interest in Net income of Subsidiaries (3,934) (2,790) Other-Net 21,500 23,265 Total 213,251 168,836 Income Before Interest Charges 729,154 636,924 Interest Charges Interest on Mortgage Bonds 279,912 255,296 Short term Interest 26,137 11,201 Less Allowance for Borrowed Funds Used During Construction (35,129) (30,024) Total 270,920 236,473 Net Income $ 458,234 $ 400,451 Earnings Per Congnon Share $3.55 $3.18 Dividends Declared Per Common Share $2.38 $2.16 The acmmpanying notes to consohdated financial statements are an integral part of these statements. 27

et .--Mw Pacific Gas and Electric Company l Consolidated Balance Sheets I December 31,1979 and 1978 In Thousands 1979 1978 Assets Utility Plant-At Original Cost Electric $ 6,346,657 5 5,963,193 Gas 2,112,778 2,024,185 Construction Work in Progress 2,565,813 2,034,218 Total Utility Plant 11,025,248 10,021.596 l Accumulated Depreciation 2,793,716 2,577,055 8,231,532 7,444,541 t'tility Plant-Net Gas Exploration Costs 83,106 44,167 Advances to Gas Producers 103,493 81,536 Investment in LNG Partnership 117,459 89,740 Investment in Alaskan Northwest Partnership 23,718 4,475 Other 23,074 21,115 Current Assets cash 2,888 23,923 Short term Investments-at cost which approximates market 120,856 498 Accounts Receivable (less allowance for uncollectible accounts: 1979,56,122;1978,55,161) 403,859 435,778 Regulatory llalancing Accounts 622,142 98,540 Materials and Supplies 71,188 54,461 Fuel Oil 207,317 154,405 Gas Stored Underground 166,552 162,090 Estimated Federal Income Tax Refund 76,000 Prepayments 15,544 37,231 Total Current Assas 1,686,346 966,876 Deferred Charges 42,035 12,710 Total Assets $10,310,763 5 8,665,160 The acco.'panying notes to consohttated financial sutements are an integral part of these statements. 1 I D j

..... x. - - ._m a:s_. -- -. - In Thousands 1979 1978 Capitalization and Liabilities Capitalization Common Stock-at par (Note 2) $ 1,136,275 51,008,793 Adcitional Paid.in Capital 812,802 664,337 Reinvested Earnings 1,440,179 1,322,303 Common Stock Equity 3,389,256 2,995,433 Preferred Stock-without mandatory redemption provision (Note 2) 1,102,451 1,102,451 Preferred Stock-redeemable with mandatory redemption provision (Note 2' 150,000 Long-term Debt (Note 3) 3,687,562 3,457,632 Total Capitalization 8,329,269 7,555,516 Current Liabilities Short term Borrowings (Note 5) 695,631 69,639 Accounts Payable 440,209 343,421 Accrued Taxes Payable 221,563 226,008 Dividends Payable 69,273 54,442 Mortgage Ilonds-current portion (Note 3) 52,015 76,905 Refunds Due Customers 71,939 222 Other 85,413 74,010 Total Current Liabilities 1,636,043 844,647 Deferred Credits Customer Advances for Construction 84,189 75,912 Deferred Investment Tax Credits 76,201 51,936 Deferred income Taxes 28,944 8,259 Deferred income Tax on Defense Facilities 28,647 31,590 Other 86,150 58,014 Total Deferred Credits 304,131 225,711 Minority Interest in Subsidiary Companies 41,320 39,286 Total Capitalization and Liabilities $10,310,763 $8,665,160 g 29

Pacific Gas and Electric Company Consolidated Statement of Changes in Financial Position For The Years Ended December 31,1979 and 1978 in Thousands 1979 1978 Funds Provided Funds Derived from Operations Net income $ 458,234 5 400.451 Non fund items in Net income Depreciation Uncluding charges to other aco>unts) 254,068 234.049 Allowance for Equity Funds Used During Construction (159,669) (125.625) Ot her-Nei 23,570 3.511 Total Funds Derived from Operations 576,203 512.386 Common Stock sold-net proceeds 276,564 58.758 Preferred stock sold-net proceeds 149,383 132.429 Mortgage lionds Sold-net proceeds 372,404 249.567 Ot her-Net 12,257 30.600 Total $1,386,811 5 083.740 Funds Applied Capital Expenditures $1,149,308 s 859.113 Allowance fi>r Equity Funds Used During Construction (159,669) (125.625) Funds Used fi>r Capital Expenditure.s 989,639 733.488 Mortgage Bonds Purchased for Sinking Fund tat coso 43,680 35.108 Matured Mortgage Bonds Retired 100,628 74.117 Dividends-preferred and common stock 340,358 296.856 Changes in Working Capitalw (87,494) (155.829) Total $1,386,811 5 983,740 <a> Changes in Working Capital: Short-term Investments $ 120,358 5 (7,193) Accounts Receivable (31,869) 54.878 Regulatory Balancing Accounts 523,602 (122,256) Fuel Oil 52,912 (94,556) Gas Stored Underground 4,462 53,384 Estimated Federal Income Tax Refund 76,000 Short term Borrowings (625,992) 53,385 Accounts Payable (96,788) (48,219) Accrued Taxes Payable 4,445 (46,873) Refunds Due Customers (71,717) (12) Other Changes in Working Capital (excluding changes in current portion of mortgage bonds due to bonds maturing in one year: 1979, 515,568: 1978, ($19,373)] (42,907) 1,633 Total (decrease) $ (87,494) s(155.829) The accompanymg notes to omsohdated rinancial statements are an miegral part of these statements 30

_. ~. - - m -- Pacific Gas and Electric Company Consolidated Statements of Common Stock Equity and Preferred Stock For the Years Ended December 31,1979 and 1978 In Thousands Common Additional Reinvested Common Stock Preferred Stock Preferred Stock siock Paid in Capital Earnings Equity 525 Par Value $100 Par Wlue llalance, January 1,1978(Note 1) s 983,901 5623.042 51,218,708 $2,825,651 $ 977,451 5 Net Income-for year 400,451 400,451 Preferred Stock Sold (5,000,000 Shares) 7,429 7,429 125,000 Common Stock Sold (2,489,160 Shares) 24,892 33,866 58,758 Dividends Declared-Cash: Preferred Stock (81,196) (81,196) Common Stock (215,660) (215,660) Italance December 31,1978 1,008,793 664,337 1,322,303 2,995,433 1,102,451 Net income-for year 458,234 458,234 Preferred Stock Sold (1,500,000 Shares) (617) (617) 150,000 Common Stock Sold (12,748,200 Shares) 127,482 149,082 276,564 Dividends Declared-Cash: Preferred Stock (90,041) (90,041) Common Stock (250,317) (250,317) Halance, December 31,1979 $1,136,275 $812,802 $1,440,179 $3,389,256 $1,102,451 $150,000 The a(company mg notes to consohdated financial statements are an integral part of these statements Opinion ofIndependent Certified Public Accountants The Stockholders and the Board of Directors of Pacific Gas and Electric Company We have examined the consolidated balance shcets of Pacific Gas and Electric Company and its subsidiaries as of December 31,1979 and 1978 and the related consolidated statements ofincome, changes in financial position, and common stock equity and preferred stock for the years then cnded. Our examinations were made in accor-dance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such financial statements present fairly the financial position of the Company and its subsidiaries at December 31,1979 and 1978 and the results of their operations and the changes in their fkancial position for the years then ended in conformity with generally accepted accounting principles applied on a ;onsistent basis, after restatement for the changes with which we concur, in consolidation policy and in the method of accounting for gas exploration

costs as described in Note 1 to the financial statements.

4 San Francisco, California February IS,1980 31 e ..m 1

e ;.m -. w- ._ ~ ~ - Pacific Gas and Electric Company - Notes to Consolidated Financial Statements For the Years Ended December 31,1979 and 1978 4 l Note 1 vested earnings atJanuary 1,1978 were reduced by Summary of Significant Accounting Policies 55,636,000. Accounting Reconis Rei enues The accounting records of the Company are main-Revenues consist of billings to customers and changes tained in accordance with the Uniform System of in balancing accounts. Billings to customers are included Accounts prescribed by the Federal Energy Regulatory in revenues as meters are read on a cycle basis through-Commission (FERC) and adopted by the California our each month. In accordance with orders of the Public Utilities Commission (CPCC). CPUC, the Company has established balancing accounts for electric energy costs, gas costs, gas sales and Consolidation and Accounting Change property taxes. Operating revenues include changes in Prior to this report. investments in and incomt from these balancing accounts. These changes represent 1 subsidiaries were reponed on the equity method of amounts authorized by the CPUC to be recovered from accaunting.The Company's major subsidiaries are or refunded to customers. The effect of using these i Pacific Gas Transmission Company (PGT) which trans-balancing accounts is that changes in costs to the ports and sells natural gas outside California and Company of electric energy, gas, property taxes and j through its subsidiary explore 3 for natural gas. Alberta fluctuations in gas sales no longer affect the Company's j and Southern Gas Co.1.td. (AMS) whose principal func-earnings. l tions are the acquisition of gas in Canada and arranging i for its transportation to the United States border. and Depreciation Natural Gas Corporation of California (NGC) which For financial statement purposes, depreciation of is a natural gas exploration and producing company. utility plant is computed on a straight line remaining Beginning with this report, the consolidated financial life basis at rates based on the estimated useful lives statements include the accounts of the Company and of properties. The annual provisior s for depreciation ^ its wholly owned and majority owned subsidiaries for expressed as a percentage of the average balances all periods presented. In consolidation, all significant of depreciable plant were 3.1% for 1979 and 1978. intercompany transactions and accounts have been i eliminated. Income Taxes The Securities and Exchange Commission (SEC) The CPUC requires that the Company include in issued new requirements for accounting for gas explo-net income the current tax differences arising from ration costs requiring that such costs be accounted for certain timing differences in connection with under either a revised full cost method or a success-depreciation, allowance for funds used during con-ful efforts" method. In accordance with the SEC struction ( ADC) and other overhead costs of construc-requirements, earnings _ of PGT and its consolidated tion. For federal income tax purposes, depreciation subsidiary, since the inception ofits natural gas explora-is generally computed using the most liberalized ' tion program in 1971, were restated to reflect adoption methods allowed by the Internal Revenue Code. Invest-of the successful efforts" method of accounting. ment tax credits are applied as a reduction of federal The change decreased ccmsolidated net income by income tax through the use of a five-year moving- $1,133,000 and earnings per share by two cents for the average method (in accordance with a CPUC decision, L year ended December 31/1978. Consolidated rein-a two. year moving average method will be used i, I g i r g t 1 m u -.

commencing in 1980). Such tax differences are reflected for borrowed funds. The equity component of ADC is included in other income and the net borrowed in customer rates authorized by the CPUC. In comput-funds component is recorded as a reduction of ing book income taxes, changes in gas and electric interest charges. Costs of depreciable units of plant balancing accounts are included to the same extent retired are eliminated from utility plant accounts and they are included in the Consolidated Statements such costs plus removal expenses less salvage are of Income (See Note 4 ). charged to accumulated depreciation. Costs of repairing Bond Premium, Discount and Related Expenses property and replacement of minor items of property are included in the Consolidated Statements ofIncome Bond issuance premium or discount and related as maintenance. expenses are amortized over the lives of the issues to which they pertain.The gain or loss on reacquisition of bonds to satisfy sinking fund requirements is Research and Development amortized over the remaining life of the reacquired Research and development (R&D) costs related to issues.The federalincome tax on such gain is specific construction projects and a portion of general recognized over the life of the remaining property. engineering research costs are capitalized. Other R&D costs are charged to expense as incurred. Retirement Plan Retirement plan costs are accrued in accordance Inventories with an actuarial cost method (entry age normal Inventories of materials and supplies, fuel oil and method). At December 31,1979, the value of retire. gas stored underground are stated at average cost. ment plan assets exceeded the estimated vested benefits of the plan. Note 2 Eamings Per Common Share Capital Stock Earnings per common share are computed by dividing Common stock outstanding at December 31,1979 was: earnings available for common stock by the weigh:ed

n Thousands average number of common shares outstanding. The ouisunaing-neia by eusnc weighted average number of common shares outstand.

s s,,,, ^"'h"'"'d h 8 ^*"""' ing is computed by dividing the aggregate of the Common. Par value number of common shares outstanding at the beginning sto per share 200.000 113.628 $ 1.136.275 of each month in the period by the number of months The redeemable preferred stock (525 par) outstanding, in the period. with no mandatory redemption provision, is subject to redemption, in whole or in part, at the option of the Utility Plant The cost of additions to utility plant and replacements Company upon payment of the redemption price plus of retirement units of property is capitalized. Cost accumulated and unpaid dividends to the date fixed includes labor, anaterial and similar items and indirect for redemption.The redemption premium per shrre charges for such items as engineering, supervision and declines in accordance with terms of the specific issue. transportation. Cost also includes ADC for the imputed The involuntary liquidation preference of the preferred cost of equity investment and a net after-tax amount stock is par value ($25) plus accrued dividends. The e m h a 33 f = = m - m m m, m e n y 7 y

preferred su>ck ($25 par) outstanding at December 31,1979 was: In Thousands outstanding-ileid b) Pubhc Redemption shares Pnce Authorued shares Amount Preferred Cumulative Par Value $25 Per Share Non Redeemable 6% (51.50 a share) 4.212 4,212 5 105.292 5.50% (51.375 a share) 1,173 1.173 29.329 5% (Si.25 a share) 400 400 10,000 htal Non Redeemable 5.785 5,785 144.621 Redeemable (no mandatory redemption provision) 10.46 % (52.615 a share) 530.10 3,500 3.500 87.500 10.28% (52.57 a share) 30.00 5.000 5.000 125.000 10.18 % (52.545 a share) 30.00 4.000 4.000 100.000 9.48% (52.37 a share) 29.50 3.000 3.000 75.009 9.30s ' (52.325 a share) 29.80 4.000 4.000 100.000 9.2 Hon (52.32 a share) 28.00 707 707 17.674 9"o (52.25 a share) 29.25 881 881 22.02-8.20"o (5;.05 a share) 29.375 2.000 2.000 50.000 8.16% ($2 04 a share) 28.875 3,000 3.000 75,000 8% (52.00 a share) 29.375 2,000 2,000 50.000 7.84% (5196 a share) 29.00 2.000 2.000 50.000 5"u (51.2 5 a shai.-) 26.75 2.861 2.861 1.524 5% Series A ($1.25 a share) 26.75 1.750 1,719 42.985 4.80% (51.20 a share) 27.25 1.517 1.517 37.934 4 50% (51.125 a share) 26 00 1.128 1,128 28.180 4.36% (5109 a share) 25.75 1.000 1.000 25,000 Unclassified in Series 30.871 Total Redeemable (no mandatory redemption provision) 69.215 38,313 957.830 Total Preferred Par Value $25 Per Share 75,000 44,098 $1,102,451 The redeemable preferred stock (5100 par) outstanding. 2004. an amount sufficient to redeem 75.000 shares at with a mandatory redemption provision, is subject to the Sinking Fund Redemption Price. This provision is redemption, in whole or in part, at the option of the cumulative.There are no redemption requirements for Company upon payment of the redemption price of the years 1980 through 1984. In addition. the Company $100 per share plus a premium, plus accumulated and has the right, at its option, to redeem at the Sinking unpaid dividends to the date fixed for redemption.The Fund Redemption Price on November 15.1985 and redemption premium per share declines annually. This on any November 15 thereafter. not more than 75.000 redeemable preferred stock is also subject to redemption additional shares. This right is not cumulative. Optional through the operation of a sinking fund at the Sinking redemptions at the Sinking Fund Redemption Price are Fund Redemption Price of $100 per share plus accumu. limited to an aggregate of 562.000 shares.The involun. lated and unpaid dividends to the date fixed for tary liquidation preference of this stock is par value redemption. For the purposes of the sinking fund the ($100) plus accrued dividends. The preferred stock Company must set aside in cash, annually, commencing ($100 par) outstanding at December 31,1979 was: with November 15.1985, and ending on November 15 In Thousands Redemption shares outstandmg-licid by Pubhc l> rice Authorved shares Amou nt Preferred Cumulative Par Value $100 Per Share Redeemable (with mandatory redemption provision) 9% (59.00 a share)

5109.00 1.500 1.500 5150.000 Unclassified in Series 8,500 Total Preferred Par Value $100 Per Share 10,000 1.500 5150.000 34

r Note 3 Inng. term Debt The First and Refunding Mortgage Bonds of PG&E are The Company's securities representing investments in issued in series, bear annual interest from 2%% to subsidiaries are pledged as collateral for the bonds. 10%% and mature fre' December 1,1980 to August 1, The mortgage bonds of Pacific Gas Transmission Com. 2012. Subject to indenu.re provisions as to earnings pany are issued in series, bear annual interest from coverage and bondable property available for security, 5 %% to 8% and mature from 1986 to 1990. All real additional bonds may be issued up to an outstanding proper.ies and substantially all personal properties and aggregate amount of 55,000,000,000.The Board of long term contracts for gas purchases, gas sales and Directors may from time to time increase the amount gas transportation are subject to the lien of the mortgage. authorized. All real properties and substantially all per. At December 31,1979, long term debt of the Company sonal properties are subject to the lien of the mortgage. and its subsidiaries was: In Thouunds 2 3 c,.n, 4i e.n, i a io Wronn 4 4 4 '. (. - e. lH I N i.. Tot al Pacific Gas and Electric Company Mortg. ige lionds 1980 5 51.405 5 5 51,405 1981 21,117 21,117 1982 63,750 150,000 213,750 1983 55,288 16.700 71,988 1984 51.389 16,700 68,089 1985 1994 41.748 253,936 279,100 574,784 1995 2004 475,634 821,934 1,297,568 2005-2012 1,396.870 1,396,870 Total Mortgage Bonds $284.697 5729,570 52,681,304 3,695,571 Mortgage Bonds Included in Current Liabilities (48,031) Unamortized Discount Net of Premium (19,079) Mortgage Bonds included in Capitalization 3,628.461 Pacific Gas Transmission Company Mortgage Bonds 5 %% Series, dueJanuary 1986 24,927 Mortgage Bonds 8% Series, due November 1990 (Net of Bonds IIeld in Treasury $3,217,000) 19,341 Subordinated Debentures 5 %% 480 Installment Obligations-Noninterest Bearing 77 Total Long term Debt 44,825 Unamortized Discount,8% Series (61) Current Portion included in Current Liabilities (3,984) 1.ong term Debt included in Capitalization 40,780 Alberta and Southern Gas Co. Ltd. Bank Loans-Canadian prime rate plus W%, due 19811984 18,321 Total long-term Debt of PG&E and Subsidiaries 53,687,562 PG&E is required, accord!ng to provisions of the First $57,757,000,5249,558,000, $105,223,000 and and Refunding Mortrage, o make semiannual sinking $100,275,000, respectively. fund payments on February 1 and August 1 of each year InJanuary 1980, PG&E's First and Refunding Mortgage for the retirement of the bonds of the Company of Bonds, Series 80A,12%%, in the principal amount of any series equal to 1/2 of one percent of the aggregate $250,000,000 and due on February 1,2013, were sold bonded indebtedness outstanding on the preceding in a public offering. November 30 and May 31, respectively. Bonds of any PGT's First Mortgage Pipeline Bonds and subordinated series may be used to satisfy this requirement. debentures, which are solely the obligation of PGT, are sinking fund requirements due in 1980 for bonds subject to redemption, at specified redemption prices, outstanding at Decem.ber 31,1979 are $37,605,000. through the operation of a sinking fund or in larger This amount, less treasury bonds of $40,979,000 increments at PGT's option, depending upon the series plus Series Q of $51,405,000 maturing on December 1, and redemption date.The annual sinking fund require-1980 is included in current liabilities. ment through 1985 is 55,959,000; for 1986,54,006,000: PG&E's combined aggregate amount of bonds thercafter through 1990, $2,052,000. The debentures maturing and sinking fund requirements for the years are subordinated in right of payment to mongage debt 1980 through 1984, calculated on the basis of bonds and certain other indebtedness. outstanding at December 31,1979, are $89,010,000, 35 t - _. m _ _,_ m

Note 4 The components ofincome tax expense (credit) are: Taxes on Income 1979 1978 Taxes on income generally reflect amounts currently in Thou ana, payable with the exception ofinvestment tax credits, current rederal s(76,oop st si changes in balancing accounts and gas exploration costs.Through 1979 investment tax credits generally banadan 121 234 reduce federal income tax expense by the use of a five-oeferred year moving average (in accordance with a CPI'C Tax related ro changes m regulatory decision, a two year moving average will be used com. balancing accounts mencing in 1980). Changes in electric and gas balancing [dj"I 'g j'3f] accounts are not included in federal and state income incestmeni tax crean tax returns until such changes are billed to customers, redent 24,265 17.348 As a result, the Company expects a federal income Amonaation of deferred tases on defense Idahoe' tax refuad of approximately $76,000,000 for the year 1979 which represents the amount of prior years' j,a1 ul,, (2 tax es available for such refund. In addition, the Com-o,her dacrred p my will have available tax credits of approximately redcol 16.303 <334) uie 3.812 130 ' 128.000.000 to reduce federal income tax payments for C'nadun 570 "'~ years after 1979. The net unbilled amount included in the balancing accounts at December 31,1979 was approx. Tout 5 87.293

los x2n imately $622,000,000 which will result in an additional tax payment of $318,000.000 when billed (See Note 1).

The reasons for the differences between the reported Note 5 ir.come tax expense and the amount computed by Compensating Balances and Short. term applying the federal income tax rate of 46% for 1979 Borrowing Arrangements and 48"u tot 1978 to income before taxes are: The Company and its subsidiaries maintain lines of credit with eighteen banks. which. at December 31. 8"9 1979, totaled 5629.495.000. Lines of credit are main. tained to support the sale of commercial paper, and at Percent Percem "['l "[,"' '" l no time during the year were the lines of credit used for direct bank borrowings. I, r$$>Ei re utong fn>m The Company and its subsidiaries compensate banks for lines of credit and cther banking services by fee im estment us (redas (7.o) is N, payments or by maintaining cash balances. The cash swe u s on maime 2.4 2o Aliow ance for borrowed and eque balances maintained at the banks are not legally restricted. ~ fund used during consiruinon (16.4) <i4 $ $ $ 2n$"n ~ "" "' As of December 31,1979 and December 31,1978, (2.0) <.i> other m erhead construtnon cmts (3.3) om there were 5682,773,000 and 569,639,000 of the Rep.nr Aw anic (2.1) 6.38 Company's and its subsidiaries' commerci:.1 paper enipeny uses (0.5) 3" outstanding at average interest rates of 13.0% at d 10.2%, er en emonicspen es o. i o> respectively. The maximum amount of commercial paper outstanding at any month.end during the year Toui 16.0% 2 e,- ended December 31,1979 was $682.773,000. During the years 1979 and 1978, the approximate weighted average interest rates for commercial paper income tax expense (credit) is included in the fin =cial were 12.1% and 8.0%, respectively, and the approxi. statements as follows: mate average commercial paper outstanding was 19w 1978 5208,641.000 and $57,629,000, respectively.These i - -in T h, wnJ-weighted average interest rates were computed on a included m opennng e pen es $100,071 si33 2"4 daily basis weighted for the amounts borrowed at Intluded m other miome (12,778) U4.4 4 4 ) each rate. Toui s 87.293 sios 82o The usual terms of short-term borrowings are 90 days for bank loans and 10 to 90 days for commercial paper. On January 15,1980, PG&E received $255,000,000 of short-term interim financing which was arranged by Bankers Trust Company at their floating prime rate ofinterest. Note 6 Commitments and Other Matters Capital expenditures for the year 1980 are estimated at $1,269,000,000. Total research and development costs incurred during the years 1979 and 1978 were approximately

- - n., ,_.. _. x. n....-... 576,000,000 and 560,000,000, of which 560,000,000 under construction or in operation. In the event of and 547,000,000 were capitalized as part of the cost property damage to a nuclear plant of a member utility, of construction projects. the Company could be subject to a maximum assess. The Company provides retirement and savings ment of approximately $19,000,000 in the event losses fund plans for substantially all employees. The costs of exceed premiums, reserves and other NAll resources. With CPUC authorization, the Company has executed these plans, charged to expense and utility plant, guarantees to assume liabilities, not to exceed were 577,702,000 and $70,986,000 for the years 5200,000,000 in aggregate principal amount, with 1979 and 1978. The Company is a member of Nuclear Mutual respect to promissory notes and a standby bank line of 1.imited (NMlJ, established by the utility industry to credit required to fund take-or pay payments to gas provide insurance coverage against property damage producers by A & S. to members' nuclear generating facilities whether Note 7 Segment Information Consolidated segment information for 1979 and 1978 follows: In Thousands - ~ ~ ~ ~ Intersegment Electric Gas Ehminations Total 1979 Operating Herenues $2,463,845 $1,908,375 $ 4,372,220 Intersegment salesw 3,440 556,354 $(559,794) Total Operating Revenues 2,467,285 2,464,729 (559,794) 4,372,220 Depreciation 183,995 66,869 250,864 Income Taxesdu 63,168 36,903 100,071 Other Operating Expenses 00 1,834,935 2,230,241 (559,794) 3,505,382 1htal Operating Expenses 2,082,098 2,334,013 (559,794) 3,856,317 Operating income $ 385,187 $ 130,716 515,903 Capital Expenditurestci $ 943,911 $ 205,397 $ 1,149,308 Utility Assetsac) $5,257,874 $2,487,076 $ 7,744,950 Construction Work in Progressic) 2,521,809 44,004 2,565,813 Total Assets $7,779,683 $2,531,080 $10,310,763 1978 Operating Revenues $2,096,933 51,472,440 $ 3,569,373 Intersegment Sales (M 3,774 305,088 5(308,862) Total Operating Revenues 2,100,707 1,777,528 (308,862) 3,569,373 Depreciation 167,014 63,603 230,617 locome Taxeson 104,346 28,918 133,264 Other Operating Expenseson 1,461,448 1,584,818 (308,862) 2,737,404 Total Operating Expenses 1,732,808 1,677,339 (308,862) 3,101,285 5 367,899 5 100,189 5 5 468,088 Operating income Opital Expenditures (c) 5 718,572 5 140,541 5 859,113 Utility Assets (c) 54,605,656 52,025,286 5 6,630,942 Construction Work in Progress (c) 2,008,144 26,074 2,034,218 Total Assets $6,613,800 $2,051,360 5 8,665,160 (Mintersegment sales for 1979 and 1978 represent 23% Note 8 and 17%, respectively,'of Total Gas Revenues and less Quarterly Financial Data than 1% of Total Electric Revenues. Intersegment (unaudited) Electric and Gas Sales are accounted for at 'ariff rates Consolidated operating revenues, operating income, prescribed by the CPUC. net income and earnings per common share for the unincome taxes and general corporate expenses are four quarters of 1979 and 1978 are shown in the table allocated to departments in accordance with the Uni. below. Due to the seasonal nature of the utility busi-form System of Accounts and requirements of the CPUC. ness, the annual amounts are not generated evenly tcilncludes allocation of Common Utility Plant, by quarter during the year. 37

represent historical amounts converted to dollars f n Thouends having approximately the same purchasing power as tone comnUl the real dollar had in mid 1979 as measured by the o eranna ser

operann, r

m en e ino,me ino,rne

ue Consumer Price Index for All Urban Consumers, fxxember si.19?9 s i.24 uus 5: 17.006 5: 01.2n 6 57:

Current cost amounts represent the price in constant dollars the Company would expect to pay for its assets september 3o. mo s i.on i s9 s:40s3s 5:23.3:2 s"" June 30.1979 s vso. sis s 29.540 s i 18.000 s 94 f t could obtain them at todav's Erices. Simh 3 t io79 si.osi o79 si2RMi9 siis4ss s ol Because regulation limits the recovery ofinventory occcmher3L1978 Sim?i.xos 5:30.s2: s i 17.727 sos seritmber 3o.1978 s 874oss si3o m o si i s.79s sb4 amounts to historical costs. the Company inventories June 30.io7s S roms 37 5:08353 5 so.iin $70 are considered to have the same constant dollar and historical cost. Statement No. 33 requires that utility Nimh 31. IO7M s HsL97o 5 4M.i74 5 777s* For the quarter ended December 31,1978, net in. plant be repriced into constant dollars and that come and earnings per common share were decreased depreciation presented on both the constant dollar and current cost basis be calculated on the repriced 51,133,000 and two cents, respectively, from amounts amount. It was assumed that applying the Handy. previously reported to reflect restatenient by a con. Whitman Index of Public Utility Construction Costs for solidated subsidiary (See Note 1). the Pacific Coast Division to historical cost of surviving Supplemental Information Required by plant would approximate current cost. The current Financial Accounting Standards Board year's provisions for depreciation on the constant de!!ar Statement No. 33 (unaudited) and current cost amounts of utility plant were deter. For many years the purchasing power of the dollar, mined by applying the Company's depreciation rates measured by consumer and wholesale price indices, has to the constant dollar and current costs. declined each year. This decline in purchasing power As prescribed in Statement No. 33. income taxes of the dollar i3 commonly called inflation" were not adjusted. Many complex theories have been proposed in PG&E has serious reservations as to whether the an attempt to measure the impact ofinflation on busi-required supplemental financial information is appro-ness, but no solution has emerged that commands priate for measuring the impact ofinflation on a utility general acceptance. In 1979 the Financial Accounting regulated, as PG&E is, on a cost of. service basis. This Standards Board (FASB) issued Statement of Financial information is presented solely because it is required to Accounting Standards No. 33 requiring that certain be presented. It should be clearly understood that the supplemental financial information be furnished required information is complicated, difficult to under-showing historical information converted to two stand and because of the permitted subjectivity inherent bases-constant dollars and current cost-using specified in developing this pre 3cribed information unwarranted techniques. Constant dollar amounts as reported herein comparisons and inferences may result. Consolidated Statement ofIncome from Continuing Operations Adjusted for Changing Prices As Required By FASH Statement No.33 For the Year Ended December 31,1979 in Thousands Com ennonal ConstJnt Current t hstoncal Cost Dollar Cost Operating Revenues 54,372,000 C54,372,000 C54,372,000 Operation, Maintenance and Other 3,663,000 3,663.000 3,663,000 251,000 494,000 699,000 Depreciation Total 3,914,000 4,157,000 4,362,000 Income from continuing operations (excluding reduction to net recoverable cost) $ 458,000 C5 215,000* C5 10,000 increase during the year in specific prices of C51,850,000 property, plant and equipment" Reduction to net recoverable cost C5 (779,000) (255.000) Effect of increase in general price level (2,169,000) Excess of increas'e in general price level over increase in specific prices after reduction to net recoverable cost (574,000) Reduction of purchasing power loss through debt financing 634,000 634,000 Net C5 (l45,000) C5 60,000 C$-Dollars having apprmimately the same purchasing power as the real dollar had in mid 1979.

lncludmg the reduction to net recm erable cost, the Ims from conunuing operanons on a constant dollar baus u ould have been Csso4.ooo.oon.

"At December 31.1979. current cost of property, plant and equipment net of accumulated depreciat on u as C517.7s9.000.000 u hde historical ei or net cost recoverable through deprectation was 58.232,000.000. 38

e Fiv;-Year Comparison of Selected Supplementary Consolidated Financial Data Adjusted for Effects of Changing Prices As Required by FASB Statement NL 33 In Thousands (Except per share amounts) Years Ended December 31, 1979 1978 1977 1976 1975 Operating Revenues C$4,372,000 C53,976,000 C54,352,000 C53,890,000 C53,159,000 liistorical Cost Information Adjusted for General Inflation income from continuing operations (excluding reduction to net recoverable cost) C$ 215,000 Income per common share (after dividend requirements on preferred stock and excluding reduction to net recoverable cost) C$ 1.19 Net assets at yearend at net recoverable cost C$3,189,000 Current Cost Information locome from continuing operations (excluding reduction to net recoverable cost) C$ 10,000 loss per common share (after dividend requirements on preferred stock) C$ (.79) Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost C$ (574,000) Net assets at year end at net recoverable cost C$3,189,000 General Infonnation Reduction of purchasing power loss through debt financing C$ 634,000 Cash dividends declared per common sharc C$ 2.38 CS 2.41 C5 2.40 C$ 2.40 C5 2.54 Market price per common share at year end C$ 21.64 C5 23.85 C5 28.06 C$ 28.86 C5 27.14 05-Doll.ars has ing apprinimately the same purchasing pon er as the real dollar had in mid 1979. Ecrage consumer price index 217.6 195.4 181.5 170.5 161.2 Ilase year 1907-100 9 O h 39 +n -- ~ w

g_rd a hi;,,g.;._,q_,.... a 3 - m Directors and Officers Directors Richard H. Madden 2 Officers Malcolm A. MacKillop Chairman of the Ik>ard and Vice President JohnI.Honner I* Chief Executive Officer, Governmental Relations f ormer Preudent and Chairman of the 130ard and Potlatch Corporation Chief Executive Of6cer George A.Maneatis Chief Executive Of 0cer. .OC "'C P'" Vice President "C Pacinc G.is and Electne Company 8 '* ""

C * ""

Frederick W. Mielke,Jr.l.4 Computer Systems and Hansom M. C.ook. President and Chief Chairman of the Board and 3. Consultant. Systron Donner P#' "N Chief Executive Officer, Corporation Ferdinand F. Mautz "C'"C "' P'" Y N8"I'I ""*[ Vice President (electronic equipment) Mervin G. Morris 3 Engineering Richard P. C.ooley t. 4 Chairman Emeritus, John A.Sproul I2wrence R. McDonnell Chairman of the Board and Chief Executive Ofncer. Y"* CC C"' Vice President (department stores) Well s I-argo llank. N. A Ellis H. Langley,Jr. Public Relations

I' n or e esdent Charles de Hrettevilleu lloward M. McKinley reutlent, a y ount Operanons f ormer Ch.tirman of Vice President

' Machine Works the lioard. The 15ank of Donald A. Brand Gas Operatims Cahforma. N. A Vice President equ pment) Richand K. Miller Myron Du Hain 5 Richard II. Peterson thairman of the lioard. Howa Pemnnel and Gened viC# P'y. Waun Former Chairman of the Board. Preudent and Chief "*'dC"' SCI *iC'* Paci6c Gas and Electric Company I xecuin e ()f0cer. Electric Operations pg p Fireman 3 I und Insurance Wilson C. Riles 2 Robert W. Brooks Vice President and companies Cahfornia : state \\ ice Preudent Comptroller Superintendent of Alfred W. L.a m es,J r. t. 2 i Nhlic Instruction b"PP Y Mason Willrich

1. (( l ri -

r >ra tion Porter Sesnon* ICI'*".A. dah Mce WeWent li a ice President and Corporate Planning (food pn> ducts and related G'1eral Partner, Assistant to the Chairman setsices) Porter Estate Company James T. Doudiet (farming, livestock, oil and John S. Cooper Treasurer Itwis S. Eaton 2 gas production) Vice President Chairman of the ik>ard John F. Taylor Customer Operations and President, Barton W. Shackelford t Sectetary Guarantee Savings and President and Chief Operating Nolan II. Daines ^" "I * " Loan Association Officer, Pacific Gas and Vice President As tant Treamer Electric Company Planning and Research James M. Italt. "'I ~ ' * *#'"E Consultant. FMC Corporation Emmett G. Solomon t.4 Joseph Y. De Young Au tant Treawr (food machinery and chemicals) Former Chairman of Vice President the Board, Crocker Division Operations David B. Allison ^ " I'"#C'#'Y Cl i i an il e ik rd Malcolm H. Furbush and Chief Executive ofGcer, John Lyons Sullivan2.4 Vice President Brian L. McGrath The Pacine Lumber Company Rancher and and General Counsel Assistant Secretary Doris F. lxonard t. 4, l}f> ni "" * "I nn rs nd Growers Secretary. Treasurer Vice President i koo ive canner of and Panner. Rates and Valuation e fruits and vegetables) Conservation Associates (park and land acquisition) 1 Member Executive Committee lesHe L. luttgens 4 2 Member Audit Committee Community leader Richard B Madden. Chairman 3 Member Compensation Committee Myron Du Bain. Chairman 4 Member Advisory Nominatmg Commmee Frederick W. Mielke.jr.. Chairman

Retired from the Board in February 1980 40

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