Text

Pacific Gas & Electric Co 1989 Annual Rept
	ML20033F056
Person / Time
Site:	Humboldt Bay, Diablo Canyon
Issue date:	12/31/1989
From:	Clarke R, Locke R; PACIFIC GAS & ELECTRIC CO.
To:	; NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
	NUDOCS 9003150333
	Download: ML20033F056 (53)
	v • d • e

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Pacmc Gas and Blocteic Company 77 litate Street,

fWed F ltae Sanitavsn CA e A!!yney at Law t

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l-S March 13, 1990 L

i Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C.

20555 Re:

Docket No. 50-133 Docket No. 50-275 Docket No. 50-323 i.

Dear Sir:

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Enclosed are ten copies of Pacific Gas and Electric

' Company's annual report for the calendar year 1989.

Very t ly yours,

,A A.

O RICHARD F. LOCKE RFL:mh cc:

Mr. Jerome D. Saltzman, NRC Enclosures f

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1969 IVM u

Operating rnrnues 8 8,588,264,000 5 7,645,748,000

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('.)l Operating income

$ 1,622,558,000 5 1,297,372,000 Net income 8 900,628,000 5

62,127,000 E

Earnings (ka) applicable to common stock 8 799,549,000 5

(40,330,000)

Earnings (loss) per common share 5

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(.10) i Dividends declared per common share 1,40 5

1.66 Construction expenditures (including AFUDC) 5 1,448,452,000 5 1,335,257,000 Total electric sales to customers (kwh) 69,765,728,000 68,537,208,000 Total gas sales to customers trncf) 197,209,000 461,292,0(0 At year end Total assets

$21,351,970,000 521,067,685,0(0 Total customers 7,482,000 7,327,000 Number of shareholders 368,000 388,000 Number of commor shares outstanding 428,990,166 411,443,226 Numberof empk res(PG&Eonly) 26,200 26,600 3

in /VM, net income ws m/um/ i>y 5.17b million ($1.43persharrlas a result ofthe Dhblo Canyon Nuclavr 1%wr Plant rate tuse sett/cment

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andadjustmentspr tunbus non.Diablo Canyon costs. 7his 4 Juscussedin Management 1 Discussion and Analysis ofConsoldatalFinancht i'

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Condition arut Results ofOperations.

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DED CATION 1-c.

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Yhls ennual report is dedicated to the '

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26,200 men and women of PG&E.Their omtre.

h ordinary efforts led to the nefe, efficient end j

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rapid restoration of ges and electric service M

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in Northern Californie following the earth :-

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quake en October 17,1989. Their schlove ~

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monts in all espects of PG&E% business resulted i

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in a very successful year, providing e basis for.

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optimism that PO&E will succeed in meeting '

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PO&E ENTERS THE 1990s recorded last year. We achieved our earnings f

prepared to build on the success it achieved in 1989 for two primary reasons. Finit, we in 1989. Your company brings many strengths earned the full return on equity invested in

' to the new decade. Ilut none is more impor-our utilit,v business authorized by the Cali-

- tant than its people-their competence, fornia Public Utilities Commission for 1989 n.

their commitment, their cooperation and Second, we continued to operate the Diablo

[ 'kk their courage.

Canyon Nuclear Power Plant safely and reli-

[d PG&E people demonstrated all of these ably.The rnenues we received for the power attributes following the 7.1 magnitude earth-pmduced by the plant contributed signifi-quake that struck Northern California on cantly to our corporate earnings for the year.

October 17 last year. Their outstanding efforts Based on the company a positive financial-were praised by the wstomers and commu-performance in 1989, and our confidence in k

nities we serve, by our regulators and by city, PG&Ei continued solid performance in state and federal officials, the years ahead, the ik3ard of Directors on Our employees' response to this disaster January 17,1990, raised the quarterly com-and their superior performance throughout mon stock dividend to 38 cents per share, an the year reinforce managementh confidence increase of 3 cents over the 35 cent level set i

that your company can meet any challenge in June 1988.

s that lies ahead-a confidence supported The new annualizeti rate is $1.52 per by the excellent results PG&E produced share, an increase of 8.6 percent from the U

. in 1989, previous annualized rate of $1 A0 per share.

Earnings in 1989 wtre $1.90 per shnte, This action is consistent with our commit-compared to the lou of 10 cents per share ment to a policy of increasing dividends for our shareholders when such increases can -

be sustained.We believe that we have the Energy nosources plans, the people, the resources and the

%,pga opportunities to increase earnings so we can -

accomplish that objective:

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' We serve one of America's most dynamic-c.cehermai s.a econumies and our utility business should 7'

continue to grow.

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We are developing new markets for our gas

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7' transmission business in Southern California q

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and the Pacific Northwest.

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We are committed to operating Diablo N

Canyon at the highest levels of safety and bs#L MN6k performance. Under the settlement agreement, k

Nk the price we are paid for power produced

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by the plant escalates annually through 1994

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' 35.8% '

at a fixed rate and thereafter at a rate based on an inflation formula.These price escala-tions can add substantially to our revenues and earnings, so long as we operate the plant effectively.

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Over the longer term, our objective is that opinion ratings were among the most favor-PG&E Enterprises, e unregulated subsid-able we have ever had. Ilut we are not inty, will provide new earnings from its -

becoming complacent. Customer service imestments in independent electric power representatives, marketing emphnres and j

generation, gas exploration and development, operating crews are continuing to find ways and development of real estate in Northern to add value to PG&E scrvice.

pr company is California.

In addition to serving our existing mar-y in addition to raising the dividend, the kets efficiently and competitively, we also are W

lloard inJanuary authorized the purchase moving aggressively to build new markets, g n on the open market of up to $500 million of Managers and engineers in our gas supply unit hyY the companyi common stock. This stock and in our subsidiary, Pacific Gas Trans-N eMeetively positioned to purchase will be used primarily to offset new mis ion Company, are developing a planned shares issued through the emphores' stock expansion of our pipeline that brings competi-ownenhip plan and the shareholder divi-tively priced Canadian natural gas into dend reinvestment plan.

California. Some of the added capacity pro-The financial results your company vided by this expansion woukt be used to continue its success achieved in 1989 clearly refleet PG&E peo-plel commitment to controlling costs in Customers served Per Employee order to keep prices competitive, and to Mpmt adding value to the services they provide.

- Throughout the company, from linemen and gas servicemen in the field, to computer operators and customer services people in 23o division offices, to budget analysts and engi-neers in corporate headquarten, PG&E people are getting the job done with fewer human and financial resources. In 1989-for the fourth consecutive year-PG&E manag-ers held their operating budgets nearly flat.

The budget approved for 1990 once again 220 shows little spending growth. Ily focusing on essential wurk, by applying new, more dfi-

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200 cient technologies, and finding better ways as i.6 87 ss 89 to accomplish their tasks, PG&E people are increasing productivity. Since 1986, we have absorbed more than 469,000 new customers meet forecasted increases in gas demand by and cumulative inflatiomf 13. 2 percent customers in PG&E's service area. Ilut a vast without significant spendmg increases. Four majority of this increased gas supply would years ago, we served 231 customers per be transported to utilities and large mdustrial employee. 'Dxlay we serve 286 customers per customers in Southern Califstnia and the employee-an increase of 24 percent-and Pacific Northwest.

we have a customer / employee ratio that ranks Our managers and plant personnel have us among the most prmluctive utilities in been very successful in the operation of the the nation.

Diablo Canyon Nuclear Ibwer Plant. As a At the same time, we continue to receive result of their competence and commitment, very high marks for the quality of service Diablo Canyon is recognized as one of the PG&E provides. In 1989 overall customer nation's premier nuclear power plants. In 1989, it continued to operate safely and

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three major diallenges in the 1990s: serving r.

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businesses u hich face increased competition

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tive pnces in global markets, will be put to

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vide value to castomers. In turn, these busi-s-

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at competitive pnces so that American busi-e <

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reliably, generating about l 5.h hillion kil(F ness can compete. PG&l5 will meet miensi-Clarke toured the San watthours of electricit) atid $1.4 bilhon in fied competitne pressures with a renewed f rancisco Marino District revenues. (her the year, the plant achtesed a dedication to holdmg dou n costs and finding offer the October 17

" capacity factor"- u hich n a measure of muovative ways to add value to our service.

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earthquake and chscuuod actual perforniance agaitnt the theoretical in the 1990s we u ill increase our efforts to repairs with PG&E crews.

maxinium performance-of b4 percent for iniprove the environinent, and uc're already hoth umts combmed. That is sigmficantl3 movmg dow n that path, higher than the % percent capacity factor Grou th will hnng mereased demand for that PG&id management had budgeted for electneity. PG&E's electne supply planners the year. The plant's performance, averaged are working to meet that mereased demand over the past three years, has exceeded the m an environmentally acceptable way. One UX industn 's aserage capacity factor for plants of thn t3 pc.

Expense Per Gstomer l.mking ahead, we are pursumg neu 1

Um-hui opptirtunities that are heing created as dereg-

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ulation occurs in the gas and electric industrs.

PG&l Enterprises is working to capitahze u,.

us on these opportumties by makmg mvestments l

in unregulated businesses u here we have expertne. The ohjective n to achiese returns that exceed utihtv returns and that u ill sustain j

carmngs grou th m the mid-1990s and m the years that follow e

ioo I lou ever, h uses attributable to startup g

and other costs for such sentures are to be 95 expected m the early years. In 19W those hesses amounted to mne cents per share. But g

we behese that the strategs for 1.nterprises n

a6 87 88 89 is m the long-term best mterests of our wn. wr s lareII(d(lers.

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key w;ill be to add to our power supply using 1987, the companyRearning Center in San

. clean fuels and renewable resources to the llamon has trained more than 11,800 maximum extent ymsible.

emphyees in technical, business and com.

For this reason we are adding to our munications skills. Throughout the company, supplies of natural gas, which is the most managen are working with their employees environmentally acceptable of the kssil fuels, to provide opportunities for improvement E people are roody We also are working to increase the amount through training and temporary assignments.

5 e qr of hydroelectric and other preferred power Our work environment is also changing k

supplies available to us, to reflect the demographics and the cultural h( d k

in addition, we are working to demon-diversity of our service territory. PG&E's P

strate the potential for vehicles powered by line managers and human resources penon-

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electricity and compressed natural gas nel have wurked hard to advance equal (CNG)-an effort which before long may opportunity for minorities and women in the help to reduce the amount of pollution in company. PG&E also supports education California's skies. PG&E's first public access programs in the community which will help CNG service station will open soon in prepare generations of future workeni. In challenges of the 1990s Concord, California, to serve company CNG 1989 the company was honored for these vehicles and selected new fleet customers.

programs by the U.S. Department of I. abor Another key to improving the envimn-with its prestigious Opportunity 2000 Award.

ment is increasing consumers' efficient use of With strong performance in our utility energy. PG&E has joined with the Natural business, a diverse and growing economy to liesourecs Defense Council, the Rocky serve, safe and reliable operation at Diablo Mountain Institute and 1,awrence llerkeley Canyon, and a clear corporate direction for 1,aboratory in a three->rar test to find ways to sustaining future earnings growth, PG&E is increase the energy efficiency of products in

. effectively positioned to continue its success.

homes, offices and businesses.

In every part of your company, employees We know, for example, that lighting can are working to make that success a reality.

3 account for between 30 and 70 percent of a Through their outstanding performance in commercial firm's energy bills. So PG&E 1989, these men and women proved once will open a $3 million 1 ightingTechnology aga'm that they can translate competence, Center next year to promote new, more commitment, cooperation and courage into efficient lighting materials and systems, superior results. I am confident they will And we are striving to capitalize on the continue that kind of performance in the third major issue for the 1990s-the chang.

decade ahead and that PG&E will continue ing nature of the wurkplace. Our employees to provide value for our sharehoklers, for our have pmven their excellence in all aspects of customers and for the communities we are our business, but they will continue to be privileged to serve.

tested. Fewer people will be entering the wurkplace, and the jobs that are available will require greater competency in technol-ogy, communications and business.

To help meet this new challenge, we are Richard A. Clarke developing an atmosphere of continuous Chairman of the lloard learning and improvement for all employees.

and Chief Executive Officer Ever>une at PG&E is encouraged to improve his or her skills and find better, more pro-February 2,1990 ductive ways to do the job. Since it opened in 3

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PG&E is people: the men and women who climb polos and string wiros, dig tronches and lay gas linos, main-tain and run a highly diversified olectric generating and transmission system, buy natural gas in throo widely disporsod markets and transport it to California, talk to customers and solvo their problems, plan for futuro growth and manage a highly complex onorgy utility. As our business has changed, PG&E people have changed with it, finding now ways to do the job, now solutions to difficult challenges, now ventures to capitalize on omorging opportunitios. Because of them, PG&E is a loador in the industry. Because of thom, PG&E is prepared to succood in the decado of the 1990s. The following section can show just a few of those c

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oxtraordinary people at work, but it is dedicated to all the 26,200 mon and women who are your company.

l SERVIN9OUR GSTOMERS PG&Ek basic utility business, providmg gas and electric services to 11.5 million people in Ncrthern and Central Cahfornia, is chang-A PG&E occount ing rapidly. N,eu computer technologies are representative increasing the flexibility and precision of consults with controlling our electric system, dispatchm.g

- "8" gas servicemen an'l troublemen in the Glodding field, running our natural gas transnussion pipelines, and receiving and managing cus-tomer accounting data - to name just a feu terro cotto file areas where service is being streamh.ned.

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One constant remains, however, and that is to provide customers a real value for their energy dollar: high-quality service at l

t oduco the f uel prices which are competitne.

consumption of

.l'o serve large commercial and. dustrial m

customers u ho have sensitive electronic control and data processing systems, the staff in our Marketing Department developed a l

program called Ibuer Quality Enhancement.

This adds value to PG&E service by helping l

these customers identify and solve relia-The opportunity bility problems on their premises. 'Ib date, 2000 hard almost 4(K) such customers have benefited recogniros l

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from this service.

PG&E's oHirm-I With the trend toward two-income house-otive action holds, many residential customers place prog rarns.

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increasing value on their time. That means l

PG&E troublemen, gas servicemen and j

phone clerks have to be available to serve

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and reroute power over alternative hnes.

p The proof that PG&E is adding value

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can be found in the evaluations customers A construction circuit brookor routinely make of seven popular PG&E crow installs o of San Motoo services: 91 percent rated the company rnassivo now

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" excellent" or "very gcod." In all our busi-230 kilovolt ness, customer satisfaction is a key to success.

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.y The PG&E spirit is teamwork.

Two linemen working at the top of a pole

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energy flowing.

I' coring service to PG&E's call-j in customers.

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R5POMNG TO TYE EARMOUME PGkE people are deepl.s committed to service. When high wiiuh knock down r.

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power lines, darkening whole neighlx>rhmh,

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that sense of committnent sends line crews out into the storm to ge t the lights back on.

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speed and efficiency with which they restored E~"

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caused by the October 17 carthquake. Over a

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plunged into darkness. In the days follow ing

, s-the quake, more than 150,000 gas customers were u ithout service.

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executives, local managers, electric and gas

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k crews-everyone knew how to do the job.

Electric service was restored to the bulk of PG&E's customers within 48 hours5.555556e-4 days 0.0133 hours 7.936508e-5 weeks 1.8264e-5 months The last

~

gas customers without service, m the San Atfor the oct ber Francisco.\\1arina District, were reconnected slightly more than a month after the disaster quake,5.400 gas 4

k customers in the

-after the gas system there had been almost k

Son Francisco completely rebuilt.

marino were Thorough planning and training-tested without service.

in an emergency response drill in June 1989 PG&E mobilized

- had prepared our managers and service crews for this situation. Our electne and gas 400 employees crews worked at peak efficiency, giving special to replace 10 miles of line in attention to public safety, The U.S. Department of Energy, m its just over a month.

final report on the earthquake, noted that PG&E uus"well prepared. The company is exceptionally well organized, confident and professional" PG&E people were supported in their efforts by more than 400 gas service person-nel from other utilities throughout the West, and by units of the U.S. Navy and Air Fore-i d

The company also helped others, u ith a donation of $1.2 milhon to the Red Cross, A customer The Salvation Artny, local food banks and service repre-other programs to assist quake victims.

isig sentatie, helps PG&E t

mployees volunteered their M.

o family of quake

$Ubk h victims in the time in the hardest-hit areas.

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from installing o is th o customer and her dog.

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The oorthquoka THed plunged 1.4 Y_()Q million electric GaE!

customers into The work of PG&f dark ness. PG&f gos ond electric crows restored crews corned service to most I

on outpouring of those custom--

of offection, ors in 48 hours5.555556e-4 days 0.0133 hours 7.936508e-5 weeks 1.8264e-5 months .

Potts showed 92 porcent of customers in offected oreas had positive feelings about 4

PG&E.

Ea6 1

To restore gas From there, to the Marino, crews and their PG&E set up truck 5 moved a temporary into the dom-service contor oged e o, celssy O*

11 w

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m

MANAG/NG OUR ASSU ATWBLO GNYON The cornpany's largest single asset is the lhablo Canyon Nuclear l'ower I'lant. In lW/, it genetated Is.b billion kiltmatthours of electricity atul $14 billion in revenues.

Ihablo Canyon contributed 25 percent of the coinpany's net inconie in F189 The inanagement, o;wrating aial niainte-nance crew > at Ihablo Canyon ure cotutnitted to running the plant at the highest lesels of safety and efficiency, so that it can cotitinue to earn resenues for PG&li shareholders und provule a inajor energs resource to the people of Califorina.

An exatuple of tlus safe atul efficient oper-ation is the refuelitig outagr '.o l' nit I, u hich begaii in early ()ctobet P( hl 's out-age teani had coinpleted a previous refuelung

--of Utut 2 in 1958 -in only S2 days, estab-lishing a plant record fot this work. They completed the niost recent outage of Unit i in only 70 days. I his is an isnportant accom-w phshinent, because each urut at the plant AD earns tevenues of approsiinately $2 milhon lor every day it can operate at full capacity.

Training is essential to achies ing such a level of perforniance. I he operating crew s at thablo Canyon spend one urek out of fue m the classrooni or ni the coint rol rooni siinula-tor. Through this cotistant training ihey have the skills u hich help make I hablo Canyon one of the best operated nuclear

}wmer plants in the countrs.

PG&l'. supports its conunitment to safe and reliable perfortuance uith the most j g O [ }en

.:.vo;.a soplusticated computer systems to niotutor pg and manage plant operations. \\\\c are also

~

providmg the inaximum support for mainte-nance crew s, includmg a neu coinputeri/cd parf.s unentory system, enabhng rapid deln-cry of necessary equipment and supphes.

Bofore ofuel technicions assembly is give it loodod into the moticulous rooctor, plan t inspections I.'

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PREPARINHOR THEFUTURE As PG&E moves into the 1990s, an increas-ingly comg:itive national market for elec-tricity, a rising demand for natural gas, and the public's desire for environmental qualit.s PG&t operat-will shape future opportunities.

Ins ervices s

Our unregulated sulwidiary, PG&E ongin. r.

Enterprises, seeks to capitalize on these study a gas opgwrtunities. Entrepreneurs, engineers, turbine unit geologists and analysts within Enterprises and in ockland, its various sutwidiaries and affiliates are california.

developing investment opportunities in business areas that build on PG&E's expertise and that can, over time, provide returns 5

greater than utihty returns.

PG& E-llechtel Generating Company, which develops, manages and owns indepen-dent pouer projects, now has eight plants representing approximately I,500 megawatts of generating capacity in various stages of development throughout the nation. A 35-megawatt plant using waste coal as fuel will y

begin commercial operation in hiontana this

'l spring. And in 1989, the joint venture partic-kc3 ipated in two winning competitive bids: one in hlassachusetts, the other in New York.

PG&E Resources, located in Dalla >,

ig acquires and develops natural gas and oil

{Ykiy:;-Jgp resources. The subsidiarv is focusing on exploration and development in Texas, po&E Proper-1,ouisiana and the Rocky Niountains. Its ties was a success rate in drilling exploratorv wells in partner in the

[g/damalap===ma*}M;3 1989 was well above the historical aserage in construction of p

the industry. In 1989 PG&E Resources this 51,000 n;pnt:, s q[ N W N wg ms a4h m3 participated in developing 21 wells u ith a squure-f oot p.

or

PGkE llech'telMg, --

potential for producing the equivalent of 2t>

offico building MAwatingComher8[

rnillion cubic feet of gas per day in Bakersfloid, PG&E iksources -

s PG&E Properties, uorking in joint ven-Calif ornia.

Company

^

tures with local and regional developers, has completed five projects in California, includ-ing an apartment complex in Folsom and an office huilding in llakersfield. A 294-unit housing development in Pittshurg is under const ruction.

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LKTEDFINANGALINFORMATION l\\tapc Gasand Elatrk Compny

, j; 1989 1988 1987 1980 1%3

;jf in thouunds. exaptMr sharr annunts

@n Operating revenues S 8,588,264 5 7,645,748

$ 7,185,701

$ 7,816,661

$ 8,430,981 7'

Operating income

$ 1,622,558

$ 1,297,372

$ 1,261,701

$ 1,653,625

$ 1,369,359 Net income S 900,628 62,127

$ 688,517

$ 1,081,223

$ 1,030,805 Earnings (Ims) per common share 1.90

(.10) $

1.53 2.60 2.65 4

Dividends declared per common share $

1.40 l.66 1.92 1.90 1.81 At year end llook value per common share S

17.38 16.79 18.68 19.06 18.05

,Th:rs are 26.20o Common stock price per share 22.00 17.50 16.25 24.25 20.00 p:sple ct Poar.

Total assets

$21,351,970

$21,067,685

$21,733,652

$21,002,253

$19,098,003 -

allaf whom con-1.ong-term debt, preferred stock with mandatory redemption

*"''"'d provision and capitallease Pr: poring th*

obligations S 7,978,968

$ 8,116,603

$ 8,511,789

$ 7,832,921

$ 7,760,506

<:mpony for the i lides discussedin Manageurnit k 1)hcussion and A nalysis of ConsoluiacJ Finance;s/ Condition and Results ofOprations.

Iuturo.

Thsts featured en the following pig:s ore just a f w cf them.

i 1'

I 1

i-1

.i 16 1

NAGEhfENTS DISalSSION AND ANALYSIS OF CONS 0ll0ATED NOAL CONDITION AND RESULTS Of OPERATIONS Panpd;aa anJ E/ata Cemyny jg

{ }3 Results of operations years primarily due to Diablo Canyon and the recovery p

of increased fuel costs. Revenues for Diablo Canyon yM hrning in 1989, the Companyt earnings per com-increased $533 million in 1989 and $157 million h

2 mon share were 51.90 compared to a loss of f.10 in 1988 in 1988.

and earnings of $1.53 in 1987 The 1989 earnings equal In 1987, revenues decreased by S631 million from an 11.1% return on weighted average common equity 1986 primarily twcuuse effectiveJanuary 1987, the and an 11.4% return on average utility rate base, in 1989, Company changed its recording of revenues for Diablo the performance of the Diablo Canyon Nuclear Ibwer Canyon essentially to reflect only amounts actually Plant (Diablo Canyon) significantly contributed to the received through interim rates and other costs approved Company s earnings whereas in 1988, settlement of the by the California Public Utilities Commission (CPUC).

Diablo Canyon rate case resulted in a substantial in 1988, as a result of the Diablo Canyon rate case

_ chargetoearnings.

settlement, the Company charged to earnings approxi-The Company has three types of operations: utility, mately 5871 million of Diablo Canpn revenues previ-

,D Diablo Canyon and nonregulated through PG&E ously recorded but uncollected through rates, as well

' Enterprises (Enterprises), a wholly owned subsidiary as approximately $150 million of litigation and other 4

formed to invest in nonregulated businesses. For 1989 Diablo Canyon costs, in addition, the Company the first full year of operations for Diablo Canyon charged to earnings various non-Diablo Canyon costs.

under the settlement and for Enterprises, selected The effect on earnings of the above charges was a financial information is shown below:

decrease of $576 million after tax.

R:sponsible for To match revenues and expenses more closely, C@mPany's cor.

f)/ /,

effective January 1987, the Company began accruing P2 rate account Utihty Canyon Enterprive revenues for service provided but unbilled at the end of rsprosentative, la mi// ions, each month.The cumulative effect of this accounting naterrda anmen change increased net income in 1987 by $91 million, net of related income taxes of $77 million.

Operating revenues

$ 7.169

$1,373

$ 46 Operating income (loe.s)

$ 1,150

$ 497

$ (24)

In 1987, the Company offered an early retirement and marketing Net income (kms)

$ 715

$ 223

$ (39) plan to qualified employees, which increased adminis-and sales train-trutive and general expenses by $87 million before taxes.

3 ;y 3 33 3g Ing programs.

Total assets at year end

$ 15,271

$ 5,786

$ 293 Annualdividend inJanuary 1990, the Company In 1989 and 1988, revenues increased $943 million increased the quarterly common stock dividend, effee-ysars has led and $460 million, respectively, over the preceding tive with the April 15,1990 payment.The increase was PG&t efforts to based on estimates that longer-term earnings will be sufficient to sustain the higher dtvidend while provid-successfully Common Stock Price Per Shore ing adequate financial flexibility. On an annualized retain electric

,.if,,,,nd basis, the new dividend is $1.52 per share compared to customers with the previous dividend of $1.40 per share.

patential to bypass PGas.

labio Canyon Under the Diablo Canyon rate case p

settlement approved by the CPUC, effectiveJuly 1988, M. w s2

~

j revenues for the plant are based primarily on the h

amount of electricity generated, rather than on tradi-l% C-r="3d/a tional cost based ratemaking. Under this" performance-4l q

33 2

based" approach, the Company assumes a significant h

h; portion of the operating risk of the plant. The extent f

H sio and timing of the recovery of actual operating costs, Q

f' f

depreciation and a return on the investment in the plant primarily depend on the amount of power pro-55 duced and the level of costs incurred. The Company's earnings are affected directly by plant performance and costs.

9 In approving the settlement, the CPUC explicitly affirmed that Diablo Canyon costs and operations no n

n a

longer should be subject to CPUC reasonableness

reviews.The CPUC cannot bind future commissions htemaking Pacific Gas and Electric Company's i

in fixing rates for Diablo Canyon, but to the extent (PG& E) prices for electric and gas energy, excluding l

pennitted by law intends that this decision renwin in Diablo Canyon, are regulated by the CPUC through effect for the full term of the settlement.

base rates and balancing accounts. Ilase rates compen-Diablo Canyon revenues are based primarily on a sate the Company for operating and maintenance o

pre established price for each kilowatt hour (kwh) of costs, taxes and depreciation, and provide a return on electricity generated by the plant. (Pricing for Diablo capital. Ilase rates are set in general rate case (GRC)

Canyon is discussed in Note 2 to the consolidated finan-proceedings every three years. lletween rate cases, the r

cial statements.) From the revenues received for Diablo Attrition Rate Adjustment ( ARA) mechanism makes Canyon, the Company must recover the costs of own-annual adjustments for certain changes in financial ing and operating the plant, including all future capital and operational expenses.

additions. If peer generation drops below specified llalancing accounts help stabilize PG&E's earnings.

r-capacity levels, the Company may request floor pay.

Energy cost balancing accounts reduce the effect on

-l ments which insure that the Company will receive carnings of fluctuations in electric and gas energy costs.

some revenue, even if the plant stops pnxlucing power.

Sales balancing accounts reduce the effect on earnings 1louever, payments received must be refunded to of fluctuations in electric and gas sales. For electric and customers under specified conditions. Deconunissioning core gas customers, the CPUC bases rates on estimated i

costs will continue to be recovered through base rates salest differences between revenues based on these an a n su o an pc nanW.

a es and adual menues aN acenulatd in Oc H:1 ped design The CPUC has directed the Company to conduct balancing accounts for suhsequent rate adjustment.

'"d'""*"

and file a study by December 31,1990, on segregation of PG&E's gas customers are separated into" core" and Die canyon's administrative and general costs and common plant "noncore" classes as part of the CPUC's regulatory Plint inf orma.

between Diablo Canyon and other operations. The framework for natund gas service, effective May 1988.

i puque of the study is to segregate the costs of operut-Core customers include all residential customers and i

tiin synom, ing Diablo Canyon from those considered in estab-commercial customers that do not exceed certain use en)of the most lishing electric and gas rates for utility customers.

limitations. Noncore customers are industrial and larger edn nced com-Ilased on the study and the comments ofinterested commercial customers that meet certain size limita-put:r systems parties, the CPUC may conduct further hearings to tions. For noncore customers, PG&E offers an array mnsider revisions to the revenue requirement for util-of services including gas transportation. While these

- in the nuclear ity expenses for the 1991 and 1992 attrition years.

changes give the Company greater flexibility in com-Power Industry.

The plant capacity factor for 1989 was 84% reflecting peting for some customers through the ability to Murh one planned refueling outage for Unit 1 in the fourth negotiate transport rates, they remove some of the c.v

.igam quarter and no extended unscheduled outages for either protection afforded previously by the gas balancing unit during the year. The plant capacity factor for accounts.

the second half of 1988, after the settlement became The Annual Cost Allocation Proceeding (ACAP)is effective, was 60% primarily due to the scheduled refuel-part of the gas regulatory framcwork which places ing and unplanned outage of Unit 2. During refueling utilities at risk for recovering most of the transportation 4

outages, which typically occur every eighteen months cor., associated with their noncore markets.'Ib the 4

and last about three months, or during unscheduled extent that gas transportation revenues collected from outages, the Company will report significantly lower the noncore customers are less than the forecasted costs revenues for the plant. The Unit I refueling in the fourth allocated to these customers, the Company is not quarter of 1989 was completed two weeks ahead of allowed full recovery of the shortfall. Currently, however, schedule. Unit 2 is scheduled for refueling beginning the Negotiated Revenue Stability Account (NRSA)

March 1990. Through December 31,1989, the life-places a limit on over or undercollections of noncore gas time capacity factor for the plant was 73% exceeding revenues, up to $17 million before tax through April the national average capacity factor for this type of 1990, u hen NRSA is scheduled io be eliminated. The l

nuclear power plant.

Company has filed a petition with the CPUC request-Under the settlement and for illustration purposes, ing an extension. In 1989, after the limited NRSA a Diablo Canyon capacity factor of 60?h in 1990 would pnxtuce Il.4 billion kwh or $1 billion in resenues on an annualized basis. An 8076 capacity factor would pnxtuce til billion kwh or $1.3 billion in revenues.

1 1

18-I r

V protection, the Company had a revenue shortfall of limit the effect of inflation on PG&F?s earnings by approximately $33 million.

closely matching rates with costs. Diablo Canyon rates Effective June 1989, the CPUC granted the Com-are based on a formula that considen, inflation after 1994, pany a $151 million increase in gas rewnues under the 3

first ACAP, primarily for net undercollections in the Liquidity and capitol itesources gas balancing accounts and an increase in purchased gas costs. In January 1990, the Company revised to Diablo Canyon While revenues are based primarily

$129 million the $143 million revenue increase requested on the amotmt of electricity generated by the plant, in its second ACAP application.

actual cash revenues collected are based on a forecasted In December 1989, in the 1990 Gl(C decision, operating capacity factor adopted by the CPUC for

. wy..

the CPUC granted PG&E an increase in the electric that year. For the twehr months ending October 31,1990, 3.p*

and gas revenue requirement of $174 million and $43 the adopted operating capacity factor is 81%, excluding d

million, respectively, effective J anuary 1,1990. These the effects of the two refueling outages scheduled dur-4 %i-amounts are based on a 12.9% return on common ing that period. Over or undercollections in one year

. k equity authorized by the CPUC for 1990, a decrease resulting from differences between the actual and fore-from the 13"o authorized for 1989.

casted operating capacity factor are refunded or collected

_g On October 17,1989, a major earthquake struck in the following year. Accordingly, cash flows owr the Northern California causing damage to a wide area long term under t he settlement will depend significantly served by PG&E. The Company currently estimates on Diablo Canyon's performance.

u ds'c.u total costs at approximatelv $100 million. These costs over s188.000 by are not expected to have a significant impact on results Capital requirements The Company's three-year rcisorching and of operations because the Company will seek reem ery projection of capital requirements is shown below:

nsgotiating a through insurance and regulatory action. Effective November 3,1989, the CPUC authorized a balancing

/cm

/90/

/9e nsw trenching account to accumulate costs associated with the earth-in mi//mn, strvice contract S* hlav 1,1990, the Company will file a report in Concord, of the costs recorded in the account for the CPUC's U'di'F

$b572 83 7 *

'2'l*

Diablo Canyon 109 102 107 Californlo, review and will propose rate recovery of carthquake-

((nterprises 125 122 100 related costs.

Ju4 I'wt

.g.d I

die M06 WO MOS The regulatory environment has helped to reduce Maturing debt and d um.ai rm=s,1 the effects of inflation on the Company's utility business, sinking funds 74 117 182 C/d lloth the AllA and the energy cost balancing accounts Total capital requirements

$1.880

$2,137

$2,587 Utahty indudes allowmrforfunds ustJJuring con struction and h %

1. 5' # N"l'F #""^?d""*" e'*' *" #"#"*Ol'*

Dioblo Canyon Operating Itovenues Enterprhes'actua/ capita /expnditurrs may tury significantly Oncluding deconunisioning rewnues) jegyjjyg,y fAf,1gjf,3ffffy,f,ffn,fffty jyty,f,fyf,ff,7f,,jfj,,.

7, gjisa,,

Enierphes ' amounts inchule oilandgas explorution andJetslopment costs and the equity share ofgenenitingfacilities.

p Utility expenditures primarily will be for replacing, g

modernizing and expanding the Company's facilities.

g h[

Pacific Gas Transmission Company ( PGT), a wholly-

~

owned subsidiary, has filed an application with the Federal Energy Regulatory Commission and PG&F,has me filed an applicatior with the CPUC for authority to g

4 p

p expand their respective connecting gas pipeline transmis-tj u

sion facilities. The escalated cost to complete the pipe-P line expansion is estimated at $1.5 billion.The expanded facilities would transport Canadian gas to the Pacific Northwest and California. Construction would be completed in 1993.

1 o

67 88 89 19

In February 1990, the CPUC issued a decision in The Company's Imnd indenture permits issuance of a proceeding to investigate California's need for new mortgage bonds up to an amount appro ed by the interstate gas pipeline capacity and the various pro-Company's lloard of Directors and the CPUC. At posals to construct that capacity.The CPUC stated it December 31,1989, the Company had $6.5 billion out-would allow competition to decide w hich of the standing in mortgage Imnds and may issue up to $3.5 numerous proposed pipeline projects should be built to billion more under the indenture provisions on earnings serve California's growing needs for additional natural coverage and property available as collateral. In 1987, gas supplies.The CPUC will support projects that 1988 and 1989, the Company reacquired certain older, meet certain c(mditions.The decision indicates that the high cost securities to reduce financing costs.

j PGT-PG&l? project meets most of the conditions, but The Company issues short-term debt (principally E.

and external financings will continue to supply capital.

expresses concern with respect to issues relating to commercial paper) for interim construction financing capacity alkication and cost alkication.The CPUC also and for fluctuations in general working capital. Short-stated it would give expedited consideration to all pipe-term debt also has helgwd fund fuel oil, nuclear fuel, gas line related issues.

inventories, advances to gas pnxluceni, and unrecov-j ered balances in balancing accounts.The Company Sources of capital Internally generated cash flows must borrow when balancing account revenues are undercollected, as in 1987,1988 and 1989, until the In 1989, proceeds from long term debt and common revenues, plus interest, are received in rates. Short-stock issued were $316 million and $335 million, term borrowings, which provide ficxibility to meet respectively. Net of optional repurchases, these cash capital needs and to schedule long-term debt issues, employees t flows supplied 21?L of cash used to meet capital require-were $628 million at December 31,1989.

improve their ments for theyear.The Company did not require In 1989, PG&l? entered into a $750 million, four-personal produc.

other significant long-term debt financing due to strong year global revolving credit facility agreement to tiv!ty and quolity cash flows from operations.

support the sale of commercial paper and for other Utility capitalization ratios authorized by the CPUC corporate purposes. lheific I?nergy Fuels Company

'" * ' k 3 "

for 1990 are 46.75?L common equity,6.2576 preferred

( PEFCO), a wholly-owned subsidiary, entered into a servla9 OPProul-stock and 477L long term debt.

$250 million revolving credit facility agreement to motely 175.000 Actual consolidated capitalization ratios for the support the sale of commercial paper which is used to Company at December 31 were:

finance the purchase of nuclear fuel. PEFCO's com-mercial paper and credit agreement are guaranteed Centrol Division 1989 nn by PG&E.

based in oakland.

Common equity 45%

43%

At December 31,1989, the Company had total Californio.

preferred stod 7

8 credit facilities available of $1,050 million, including 1.ong term debt 48 49 those mentioned above.

Tota 1 capitalization 100 %

100 %

Statement of Financial Accounting Standards n,vn, x "

(SFAS) No. 96, elavantinghrInnunr Lxrs, issued in o w /n,vni" 1 ong term debt has been sold in the United States December 1987, established new financial accounting and in European financial markets. Common stock has standards for income taxes, which must be adopted by been issued through the Company's dividend reinwst.

1992.(See Note 8.)

ment and employee savings plans. Over the next two and one-half years, the Company plans to purchae up to $500 million of its common stock on the open market or in negotiated transactions, primarily to offset new shares purchased from the Company by these plans.

$a

l ATEMENTOfCONSOUDATEDINCOME ikq/ic Gas and l'/atroc Compny t

_l:

\\-

Durs endedikamber31 1989 hM 1987

\\

le thutan.h. enapprsharr amnnts h@Q e

operating reverntes Nc[d -

-j Electric

$6,216,050

$5,512,865

$5,133,028 -

Gas 2,372,214 2,132,883 2,052,673 4 x:

M 7btal operating revenues 8,588,264 7,645,748 7,185,701 Operating expenses Cmt of electric energy 1,755,955 1,666,971 1,383,497-Cost of gas 1,181,772 1,031,353 899,981 Transmission 161,996 142,572 135,435

. O Distribution 199,972 201,231 189,782 l-Customer accounts and services 32't,756 304,654 283,965 M

. Administrative and general 698,544 641,943-708,200

. /

Maintenance 372,845 382,366 341,118 Depreciation' 1,000,316 931,964 875,208 income taxes 724,718 508,258 603,012 '

e l'roperty and other taxes 270,573 252,257 240,217 Other-269,259 284,807 263,585-Implemented a 7btal operating expenses 6,965,706

- 6,348,376 5,924,000 t n:w Attounts i

Operating incorne 1,622,558 1,297,372 1,261,701 j

Payable $ystem

!~

and is currently '

Diablo Canmn rate case settlement (1,021,858)

"d d '"8 " "*"

~

[

Income tax benefit related to Diablo Canyon rate case settlement 509,547

[

Payroll / Human Allowance for eqtlity funds tised during Construction 25,200 18,603 2,564 i,

' nmurces.

Interest income 131,250 115,442 99,011 p

Other-net -

(43,530)

(55,258) 10,312 sy,, g,,

,,,, g., s,.,,

Nal odan inanc and #nerie deductions) 112,920 (433,524) 111,887' t chnology.

Incorne before interest expense 1,735,478 863,848 1,373,588 l

J rer,y ta.m Interest expense Interest on long-term debt 733,776 722,074 698,233

- ar.m.,gre aa...u,

r Other interest charges -

119,335 91,813 77,845 Allowance for borrowed funds used during construction (18,261)

(12,166) 316-Net interest expense 834,850 801,721 776,394 j

j income before change in rewrding unbilled revenues 900,628 62,\\27 597,l94 l

Cumulative effect as of January 1,1987 of accruing unbilled revenues,

}:

net of income taxes of $77,045 91,323.

Net income 900,628 62,127 688,517 y.

l' referred dividend requ rement 101,079 102,457 110,782 Earnings (lass) applicable to cornmon stock 5 799,549

$ (40,330) $ 577,735 r

g ii*eighted average cornmon shares outstanding 420,940 40l,775 377,723 Earnings (loss)per common share before change in record:ng unbilled revenues S1.90

$ (,10)

$1.29 Cumulative effect as of January 1,1987 of accruing unbilled revenues

.24 Earnings (loss)per common share S1.90

$ (.10)

$l.53 1

Dividends declared per cornmon share

$1.40

$l.66

$1.92 l

The aaompnying Nota to Consohdated l YnanaldStatements are an integru/prt ofthis uatement.

21 n

a--

n-,

-n-.

r w

n,,,-

1 TE0 MLANCESHEET

\\

l

. IkciRc Gas amlT/cciric Cempiny f

1 1

j lhember31 1989 lbSR

)

)f

. In thousans j

~ Assets y j..

Plant in service (at original cost)

]

"9 F.lectric l

Non nuclear

$13,606,860

$12,721,004 -

4 o

Diablo Canyon 5,655,651 5,602,997-

- Gas 4,244,858 3,889,030 J

- lbtal plant in i,crvice 23,507,369 22,213,031

' 'y Accumulated depreciation' (7,533,159)

(6,717,941)

Net plant in service 15,974,210 15,495,090' Construction work in pwgress 683,723 837,941 Advances to gas prnducers 223,665' 280,333 1

L Funds held by trustee 207,262 l43,458 l-Oil and gas exploration costs 176,809 213,842

_ Invcattnents -

144,663 106,106 ~

Capitalleases(including nuclear fuel of $212,255 in 1988) 15,337 228,553 i.'

other 5,851 16,035 Provided leader.

Total 17,431,520 17,321,358 ship in repairing

(,ufrent assets e

demased Cash and cash equivalents 66,778 96,966 substation so l Accounts receivable Customers 1,102,867 1,001,969.

restore power to Other 393,087 472,014 l

Allowance for uncollectible accounts (14,275)

(7,348)

Mtrgan Hill.

.. Regulatory balancing accounts receivable.

760,944 636,489-i.-

l

. /w4 c,mh=/< -

Inventories

...uu.i<uw i:tuir,&,

Fuel oil 99,399 109,400 Nuclear fuel 138,406 I

Gas stored underground 196,217 -

204,077_

l rwmi.,n / at hlaterials and supplies 220,038 216,921 l' repayments 57,115 38,408 7btalcurrent assets 3,020,576 2,768,896

{

. Deferred charges Regulatory assets.

293,263 304,336 Unamor:ized project costs 96,991 125,796 j

Workers' compensation and disability claims recoverable 103,061 100,000 Unamortized loss net of gain on reacquired debt 235,828 225,772 Other-net 170,731 221,527 Total deferred charges 899,874 977,431-4 Total assets

$21,351,970

$21,067,685 -

The awomjwnying Notes to Consohdital Financial Statements are an integralpart ofthis statement.

I 22 a

WS000ATEDMiAKESHEET

' 1tactfic G,es est1:/utdc Compey.

. h.

ikrember3/

1989 '

IW lh in thousamis

(&R Capitalisation'and liabilities Capitalisation

@R Common stock.

$ 2,144,951

? 2,057,216 i

Additional paid in capital 3,121,583 2,874,279 s9

{e

. Iteinvested earnings

. 2,188,859 1,978,432 Conunon stock equity _

7,455,393 6,909,927 Preferred stock without mandatory redemption provision 1,010,195 1,010,195' y=*Pfl Preferred stock with mandatory redemption provision 142,133-

~ 167,378 a~

'Customeradvancesforconstruction

.l

- lamg term debt 7,809,187 7.781,580 v

1 J

7btal capitalisation 16,416,908 15,869,080-

' Nonctmvnt liabilities 164,559 145,351 Workers' compensation and disability claims 113,000 100,000 Capitallease obligations 15,026 155,023 Other 134,978 152,689-

. Works on struc.

'7btal noncurrent liabilitics 427,563 553,063-

~tural and policy Current liabilities

'****"*d Short-term borrowings 627,732 858,232 of controlling Accounts payable

rapidly rising -

Trade creditors -

$26,316 450,770 Other 296,259 230,214 workerv com..

Accrued taxes 17,382 23,67i' Pensation costs.

g I:"dit

4 1emg term debt and preferred stock 74,133 68,350 mym. wry. it.wn, Capitallease obligations 253 225,839 :

,a ca,,

~ Interest payable 73,90?

71,181 Dividends payable 149,61s 145,555' Amounts due customers 97,093 109,006 Otner-180,571 74,497 7btalcurrent liabilitics 2,380,816 2,545,099 Deferred credits Deferred investment tax credits 536,056 546,078

. Deferred income taxes 1,340,972 1,319,139 Other.

249,655 235,226 7btal deferred credits 2,126,683 2;100,443 V.

Contingencies (Note 10)

. 7btal capitalization and liabilities

$21,351,970

?2 l,067,685

+

t.

ATNENTOFCONSOUNTED CASH R0WS Itwik-Gas aml1:Intrk Company Years enJn/nnemkr31 1989 1985 1987 in thousarah p) -

Cashflowsfrom operations y%

Net income s 90(,,628 5

62,127 5 - 688,517 Kg3 Adjustments to reconcile net income to net cash provided by

{^ i J operating activities 0

Depreciation 1,000,316 931,964 875,208 g

Amortization 93,396 152,583 190,355 Deferred taxes 84,057 (238,385) 172,796 lkgulatory balancing accounts 871,144 Diablo Canyon Other (124,455)

(2,592)

(145,507)

' 'k*i Change in operating assets and liabilities

~"

Accounts receivable (15,044)

(40,795)

(417,470)

[,',,.f. j Fuel inventories 42,482 11,309

' 35,183 Accounts payable 141,591 (46,704) 44,776 Accrued taxes (6,289)

(77,956) 51,793 Advances to gas producers 56,668 54,434 32,659 Other working capital 75,059 (32,613) 10,343 -

"'b'"**"'

Other-net 44,619 152,111 277,578 b""d * ' "h *'" * '

Net cash provided by operations 2,293,028 1,796,627 1,822,231

~ thscompany investing activities sinds him. Hos Construction expenditures (1,423,252)

(I,316,654)

(1,326,211) ru.iv.d owards Other-net -

64,532 8.531 158,067 Izr occomplishi Nel cash used in investing activities (1,358,720)

(i,308,123)

(1,i68,144)

- m:nts in boosting g.

,g.

marot. ond raist Common stock issued 334,988 378,233 415,898 Ing productivity l' referred stock redeemed (25,390)

'(15,000)

(268,976).

long term debt issued 316,379 1,059,570 1,083,703 through his own long term debt matured or redeemed (249,357)

(1,262,191)

(314,136)

Phltive example and leadership Short term debt issued (redeemed)-net (230,500);

304,208 (547,189)'

sivi..

Capitallease payments (356,911)

(80,504)

(97,432).

Dividends paid (688,126)

(810,044)

(840,466)

Ai+.upr, Other-net 1,952 (41,852) 13,204 liww=

Net cash used infinancing activitles (964,496)

(537,045)

(626,734)

Net change in cash and cash equiralents (30,188)

(48,591) 27,353-Cash and cash equivalents at January I 96,966 145,557 118,204 Cash and cash equivalents at December 3I S 66,778 96,966 5 l45.557 Supplemental discimures of cash flow information c

Cash paid during the year for:

Interest 5 772,492

$ 748,272

$ 736,107 Income taxes S 535,486 5 414,348

$ 250,817 The aaampanying Notes to Consolidated Finana;d Statements air an integrulpart ofthh statement.

24-

~..

~

/

4TEMENT OF CONS 000 ATE 0 COMMON STOCK EQUITYAND PREFERRED STOCK

)

1sucfic Gau and Elutru Compny Perf<rm/

Pnknn/

stub stwh a

without with AJJutronal Common

. mandatory mandatory g.

Common pil-in Reinwsted uwb ndempion ' mlempiou

,:::)

stub cap > ital rantings ryuity pmviuon pwision*

, _ l9 '.

ln thouunds, twp shaws i, j Balance, December Jf,1986

$1,840,636

$2,319,344

$2,855,748

$7,015,728

$1,207,865 0225,285 P :

Net income-1987 688,517 688,517 2

M Common stock sold (20,181,371 shares) 100,907 314,991 415,898 i

Preferred stock redeemed (8,209,650 shares)

(22,681)

(197,670)

(30,285)

Cash dividends declared

' Preferred stock (120,992)

(120,992) y' Common stock (728,873)

(728,873)

Foreign currency translation adjustment 4,708 4,708

.e Balance, December Jf,1987 1,941,543 2,611,654 2,699,108 7,252,305 1,010,195-195,000 Net income-1988 62,127 62,127 Common stock soki (23,134,679 shares)

!I5,673 262,560 378,233 Preferred stock redeemed J erest.d a syse.m -

(150,000 shares) 65 (18,407)

(18,342)

(15,000)

Cash dividends declared

'#r ""*8 '3"9 Y

Preferred stock (102,752)

(102,752) lagislation whkh Common stock (666,846)

(666,846) may offect her Foreign currency d2partment's translation adjustment 5,202 5,202 cptrations, Her Balance, DecemberJI,1988 2,057,216 2,874,279 1,978,432 6,909,927

!,010,195 180,000 Net income-1989 900,628 900,628 systsm has sinco -

Common stock sold bS*n adopted (17,546,940 shares) 87,735 247,253 334,988 by othe' l' referred stock redeemed esp =rtm.nts.

(252,450 shares) 51 (196)

(145)

(25,245)

Cash dividends declared

./,m. c4,n Preferred stock (101,560)

(101,560) d"'"'"'"""'"'

Common stock (590,626)

(590,626)

L A =dba-Foreign currency 3r ii,..t -

translation adjustment 2,181 2,181 r.svie..<nist Balance, December 31,1989

$2,144,951 53,121,583 82,188,859 $7,455,393 $1,010,195 8154,755

' N'""'"X eIndudes currentprtion.

The axompnying Notes to Consolilatal Financid Statements are an integralprt ofthis statement.

l '.

l.

[

Ly t

25

e ATEMENT Of CONS 000ATED CAMTAUZATION i

Ituapr GasandEletric Company

}

l y

Daraber31 -

l989 JVM s,

la thonaanih, exaptparentages andsharrs lp; p:

Common stock, par value $5 per share (authorized 800,(K)0,000 shares,

7. ;

y d4 issued and outstanding at December 31,1989: 428,990,166; a

1988:411,443,226) 5 2,144,951

$ 2,057,216 a

['

Additional paid-in capital 3,121,583 2,874,279 Reinvested earnings 2,188,859 1,975,432 o

Cornrnon stock equity 7,455,393 45%

6,909,927 43 %

Preferred stock without mandatory redemption provision

)

Par value $25 per share (authorized 75,000,000 shares)

Nonredeernable 5% to 6%-5,784,875 shares outstanding 144,621 144,621 Redeernable 4,36% to 8.2%- 13,534,959 shares outsta nding 338,373 338,373 9% to 10.46%-21,088,034 shares outstanding 527,201 527,201 s

1,010,195 1,010,195

~

Preferred stock with mandatory redemption provision Par value $100 per share (authorized 10,000,000 shares)

Received Choir-9% and 10.17%- 1,547,550 and 1,800,000 shares outstanding 154,755 180,000

"'*"*"'d'"

Totalpreferred stock 1,164,950 7%

1,190,195 ' 8 %

tesa for improve.

Less preferred stock-current portion 12,622 12,622 Preferred stock in total capitaliwtion 1,152,328 i,177,573

""d'"*'***'

Pacyic Gas and Electric Cornpany Pignt, sowing the First and refunding mortgage honds tsmpany over ~

hiaturity '

Interest rates 1989 1994 4.375% to 14%

391,305 442,843 s 2s muuon. vil, 1995-2016 4.25% to 8.125%

1,613,393 1,613,393 yser soordinated -

gg 9

g g

and ereined 1995 2022 9% to 9.93%

1,559,250 1,359,250 employee groups 2012-2020 10% to 13.5%

1,223,426 1,415,474

- 's f urther

- Principal amounts outstanding 6,497,358 6,540,944 increase their Unamortized discount net of premium (91,559)

(93,229) ptrformance and - - Total mortgage bonds 6,405,799 6,447,715 l

p2rticipation in

. Unsecured debentur.s,10.8% to 12%, due 1994 2000 221,538 223,650 lbilution control loan agreements, variable rates, due 2008 2016 925,000 925,000 Prablom solving 9

and decision t

7btal PGUE long-terrn debt 7,709,677 7,755,567 l-

"*"8' 1,ong-term debt of subsidiaries 161,021 81,741

- ""~'

lbtallong-tenn debt of PGUE and subsidiaries 7,870,698 48%

7,837,308 49 %

. r:xawaw su anana; Less long-term debt-current portion 61,511 55.728 Long-terrn debt in total capitalization 7,809,187 7,78l,580 l

7bral capitalization

$16,416,908

$15,869,080 1

The accompanying Not:s to Consoldated Finanaal Statements are an integralpart ofthh statement.

!l-l l

?6 '

EDULE Of t0NS0lI0ATED SEGMENTINFORMATION

' ikafic Gas andi:latnc Com/wny Intmegment

~

1%x a,.

thirs ended skrmber3/

Elatric Gas ehminations 1btal 6

glQhi;

.j--

in thousandu Y

,j

/089 gj Operating revenues 8 6,216,050 8 2,372,214 8 8,588,264

".i Inten.cgment revenues (a) 12,463 670,011 8 (682,474)

Totaloperating reve mes 8 6,228,513 8 3,042,225

$ (682,474) $ 8,588,264 Depreciation S 753,488 8 246,828 8 1,000,316 Operating incorne before incorne ta2cs(b)

S 2,099,884 8 247,392 8 2,347,276 Construction capenditures(c)

$ 1,016,707 5 431,745 8 1,448,452

- ~- '- '

identifiable assets (e) 816,272,545 8 4,182,397 820,454,942 Corgerate assets 897,028 7btal asscts 521,351,970

[

/98S j

Operating revenues

$ 5,512,865

$ 2,132,883

$ 7,645,748 Intenegment revenues (a) 9,807 717,833

$ (727,640) j

...w Total operating revenues

$ 5,522,672

$ 2,850,716 $ (727,640) $ 7,645,748 Depreciation S

716,539 5

215,425 931,964 Helped to consoH-Operating incorne before incorne taxes (b)

$ 1,587,438 218,192

$ 1,805,630 dat* Hvo oHic*

Construction expenditures (c) 932,573 402 684

$ 1,335,237 4

=

locations-with identifiable assets (c)

$ 16,058,553

$ 4,079,365

$ 20,137,918 Corporate assets 929,767 H. uner.n, 7btal assets

$ 21,067,685 way of doing thing -by creat-ing tonel"*"'

Operating revenues

$ 5,133,028 5 2,052,673

$ 7,185,701 policles and pro-Intenegment revenues (a) 7,724 631,981

$ (639,703) cedur** for Totaloperating revenues 5 5,140,752

$ 2,684,654

$ (639,705) $ 7,185,701 handling routin.. ' Depreciation 674,135 5

201,073 875,208 Operating incorne before incorne taxes (b)

$ 1,574,483 290,230

$ 1,864,713 -

custom.r inquer.

Construction expenditures (c) 948,080 380,695

$ 1,328,775

""d'"8 Identifiable assets (e) f 16,874,666

$ 3,765,079

~ $ 20,639,745 billing and credit Corporate assets 1,093,907 Information.

7btalassets

$ 21,733,652 Charlae.\\l.enfrr.

(al intersegment elatra andgas trunna an anonntdfbrat tart][rutapirsaihd by the CPUC.

s<mer;;me (b) Iname taxa andgenerulcorprate expnsa areallocardin awon/ana ccith the FERC Uniform System ofAnnunts andrrrjuirements ofthe

.W"'"'""*

CPUC. Oprating iname in the Statement ofConsoli/atdIname is net ofiname taxes.

(c) Indades an allocation ofammen plant in servkr and A FUDC.

Theaavmpnying No'n to Consoli/atd FinancidStatements are an integralprt ofthh schdule.

=

l w

ITES TO CONSOUDATED FINANGAL STATEMENTS iwspe Gas and Clartric Campany theyars enJalikrrmber3/. JWV.1% Sand 1957 h

k]j;[

Note 1: Summary of Significont Accounting Policios The CPUC authorizes the use of balanc6g accounts

"; 3 which reduce earnings fluctuations from changes in

(

j Accounting records The accounting records of sales and most costs of providing electricity and gas. The Pacific Gas and Electric Company (PG&E) are kept in balances of these accounts represent anmunts that will-accordance with the Uniform System of Accounts pre-be recovered from, or repaid to, customers by adjust-scribed by the Federal Energy llegulatory Commission ments to future customer rates.The CPUC reviews the (FEllC) and adopted by the California Public Utilities reasonableness of the amounts in these accounts.

Commission (CPUC).

Plant in scrrice The costs of plant additions, includ-Principles of consolidation The consolidated finan-ing replacements of plant retired, are capitalized. Costs

/(-

cial statements include PG&E and its wholly owned include labor, material, construction overheads and an and majority-owned subsidiaries (the Company). All allowance for funds used during construction ( AFU DC).

significant intercompany transactions are eliminated.

AFUDC is the cat of financing the construction of Major subsidiaries are: Pacific Gas Transmission new facilities. EffectiveJuly 1988, financing costs of

. Company (PGT)-transports and sells natural gas capital additions for the Diablo Canyon Nuclear Ibwer -

outside California: Alberta and Southern Gas Co.1,td.

Plant (Diablo Canyon) are calculated under Statement

( A&S)- buys gas in Canada and arnmges transport of Financial Accounting Standards (SFAS) No. 34, to the U.S. border; Pacific Energy Fuels Company Cyitahhation of/ntmsi Cost, since Diablo Canyon is no oweioped and (PEFCO)-finances the purchase of nuclear fuel longer on a cost based ratemaking basis. (See Note 2d through issuance of its commercial paper; PG&E Costs of depreciable retired utility plant plus removal implemented a g

_ gg; g g g

g g,

, g

,gg l

C*mP *'* SUI *'Y subsidiaries of PG&E, including PG&E Resources tion. Property maintenance, repairs and minor replace-pre; rom for Company (PG&E Resources) which acquires and ments and additions are charged to maintenance expense, operates oil and natural gas production properties.

mzter readers Alberta Natural Gas Company 1.td ( ANG), an Depreciation For financial report ing pu rpmes, depre-which has affiliate of PGT, owns and operates a pipeline in ciation of plant in service is computed using a straight-rssulted in on 88 Car,ada, which transports natural gas for A&S to the line remaining-life method. For federal income tax parcent reduc.

U.S. border. The investment in ANG, a less than purposes, the nmst liberal depreciation methods allowed

tisn in accidents 50Lowned affiliate, is accounted for by the equity by the Internal Revenue Code generally are used.

method of accounting.

etmpany $23,000 Revenues Revenues include billings to customers, income tax return that includes subsidiaries in which i

in 1989 com.

accrued unbilled revenues and changes in regulatory its ownership is 80% or more, income tax expense presd 101988.

b3 anc ng accounts, includes the current and deferred income tax expense llefore 1987, rewnues were recognized as customers resulting from operations during the year. Deferred

^ * * *

were billed throughout each month.'Ib match revenues income tax expense is provided on most of the major 8*r h/m and expenses more chisely, effectiveJanuary 1987, the timing differences between financial statement and se,,,

Company began accruing revenues for service provided income tax repmting, to the extent permitted for rate-l hut unbilled at the end of each month, making purposes. These timing differences are item.

ized in the deferred tax section of Note H. Although the l

tax effects of mat major timing differences are deferred, -

others are recorded currently. Timing differences for which there are no deferred taxes include certain capitalized overheads, percentage repair allowances, I

u

excess depreciation for state purposes, and removal costs Noncash investing and financing actis ities include tual federal tax depreciation on propert3 acquired mereases of $50 million and $48 million in 1988 and prior to 1981. At 1)ecember 31,1989, the cumulative 1987, respectively, in capital lease obligations, primarily net amount of these differences was $2.1 billion for for nuclear fuel. (See Note 6.)

federal purpises and $2.5 billion for state purposes.

The Compan3 expects to recover the tax effects of these Reclassifications Prior years' amounts in the consoh-timing differences in future rates. Invest ment tax credits dated financial statements have been reclassified u here are deferred ami anmrtized to income over the life of necessary to conform to the 1989 presentation.

the related propert3

= mq f Note 2: Diablo Canyon IJebt premium, discount and related espense l.ong-term debt premium, discount and expense are Rute case settlement In 1)ecember 19S8, the CPUC amortized over the lite of each issue. Gains and losses approved a settlement of the Diablo Canyon rate (ase.

A on reacquired debt are amortized over the remaining The settlement, effectiveJuly 1988, adopted alternative original hves of debt reacqmred, consistent with rate-ratemaking for Diablo Canyon by basing revenues making. Effective July 1988, gains and losses on reac-primarily on the amount of electricity generated rather quired debt alkicated to 1)iablo Canvon are recognized than on traditional cost based ratemaking. In approv-m income.

ing the settlement, the CPUC explicitly affirmed that heped and Di blo Canyon costs and operations no longer should intentories Nuclear fuel mventorv is stated at the be subject to CPUC reasonableness review s. The CPUC imp.m.nted l

lower of cost or market. Amortization of fuelin the cannot bind future commissions in fixing rates for n.w pionnine reactor is based on the amount of p>uer generated.

1)iablo Canyon,but to the extent pernatted by lau criteria f or trans.

As required by federal law, the t.S. Department intends that this decision remain in effect for the full "f Energy (IX)E) is responsible for the future storage term of the settlement.

mission and sub-and disposal of spent nuclear fuel. The cost of these The settlement provides that certain costs of Diablo section f aciuti.s.

act vities is funded through a one-tenth of one cent Canyon aggregating $; 45t> bilhon after tax will con-noving $7 mlHion fee on each kilow att-hour (ku bl generated by all nuclear tinue to be recovered, meludmg a full return, through in ono y.or.

power plants, including Ihablo Canyon. This fee is base rates. Other than these and decommissioning deposited u ith the IX)L. The cost of nuclear fuel, costs, Diablo Canyon no longer meets the criteria for m,_

including the spent fuel fee, is recoverable through the application of SFAS No. 71, circoundng/br t/w E.gecn o/

" " ' " ^ ' " " '

Diablo Canyon settlement revenues. (See Note 2.)

Certain 7) pes o/Rmdadon. Consequently, application i* sh-Other inventories are valued at average cost except of this statement was discontinued for Diablo Canyon sm -

for fuel oil, u hich is valued by the last -in first-out effective July 195S.

(l.lFO) met hod uww w, in 1985, as a result of the settlement, the Company charged to earnings approximately $8l milhon of Oil urulgas evploration co3ts PG&E Resources uses Diablo Canyon revenues previously recorded but uncol-the successful efforts method of account mg to deter-lected through rates, as well as approximately $150 mine the profits and losses on nonregulated oil and gas million of htigation and other Diablo Canyon costs.

exploration, desclopment and production.

Pricmg Under the settlement, revenues are based stati ment of consolidated cash flows Cash and on a pre-estabbshed price per ku h consisting of a fixed cash equivalents include special deposits, working funds and short -term unestments (at cost u hich approxi-mates market L N

)TES TO CONS 000ATED RNANGAL STATEhENTS <cna-o 1\\xo)ic Gas adElktsc Comany 6

).A 1%

component and an escalating component.The total Redeemable preferred stock without mandatory

@g Q price for 1989 was 8.34 cents per kwh, effective January 1.

redemption provision ($25 par) is subject to redemption, j

Total prices for the years 1990 through 1994, effective in whole or in part, if the Company pays the specified

'3 January 1 of each year, are 8.93 cents,9.6 cents,10.34 redemption price plus accumulated and unpaid divi-1 cents,11.16 cents and 11.89 cents per kwh. For 1995 dends to the redemption date. Per share information is:

through 2016, the escalating component will be adjusted by an inflation factor. During the first 700 hours0.0081 days 0.194 hours 0.00116 weeks 2.6635e-4 months of ses,

A maid,w/<=>

h/rveiw r s

full power operation during the peak period in June 436%in8.2%

yi.09 io $2.05 725.75 to 528.125 through September, the price is 130% of the stated 9% to 10.46"o 52.25 to7:.615 525.85 o 7 8.50 f' f ~ ~ L amount to encourage the Company to utilize the plant y

during the peak period. Ileginning in January of each Preferred stock with mandatory redemption provision I

' ' g: %

year, during the first 700 hours0.0081 days 0.194 hours 0.00116 weeks 2.6635e-4 months of full power operation

($100 par) consists of a 9% and a 10.17%eries, each outside this peak period, the price is 70% of the stated entitled to a sinking fund providing for the retirement V

amount. At all other times, the price is 100% of the of stock outstanding at $100 per share plus accumu-stated amount, lated and unpaid dividends. The total redemption cost.

l.

excluding any accumulated and unpaid dividends, for Decommissioning costs Since 1987, the CPUC has each of the years 1990 through 1994 is $13 million.

l granted the Company $33 million in annual revenues in addition to sinking fund retirements, the 9%

to pmvide for the future costs of decommissioning series, and after August 14,1993, the 10.17beries, may l

nec.iv.d com.

Diablo Canyon.This amount is based on an estimated be redeemed at PG&E's option for $100 per share plus Pony comm n-g g g, dations for rigor-1985 dollars), which includes a contingency factor of premium under specified circumstances.

ovnty contromns 50% for expected changes in regulatory requirements Preferred stock dividends are cumulative. All shares and waste disposal cost increases. Decommissioning of preferred stock have equal preference in dividend casts and inu.ai. -

costs will continue to be recovered through base rates and liquidation rights. Upon liquidation or dissolution In0 P.roting gg g gg g

g

H W '"'Y As of December 31,1989, approximately $149 ndllion the par value of such shares plus all accumulated and l

through r..n.go-had been deposited in an external trust fund to be used unpaid dividends, as specified for the class and series.

' elated controc,,

for the decommissioning of Diablo Canyon and was Note 4: Long-term Debt included in funds held by trustee in the consolidated balance sheet. Funds may not be released from the i mai om.

trust fund until authorized by the CPUC.

Mortgage fmnds The first and refunding mortgage bonds of PG&E are issued in series, bear annual h.ad i.ctric Note 3: Preferred Stock interest rates ranging from 4.25% to 13% and mature f acum.: m from 1990 to 2022. Additional bonds may be issued up

"" d * "" d Nonredeemable preferred stock ($25 par) consists of to a maximum total outstanding of $10 billion, assum-iacumes.

a 5%, a 3.5%, and a 6 eries, which have rights to ing compliance with indenture covenants for earnings n;m,cu annual dividends per share of $1.25, $1.375, and $1.50, coverage and property available as security.The inden-s espectively, ture requires that net earnings not including deprecia-l 3.

tion and interest be equal to or greater than 1.75 times the annual interest charges on PG&E's mortgage s<mm 1

a m

]

30

londs outstanding.The ikiard of Directors of PGkE l'he Company's obligations for such demands are may increase the amount authorized, subject to CPL'C secured ly irrevocable letters of credit w hich can be approval. All real properties and substantially all wr-drawn on at anytime until 1996. Any bornnvings result-I sonal properties are subject to the lien of the indenture.

ing from use of the letters of credit would rnature in Stock representing PGk Ei investments in subsidiaries 1996. PG&l' has additional loans with the agency is pledged as collateral for PGkla mortgage bonds, totaling $423 million with interest rates ranging from PG&E is required by the indenture to make semi-6.25% to 8.8759b and maturitier, from 2007 to 2018.

ant ual sinking fund payments on l'ebruary I and These loans are secured by PG&la mongage bonds.

August i of each year for the retirement of the bonds.

The payments equal b of 1% of the aggregate lended Repoyenent schedule For the 3 cars 1990 through indebtedness outstanding on the preceding November 1994, the Companyi combined aggregate amount of 30 and May 31, respectively. Bonds of any series, with debt maturing and sinking fund requirements, as of certain exceptions, may be used to satisfy this require-December 31,1989, is $62 million, f104 million, f169 ment, in addition, holders of Serier,84 D bonds matur-million, f 338 million, and f174 million.

ing in 2017 have an option to redeem their bonds in 1993.

PGkB continues to reacquire high-cost debt w hen Note 5: Short4erm Sorrowings it is economical to do so, in 1989, PG& E reacquired fl61 million of its outstanding long term debt with Short term borrowings are principally commercial interest rates ranging from 12?h to 14"u, at a redemp-paper with weighted average interest rates of 10.1% and perf ormo n,. f e, tion premium of $25 million.The premium is amor-9.7% at December 31,1989 and 1988, resswetively.The tized over the remaining original lives of the debt usual maturity for commercial paper is 10 to 90 days.

mniured '983ai' reacquired. EffectiveJuly 1988, the portion alkicated to PG&E has a f 750 million revolving credit facility factors itab.

Diablo Canyon is charged to income.

agreement to supiort the sale of commercial paper and in January 1989. PG&E issued f 200 million of for other corim.rute purposes. PEFCOi conunercial ush.d jointiy Series 89A mortgage bonds et 9.95%, to mature in paper issued to finance the purchase of nuclear fuelis by tho company R bmq 2022. Proceeds from these bonds were applied supported by a $250 million revolving credit facility and the union.

to construction expenditures and to the redemption, agreement guaranteed by PGkE. PEI'COicommer-orinhom eom..

repayment, or retirement of debt or preferred stock.

cial paper also is guaranteed by PG&E The Company is in compliance with all covenants associated with out a portect 100 IblIntion amtrulloan ogreements PGkE has hians both agreements.There were no bornnvings outt,tanding

'"'"* *"*"'Y from an agency of the State of California to finance

@nst either of these facilities at December 31,1989 Inden and a 122 air and water inllution control, and sewage and solid A&S maintains a $35 million(Canadian)line of on the preduc.

waste disposal facilities. In IWS, PG&E borrowed credit with a bank to support the sale of commercial

$925 million to refund existing loans with the agency, paper for take or pay payments on gas contracts. PG&E tivity inden.

Interest rates on the $925 million in loans varv desvnd.

has executed guarantees to assume liabilities not to ing on u hether the loans are in a daily, weekl,i, com-exceed $350 million on commercial paper and a bank G" -

mercial paper, or fixed rate imxte. Conven, ions from line of credit for A&S to cover take or pay bornnvings, one mode to another take place at PG&Ei option.

(See Note 9.) A&S also maintains lines of credit with Average annual interest rates ':r 1989 ranged from 6.3"5 to 6.6% These loans ac e subject to redemption by the holder on demand under certain circumstances.

l l

n

ITES TO CONSOUNTED FINANOM STATEMENTS ~ a An Ga aus I./ nim ( own

,46 g

%.y, "M M four banks totahng $2I mlhon tCanadiani for operu.

The plan's funded status wat i

' [N tiont 4 of Decernbet il, IW9, Akb had no sigtuficant borrou ings outstanding agaitist either of these lines

/ b* i 1989

/40 L-pg of eredit.

In themaw V'

Tbc Compum pan fees to the bank, for credit k"'"""'I"*'"""'"'"'I""3""'""

fat ihtit' and uthet banking sen n es.

benefit obhrations

\\ ested tv nrhts

$2,003,3h5 f 1,"",000 Neto 6: Nuclear twel Loose Nornented hencho 127,67t>

14 4.' l I buniulated beneht obbganon 2,l31,261 1,Vi l,'l I IMI. leased nuclear fuel froni l'acific 1.nergy 'Irust I.ffect of om.irt ted futun (PI'T) under un agrectnent that uns tertmnated m

'""4""'"""""'"*""

March lW9. l. case paritietits were based ori the cost of P'"irded I" ncht ohhganon 2 M6,2tb 2 '2iE

'i 7

~

Plan awet> at nearket s stor 3,075,207 2,4 li,'Os the nuclear fuel used phis the daily Iltlunce chat ges on I'l!!"s tiet itivestmerit in nuclear Iuel during the perimL Pronvud lu nrht oMganon in tu t u olihm tbam Nuclent fuellease expelises were $% inilhon atKI o

(96,989) lhi,lD9 filU tmlhon,includitig interest of $21 milhon und iIl l'ntn ogniyrd pno, wn in < mi (4,247) tmlhoti, in 198b and 195', respectiveh. The carn ine l'orn orinied net gain 306,741 t i"9

% alue of tioclear fuel under capital lebe, net of accumo-l'"'""gniird nd o%gunon

( W3,%

iN.Wi lated amorttiatton o( f 4d1 million, was $212 inilhon as

%u rord penuon hutuhn 5 34,602 f ilW mano,,, p n, ion of De(ember 11, lONb.

f und on well es In March IVK9, l'l.I'CO putt hased Pl..I..

.bsutuptmns used to calculate the projected benefit krennun-d " "' '"" d mg mvestinent in the nuclear fuel lease. The acquisit'""

obbganon to determme the plan's fundt J status were:

cost was (manted b the issuntice of coturnercial papet.

established f or 3

mniuol decom.

I'l I CO continues to fmance the acqmsition of nu(Irai N@d couge diwount rau 7M k. 0"-

fuel through the issuance of its comtiirrcial papei.

Rait o,p,oiectedtuiurr

'"'"'*"'"8

t her Note sa coninen'anoninoruw' 6M

^0*

nusloor power P an'S-Note 7: Retirement Plan end Posteetirement Benefits Plan assets ate composed prunar.lv of conunon stocks, l

fixed income securities and real estate investments.

5,m o&..

pany pros ides a defiiied Tlie unrecogiiized net obligation is britig atiiottired in n

IW r, l. o o.. e benefit retitement plan cosermg substantially all mer approxunately th years employees. The returment benefits ate based on yean Net pension cost, usmg the projected unit credit

,,a-u i, "

ok setTice utid the eniployce's base salan. 'l'he Compa.

actuurial cost ineibod, w as:

n3's fundmg pohey is to contribute each year not more than the tuaximum amount deductible for iederal 1969

!" U

/C income tax purposes and not less than the miturnutu

/r i4+,an contribution required under the I.mployee lletirement sen n r cou tor benefin Incotne $ccurity Act of 14'4.I.he cost of this plan u as earned 8 90,735 f k I,td f 92 bl2 charged to expense and plant m sen ice-Intercia cmi on proirmed bencia obhganon 215,993 2 0", " 2 i s4."4 Retorn on plan aweb

($$2,393) i i21,0Ci 189,04ni Net aniornranon and drier r al 349,742 lh 'in i s].2 ii l

Net penuon cost 104,077 10;.4'4 101.104

( t,wt sil rath ret tr rnirnt befirbb

~

I,Il5 2 Net penuon rosi r n og ro/rd

$ 104,077 1 101.4'4 1 1 %. ' C U

The expected long term rate of return on plan nu.ets hoe si huomehmes used in determining pernion cost was 8.5%,9% and 8?i, for 1989,1988 and 1987, respectively.

The current and deferred components of income tax Effective January 1988, pension benefits for manage-experne were:

ment empk res were based on final three year >' average 3

pay, l'or nonmanagement empk res, the Cornpany 1969

/0AA 1987 3

historically has amended the retirement plan every two la r4.awa,/,

to three yenn, so that pension benefits are based on the Cu nt most current salaries. Subject to colkrtive bargain.

rd 7,0 H f U3M,4 f 3DM ing, the Company intends to continue this practice State 139,975 88,579 111,k35 and therefore future amendments to the plan for non-

.Dital current 596,969 222,443 424,979 management emp,h res have been anticipated and 3

Federal w

s air reflected in the projected benefit obligation and

, jr c

pernion cost.

Italancing ercounts 78,445

(!!,215) 100,229 Depreciation 95,414 223,494 107.143 contributiom in aid Early retirement phm in 1987, PG&E offered an of comtruction (27,708)

(27.100)

(30,741) early tetirement plan to qualified empk res, w hich

,g n;;;m.cntorv 7,912 14,282 (38,924) 3

~

increased administrative and general expenses in 1987 Capitalind inteint on, eta,voral by $87 million before taxch, and ovetheada 0,240) 13,511 (44,246) 1;arly retirement plan 2,630 7,401 (37,790)

P3&t biologists Unbilled revenues (39,599)

(6,433) 4 H,642 f.(fc insurance bcnefits I,he Company provides life Stste tas deductionn (20,173) 15,300 (9,721)

- "U"I"8 inkurance benefits for retired empk res, This benefit cain/h son 3

marine environ-is provided through an insurance company w hose pre, n acquired debt 908 H,216 (2,694) b'

~

C#'

ment around the miutns are based on total claitus paid in the prior year.

}

~

A life insurance plan available to certain managemert adjuume'nt account (446,280) gg, g, employees uses the same actuarial funding methods Other-net (12,532)

(147)

(9,066)

W do w P e er and assumptions as the retirement plan.The annual Total deferred 64,057 (238,385) 172,832 Plant.

contribution is the normal cost plus the amortization imentment tas credits net (11,161)

(7,423) 34,663 3,m, x,,..

of the unfunded actuarialliability,The cost of provid-

.n,g;,,,,,,,

ing life insurance beufits was charged to expense and npense n69,hs5

$ (21,365) f.632,474 plant in service and totaled $2.6 million, f1,3 million and

$2.2 million for 1989,1988 and 1987, respecthrly, ciantification or income insen llcalth core bein its The Company provides health inauded in ointing f

care benefits for retired empk res and their cligible 3,ci$$n other-net 3

4,s )

)

5 )

dependents, Costs are based on benefits paid during included in accounting 77,045 each year.The cost of providing there benefits for change retirees cannot be f cparated from the cost for active Diablo Canyon settlement t 309,547) emplovces. I lealth care costs (in thousands) and the Totalincome in n penw

%69,8h5

$ (23,365) $632A74 number of covered retired and active employees were:

1989 19AS 1987 llcalth care cmts

$92,000

$99,000 587,000 Retired employees 6,400 8,400 N,400 Active empkyees 27,900 28,400 28,900 The cat of health care benefits uas charged to experne and plant in service, 31

WES TO CONS 000ATED RNANGAL STATEMENTS w.m,.-

/h,A (,,. anw/ /./n tm CmAm i L

' j' ?)g$. 9 The differet ces between reported state arid federal for Diablo Cutivon revenues accrued but not collected jI Ti nicome tases utid annourits deternuned on income twfore had been provided m prior yean using historical sam W ia income tas expense bs upply ing the federal statuton mcome tax rutek. In 19Nb, these deferred iticome taxes

>A rate are:

were revenied und the difference between lustorical and present income tus rates u as included m net mcotur.

1949 W

M-hi Ah No. 96, Anws/ing ha /wwme' 7a.st.i. issued in l

/= f4oeau l)ecernher 19I, estabhshed new f4nuncial accounting standards for incorne ta Ats The Company currently is 1.s pec t ed lederal evaluatmg the accout tmg, regulutory and financial int omt tas esprnst unphcahons of hfAh N.o.% wluch nmst be adopted 5

at statuton rate 8 SAA,974 f Ii Fu f ' 2 h. Udt-k Incremst edertenwi by 1992. The Company estiinates that both consoli-in mcome tas ryirn" dated ussets noid habilitiek will increase bs two to three resulong from bdhon ? llan min adophon, as the result of recordmg Investment und additio deferred tuses and the related regulaton other tas credits (24,547)

< 21.02 ; i i 29,u lin Statt llironic tas assets. l Ile ifnpart (in c(inso!iduled liet incolt)r is flot i nri ol leet ey,ected to be innterial.

tienchi i 9ti,225 1 I if A

'4.h 4 I man < ial tutt Note 9: Commitments un ni deptroa

" "I Bogen " lob in depret intion fi9,7k0 l o t 0" t i1Jat-f.apstol eAperuhturca Cupital experiditures for lWO sharing" - s ooe d 6 Ql' t )(

(14,t:29) th.0 to two ute estunated to be upprouninteh !l} Inlhon, con-Rem <n al o mis (t,724) if C 4i C ul2i a*'las ca* 'uH gy p,,,,nno nu go,ggi,

, n,yo,

N 2ni sist mg of f 1.6 bilhon, mcludmg AlTl)C, for ut lity time worblood Lapitahird mterest h,404 hIfd 114.0941 expenditutes, f 109 nulhon for Ihablo Curlyon and f125

( apuuhrrd mdhon for nonreguluted mvestments.

g our heads

( A,ti21) t1l sto i s,..t >,oi pore time IhaMo Lanyon settit ment t IO4. lf Oi

\\otural gas tuka -or-puy contracta AAh,the employoos - os o

( hher - net I,904 1.0C

' 2* ?

Company 's Canadian gas purchasmg subsuhuts has creative, flo alble

'Ioanl un omt in contructed to inake tuke-o'- pa) payments to Canadwn 4 'C "*

I Mb b b I

' I '

4 natural gas producen if it dot s not take certam quanti-response to the ties of natural gas during u contruct yeut. The contracts demands of work int omt brfort mcomt pernut make-up of the prepaid gas and provide for

' n r 4* n' <

81.570 513 f l ^ 2 83.'20 9"1 and tomnv

n. indium m of ukom mne d m& g of l.Het int in ratt n oi.d the gas prior to the espiration of the contracts is tiot

,,, i g,,

Total advances b Akh io producers as of imi 3

<,= w. a,. = - u-t,

,mr

,n r y_,

un umi ce Decender u. m. mere f a mdhon Advances ume-n.,n i.m w,,,

m ltubuthed b) Ahks pas cust(linen are fit aficed b) sborI*

n. u...a.. u-term borrow mgs. PG&l: has executed guarunters to The 198s effective tax rate uas affected prnnard b) assume liabihties not io exceed iHo milhon on com-3 the l hablo Canyon settlement. Deferred mcome tases mercud paper und a standby bank kne of credit for Akh to cover takt-or-pay boriou mgs. t$ce Note U e

m 44

t Stoc* Option Plan The Company has a Stock Option tion date. Ilouewr, such amt represents a return of the Plan (Plan) to grant incentive ar.d nonqualified stock benefits the Company received through its purchases optiora with asociated stock appreciation rights (sal (4 from WAPA, which were paned on to ratepayen at that and dividend equivalents to key management empkiyees.

time. The Company believes it is entitled to renwer in A total of 1.5 million shares of the Companyi com-

' retn nuts of energy resold toWAPA.

mon Stock was authorized for award under the Plan.

Costs anociated with the Plan are not recoverable Qualifyingfacilitics (Ors) Under the Public Utility in rates, llegulatory Iblicy Act of 1978, the Company is requiral During 1987 through 1989, nonqualified options on to purchase energy and capacity produced ly Ql's.The

,,,3,,,,

322,630 shares were granted at option prices ranging CPUC established a series of power purchase agree-from fl6.75 to #26.63. Option prices were the market ments which set the applicable terms, conditiorn and

'neler**s price per share on the date of grant.

price options.

. u,. in S.

The options expire ten yean and one day after the Under the pourt purchase agreements, sellen receive date of grant, and become exercisable on a cumulative payments for the energy delivered at a calculated

,,,,,,,,vany ond buis at one third each year commencing twoyean rate equal to the Company \\ own marginal nuts for C * * ' d * * * '" * *

' from the date of grant. Options also twcome exercisable constructing new facilities or purchasing power, or at tred. rick W.

upon retirement or death. As of Decemtwr 31,1989, forecasted rates negotiated in the individual agree-m ih..><.A..,d.

optiora on 72,996 shares were exercisable. No optiora ment. The total nut of the QF purchase payments is or SARs have been exercised.

renntrable in rates.

ni knc Mas Approximately f 857 million,5338 million and Poe.s Het shls i n.,,g n., fw,cr Adtninistmtion (il AIM) energy f 360 million was paid to QFs for 12,973 million,9,387 y.or's recipi.nus agreement The Company has an agreement with million and 6,718 million kwh of energy and aunciated WAPA to purchase energy from them and resell it io capacity in 1989,1988 and 1987, respectively, them upon their request. The energy under contract has been purchased by the Company from WAPA at Neee 10: contingencies favorable prices based on WAPAi cost of generation.

That energy must be sold back toWAPA at a price 11clms PumpedStomgc Project (llclms) iIrlms, equal to the Company \\ current thermal production which was delayed due o a water conduit rupture in cost at the time of delivery to WAPA leu the Companyt 1982 and various start up problems, became commer-savings that traulted from the purchases at the lower cially operable in 1084.

WAPA prices.

The total amt of the project as of Ikccmber 31,1989 The contract will expire in 2005 As of December was $969 million, of which $716 million is in rate base 31,1989, the nut to the Company to return the amount and $22 million was disalknved ly the CPUC The of energy currently available toWAPA wa approsi-Company was granted recovery of an additional 531 mately $412 million, auuming WAPA requests the million of costs in the 1990 general rate case.The return of all the energy prior to the contract's expira-remaining $180 million is not in rate bue and therefore is not earning a return on investment.The Company currently is seeking renwery of the majority of these t:

I

'M.

b-

RS TO WNS000ATED flNANGAL STATEMENTS <c...at Itm& Gas e.a!IJaem Com)vny y

,y costs through litigation. Any costs then remaining w ill With rnpect to property darnage at Diablo Canpn, W

he subtnitted to the CPUC for recovery in rates.

the NN11,cmtrage is limital to $500 million and an The CPUC has indicated that PG&l will bear a additional f1.5 billion of exens emrrage is provided heavy burden of pniofin establishing the reasonable.

by N1.11.11 and the nuclear insurance industry pools.

ness of thne costs. In addition,if PG& F. seeks to ncmtr The maxnnum industry liability for third party these costs in rates, the CPUC intends to consider an claims r.,.ulting from any nuclear incident is $7A billion offset to rnrnun to reflect lost or deferred capacity per incident under provisions of the Price Anderson benehts due to the delay in commercial operation.

Act. In the nrnt that a nuclear incident results in public in its IWS llelms rate case decision, the CPUC liability claina in excess of f 200 million, PG&F,is E

derbned to include in ratn the rnrnun accrued dur.

sulicct to a reinstwetive assessment of up to f63 million ab ing the time lleinn was out of service for the modifica-lwr inciderit for each of its two licerned reacton, riot tion and repair of the generators.Thne revenun and to nceed !10 million per reactor Iwr calendar year with related interni amounted to $53 million. PG&l'. w ill payments in ncns deferted to the nut calendar year.

be alkmrd to file a separate application for recovery in addition,if the sum of all public liability claina and after claims against thini partin are resohrd.

legal costs arising from any nuclear incident neceds The Company believn that it in entitled to recover the maximum amourn of financial protection, each in rato all Ileinn costs not recovered through claina licensee nn be assessed an additional 5'0 (f 3.2 million) or litigation and that any revenun or costs disallourd of the maximum retnywcrive assessment for each of an an.. u.,

by the CPUC would not have a significant impact on its licensed reactors.

I II"*"#I"I * I' I"" "' "I "I "P"'"'i""

I I:r ev., a2 y. ors.

G.eothermal steam contracts litigatwn In January 6P:nds mot.

3 uclear inmrance PGkl5 is a inember of Nuclear 1987, two lawsuits were filed against the Coinpany thsn 60 hours6.944444e-4 days 0.0167 hours 9.920635e-5 weeks 2.283e-5 months o Slutual 1 imited (NN11.) and Nuclear l'.lectric insur.

relating to the sale of geothermal steam to the Com-month volonn.,.

ance 1,imited (N1:II,I and 11). In the event of proiwrty pany for use in the generation of electricity at the damage to a nuclear plant of a memtwr utility or Company's Geysen, Geothermal Ibwer Plant, in total, in, g,a,s,,,

increased cost of replacement ixmtr due to a prolonged the lawsuits claim damagn in ncess of f120 million scouts.Co..ndy accidemal ounge of a memtwr mility's reactor unit, for breacho of contract.The Company has filed a eniss-en me.a coundl PG&E may be sulicct to maximum assosments of f 55 mmplaint requesting damages in ncess of $37 million.

vics pr.sident, million (property damage) Or 59 million (replacement The Company plans to defend these lawsuits pmver) in each case per policy gwrimb if hisses neced vigmously and believn that the ultimate outcome of mioped premiums, rnents NNil., NEll,I or NEll. Il resounts.

this matter would not have a significant impact on its

"*"r *P* dol j

financial position or results of operatioin.

progroms, i

1 Udium Mlow f) male caneen Malau, 1%w lue skaan hay IAfwh A wsh l

l l

4 l

1 r

1 1

i IIRChydrocircrricrelicensing Federallegislation has challenged El Pasol pmposed alloet. tion of these amis.

has eliminated any preference for governmentally run The Company began payments to U Paso in utilities in the relicensing of hydroelectric projects.

January 1989, and as of January 1990, had paid approx-i Certain governmentally nm utilities previously had imately $21 million in direct billings.The Company i

challenged the Companyt relicensing of three hydro-has applied to the CPUC for rate recovery and believes l

clectric pnjects, that the ultimate outcome would not have a significant The nnv law requires the Company to pay these impact on its financial position et resuln of operations.

challengen a" reasonable" settlement consisting of their asts incurred to punue the licenses and a potential 1:nvironinentalcleanup enutters The Company further amount ranging from 0% to 100% of the Com-currently is assessing measures that may need to be taken, panyi remaining net inver.tment of approximately principally at retired manufactured gas plant sites, to

$126 million in the pmjects. In return, the challengers comply with environmentallaws and regulations.The are required to withdraw their competing license probable costs of these measures cannot be deter-applications. hettlement negotiationti are taking place mined at this time due to uncertainty as to the extent of and a tentative agreement has been reached for one environmental risks and the Companyi responsibility, project. The other two projects currently are proceed-the complexity of environmental laws and regulations ing toward eventual FERC hearing. The Company and the selection of alternative compliance approaches.

expects to recover settlement nuts for each project Ilowever the Company expects to recover in rates nets v: tune..r.d through rates.

not recovered through insurance and believes that the ultimate outcome would not have a significant impact wuh indian nom.

Take-or pay liabilitics The Company has a service on its financial position or results of operations.

muniti.s in the agreement with El Ibso Natural Gas Company (El nsrthsen port of Paso) for the purchase of natural gas. Under a FERC a v,.2,,ic.,,,.

order, El Paso may recover take or-pay settlement costs from customers, subject to refund. As a result, the Company estimates that it could be assessed over f100 24-hcur h.atch million in fixed costs over tbree years. The Company f reility, improv.

(h3 dsm.stic wot;r system for tha fuolumn.

L Ror.cherlo, b gtn drug and alcohol s buss progroms and erout. cul-turst programs f tr indian youth.

ikunk flenJrnis Centow Mar Reperveratiw (tfulic Asurdi V

TOfI&OENTMI8illACCOUNTANTS 1%cs& Gas andEhcork Compey M1n 4

h! y To the Shareholden and the lloard of Directon of also includes assessing the accounting principles used j

Pacific Gas and Electric Company:

and significant estimates made 1 management, as wrli 7

as evaluating the overall financial statement presente-We have audited the accompanying cornolidated tion.We believe that our audits provide a reasonable balance sheet and the statement of consolidated capital-basis for our opinion.

ization of Pacific Gas and Electric Company (a California In our opinion, the consolidated financial ststements corporation) and sutsidiaries as of December 31,1989 and schedule of consolidated segment information and 1988, and the related statements of consolidated referred to above present fairly, in all material respects, income, cash ikws, common stock equity and preferred the financial position of Pacific Gas and Electric stock, and the schedule of consolidated segment infor-Company and sutsidiaries as of December 31,1989 and mation for each of the three yean in the period ended 1988, and the results of their operations and cash ikws December 31,1989.These financial $tatements are for each of the three yean in the perirxl ended December the responsibility of the Company \\ management.

31,1989 in conformity with generally accepted Our responsibility is to express an opinion on these accounting principles.

financial statements based on our audits.

As discussed in Note I to the consolidated financial We conducted our audits in accordance with generally statements, effective January 1,1987, the Company accepted auditing standards.Thcme standards require changed its method of recognizing revenues to accrue that we plan and perform the audit to obtain reasonable for service provided but unbilled.

assurance about whether the financial statements are free of material misstatement. An audit includes exam-ARTilUR ANDERSEN & CO.

ining, on a test basis, evidence supporting the amounts San Francisco, California and diseksures in the financial statements. An audit February 2,1990 RESPONSIBillTY FOR FINANCIAL STATEMENTS 1tucupc Gas and Llatrk Cemyny The responsibility for the integrity of the financial extent they consider necessary in order to support their information included in this annual report rests with opinion on the consolidated financial statements.Their management. Such information has been prepared in auditon' report contains an independent informed accordance with generally accepted accounting princi-judgment as to the fairness, in all material respects, of pies appropriate in the circumstances, and is based the Company \\ reported results of operations and on the Companyt best estimates and judgments after financial position, giving consideration to materiality.

In a further attempt to assure objectivity and remove PG&E maintains systems of internal accounting bias, the financial data contained in this report have 5 ormal policies and procedures been reviewed by the Audit Committee of the lloard of f

controls supported 1 which are communicated throughout the Company.

Directors.The Audit Committee is compcmed of five These controls are adequate to provide reasonable outside directon who meet regularly with management, assurance that assets are safeguarded from kss or the corporate internal auditors and Arthur Andenen unauthorized use and to produce the records necessary

& Co., jointly and grately, to review internal account-for the preparation of financial information.There are ing controbd auditing ed finanewl reporting matters.

limits inherent in all systems of internal control, based The Company maintains high standards in select-on the recognition that the costs of such systems should ing, training and developing personnel to ensure that not exceed the benefits to be derived.The Company managemen*'s objectives of maintaining strong, effective believes its systems provide this appropriate balance.

internal controls and unbiased, uniform reporting in addition, the Company's internal auditors perform standardi are attained.The Company blieves its poli-audits and evaluate the adequacy of and the adherence cies and procedures provide reasonable assurance that to these controls, policies and procedures.

operations are conducted in conformity with applicable l

Arthur Andenen & Co., the Company's indepen-laws and with its commitment to a high standard of dent public accountants, review and evaluate the business conduct.

n Company) internal accounting control systems to the

IARTBlY CONSOUDATED RNANGAL DATA a.as,,,,o nualic ca,and Urrtrk Csmpny Quarterly financial data for the four quarters of 1989 stock exchanges.There were approximately 287,00()

9 and 1988 are shown below. Due to the seasonal nature commou sharehoklers of record as of December 31,1989.

j of the utility business and the planned refueling outages Dividends are paid on a quarterly basis, and there are for Diablo Can,wn, operating revenues, operating no material restrictions on the present ability of the g 3 M

income, and net income are not generated evenly by Company to pay dividends. In the fourth quaner of 1988, t

quarter dur;ng the year.

the Company charged to earnings $576 million after The Companyi common stxk is traded on the New tax for the Diablo Canyon rate case settlement and for York,l'acific, london, Amsterdam,llasel and Zunch wiious ncn-Diablo Canyon adjustments.

4th

.tn/

2nd 1st o

In tken nands. rurftpr sharr amen.*s 1989 Operating revenues

$2,146,711 82,245,948 82,086,494

$2,109,111 Operating income

$ 296,437 5 475,876 8 430,479 8 419,766 Net income 5 102,975 8 317,022 8 236,193

$ 244,438 Earnings per common share S

.18 8

.69 8

.50

.53

?

Dividends declared per common share

.35 8

.35 5

.35 8

.35 Common Stock price per share Iligh 5

22.00 21.63 8

20.50 18.50 tsn* wine bl, low 18.75 8

19.50 17.50 S

17.25 sin's inj ury in o tregia drunk.

Operating rewnues

$2,043,571

$1,966,016

$ 1,766,565

$1,869,596 driving oundent.

Operating income 5 290,085

$ 388,685 5 318,403 5 300,199 kgtn a serlos of Net income (ku)

$ (461,644) $ 240,649

$ 146,454

$ 136,668 tziks to hlgh Earnings (hu) per common share (1.19) $

.53

.30

.28 Dividends declared per common share

.35

.35 5

.48

, g i,,,,,,

Common stock price per share

""d h* " *"'

liigh 18.38 17.50 16.13 18.00 tinutd efforts for lxnv 16,63 15.00 14.00 15.13 fiv3 years now.

Also provides suppsrt to tomi.

II:s with men-tally impolted mtmbers.

Ikhn Hatres

.twuk Ekstrebatson Ingrerer (Mw/h Auwrdt

.M --

fliusdant) 1sw@c Gas and LIntri Cmjuny s

G?

krs endalikremkr31 1989 1985 1987 0*l ?

Electric statistics Net area output (millions of kwh) 94,155 91,575 88,444

~4 Net area output-percent llydroelectric plants 11.5 %

9.3%

10.2 %

Thermal electric plants (excluding nuclear) 35.9 42.3 38.2 Nuclear plants 16.8 12.5 15.8 Other producers 35.8 35.9 35.8 7btal 100.0%

100.0 %

Area capability-mw (at uhnual peak) liydnx lectrie plants (achen,e conditions) 3,895 3,875 3,938 Thermal electric plants (excluding nuclear) 8,995 S,095 9,070 Nuclear plants 2.160 2,160 2,164

,A Other producen (acherse conditions) 8,194 8,917 6,554 3

M 7bral 23,244 23,947 21.726 1

Net area peak demand-mw 17,623 18,490 16,202 Reserves capacity margin at peak-percent 8.8%

7.8%

19.3 %

Annualload factor-percent 61.0%

56.7%

62.3 %

v>*r*. hos b**a Average annual residential consumption-kwh 6,468 6,537 6,489 ectiv.iy inv.tv.d Astrage residential revenue per kw h 9.69C 8.64e 7.80f Average annual residential bill

$626

$565

$506 with the Oakland

'lbtal customers (cud of year) 4,110,000 4,027,000 3,951,000 C*'""'""" Y Plant imrstment per customer

$3,474

$3,520

$3,565 Organisations.

Customen per mile of distribution line 40.8 40.3 40.0 Gas statistics atlehborhood Gas purchased for U.S. operations (thousands of mcf) 756,222 745,606 681,421 groups striving Source of gas purchased-percent l# rom California 11.7 %

15.8 %

18.3 %

ta improve the l' rom other states 39.2 33.0 27.7 0511'y of lif e la girom Canada 49.1 51.2 54.0 7btal 100.0 %

100.0 %

rently serves os "E

E E"

'U U"

l-[ rom Califorma prssident of the

$1.83

$1.69

$1.71 grsup.

girom other states

$2.58

$2.47

$2.16 ti i.s..

17 tom Canada

$2.36

$1.88

$1.87 c.u.- smo, oet, Average

$2.38

$2.05

$1.92

. Ibak day sendout-mmcf 3,430 3,524 3,530 Average annual residential consumption-mcf 67.0 64.0 66.0

' *"* d**#'

Average residential revenue per mcf

$5.28

$4.77

$4.55 Average annual residential bill

$352

$305

$300 Total customers (end of year) 3,372,000 3,300,000 3,245,000 Plant investment per customer

$705

$665

$631 Customen per mile of distribution main 100.4 100.1 100.3

)

Miscellaneous statistics Customen served per employee 286 275 264 Depreciation and amortization as a percent of average depreciable plant Electric 3.6%

3.6%

Gas 5.3%

5.3%

5.7%

PG&E composite (includes common plant in service) 4.0%

4.0%

40

h i

l IM 10M 19M

/W 19b2 198 /

1980 1y79 i

84,633 85,398 84,227 78,879 78,390 80,606 76,747 77,511 17.4 %

13.3%

17.VE 22.9 %

19.9 %

13.2 %

17.3 %

15.3 %

28.7 40.2 36.8 28.9 31.7 48.8 46.0 33.6 14.5 7.6

.3 39.4 38.9 45.0 48.2 48.4 38.0 36.7 31.I 100.0 %

100.0 %

100.UL 100.0L 100.0 %

3,875 3,913 3,723 2,658 2,518 2,517 2,491 2,485 9,171 8,939 8,926 8,923 8,699 8,815 8,694 8,629 2,132 1,073 6.978 6,866 7,561 7,617 6,673 8,732 7.I80 7,307 22,176 20,791 20,210 19,198 17,890 20,064 18,365 18,421 15,439 16,507 16,225 15,I56 13,907 15,542 15.336 15,065 25.7%

11.6%

6.2%

8.8%

9.6%

5.9%

9.05 12.I %

62.6 %

59.1%

59.4 %

64.4 %

59.2 %

57.0%

58.7%

6,343 6,533 6,557 6,386 6,252 6,489 6,535 6,811 7.82f 7.88f 6.75f 6.03f 7.33f 5.77f 5.16e 3.54f

$496

$515

$443

$385

$458

$374

$337

$241 3,855,000 3,761,000 3,686,000 3,594,000 3,546,000 3,515,000 3,448,000 3,366,000

$3,592

$3,407

$3,157

$2,847

$2,554

$2,310

$2,199

$2,032 39.5 38.8 38.3 39.4 39.1 39.2 39.1 38.9 i

586,135 778,318 690,455 621,539 698,166 835,684 781,643 843,381 l

24.4 %

21.95 24.0 %

23.1 %

18.2 %

19.5 %

16.0 %

16.8 %

33.7 39.3 42.4 36.9 45.4 49.2 43.7 37.0 41.9 38.8 33.6 40.0 36.4 31.3 40.3 46.2 1

100.0 %

100.&k 100.0 %

$2.20

$2.88

$3.60

$3.40

$3.09

$2.60

$2.16

$1.74 l

$2.58

$3.61

$3.98

$4.02

$3.54

$2.57

$2.30

$1,79 l

$2.26

$3.14

$4.21

$4.49

$5.14

$4.86

$4.34

$2.61

$2.36

$3.27

$3.96

$4.07

$4.04

$3.29

$3.10

$2.16 3,107 3,603 3,205 3,025 3,133 3,144 3,275 3,398 64.6 75.I 69.6 73.0 78.3 72.7 81.6 90.4

$4.75

$3.38

$3.43

$4.84

$4.39

$3.91

$3.70

$2.37

$307

$404

$378

$353

$344

$284

$302

$214 3,158,000 3,083,000 3,021,000 2,949,000 2,915,000 2,897,000 2,858,000 2,805,000

$595

$555

$500

$471

$474

$475

$467

$450 99.8 98.9 98.4 97.2 96.8 96.9 97.0 97.2 240 231 236 240 249 241 229 230 3.5%

3.6%

3.7%

3.5%

3.3%

3.1%

4.2%

4.3%

4.2%

3.5%

3.1%

3.8%

3.9%

3.7%

3.4%

3.4%-

3.2%

4

(Uus./urnf) 1hqGr Gas sm/ E/utm Cem/wny l'wn cm/n/lkcrearr3/

1989

/VA8 1037 pf in thosunds

'l

)Q Electric departtnent

$jt{ j Revenues Residential 5 2,212,789 5 1,950,125 5 1,711,031 y

"q Commercial 2,289,726 2,083,570 1,955,721 i

Industrial (1,0(K) kw demand or over) 1,032,304 945,893 980,773 Agricultural power 346,982 290,139 239,204 L

Public street and highway lighting 45,210 44,254 40,803 Other electric utilities 90,7%

101,147 122,349 Miscellaneous 50,959 87,120 77,102 Other 4,806 3,854 3,492-Regulatog balancing accounts 142,478 6.763 2,553 7btal electric revenues 5 6,216,050

$ 5.512,865 5 5,133,028 Sales-kwh N

Residential 22,845,271 22,564,697 21,932,544

$j Commercial 24,723,165 23,917,480 22,621,071 Industrial (1,000 kw demand or over) 16,222,496 15,942,700 16,061,922 Agricultural power 3,897,556 3,782,041 3,154,373

. 'yars. h n orgon-Publie street and highway lighting 365,595 349,180 341,909 Other electric utilities 1,711,645 1,981,110 2,446,371 laid fundroising onnts in 7btal electric sales to customers 69,765,728 68,537,208 66,558,190

- a'er* y 'o Gas department bin. fit Hospic.

Retenues Residential 8 1,108,446

$ 936,872

$ 901,326 and Camp Commercial 532,587 467,334 435,618

'""b"'*""'

Industrial 449,526 409,014 299,870 dation arranging Other gas utilities 99,110 68,405 88,861 Miscellaneous (27,713) 108,916 1,073 zumm.r eamp Regulatoy balancing accoums N,M W,Q l W,M

.ap.ri.n.. so, Subsidiary companies (U.S. and Canada) 159,953 124,442 136,922 Gas transport 67,588 60,322 69,155

' *' ""*"Y "I 7btalgas retenues S 2,372,214

$ 2,132,883

$ 2,052,673 rannu.

N*I'* ~ *'l rm,nwaa er Residential 210,116 196,275 197,882 Commercial 101,309 92,671 80,144 t.un.w asww>

Industrial 144,233 143,449 99,719 Other gas utilities 41,551 28,897 46,977 7btalgas sales to customers 497,209 461,292 424,722 PG&E use (prim.irily electrie generation) 227,663 263,588 239,815 Subsidiary companies (U.S. and Canada) 61,862 51,009 46,229 7btal 786,734 775,889 710,766 42

1980 19M 19M 1963 196 :

J061 low 1979

$ 1,U9,108

$ 1,659,401

$ 1,400,148

$ 1,192,997

$ 1,401,267

$ 1,128,851

$ 998,130

$ 693,368

! 918,093 1,952,531 1,580,192 1,326,406 1,530,542 1,233,564 1,067,198 752,359 1,184,217 1,381,346 1,105,750 914,786 1,078,493 860,577 699,073 461,653 220,462 287,226 239,644 157,528 235,164 241,221 212,770 142,727 45,149 46,997 41,970 48,320 53,224 41,498 38,225 30,491 63,915 93.473 99.350 129,992 172,819 117,791 71,926 67,740 73,839 92,737 116,050 40,350 56,256 70,094 58,568 50,i11 3,504 5,305 7,113 7,890 8,008 7,313 5,336 4,115 419,151 300,967 567,948 87,545 1687,171) 204,964 (223,385) 261,281

$ 5,567.438

$ 3,819,983

$ 5,158,165

$ 3,905,814

$ 3,848,602 5 3,905,873

$ 2,927,841 5 2,463,845 20,949,230 21,067,234 20,730,060 19,778,553 19,107,415 19,575,283 19,329,190 19,605,541 21,286,100 21,452,853 20,626,467 19,259,758 18,662,382 18,722,954 18,283,154 17,891,820 15,972,091 17,042,349 16,108,571 14,986,722 15,843.646 16,401,293 14,801,260 15,253,371 2,560,390 3,252,215 3,309,155 2,304,205 2,922,541 3,890,088 3,540,022 3,715,026 344,276 336,736 329,378 339,823 365,119 401,930 431,564 455,445 725,397 1,576,215 2,230,163 3,341,984 3,544,563 2,676,998 1,906,465 2,807,249 61.837,484 64,727,602 63,333 794 60,011,045 60,445,6th 61,668,546 58,291,655 59,728,452

$ 899,039

$ 1,156,002

$ 1,058,99/

$ 972,150

$ 935,996

$ 764,468 5 799,307 5 555,017 435,351 562,590 596,107 651,332 681,520 607,417 626,611 406,497 437,677 800,651 732,875 648,832 712,341 794,786 708,259 499,242 28,962 38,322 37,410 39,202 52,589 158,433 148,074 85,867 976 6,069 3,686 5,469 8,835 2,290 (6,560) 7.128 220,840 (233,064)

(107,521) 91,820 149,817 (276,749)

(133,807) 176,354 207,883 280,428 349,986 332,080 395,395 238,057 189,174 170,519 18,495

$ 2,249,223

$ 2,610,998

$ 2,671,538 5 2,740,885

$ 2,936,493

$ 2,288,702

$ 2,331,058

$ 1,900,624 189,120 214,935 195,092 200,774 213,031 195,631 216,I84 234,295 78,087 89,415 90,027 109,637 124,622 128,758 146,827 143,707 128,854 178,407 137,178 114,310 132,789 171,769 161,060 186JM 9,832 9,247 8,281 8,532 12,021 35,135 34,821 36,013 405,893 492,004 430,578 433,253 482,463 531,293 558,892 600,180 153,566 263,017 242,985 170,773 201,219 280,990 202,964 216,062 56,027 62,184 61,400 69,417 96,330 73,166 72,608 77,411 615,486 817,205 734,963 673,443 780,012 885,449 834A64 893,653 o

JM& Gas emiFlurri Com/wey Q

Roord of Directors' Georted.3fancath Pormonent Committoost Compcuution and ea'3 President, Pacific Gas and of the soord of Directors afanaccment Iwc/op.

}j Ruhan/ A. C/arke Electric Company ment Committer Extrutity Committec Recommends compensa-O.i Chairman of theIk>ard and Chief Executive Officer, 3farv S 3fet Within limits, may exercise tion and empkyee benefit 4

Pacific Gas and Electric President, Mills College powers and perform duties policies and practices.

of the lloard.

Company Reviews planning for l'rrJeri,4 II: 3fic/le.Jr executive development and

//any Af. Conger Former Chairman of the Richard A. Clarke succession.

Chairmanof thelloard and floard and Chief Executive (Chairman)

Chief Executive Officer, Officer, Pacific Gas and Lewis S.Eaton Leslie 1,.Luttgens llomestake Mining Electric Company Leslie L.Luttgens (Chairman)

Richard IL Madden Company liarry M. Conger li'i//em E 31///cr liter A.Magowan Richard ll. Madden Lewis S. l'aton President and Chief George A.Maneatis William E Miller Chairmanof Guarantee Executive Officer, John itM. Place Savings and Loan SRI international Audit C.ommitt<v John C.Sawhill Association (research and consulting)

Reviews financial statements and internal 3jpgy,y Nominating lia 3fichac/ //,yman John R 31. P/,uc accounting and control commjff,y Chancellor, University of Former Chairman of the procedures with indepen-Recommends candidates California,llerkeley lloard and Chief Executive dent public accountants.

for nomination as directors.

Officer, Crocker National 3fchin R Lane Corporation and Ciucker 1,ewis S. Eaton (Chairman) Richard A. Clarke Co Chairman of the lloard, National llank Ira Michael lleyman (Chairman) 1.ane Publishing Company Melvin 11. Lane liarry M. Conger (Sunset Magazine)

Car /E Reichan/t ltter A.Magowan Leslie L.Luttgens Chairman of the lloard and MaryS.Metz Itter A.Magowan Le3/ic I.. I,utigen3 Chief Executive Officer, Frederick W. Mielke,Jr.

I..'"ance C,ommi//'r San I rancisco llay Area Wells Fargo & Company pgmpg community leader and Wells Fargollank, N.A. Recommends long range financial policies and Richan/ R Afadden il'ihon C Riley objectives and actions Chairman of the lloard and President, Wilson Riles required to achieve those h,$'$'n'[7j'2 2

90 Chief ExecutiveOfficer, and Associates,Inc.

objectives.

3:11ccied l'ebruary :1.1990.

Ibtlatch Corporation (educational development (dhersified forest products) and consulting)

Richard A. Clarke (Chairman)

/Wcr A. Afagown John C Sawhi//)

Richard ll. Madden Chairman of the lloard, President and Chief William E Miller President, and Chief Executive Officer, John ILM. Place Executive Officer, Safeway The Nature Conservancy Carl E.Reichardt Stores, incorporated (effective April 1,1990)

Stanley T. Skinner Stanley T Skinner Vice Chairman of the lloard, Pacific Gas and Electric Company

.e

Ikq& Gas andElectrk Comjoy 4

d 1

0 6 S PG&E Officers l'hilip G. llimask Jahn E. Koehn Chief Executive Officers Vice President Vice President of Principal PG&E

-4

Richard A. Clarke General Construction Community and subsidiories and Chairmanof thelloardand Governmental Relations Chief Executhe Officer John C I)anichen Vice President lii7/sm R..ilarotti I resident and Chief l

'Stanhy TMinner Computer and Vice President F.xecuthe Omcer Vice Chairman of Telecommunications Gas and ElectricTechnical PO&E E"P'i

thelloard Services Services Stej> hen !! Reynolds

Gerxe A. Mancath Richan/A 1)nuyer Peter C. Nebon President and Chief President Vice President Vice President Executive Officer General Services MissionTrail Region

Jerri R. Mi1al Pacific GasTransmission ExecutiveVice President RogerJ. Ihnn Jacka/rne1yhnnenstie/

Company and General Manager, Vice President Vice President 73yg,, p j.).,f,y j

Gas Supply llusiness Unit San Joaquin Valley Region Corporate Planning President and Chief Executive Officer

lkna/J A. Brand IXiniel E. Gi/uon GuJon R. Smith Senior Vice President Vice President Vice President Albena Natural Gas and General Manager, Gas Supply Finance and Rates Company 1.id Engineering and Alberta and Southern Construction Robert 11 G/vnn. Jr James B Stontamon.

Gas Co. Ltd.

Ilusiness Unit Vice President Vice President Ibver Generation Gas Transmission and chief Executive officers f Principal PG&E

Gene G. Elam Storage tnewprnses d

Senior Vice President flowan/1: Go/uh ond R ictod o tur Administrative Services Vice President and John 1 A 7bwnsenJ' General Counsel Vice President Jos,ph r lii//sms

liryi/ G. Roar Diablo Canyon Operations President and Chief Senior Vice President 1.dand M. Gusta6on and Plant Manager Executive Officer and General Manager, Vice President PG&E Resources Distribution llusiness Unit Golden Gate Region liiWsm II. lik//.ur Company Vice President

Gnyory M. Rueyer Rohn J. flaywori Engineering Joseph !!Keansey Senior Vice President and Vice President President and Chief General Manager, Electric Ihver Planning and G/on;iS Gu Executive Officer Supply llusiness Unit Contracts Controller The PG&E-Ilechtel

'" " E

""U*"Y

James /1 Shdkr' Thomas ti:llich Jack EJenkinvStark Senior Vice President and Vice President and Treasurer py,,,ff fy igy,c3,y General Manager, Corporate Secretary President and Chief Nuclear lhver Generation Brian IJ/cGnith Executive Officer llusiness Unit G, rant N. Ilonie Assistant Corporate PG&E Operating

\\ ice President decretary Services Company Nonnan I.. Bryan Corporate Vice President Communications Kath'un Ru,ycr Redmxl Region Assistant Corporate

** b" M *"* F **"'

John C Revicr Secretary Committec Grotye E Chhun. Jr h..ce Pres. dent

'F.Henke February 1.1990 i

Vice President Sacramento Valley Region Ju/n R. Fork East llay Region Assistant Treasurer 1

Ruur//11. Cunningham Vice President Iluman Resources y

AREN0l0ERIMORMTION 1U$ Gsu ond Llwmt Compey

$horeholder Services PG&E's Dhidend nowtoCoun/une olvidend noinvestment Office Reinvestment Plan. Also,

.-lawn /3 Plon you recchc alldividend If you want to consolidate You may automatically rein-Ef 77 seole street, s

O

!o payments, annual and quar-39ur separate accounts into vest your dividends from r

i co.CA 94106 a

1 800-3677731 terly reports, and proxy one account,39u should mmmon and preferred stock

~

materials through your contact the Shareholder in new shares of PG&E broker.Therefore,if you Senices office to obtain common stock through Shoreholder Handbook are receiving unwanted the necessary forms and the Companyi Dividend

- PG&E has prepared a duplicate mailings, you instructions.When accounts Reimestment Plan.

helpfulshareholder's hand-should contact your broker, are consolidated, it may if you hold certificates book providing informa-not PG&E, to eliminate be necessary to reissue the in your own name (rather tion on the Company's the duplications.

stock certificates, than through a broker) shareholder services, stock you may obtain the Plan certificates, and stock Lost or stolen certificates / /ow to I;/imin.ac prospectus and enrollment transfer systems. Copies are If your stock certificate is Du/>//.ne Muhne form by contacting the t

available from the Share-lost, stolen, burned or in if you want to maintsin Shareholder Services office.

holder Services office.

some other way destroved, more than one account but However, if your certifi-you should notify the eliminate additional mail-cates are held ty a broker Stock Held in Brokeroge Shareholder Services office ings of annual and quarterly (in" street name"), then Accounts (" Street Name")

in writing immediately, reports, you may do so ty 39u are not eligible to par-When you purchase your r.ending the labels (or a ticipate in the Dividend stock and the stock is held moi,lple olvidend check 5 copy of the labels) from a Reimestment Plan.

for you ty the broker,it and Duplicato mailings Company mailing to the is listed with the Company Some shareholders hold Sharehdder Sen ices office, in the brokerk name, or their stock on our records indicating the names you

street name" PG&E does in similar but different widao keep on the m' ailing l

not know the identity of names (e.g. Robert A.

list for annual and quar-individualshareholders Johnson and R.A. Johnson). terly repons and the names L

who hold their stock in this When this occurs, the you wish to delete.This manner-we simply know law requires that we create will only affect these mail-l that a brokerholds a certain a separate account for ingst dividend checks and number of shares which each name. Even though proxy materials will con-may be for nny number of the mailing addresses are tinue to be sent to each

~

l customers, the same, we are required account.

If vu hold,mur stock to mail separate dividend l

3 in street name,39u are not checks and annual and Replacement of olvidend eligible to participate in quarterly reports to each checks account.

If you do not ree-ive,mur dividend check within five business days after the payment date, or if a check is lost or destroyed,39u should notify the Share-holder Senices office so that payment may tie stopped on the check and a replace-ment issued.

46

t i

I l

Stock tachonge Listings shoreholder Servltes Annual Meeting of f

PG&Et common stock If you have questions shareholders is traded on the New York, about pur account or need Date: April 18,1990 I%cific, London, liasel, copies of the Company's

- ',[P.m.

Z0 rich,and Amsterdam publications, please write masonic Auditorium stock exchanges.The offi-to theTransfer Agent at 1111 california street cial New York Stock the address shown beknv or son Francisco, California Exchangesymbolis"PCG" call 1-800-367-7731.

but the Companyi com-If you have general A notice of the meeting, mon stock usually is listed questions about PG&E.or in the newspaper under information contnined P"I "' "' * * * " *". P*I

~

"PacG E" in the annual or quarterly

.'" " "E "" '

The Company has 21 reports, please write to

",", 'f".,',."b i issues of preferred stock, the Office of the Corporate to all shareholders of record.

l f,

most of which are listed Secretary at the address y

on the American Stock shown beknv or call A nport on the annual rnecting will also be mailed i

Exchange and the Pacific (415)973 2880.

to shareholders.

Stock Exchange.

Security analysts, part-Uses odvanced Netrya/vr folio managcts or other 10-K Report he inwst-communicetions, If pu would like a copy of First Preferred ment c mnmnh,sh uld the Company's 1989 Form Cumulative, l$rValue write t the Director of 10 K Report to the Securi-Investor Relat,ons at the m ssonice, i

ties and Et '.n nge Com-

$25 lbr Share Redeemable:

address shown below or cxd now com-10.46 %

PGEpfS mission, please contact the call (415)972 3007, Shareholder Services office.

puter techniques 10.28 %

PGEpfW 10.18%

PGEpfi' to lurease vice President and

(

9 48%

ECE IN P

Corporate Secretory Payrnent Datos servia to shore-9 3(rk PGE ifV I

ThomasW. Iligh c,...

iwfems holders, improve 9.28%

PGEpfj 7711eale Street, Room 3205 Stuk Stae cmpf f yeo Ep San Francisco,CA 94106 January 15 February 15 productivity, and P

April 15 May 15 l

8.167.,

PGEpfk.

Transfer Agent i

3"I IS

^"E""' IS

d"'''

f 8.00 %

PGEpf0 Daniel T.1.amey October l5 Nownk l5

'Wim 7.84 %

PGEpfM Shareholder Services rn.p,i,,

5.00%

PGEpfD 7711cale Street, Room 2600 5.00% Series A PGEpfE San Fmncisco, CA 94106 4.80 %

PGEpfG 4.50%

PGEpfH Director of 4.36%

PGEpfl 8"'*5' R*l3*"5 Nonredeemable:

Kent M. Harvey l

6.0(rk PGEpfA 77 Ileale Street, Room 835

- 5.5(Yk PGEpfil San Francisco, CA 94106 5.0(15 PGEpfC

$100 First Preferred,

"*8' " S'**k First Interstate Ilank Cumulative, Par Yahie i Califorma

$100 Itr Share 345 Calif rnia Street 10.17%

Unlisted San ivancisco, CA 94104 9.00 %

Unlisted 47 --

i 65%RNGTERRITORY I

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O 4:j l'G&E provides natural ies in the world-larger D' M d 8 "l*rladu *id 6d=*-1

j gas and electricity to th6n the economics of W

11.3 million geople in one Australia, the Netherlands, la N vaut of the nation's most scenic or Switzerland.Just as and prosperous regions important, the region has

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California. Our 94,0lKl-the rest of the U.S. economy.

[i square mile service terri-This solid and steady g

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in the north to llakersfield in a single word: divenity.

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l in the south and from the Our service territoryl Pacific Ocean in the west prosperity does not depend y

s to the snow capped Sierra on a single industry or a Nevada in the east.

single product. Instead, o

Standing alone, the area the arcai economy rests on

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