ML20052G711

Annual Financial Rept 1981

ML20052G711
Person / Time
Site:	San Onofre
Issue date:	05/14/1982
From:	SAN DIEGO GAS & ELECTRIC CO.
To:
Shared Package
ML13310A719	List: ML13310A718 ML20052G704 ML20052G711 ML20052G720 ML20052G730
References
NUDOCS 8205180595
Download: ML20052G711 (37)

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eaum San Diego G,as & Electn.e Annual Report 1981

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Contents Financial Illghlights 1

Letter to Shareholders 2

1981 Review 4

Management Overview Operations.

12 Finance.

14 Customer Service 16 Management Changes 18 Financial Section Selected Financial Data 19 Management's Discussion 19 and Analysis Auditors

• Opinion

.21 Financial Statements

.. 22-27 Notes to Financial Statements

.28-31 Infonnation on Effects

... 32-33 of Changing Prices Financial Data

. 34 Stock Prices and Dividends

.35 Ollicers and Directors

.. 36 Stock Transfer Agents

.37 San Diego Gas & Electric Company is an investor-owned public utility that 9enerates, purchases and distributes electricity to nearly 800,000 customers in San Diego County and portions of Orange and Imperial Counties in California. It also purchases and distributes natural gas to more than 500.000 customers in San Diego County.

The company headquarters are located at 101 Ash Street, San Diego, California 92101. The company's common stock is traded on the New York and Pacific Stock Exchanges.

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To Our Shareholders Results improved stbstantially million, compared with 8190 mil-qualifies for federal tax benefits un-for your company in 1981. Earn-lion in 1980.

der the Economic Recovery Tax Act ings increased to a recon! 82.34 per Net income, before preferred divi-of 1981. Individual shareholders, conunon share, much Letter than dend requirements, totaled 8110 from now through 1985, can rein-in any of the last three years when million, compared with 852 million vest dividends in new SDG&E carnings were depressed.

In 1980.

common stock and exclude up to In addition to higher carnings.

There (vere several reasons for 8750 (or SI,500 0n ajoint return) of other factors ir dicate that we are the improved financial results. The this amount from their federal tax-now in a stronger position to deal fundamental one was our ability to able income.

successfully with the uncertainties manage more profitably in 1981, At its organizational meeting in of the 1980s.

with more realistic rates, more effi-April, the Board of Directors elected For example, there are clear in-cient use of manpower, and more Robert E. Morris chairman of the dications that the regulatory cli-cilicient plants.

board and chief executive ollicer of mate for California utilities, while By tightly controlling expenses, the company. Ile had served as still demanding. has nevertheless we came close to earning our au-president and CEO since 1975.

improved. The California Public thorized rate of return. This was a Thomas A. Page, who had been the Utilities Conunission's recent dect-significa n t accomplishment, executive vice president and chief sions reflect a more realistic view of achieved in spite of lower than ex-the problems facing us.

pected sales, higher interest rates In fact, the CPUC made three de-and general inflation. For the year, cisions of critical importance to we earned 11.21 percent return on your company. They were:

rate base, compared to our autho-o A 896 million general r ite in-rized rate of 11.36 percent.

Revenues crease effective January 1.1981.

In addition we completed a sale un minior..,)

that helped improve carnings of surplus land which contributed 1977 ssat i last year.

13 cents per share to earnings.

3973 goi4 o A 81GG million general rate in-In 1981, S4.6 million was added II979

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874 crease clicctive January 1,1982, to the reserve which had been es- {MWmM tgeo '

t eseo, that will help meet rising costs tablishalin 1980 to cover probable and achieve further improvement losse wng from oil exchanges in carnings.

wP tt a:ed Petroleum Distribu-Net Income 4 tlc original reserve de-Un minions) o Approval to proceed with the 1980 carnings. The com-1977 860.2 Eastern Interconnection, a tr.m w

mission line that will allow us to pm.

!apted the conservative 1978 866.8 import cheaper, coal-fired powet position (A enlarging the reserve in r~-

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2j generated hi Arizona and New 1981 in order to cover the entire Mexico.

UPD receivable. This decreased leep.

Mees.1 The transmission line will be a 1981 earnings by approximately 8

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key element in our program to di-cents a common share. The com-Dividends versify sources of power and de-pany is vigorously pursuing legal 3.g g j

crease dependence on oil.

action against UPD, and any 3g77 gg3 The improved results were amount recovered will flow to 3978 8I40 achieved in a dlflicuh, recessionary shareholder earnings.

31.4,8, year and imlicate that the com-In August, the Board of Directors ;1979 pany's financial position is being again increased the annual divi- % [ " ^ # " T $, l Q strengthened. Operating revenues dend on common stock by 8 cents a yy. 'gg' rose to S1.16 billion, up from 8960 share, to a rate of 81.68. As the million in 1980. Operating ex-company's financial results con-Earnings Per Share penses rose to S1.02 billion, com-tinue to improve, we hope to re-pared with 8860 million in 1980.

commend dividend increases that 1977 s2.32 Revenue from the sale of clee-will more fully offset the effects of 1978 82.02 T

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tricity totaled 8947 million for the inflation.

IIN97 in 1980, was modified to provide common

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year, compared with 8770 million The dividend reinvestment plan

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Gas sales revenues totaled 8211 shareholders with a plan that 2

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operating officer since 1978, was crease substantially and be limited no reasonable assurance of elected pr sident.

primarily to facilities to serve new completion.

On October 1. Mr. Page succeeded customers. Moreover, a high per-During 1982. our objective is to Mr. Morris as chief executive ollicer, centage of the cash requirements earn the 12 92 percent rate of re-and the basic management fune-will be generated internally, tum authr, Ized in our recent rate tions of the company were Our decision to reduce future case dec'sion which became organized into three groups:

capital spending and to concen-elTective ori January 1.1982.

fl n a n ee, customer service.

trate on electric distribution rather To our caiployees, shareholders operations.

than generation. reflects a funda-and custon.ers, we wish to express Alton T. Davis was elected group mental change in our business our thanks for their loyal support vice president-operations:

approach. It Is a planned reduction through difficult times. This Richard Korpan was elected group of risk. We will not commit to long-company has begun to regain its fi-vice prestfant-finance: and Jack term projects which require capital nancial health. We are dedicated to E. Thomaa who became a group investments in the billions, with completion of that task.

vice president in 1980, continued to head the customer service group.

Elsewhere in this report, the group vice presidents give their

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a five-year financial-operating-

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capital plan. The 1981 earnings im-

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From a capital standpoint, the next two years will continue to be

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for the completion of Units 2 and 3 at San Ono.fre, the Eatdern Inter-

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connection, and additions to our

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require careful management and R.E. Morris T. A. Page monitoring of internal cash flow.

Chainnan cf the Board President and While the two major projects re.

Chief Executive Ollicer quire t apitalin the short term, they are essential to long-ter m financial and rate stability. We must cut our dependence on oil, a task we are committed to accomplish through the expanded use of nuclear and cheaper coal fired power sources.

With the completion of San Onofre Units 2 and 3 by 1983, and the Eastern Interconnection in 1984. our capital needs will de-l 3

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1981 Review SDG&E's operating strategy is to 1981 from both the California Pub-An associated substation and in-reduce dependency on oil. It is not a lic Utilities Commission and the terconnecting 230-kilovolt line will new one. And in 1981, thecompany Federal Bureau of Land Manage-provide access to geothermal moved closer to that goal. Essential ment. Some months before, the Ari-power from Imperial Valley and to the plan is the completion of two zona Corporation Commission had from Mexico. Engineering work is basic projects that will allow diver-approved the section of the line under way on this project.

sification and flexibility in provid-within that state.

Another element in SDG&E's ing San Diego's electric supply.

Several appeals have been filed transmission program was com-One is the San Onofre Nuclear with the California Public Utilities pleted June 18,1981. It is a 230-Generating Station's Units 2 and 3.

Commission in opposition to the kilovolt line from Encina Power SDG&E's 20 percent share of these line. The company is confident that Plant to the San Onofre station, two units will add 440 megawatts because a thorough investigation which strengthened the connection of nuclear power to the electric of environmental impacts relating between the company and South-system.

to the project was conducted, the ern California Edison's system.

The second major project is the decision will be upheld. Two and Thislineimproves reliability and Eastern Interconnection, a 280- one-half years of report prepara-increases the ability to transport mile, 500-kilovolt transmission tion and public review were held.

purchased power. Sales of surplus line connecting San Diego with Ari-Under an agreement with Ari-power to other utilities in the Cal-zona. This will link San Diego with zona Public Service, SDG&E will ifornia Power Pool are enhanced coal-fired projects in the Southwest be responsible for all costs of the with this line, as well as the capac-and geothermal power in Imperial California portion of thelineand 89 ity for purchases when economic Valley and Mexico, percent of the Arizona portion.

conditions warrant.

llearings on operating licenses When completed in 1984, the During the year, progress con-for San Onofre Units 2 and 3 were Eastern Interconnection will be tinued on the development of geo-l concluded by the Atomic Safety used to bring cheaper, coal-fired thermal resources in the Imperial and Licensing Board. In January power to San Diego from the South-Valley. The Heber Binary Project, a 1982, the board also cleared the west. SDG&E has already con-45-megawatt demonstration pro-way for the low-power license tracted for purchased power with ject, received 811 million in federal which was granted for Unit 2 by the Public Service Company of New funds to be used for design work, Nuclear Regulatory Commission in Mexico and Tucson Electric Power. purchase of turbine generators j

February. It is anticipated that Unit By providing continuing access and other equipment. There are a l

2 will be in operation before the end to coal-fired electricity, this number of participants in the pro-of the year, with Unit 3 scheduled transmission line will enable the ject, with SDG&E designated as for operation in 1983.

company to reduce oil consump-the manager and operator. The The Eastern Interconnection tion by an estimated 5.5 million company's other interests in geo-won final approval in December barrels a y ar-thermal developments include con-tracts to purchase power.

SDG&E anticipates that geo-thermal energy may supply 450 megawatts of the company's power

eeds by 1990, with most of that Fuel Mix and Purchned Power Power coming from geothermal ny hnent of Kilowatt ifour Output g

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.i ' e The nation's natural gas supply

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'MM4 federal price deregulation of newly-o 10 20 ao ao 50 00 70 so 90 goo discovered gas.

Sales of natural gas by the com-pany, including interdepartmental Od

& Gas Nurlmr nmle sales, Were nearly 891 million therms, up slightly from 1980. A 4

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significant amount of this gas was vious high by 63 megawatts. Dur-an Il-year period. Unit l's operat-burned as electric power plant fuel.

Ing this period, SDG&E was able to ing record is one of the best in the The gas used for electric production continue olT-system sales of nearly nation for a nuclear power plant. It was much less expensive than im-300 megawatts.

is also better than most oil and ported oil. Its use has helped hold During August, the average coal-fired plants. With the repair down the cost of electricity.

availability of generating units at work now completed, it is antici-The gas division continues to Encina, South Bay and Silver Gate pated that Unit I will contribute an plan for the addition of new cus-power plants was 96 percent. On increased percentage to the 1982 tomers and the future growth of the the record-setting day, only 1.6 per-electric supply.

gas system. One major p'roject is cent of the company's generating expansion of the Moreno Com-equipment was unavailable.

Regulation and Rates pressor Station near Riverside The maintenance program has More adequate and timely rate from 7.700 to 12,500 horsepower.

saved consumers more than 891 decisions were a key element in The use of new technology has million in fuel costs during the past SDG&E's financial improvement permitted the relocation of some eight years. It has boosted the in 1981. Recent decisions reflect a major gas lines without curtailing company to the 24th most ellicient more realistic understanding by service to existing customers. Sev-electric utility among 100 U.S. in-the California Public Utilities Com-eral such relocation projects were vestor-owned utilities, according to mission of the need for a financially undertaken to accommodate con-a survey conducted by Electric healthy company to benefit both struction of new office parks and Light & Power Magazine. This is an investor and ratepayer.

residential subdivisions.

increase from a 72nd ranking in In 1982, for the second consecu-1973.

Power Plant EfHelency tive year, general rate relief cover-The contribution of nuclear gen-ing costs other than fuel became An extensive and ongoing power crated electricity remained below effective at the beginning of the plant maintenance program, be-the 2 percent range, due to the un-year. With rates in elTect which re-gun in 1972. became a major asset availability of San Onofre Unit 1.

ilect current costs, the company in 1981. The results of this program The unit was shut down in April of has an opportunity to earn its au-enabled the company to meet a ree-1980 for repairs to its steam gener-thorized rate of return.

ord electric demand, while continu-ator tubes. The repairs and retrofit The decision on the 1982 general ing sales to other utilities which work, newly required since the rate case was made on December were short of capacity. This added Three Mile Island incident, kept the 30,1981, when the commission to the company's revenues and unit out of service most of 1981.

approved an increase of 8166 mil-carnings.

The plant's capacity factor was lion, effective January 1,1982. A 1 tot weather created the record 20 percent for the year. This com-16.25 percent return on conunon power demand of 2.113 megawatts pares with the accumulative unit equity was authorized. The overall on August 27. exceeding the pre-capacity factor of 73 percent over rate of return on rate base was set at 12.92 percent.

Two innovative procedures for mg d Ms e mum in ou sales (excluding interdepartmental sales) un mitoons of thenns) the 1982 general rate decision. One is a revenue adjustment mecha-

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6 81 A second new procedure is the Hyqdd. daw %4hwedaa.mAAAdwAWm ggMiegenc "

authorized attrition allowance for L fW.a aunM I8 1983, with rates to be adjusted on e.wtric sale

• January 1,1983. The allowance un tons of kwhrs)

Wld Mll k bad on 1977 8.93 an indexing mechanism for opera-(1978 "

N 9As ting and maintenanceexpenses.

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13.25 percent to cover the inciease able to synchronize CAM rate bonds in July, $49 million in capital costs associated with the filings with those of our supplier.

2 million shares of common proposed issuance of new debt and Southern California Gas Company.

stock in September, S23 preferred stock.

By hearing both cases together, the million The general rate inereasc also in-commission has been able to 1.3 million shares of cluded S22.5 million related to authorize our rate mereases simul-preference stock in October, provisions of the Economic Recov-taneously with those of our sup-834 million.

ery Tax Act of 1981 (ERTA). The plier. As these increases become Common stock sales through the CPUC modified rate-making pro-larger, due to the deregulation of dividend reinvestment plan and to cedures so that the company can natural gas, the elimination of a lag the company's savings plan real-benefit from tax reductions time in rate relief becomes more ized proceeds of S12 million.

generated under ERTA. Previously, and more important.

The 1982 financing program the reductions were immediately In 1979, the CPUC stated that it opened with the sale of 3 mtDion flowed through to customers in the would order management audits of shares of common stock in Janu-form oflower rates. The new pro-the major California utilities. State-ary, netting 836 million.

cedure spreads tax benefits over wide, the PG&E audit has been The company is attempting to the life of the plant and equipment, completed, and the audit of Pacific open a significant new avenue for thus reducing the company's need Telephone is under way. In Febru-financing major construction with for borrowed funds.

ary 1982, the commission, follow-the issuance of industrial develop-The company currently files ing its announced intention, or-ment bonds (IDBs).

three times a year to adjust fuel dered a management audit of If completed, this type of finane-costs related to ciectric generation. SDG&E. The company welcomes ing would offer a sizable cost The procedure, referred to as the this opportunity to assess its advantage for SDG&E and its Energy Cost Adjustment Mause strengths and to identify areas customers. The bonds are issued (ECAC). allows SDG&E to sa rate where improvements can be made. through a governmental agency, adjustments to offset increases or The audit, which will take several such as a city, and the interest paid decreases in fuel costs. The first months to complete, will be made to bondholders is tax exempt. Con-two are normal pass-through pro-by an independent firm selected by sequently, the interest rate is lower ceedings. The third ECAC hearing the commission.

than that of first mortgage bondsby is a review of management prac-The CPUC has worked effectively as much as 3 to 5 percent. The sav-tices regarding fuel purchases and to reduce the regulatory lag associ-ing on a $100 million bond issue sales, fuel mix, plant reliability, ated with rate relief. Ilowever, the could amount to between 83-5 mil-power purchases and related process is still a demanding one. In lion per year over a 30-year period.

matters.

1981, a total of 270 days was spent Preliminary approval has been A major improvement in the pro-in actual hearings, consuming given by the City of San Diego for ccedings was instituted in 1980 valuable staff time during and in financing part of the Eastern Inter-when ECAC requests became preparation for the proceedings.

connection and San Onofre Units 2 based on forecast data rather than

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Obtaining cap tal is working to meet al1 requirements historical data. This more ac.

curately reflects fuel costs, and Construction expenditures, with necessary to qualify for this tax-ex-minimizes major swings in balanc-a consequent need for outside capi. empt financing.

Ing accounts trom undercollections tal, will remain high until 1984 to overcollections.

when San Onofre Onit 3 and the Customers L)uring 1981, the company was Eastem Interconnection transmis-During the past decade. SDG&E able to pass on three major fuel re-sion line are scheduled for comple-has had to cope with extraordinary lated reductions to its electric cus-tion. Financing requhements will customer growth. In 1977, a total of tomers, totaling 882 million.

be met primarily through the sale 16,888 new gas customers were The CPUC also moved to expedite of stocks and bonds.

connected to the system. This was rate proceedings associated with External financing in 1981 con-the highest ever in any one year.

wholesale natural gas costs sisted of four issues of securities. to-The number of new electric custom-tbrough a Consolidated Adjust-taling 6129 million. The issues and ers added in any one year peaked ment Mechanism (CAM). This is a net proceeds to the company wcre: during the same period, with balancing account rate filing which 2 million shares of common 37,529 new connectJons.

is made twiec a year.

stock in April,823 mt!1 ton Subsequently, the growth rate Dming 1981, the company was 850 million in first mortgage has slowed, but it still remains a s

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significant challenge requiring ments, save fuel and help custom-Commercial and industrial about 850 million a year in capital ers control their energy costs.

energy audits also achieved signifi-Investment to expand the distribu-A key conservation program for cant savings. Big Bear Super-tion systems.

residential customers is the llome markets will save 475,000 kilowatt New electric customers added in Energy Audit. This is an in-home hours a year at one outlet by put-1981 totaled 19,471. During the survey of energy uses, with a com-ting doors on open cases and elim-same period. 9,667 new gas cus-puMrized analysis of elTective, eco-inating 103-horsepower cooling tomersjoined the system. At year nomical ways for customers to equipment. A second store reduced end, total electric customers num-save. During 1981. SDG&E audi-freezer capacity and shut coolers bered 792,400, and the number of tors visited more than 13.700 down briefly each night, saving gas customers totaled 513,683.

homes to conduct this personalized 350,000 kilowatt hours a year.

Only moderate growth in the service.

Dwing the year,1,600 energy au-number of residential customers is Additional assistance in conserv-dits were completed by SDG&E expected in 1982. Commercial ing energy is offered through representatives 1n the commercial /

growth will be higher, despite the educational brechures and pamph-industrial sector. Yearly savings recession, reflecting a continuing lets The company also o!Ters 8 per-are estimated at 35.625,000 kilo-expansion of San Diego's economy. cent financing to help residential watts. As important is the nearly The reorganization of the cus-customers insulate their homes 7,500 kilowatts in electric use tomer service division, emphasiz-and achieve even greater energy shifted to off-peak hours.

Ing decentralized service centers, savings. A free weatherization pro-started in 1980 and became more gram is designed to help customers Cogeneration and Solar operationally effective during 1981. with low incomes.

Akin to conservation is the con-Activity focused on improving de-Load management programs are cept of cogeneration, which saves livery of customer services and im-emphasized as a way to keep the energy by utilizing heat for electric plementing energy conservation peak demand for power down. For generation and other purposes at programs.

example, one program encourages the same time. SDG&E has a Seven service centers are now in swimming pool owners to set pool higher percentage of company-operation throughout the service filters to operate during off-peak pe-owned cogeneration than any territory. Each center brings a full riods. Another program promotes other utilltv in California. The com-range of customer services to the the use of electronic devices de-pany has fivt plants on its system neighborhood it serves.

signed to automatically shift air with a capacity of 62 megawatts or Conservation mndiu n ng and w tu heatus oiT-2.4 percent of total system capae-peak. The company installed 3,165 ity.

SDG&E conducts a wide-ranging of the electronic peak shift devices Durmg1981 SDG&Eannounced number of energy conservation on equipment in homes and busi-plans to participate in a project s

programs to reduce load require-nesses during 1981.

that will use photovoltaic cells and solar energy for a pioneering cogeneration facility at the liotel cas customer.

del Coronado. The installation will on thousandst 4

supply hot water and electricity.

1977 462 SDG&E also is evaluating 1978 477 advanced solar heating and cool-ing syskms at a mad sh near

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Ilue will change the way we operate.

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The Eastern Intercoimection will the company and to its customers 1

change the way we operate more by getting more energy out of the than any other project we have fuel we use. Although the average Alton T. Davis planned because it will shift our age or our generating facilities is 19 Gnmp Vice President-system away from the baseload years, we have steadily improved Operaftons production of electricity to its pur-plant elliciency during the past de-chase and distribution. Our pres-cade. The direct benefit has been a Horrt Newark, Neto Jersey,19J7.

ent plants, with the exception of $91 million saving in fuel costs nuclear, will be called upon to since 1973. An additional benefit Graduate, U.S. Naval Academy.

Lieutenant U.S. Navy, weapons provide aur peaking and nwerve re-has been our ability to sell surplus specialist. Joined SDG&E in quirements.

power to other utilities.

Tht interconnei tion will provide Our challenge now is to focus on 1968 as associate engineer, rose to become ofce president of the 8"" UICN".with access to the lower long-tenn strategy while ensuring cost coal-bred energy of the South-successful completion of near-tenn

' gas dinsion in 1976. Received an MHA degreefrom Pepperdine west. It will also pennit considera-objectives. We are not building gen-University In 1977. Named to U"" "I CC""*nics inherent in joint crating plants in this decade, and present post in October 1981.

operation of. our electric system we know some of our older, less efh-with other utilities. We are cur-cient facilities will have to be re-rently studying the feasibility of placed. We know, too, from past ex-Operationally, SDG&E's strat-such an anangement with 'lheson perience we will have lo continue to egy for the "l80s is to be as flexible Electric Power Company in which plan for contingencies that will af-as possible h. "end to focus the we would use Tucson's less expen-feet our operations. Toward this company's resources on an effi-sive coal-fired power as the base end, we have created a high level cient system that relles on a highly source of electricity for both sys-Resource and Operating Commit-diversified energy mix.

tems. The power we generate in the tee to ensure our operating system Our near-tenn objective is to re-San Diego area would supply the and nwources are linely integrated duce our reliance on high-cost oil spinning reserve necessary for for maximum clTiciency.

as a boiler fuel. In 1977, oil peak periods. This arrangement Obviously, none of this is possi-provided about 73 percent of our between the two utilities will re-ble without loyal. dedicated, pro-electricity requirements. In 1981, it quire some years of preparatory fessionally competent people. I had dropped to 41 percent, and we work before it can be implemented believe we havejust that, and we expect to cut this to about 20 per-but has the potential for saving mil-plan to enhance their effectiveness cent by 1985.

lions of dollars in operating costs Ihrough continued training and lly then, nuclear power from San each year.

modern management techniques.

Onofre will provide 25 percent and in the meantime, we cannot rely Our goalis excellence in all facets natural gas another 20 percent.

solely on purchased power. To of our operations.

Purchased coal fired power from maintain llexibility, we look for the Arizona and New Mexico, and geo-completion of San Onofre Units 2 thermal power from projects in and 3 within the next two years.

Mexico and the lmperial Valley will SDG&E has a 20 percent owner-provide nearly 35 percent. New ship in the nuclear project. South-n

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the 1975 80 period, and will add than three times the total an-N.AT. b NM. " ~~, g -. J anothec S1 billion by 1985. There nual interest the company pays.

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capital budgets: high customer two times coverage ofinterest pay-k d @%

growth, inflation and the need to ments impairs the company's abil-

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ity to borrow long-term debt at W

The capital requirements of re-reasonable cost. The 1982 rate in-cent years have been financed at crease and the positive effect of the 4-K VM g?,

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2 curities and with a credit rating The third objective is to increase f ' 2gh.

% _ d.$ quarter of the utility industry.

k-that placed SDG&E at the bottom the conanon stock portion of our total capitalization, including

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The intense competition for capi-leases, to 40 percent or more. Addi-tal is likely to remain. So, if we are tional equity will reduce the risk as-Richard Korpan to meet our service obligation to sociated with a higher level of debt Group VIce l' resident-Finance customers and provide sufficient and its fixed costs in the capital return on investment to share-structure. Somc headway has been ik>rn Urbana, Illinois,1942.

holders, we must be financially made. We expect to meet this objec-Graduate, Nortfuvestern strong. A financially strong utility tive by 1984.

University with US degree in is not a luxury, but a necessity.

The fourth objective is to in-husiness administmtion.

Recognition of the need to crease the portion of construction Received a JD de strengthen SDG&E's financial expenditures paid for by internal of Dencer Law Sc' gree, Universitif hoolin 1967, position led to the development in generation of funds from nearly 25 Joined Public Service of Colorado 1979 of a five-year. five-point finan-percent to 40 percent or greater.

two yerus later. Came to SDG&E cial plan. The primary goal is to re-When this is accomplished, the as treasurerJanuary 1979.

gain an "A" bond rating. With an company will have less need to use improved bond rating, the com-costly outside financing. Increased We are pleased about earning pany will save millions of dollars in internal generation of funds, cou-S2.34 for 1981 because it's positive interest on future financings-pied with reduced construction evidence that our plan for financial savings that will benefit both programs, will make improved improve ient is working. We want shareholders and ratepayers.

financial results easier to achieve our shareholders to know that we Our five-year plan has five and sustain.

are not satisfied with what has specific objectives:

The final objective in the plan is been achieved. We intend not only The cornerstone of the plan is the to maintain dividend growth. Your to sustain 1981 results, but to do objective of limiting cash spent on board of directors has increased considerably better in 1982.

construction each year to 10 per-the dividend in each of the last five The company recognizes that im-cent orless of the total capitaliza-years. It is our intent to producc proved financiai results and tion of the company. We believe 10 sufficient earnings to allow regu-cifletent management of expenses percent is the maximum annual lar dividend increases, keeping are mandatory if we are to be sue-growth rate that can be supported SDG&E common stock a competi-cessful in the '80s. We are deter-with reasonable rate increases and tive investment alternative.

mined to manage expenses so that still allow steady financial You can be assured that SDG&E the company has a real oppor-improvement. We don't expect to is committed to the successful com-tunity to earn its authorized return achieve this goal until 1984 be-pletion of the live-year plan, which on equity of 16.25 percent. The cause of heavy spending in 1982-is aimed at rebuilding the financial timely rate relief we accived cifec-83 for construction of the Eastern integrity of your company. We be-tive Jan mry 1,1982 will help.This Interconnection, completion of San lieve that your company is posi-will git us a full year of rates that Onofre Units 2 and 3, and main-tioned to reach these objectives, more nearly reflect today's operat-talning and improving our present and move through the 1980s and ing expenses.

plant and distribution system.

beyond as a fiscally sound, well-The challenge will continue to be The second objective is to im-managed utility and an attrac-capital requirements. The com-prove earnings thefore taxes and tive investment opportunity.

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7;MT With today's pricing. for the liist employees have become much g$w hM.d time ever, customers havt to bud-more closely identified with the 4d

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y grows and becomes more complex. of these objectives requires astute we have had to become more auto management, along with the in-

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E cies. As we use more computers employees. Fortunately, we have

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A-ers becomes inore impersonal.13ut of telephone inquiries have in-4b.

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we must not lose sight of the creased, w e have improved our human relations aspect ofour busi-ability to iespomi. Atone time.cus-ness.

tomers had to wait an average of Jack E. Thomas computers can't deal with peo-three minutes to talk with one of Group Vice President-Custorner ple.. with the human concerns of our customer service representa-Service our business: people can

.our lives. Today, we have turn able to employees do. They are our great-cut that wait to 40 seconds.

Horn Porthmd. Orefpm,1932.

est asset and we must apply this A construction job that required Engineering graduate of Oretum asset to the benefit of our custom-100 inan-hours in 1978 now re-Siute, joined SDG&E us an ers. We have the expertise to help quires only 92 man-hours.

engineer in 1957. Elected a delkrt the impact of rising prices.

In the past we have taken up to corpornic ofre president in 1971, We can help our customers achieve 12 weeks to approve builders' named to head the nem maxiinum efficieticy for every plans for new developments. We customer service group avhen it dollar spent on gas and ch etricity. are currently working on cutting acasformed in 1980.

Conservation is important for that in half.

two reasons. It's the customer's We rely heavily on our employees Our business has changed dra-best means of controlling his own to carry the wmd that our outlook matically in the past decade. The costs. In addition, for a company and attitudes toward customers

'50s atul thc H0s were a golden cra conunitted to avoiding new con. have changed. We are making it for the utility business. We were struction projects, conservation is clear to all compan,y employees able to prodtur a marvelous prod-essential to keep future demand what we me trying to do, how we urt with a declining unit price to down.

intend to get t here, and the need for our custoiners. Gas azul chrtricity Wrognizing that custe ner con-their whole-hearted support if we weie bargains. and customers ree cerns have a higher level ofinten-are to achieve our goals.

ognized this. As a result, they pur-sity than in the past, we have post-We know that if customers are chased great quantities of energy.

tioned our comparty to focus on not convinced we can care for them We became a country of great con-customer service. More than one-at an acceptable level, they will sumers.

bigger, better and al-half of our employees. 2,900 of seek alternatives. We are confident ways more.

5.000, report to the customer serv-that we have the skills and Ihe 1)nring this golden age. utilitics ice group.

people required to bulki a compe weie able to focus on the tech in 1980. we rcorganimt. creating tent and accessible service organi-nological asptws of our business. seven new servkr centers located zation.

t he engineering ami construction o! within the conunumlics we serve.

facihties. And we were the guys in They functwo as miniature dis-winte hats-tribution systems to serve cus-Today, it is more ddlicult im both tomer needs at a local level Within management and customers. We these service centers, requirements have, top shel, created a sacicly for slew seivice, constt uction, ic-where energy is emential. Consu":

palis, billing information and as-cis oced our piodm a mut have uo sistance can be handled faster and i

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l Management Changes New OfHeers Elected E. Felsinger was named manager of the gas division. Felsinger, 34 The board of directors elected fonnerly was manager of the com-four new company ollicers in 1981: pany's South Bay Power Plant.

1981 Revenue Dollar Chris liarlow. 36, was elected James C. IIolcombe, 36, was source vice president of the newly created named division manager of power Information services division, supply, succeeding David W. Gil-

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's all company data processing, wont tired from the company after 12 pn> cessing, and various othee ser-years of service. Prior to his ap-vices. Ilarlow was fonnerly senior pointn ent, llolcombe served as vice president of Adapt, Inc., a San manager of electric operations for

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and computer time-sharing hnn.

R. Unice 1 iska,39, was named Alan J. McCutcheon, 62, was elected vice president-metro manager of Un newly m'ated

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cust mer service administration region, succeeding Alton T. Davis, (11 vision. The new division consoli who was named group vlee dates aH of the company s president-operations. McCutch-customer service, conservation, con has been widi SDG&E since construction management and dis-1947, and was manager of the com-trumtion engineering activntes.

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pany's San Diego (now Centre City)

I iskajoined SDG&E in 1970 and 81.7* Detme sain l

district (br 10 years.

has held a number of positions in 18.2' Gas Sales l

R. I,ce Ilaney, 42, was eh eted customer service since then.

oo.le steam sales treasurer of the company, a post-tion fonnerly held by Richani Kor-Equal Employment m posmon pan, group vice president-Opportunities

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hnance, llaney joined SDG&E in 1972,and was manager of financial For 16 years, SDG&E has re-services mul assistant treasurer cruited and hired talented women prior to his election as treasurer.

and members of ethnic minority Richan! I, Manning, 49, was groups for its employee workforce.

elected vice president-public rela. This company effort as an equal tions, suremling R. Denis Richter, opportunity, allinnative action em-who retired after 13 years of service ployer has as its goal a workforce with the company. Manning, for-that rellects the makeup of the com-merly was manages of public munities the company serves, affairs for Western Oil and Gas As a result, women and minor-Association.

Ities are becoming a stronger and Three SDG&E division nmn-more significant element in the agers were named in 1981. Donakl company's management team.

Gl.7e Fuel &

Purchased Energy 08.4C Other Expenses o7.8C Salaries & nenefits, oSAC Cost of Money 05.lc Depreciauon o2.lc Total Taxes o2.3C Reinvested in llusiness o7.2C Dividends to Shareholders

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Selected Financial Data (in thousands exttpt per shan amounts)

For the Years Endni Dntmber 31 1981 1980 1979 1978 1977 Operating Revenues S1,159,662 S 960,444 S 745,232 S 613,623 S 540,794 Operating income 142,123 100,336 97,233 91,409 83,073 Net income (before preferred dividend requirements) 110,156 52,046 70.166 66,802 60,248 Earnings Per Common Share 2.34 1.01 1.80 2.02 2.32 Dividends Declared Per Common Share 1.64 1.56 1.48 1.40 1.28 Funds Provided from Operations 174,408 102,443 76,025 85,352 39,067 Funds Provided from lemg-Tenn Financing 138,455 155,621 68,482 270,893 172,331 Additions to Utility Plant (Excluding Allowance for Funds Used During Constniction) 209,729 178,141 200,126 200,274 205,489 At Di nier 31 Total Assets 2,179,904 1,980,349 1,782,565 1,540,513 1,413.169 Ixmg-Tenn Debt (Excludes Current Portion) and Preferred Stock Subject to Mandatory Redemption 812.238 817,321 725.078 658,065 657,599 The alsove selectal hnancial data and the following management's discussion and an-dysis of financial condition and results of operations should le read in ninjunction with the financial statemmts. notes to financial statements and statistical data mntained elsewhne in this t rport.

Managernent's Discussion and Analysis of Financial C ndition and Results of Operations LIQUIDITY AND CAPITAL term financing and maturing long-quirements of the indentures. This RESOURCES term debt by issuing equity and will allow the company more debt securities and expects to issue flexibility in the structure and tim-The company's liquidity is a app xima e y mi Hon in ing of utside Snam'ings.

function of its ability to internally equity ami debt financingsin 1982.

The company expects improved generate cash, to access long-tenn security markets and to availitself To finance the purchase of fuel internal cash flow and liquidity as of short-tenn debt credit facilities.

oil, the company may borrow up a result ofits most recent general The sale of energy to its customers to S150 million in bankers' ac-rate decision effective January 1, provides the cash to pay for operat.

ceptances. The company also 1982. The California Public Util-ing expenses, interest expenses, mainthins a nuclear fuel lease ar-itics Commission's decision con-dividends and a portion of the com.

rangement to finance up to 866 mil-tained several important features pany's construction program. To lion of nuclear fuel: as of December in addition to an increasein annual provide financing beyond internal 31,1981, the company was re-revenues of 8166.3 million:

sources, the company maintains negotiating to expand this lease ar-Authorized a 12.92% rate of short-tenn unsecured lines oferedit rangement to S100 million, As of return on rate base and a aggregating 8120 million, all of December 31,1981, the company 16.25% rate of return on which are available to support had a total of $240 million out-common equity for 1982 com-commercial paper which the com.

standing under these short-term pared to 11.36% and 14.50%,

pany issues. As of December 31.

debt lines and the nuclear fuel respectively, for 1981.

1981, the company was in the pro _

lease.

. Established a new electric reve-cess of renegotiating an additional On January 15,1982, the com-nue adjustment mechanism to S30 million in bank lines which pany exchanged S19.8 million ofits eliminate fluctuations previ-will also be available to support sinking fund debentures for first ously caused by actual reve-commercial paper. The company mortgage bonds and eliminated the nues differing from electric rev-periodically replaces such short-restrictive interest coverage re-enues authorized in rates.

19

W Allowed annual deferred taxes of common equity (40.9%), pre-The significant increase in the of $22.5 million under the Eco-ferred stock (15.0%) and long-term cest of clectric fuel refleets nomicRecoveryTax Actof1981 debt (44.1%). If various leases were increased prices in fuel oil and nat-resulting in increased cash to be capitalized and treated as ural gas. In addition, the increased flow, since tax cifects were pre-debt, the common equity portion of cost of gas purchased for resale re-viously required to be flowed the company's capitalization for flects rising costs from the through eurrent1y to 1981 would have been 35.9%. One company's supplier. The company i

ratepayers.

of the company's goals is to in-expects these costs to continue to Authorized a 13.25% rate of crease the common equity portion rise, although such increases are return on rate base effective of capitalization (including leases) expected to be offset by additional January 1,1983 to offset to 40% by 1984.

revenues tbrough the energy cost expected increases in capital adjustment clause for the cost of costs associated with proposed electric fuel and the consolidated 1982 linancings.

adjustment mechanism for gas Allowed an attrition allowance RESULTS OF costs.

for 1983 with rates to be ad-OPERATIONS The rise in non-fuel operating ex-justed January 1,1983.

penses reflects, in part, the impact l

The company continues to ex.

The following table sets forth the of inflation and customer growth, pand its facilities to both meet the amounts of changes in the com-as wellasincreased costs related to 4

increased demand on its system Pany's electric and gas revenues, the company's energy conserva-and to reduce its reliance on oil.

together with the approximate tion programs and increased fran-amounts of increases and de-fired generation. The major chise payments due to higher projects the company has under creases attributable to certain fac-revenues. Income tax expenses in-way include San Onofre Nuclear tors.

creased as a result of higher tax-Units 2 and 3, scheduled for com-able operating income. Mainte-pletion in 1982 and 1983, respec-(Millions or no11arsi nance expense increases also con-tively, and the 500-Kv Eastern For the Years tributed to the rise in other operat-Interconnection scheduled forcom-Ended ing expenses due to an increased December 31 1981 1980 1979 pletion in 1984, which will bring emphasis on maintaining the re-l coal-fired generation from New Electric Revenues:

liability and efficiency of the Fuel cost rate Mext?o and Arizona. On February company's older plant.

IG,1982. San Onofre Nuclear Unit The Allowance for Funds Used Net es 2 received its low-power license deferred:

During Construction, which is not which allows the company to load Energy cost an item of current cash income, in-nuclear fuel and begin low-power adjustment creased for the past threeyeam as a testing.

ot [e

$! ( oj{

j result of the useofa higherrateand Theestimated cash requirements ceneral rate the larger investment in construc-for the construction program are inert ases 77.5 24.8 39.2 tion work in progress,' primarily approximately $277 million for sales volume San Onofre Units 2 and 3.

1982 and S827 million for the changes 12S (2.6) 3R2 The Provision for Exchange Loss period 1983-1985. These cash re.

Net increases 8177.5 $177.4 $124.1 was established in 1980 to provide quirements, as well as funds cas nevenues:

a reserve for a probable loss on fuel -

needed to retire long-term debt and Ibrehased gas oil exchange transactions with rate increases s 25.4 s 27.3 s 13.6 sinking fund requirements (854 United Petroleum Distributors, Inc.

- million in 1982 and 8114 million for "NM**

This $26.0 million reserve reduced the period 1983-1985), will be consolidated 1980 earnings per common share financed with funds generated in-adjustment by 80.53, net of taxes. In July 1981, ternally and the sale of debt and mechanism (20.6) 2G.2 (23.9) equity securities. The company es-inNi partmental an additional reserve of 84.6 mil-li n (80.08 per common share, net timates that internally generated sales (net or coso 20.4 (5.41 4.6 of taxes) was established (see Note funds will provide 20%-30% ofits cencrai rate 8), thereby reserving the total capital needs during 1982-1983 increases 0.3 4.3 2.8 amount on exchange of S30.6 mil-S"I"" 'p*

and 40%'-50% during 1984-1985.

11 n.The increases in tax credits on A uto)

- 9.9 j

' At December 31,1981, the com-non-operating income in 1981 and Net increases 821.4837.88 7.5 pany's capital structure emisisted 1980 reflect the tax effects of these l

l 20

l l

l provisions for exchange loss as liigher average interest rates due It is expected that inflation will well as more interest expense allo-to market conditions and increases continue to impact the company's cated to construction work in of S32.5 million and S135.1 million operations. Successful achieve-progress.

In debt issued to finance the ment of the company's goals relat-Other Income Credits-Net de-company's construction program ing to its construction program and creased in 1981 as a result of and fuel inventory in 1981 and its overall financial stability is decreased interest income on the 1980, respectively, resulted in based, in part, upon receipt of ade-undercollected balances in the reg-significantly higher overall interest quate and timely rate relief. The ulatory balancing accounts. This charges. In addition, during 1981, company has prepared informa-decrease was partially offset by in-the company % regulatory balanc-tion en the effects ofinflation and creased earnings from the com-ing accounts were generally over-changing prices in accordance with pany's subsidiaries including the collected, requiring additional the Financial Accounting Stan-May 1981 recognition of a non-interest costs.

dards Board's Statement No. 33.

recurring gain of 85.2 million The increases in average com-Such information is contained on (80.13 per common share), after mon shares outstanding during pages 32 and 33.

taxes, from the sale of certain land 1981 and 1980 diluted earnings per holdings. In 1980. Other Income share by 80.34 and 80.17, respec-Credits-Net increasal as a result of tively. The company will continue inercased interest income on the to issue common stock to finance undercollectal balances in the reg-its construction program and these ufatory balancing accounts and in-Issuances will continue to have a creased earnings from the com-dilutive effect on earnings per pany's subsidiaries.

share.

Auditors' Opinion Deloitte liaskins & Sells Certified Public Accountants 1010 Second Avenue San Diego, California 92101 To the Shareholders and Board of Directors of San Diego Gas & Electric Company:

We have examined the financial statements and schedules of San Diego Gas & Electric Company (pages 22 to 33) for the years ended December 31,1981,1980 and 1979. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such

other auditing pmcedures as we considered necessary in the circumstances.

In our opinion, such financial statements and schedules present fairly the financial position of the company at December 31,1981 and 1980 and the results of its operations and the changes in its financial position for each of the three years in the period ended December 31,1981, in conformity with generally accepted accounting principles applied on a consistent basis.

DELOITTE IIASKINS & SELLS February 9,1982 21

Ctatements cfIncoma (In thousands except per share airwxints)

For the Ycars Endeel Ikxember 31 1981 1980 1979 OPERATING REVENUES (Note 11:

Electric S 947,440

$769,899 S592,549 Gas 210,985 189,550 151.700 Steam 1,237 995 983 Total Operating Revenues 1,159.662 960,444 745,232 OPERATING EXPENSES:

Fuel and Purchased Energy:

Electrie 580,743 4532,516 331,499 Gas 135,455 130,116 98,847 Transmission, Distribution and Storage 24,806 21,906 20,575 Other Operating 107,630 89,092 75,968 Maintenar.cc 38,368 35,743 31,218 Franchise Payments 23.189 18,870 13,953 Depreciation and Amortization 58,751 53,453 47,592 Taxes:

Property 12,424 13,755 13,159 Federal Income (Notc 3) 25,656 8,069 9.304 State Franchise (Note 3) 6,610 3,246 2,857 Other 3,907 3,342 3,027 Total Operating Expenses 1,017,539 860,108 647,999 OPERATING INCOME 142,123 100,336 97,233 OTilER INCOME CREDITS AND (DEBITS):

Allowance for Other Funds Used During Construction 30,926 24,820 18,033 Provision for Exchange Loss (Note 8)

(4,588)

(26,000)

Taxes on Non-Operating income (Note 3) 24,406 19,801 7,438 Other-Nel 10,372 12,219 3,687 Total Other income Credits 61,116 30,840 29,158 INCOME BEFORE INTEREST Cil ARGES 203,239 131,176 126,391 INTEREST CilARGES:

Long-Term Debt 72,659 63,921 54,657 Short-Term Debt and Other 39,200 29,713 8,770 Allowance for Borrowed Funds Used During Construction (18,776)

(14,504)

(7,202)

Total Interest Charges 93,083 79,130 56,225 NET INCOME (before preferred dividend requirements) 110,156 52,046 70,166 PREFERRED DIVIDEND REQUIREMENTS 18,718 17,643 17,643 EARNINGS APPLICABLE 1D COMMON SilARES S

91,438 8 34,403 S 52,523 AVERAGE COMMON SIIARES OlJ1' STANDING 39,091 34,135 29,230 EARNINGS PER COMMON SilARE S

2,34 S

1.01 S

1,80 DIVIDENDS DECLARED PER COMMON SilARE S

1,64 8

1.56 8

1,48 S(T notes to financial state:Trnts.

l 1

22

Balance Sheets (in timusaruts of Allars)

Halance at Dewinber 31 1981 1980 Assets UTILrrY PLANT-At Original Cost:

In Service:

Electrie

$1,243,258 81.140,838 Gas 260,699 243,588 Common and Steam 28,505 26,545 Total Plant in Service 1,532,462 1,410,971 Plant Ileld for Future Use (Note 7) 50,177 60,280 Constnietion Work in Progress 669,077 538,161 Total Utility Plant 2,251,716 2,009.412 Less Accumulated Depreciation 458,053 418,560 Net Utility Plant (Note 2) 1,793,663 1,590,852 NON-tTrlLITY PLANT-At Cost (Less Accumulated Depreciation:

1981, $80; I980, 378) 11,652 5.I92 INVESTMENTS IN AND ADVANCES 'ID SUBSIDIARIES 27,167 24,517 CURRENT ASSETS:

Cash (including U.S. Treasury Notes: 1981,81,500; 1980,83,250) 6.132 5,338 Receivables (Less Allowance for Doubtful Accounts:

1981, S907;1980,8733):

Customer (Note 2) 86,996 83,639 Other 14,685 23,711 Materials and Supplies-At Average Cost:

Plant Materials and Operating Supplies 30,395 29,449 Fuel Inventory (Note 4) 161,326 135,750 Regulatory llalancing Accounts-Undercollected 12,536 29,021 Other 2,838 3,845 Total Current Assets 314,908 310,753 DEFERRED CllARGES AND OTilER ASSETS (Notes 1,7 and 8) 32,514 49,035 TOTAI S2,179,904

$ 1,980,349 C:pitalization and Liabilities CAPITAllZATION (See Statements of Capital Stock and Long-Term Debt):

Common Equity

$ 672,379

$ 585,786 Preferred Stock (Note 5):

Not Subject to Mandatory Redemption 161,000 128,500 Subject to Mandatory Redemption 85,000 85,000 Long-Tenn Debt (Notc 2) 727,238 732,321 Total Capitalization 1,645,617 1,531,607 CURRENT LIABILITIES:

Note Ibyable to Subsidiary 7,214 14,005 Bank Loans (Note 4) 3,000 50,000 Commercial Paper (Note 4) 40,000 18,000 Hankers' Acceptances (Note 4) 135,500 117,000 Accounts Payable 97,584 90,121 Dividends Ibyable 22,912 18,999

'lhxes Accrued (Note 3) 17,436 15,368 Interest Acenied 24,871 22,263 Regulatory Balancing Accounts-Overcollected 35,449 1,966 Current Portion of Long-Term Debt 54,276 2,883 Other 31,997 45,046 Total Current Liabilities 470,239 395,651 CUSTOMER ADVANCES FOR CONSTRUCrlON 27.970 25,992 RESERVES AND DEFERRED CREDITS 36,078 27,099 COMMirMENTS AND CONTINGENCIES (Notes 6,7 and 8)

TOTAL

$2,179,904

$ 1,980,349 Sm notm to financial staternents.

23

Etatements cf Chang 33 in Financial Positiin (In thousands of dollars)

For the Years Ended Derrmtsr 31 1981 1980 1979 1

Funds Provided:

OPERATIONS:

Net Income (before preferred dividend recluirements)

S110.156 8 52,046 S 70,166 Charges (Credits) to Income Not Affecting Funds:

Depreciation and Amortization 58,751 53,453 47,592 Allowance for Funds Used During Construction (49,702)

(39,324)

(25,235)

IYovision for Exchange 12)ss 4.588 26,000 Regulatory Balancing Accounts-Net 49,968 14,001 (16,383)

Other-Net 647 (3,733)

(115) i Funds Provided From Operations 174,408 102.443 76,025 s LONG-TERM FINANCING:

Proceeds From:

Sale of Common Stock 58,559 64.113 51,891 Sale ofIYeference Stock 34,090 Sale of First Mortgage Bonds 48,678 123,569 Other l>>ng-Tenn Debt 10 1.008 69,617 Retirement of Long-Tenn Debt (2,882)

(33,069)

(53,026)

Funds Provided From tamg-Tenn Financing 138,455 155,621 68,482 OTilER SOURCES:

Customer Advances for Construction 1,978 1,415 3,286 Decrease in Working Capital 116,419 Decrease in Advances to Subsidiaries-Net 8,041 3,144 1,085 Other 1,894 2,879 1,781 Funds Provided From Other Sources 11,913 7,438 122,571 Totai S324,776 S265,502 S 267,078 Funds Applied:

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

S209,729 S178,141 S 200,126 Net Increase in Deferred Charges and Other Assets 407 1,168 5,666 Dividends on Preferred Stock 18,718 17,643 17,643 Dividends on Connuon Stock 64,994 53,955 43,643 Increase in Working Capital 30,928 14.595 Totai S324,776 S265,502 8 267,078 W rking Capital Changes l

(Other Than Current Portion of Long-Tenn Debt and l

Regulatory Balancing Accounts):

Receivables S (5,669)

S 42,049 8 (17,158)

Plant Materials and Operating Supplies 946 7,227 (333)

Fuel Inventory 25,576 63,173 27.939 Short-Tenn 1)cht 13,291 (43,585)

(l10.525)

Accounts Payable (7.463)

(16,304)

(18,565)

' nixes, Interest Accrued and Other 4,247 (37,965) 2,223 Increase (Decrease) in Working Capital S 30,928 8 14,595 S(116,419)

(

SM notes to financial statements.

1 1

24

Etatements cf Chang n in C:pital Stock and R;tained Earning]

(In Ihousands of dollars)

Prtierred Stock Not Subjcet to Subject to For the Years Ended Mandatory Mandau>ry Common Premium Retained December 31,1979,1980 and 1981 Redemption Redemption S,ock (Irss Expense)

Earnings Balance, January 1,1979 S128.500 885,000

$ 137,964

$ 184,562 8157,928 Net income-for year 70,166 Common Stock Sold (3,595,428 Shares) 17,977 33,914 Dividends Ucclared:

Preferred Stock (17,643)

Common Stock (43,643) llalance December 31,1979 128,500 85,000 155,941 218,476 166,808 Net income-for year 52,046 Common Stock Sold (5,281,246 Shares) 26,406 37,707 Dividends Declared:

Preferred Stock (17,643)

Common Stoc'-

(53,955) llalance, Decemin

.n, 1980 128,500 85,000 182.347 256,183 147,256 Net Income-for year 110,156 Preference Stock Sold (1,300,000 Shares) 32,500 1,590 Common Stock Sold (5,029.551 Shares) 25,148 33,411 Dividends Declared:

Preferred Stock (18,718)

Common Stock (64,994) llalance, December 31,1981 S161,000 885,000 8207,495 S291,184 S173,700 Stat:ments of Capital Stock (In thousands of dollars) llalance at December 31 1981 1980 IC:mmon Equity:

Common Swek, S5 Par Value. Authorized 80,000,000 Shares, Outstanding: 1981,41,499,034 Shares: 1980,36,469,483 Shares S207,495 8182,347 Premium on Capital Stock (Less Expense) 291,184 256,183

_13ctained Earnings 173,700 147,256 Total Common Equity 8672,379 8585,786 Pref:rred Stock (Note 5):

NOT SUlkJECT TO MANDATORY REDEMPTION:

CUMULATIVE PREFERRED STOCK,820 PAR VALUE, AUTIIORIZED 1,375,000 SIIARES:

5% Series,375,000 Shares Outstanding 8 7,500 S 7,500 4%% Series,300,000 Shares Outstanding 6,000 6,000 4,40% Series, 325,000 Shares Outstanding 6,500 6,500 4.60% Series, 375,000 Shares Outstanding 7,500 7,500 PREFERENCE STOCK (CUMULATIVE) WITIIOUT PAR VALUE:*

89.84 Series, 160,000 Shares Outstanding 16,000 16,000 87.80 Series, 200,000 Shares Outstanding 20,000 20,000 87,20 Series, 150,000 Shares Outstanding 15,000 15,000 82.68 Series, 1,000,000 Shares Outstanding 25,000 25,000

(

S2,475 Series, 1,000,000 Shares Outstanding 25,000 25,000

_ _S4.65 Series, 1.300,000 Shares Outstanding 32,500

.___ Total Npt Suhject to Mandatory Redemption S161,000

$ 128,500

%Jik!ECT TO MANDATORY REDEMirrlON:

PREFERENCE STOCK (CUMULATIVE) WITIIOUT PAR VALUE:'

S7.325 Series. 300,000 Shares outstanding 8 30,000 8 30,000 88.25 Series. 250,000 Shares Outstanding 25,000 25,000 89.125 Series, 300,000 Shares Outstanding 30,000 30,000

. _ _ jyal Subject to Mandatory Redemption S 85,000 8 85,000

• Authc-1 ed 5.000,000 sharrs total (both subject to and not subject to mandatory redemption).

SM notes to financial stateracnts.

25

Ctatements d Long-Tcrm Debt (In thousands of dollars)

Italance at Darmber 31 1981 1980 FIRST MORTGAGE IlONDS:

3%% Series D Due April 1,1982 S 12.000 S 12,000 2%% Senes E, Due April 1,1984 17,000 17,000 3%% Series F Duc October 1,1985 18,000 18,000 4%% Series G Due October 1,1987 12,000 12,000 4%% Series i1 Duc October 1,1990 30,000 30,000 5%% Series I, Due March 1,1997 25,000 25,000 7% Series J. Duc December 1,1998 35,000 35,000 8%% Series K. Duc February 1,2000 40,000 40,000 8% Series L. Due September 1,2001 45,000 45,000 8%% Series M Due January 15,2004 75,000 75,000 10.7% Series O, Due May 1,1982 40,000 40,000 10% Series 11 Due July 15,2006 45,000 45,000 8%% Series Q. Duc March 15,2007 50,000 50,000 9%% Series R, Due May 1,2008 50,000 50,000 16% Series S. Due March 15,2010 50,000 50,000 13%% Series T, Due August 1,2010 75,000 75,000 17%% Series V. Due July 15,2011 50,000 Total 669,000 619,000 SINKING FUND DEllENTURES:

4%%, Due January 15,1984 8,250 8,625 4%%, Due September 1,1994 14,800 15,200 Total 23,050 23,825 OTIIER LONG-TERM DEllT:

Foreign Term Loans, Variable Rates (13.9% at December 31,1981: 19.3% at December 31,1980),

Due October 25,1983-April 26,1986 35,000 35,000 Term Loan,8%%, Duc May 1,1983-1935 40,000 40,000 Pollution Control llonds,6%% 1977 Series A, I)ue April 1,2007 9,575 9,575 Pollution Control llonds, 7.20% 1979 Series A. Due April 1,2009 5,700 5,700 Other 4,166 6,262 Total 94,441 96,537 UNAMORTIZED DISCOUNT ON LONG-TERM DEllT (4,977)

(4,158)

CURRENT PORTION OF LONG-TERM DEllT (54,276)

(2,883)

TOTAL S727,238 S732,321 See Note 2 of Notes to Financial Statements.

2ti

Schedules cf FinancialInformati n by Segm

nt3 cf Busin;ss j (In thousands of dollars) l The company is an operatir.g public utility engaged in the gcneration, purchase, distribution and sale of electric and steam energy and the purchase, distribution and sale of natural gas. Income taxes and corporate expenses are allocated to departments in accordance with regulatory accounting requirements.

Adjustments Electric Gas Other and For the Year Ended Dewmber 31,1981 Operations Operations Operations Eliminations Total Opcrating Revenues:

Unalliliated Customers S 947,440 $ 167,052 8 1,237 S1,115,729

_Intersegment Sales 167,188 S(123,255) 43,933*

Total Operating Revenues 947,440 334,240 1.237 (123,255) 1,159,662 Operating Income 124.461 17,758 (96) 142,123 Depreciation and Amortization 50,039 8,676 36 58,751 Capital Expenditures 192,824 16,882 23 209,729 Identifiable Assets:

Net Utility Plant 1.625.586 167,857 220 1,793,663 Plant Materials and Operating Supplies 27,307 3,058 30 30,395 Fuel Inventory 158,910 2,416 161,326 Other Corporate Assets 194,520 Total Assets S2,179,904 For the Year Ended December 31,1980 Operating Revenues:

Unalliliated Customers S 769,899 8 166,074 S

995 S 936,968 Intersegment Sales 132,962 S(109,486) 23,476*

Total Opetating Revenues 769,899 299,036 995 (109,486) 960,444 Operating Income 83,785 16.563 (12) 100,336 Depreciation and Amortization 45,312 8,106 35 53,453 Capital Expenditures 158,441 19,663 37 178,141 Identifiable Assets:

Net Utility Plant 1,431,262 159,357 233 1,590,852 Plant Materials and Operating Supplies 26,827 2,604 18 29,449 Fuel Inventory 133,635 2.I15 135,750 Other Corporate Assets 224,298 Total Assets S1,980,349 For the Year Ended December 31,1979 Operating Revenues:

Unallillated Customers S 592,549 S 122,772 S

983

$ 716,304 Intersegment Sales 85.516 S (56,588) 28,928*

Total Operating Revenues 592,549 208,288 983 (56,588) 745,232 Operating income 89,305 7,912 16 97,233 Depreciation and Amortization 40,018 7,539 35 47,592

_ Capital Expenditures 183,879 16.240 7

200,126 Identifiable Assets:

Net Utility Plant 1,271,442 148,114 232 1,419,788 Plant Materials and Operating Supplies 19,883 2,317 22 22,222 Fuel Inventory 69,268

-3,309 72,577 Other Corporate Assets 267,978 Total Assets S1,782,565

• Hevenue from interdepartmental sales of gas allowed by the CPUC in tartiT rates.

See notes to financial statements.

27

N tes to Financial Stat m nts

1. Summary of Accounting costs are cap!talized. Other such under the Tax Reduction Act of Policies costs are either charged to expense 1975, to income ratably over the as incurred or deferred and amor-book lives of the respective Cystem of Accounts tized in accordance with require-properties.

The accounting records of the ments of the CPUC.The company Federal and state taxes on in-company are maintained in accor-incurred research, development come are allocated between operat-dance with the Unifonn System of and demonstration costs of ap-Ing income and other income Accounts prescribed by the Federal proximately $6.4 million, S4.1 mil-

credits, gggO nd 1579* r pecti ly*

The company provides a savings lopt 1yti a fo b

lic Utilities Commission (CPUC).

Depreciation plan and a noncontributory funded Utility Plant Provisions for depreciation of pension pian for substantially all The cost of additions to utility property, plant and equipment for employees. In addition, an un-plant and the replacements of re-financial statement purposes are funded noncontributory pension tirement units of property is cap-generally based on the estimateo plan is maintained for certain italized. The cost of utility plant service lives of the respective prop-oflicers of the company.

Includes labor, material and simi-erties using the straight-line re-The savings plan provides for a laritems as well as indirect charges maining life method of computa-company contribution equal to for engineering, supervision, trans-tion. The provisions for deprecia-50% of the amount a participant portation and other related items.

tion for 1981,1980 and 1979 were elects to set aside, The company's The company capitalizes an al-3.32%, 3.31% and 3.32%, respec-contribution cannot, within spect-lowance for funds used during con-tively, of the related aggregate de-fied limits, exceed 3% of the partici-struction (AFUDC) based on the preciable asset balances for these pant's basic compensation.

cost of capital devoted to plant periods.

The company makes annual con-under construction. Costs of de-For federal income tax purposes, tributions to its funded pension preciable units of plant retired are the company computes deprecia-plan equal to its pension expense.

climinated from utility plant ac-tion using the most liberal methods A comparison of accumulated plan counts and such costs, plus re-and lives permitted by the Treas' benefits and plan net assets for this moval expenses less salvage value, ury Department. Service lives for plan as of the valuation date is pre-are charged to accumulated federal income tax purposes are sented below:

depreciation.

generally shorter than the service As of December 31,1981,the lives used for financial statement (Mmions of Dollars) company had a 20% interest in purposes.

1981 1 80 nuclear facilities which were in-Income Taxes Aetu rtM Present value cluded in I>lant in service (856.3 The company, in accordance or amumulated million, less accumulated deprecia-with requirements of the CPUC, in_

plan benefits tion of 814.4 million) and in con-cludes in net income the current vmted 8 82.1 s coa struction in progress (S593.1 mil-tax reductions that result from NonVmted M

M lion). The company obtains its own timing differences and certain mi s 85.5 s g_g financing for such costs and investment tax cr-dits, sum-Net assets available includes its share of direct ex-for knents g6 gu marized in Note 3. No provision is penses in the corresponding oper-made for deferred taxes relating to The mmpany accruesits pension ating accounts in the Statements of these timing dilTerences, except for "P"""

P'"" I" deferred energy costs and certain an rdann wim"genuaHy ao income.

The company makes no provi-plant sales and abandonments. As c pted accounting principles. As of slon for future storage or disposal a result of the Economic Recovery costs for spent nuclear fuel, but Tax Act of 1981, and in accordance present value of unfunded ac-charges those costs to expense as with a recent rate decision, the Incurred with rate recovery ob-company began on January 1.

E" tained through provisions of the 1982 to record deferred taxes for all ra return used in deten energy cost adjustment clause.The investment tax credits and the ex-mining the actuarial present value company estimates its share of fu~

cess of tax over book depreciation.

f accumulated pension plan bene-ture dismantling and decon-The company files consolidated i ts w s 7.5% for both plans in 1981 tamination costs for its nuclear federal and state tax returns with and 7.0% for the funded plan in plant in operation to approximate its subsidiaries and allocates cur 816.5 million and such costs are re-rent tax expense to each subsidiarf

• • P "Y,* ""

covered in rates through increased as if computed on a separate com-the plans enarged to expense and depreciation expense over the esti-pany basis. Where applicable, sub-utuity plant k th years N.

mated life of the plant.

sidiaries Provide deferred taxes in 1980 and 1979 were S14.3 million, Research, Development and accordance with generally ac-

$11.5 million and $10.4 million, Demonstration cepted accounting principles for respectively.

Research, development and dem-non-regulated enterprises.

onstration costs related to specific The company elected to amortize Subsidiaries construction projects and a portion.

the additional investment tax cred-The company accounts for its in-of gcneral engineering research its, made available to the company vestments in operating subsidi-l 28

artes by the equity method. The At December 31,1981, the com-The mandatory payments to re-accounts of its non-operating sub-pany had St.5 million of promis-tire the company's long-term debt tidiary are consolidated in the ac-sory notes, payable in pounds ster-during the next five years are 854.3 companying financial statements.

ling, with an English lending syn-million for 1982 S17.4 million for The assets and revenues of the sub-dicate which are collateralized by 1983 S47.0 million for 1984, S40.5 sidhries are not significant in rela.

substantially all of the company's million for 1985 and 815.8 million tion to thcse of the company, customer accounts receivable.

for 1986.

Eevenr.es Revenues are recognized on the

3. Income Taxes basis of cycle billings rendered Total income tax expense was less than the amount computed by monthly. The company does not applying the federal and state statutory rates to income before income record unbilled revenues. As re-tax. The reasons for this difference are as follows:

quired by the CPUC, the company trhousands of Dollars) has been instructed to defer any For the Years Ended December 31 1981 1980 1979 over or undercollections as a result of(l) total fuel cosis experienced dif.

Tax expense at statutory rates S 63,927 S 22,959 8 38,089 fering from those used to set rates, Reductions in taxes resulting from:

(2) total gas revenues experienced Excess of tax over book depreciation 6,548 12,053 12,454 differing from the gas margin Regulatory balancing accounts-net (25,576) (7,165) 7.440 allowed in thelast general ratecase Allowance for funds used during and (3) effective for 1982, total elec-construction 25,439 20,126 12,835 tric revenues experienced dilTering Payroll and use taxes capitalized 2,934 3,381 3,068 from base rate revenues adopted in Employee benefits capitalized 2,422 2,223 2,634 the last general rate case. At Sundesert suspension (4,190)

(4,012)

(2,732)

December 31,1981, the company Operating loss carryforward utilized 1,800 3,598 385 had net overcollections of 622.9 Fuel oil exchange (6,291)

(916) million which are to be returned Encina East sale 3,964 (4,794) to its ratepayers through rate Nuclear fuel lease 5,016 2,479 1,270 adjustments.

Removal cost 1,715 1,793 1,516 Oth:r Property taxes 3,166 1,175 1,146 The company has deferred origi.

Fuel oil inventory-moving average to nal costs of approximately 650.3 FIFO 3,918 (45)

(1,190) million (S19.3 million unamortized California franchise tax (3,132)

(555)

(377) at December 31,1981) relating to investment tax credit 27,952 cancellation charges and other Other-net (8,717)

(3,724)

(1,137) costs incurred in connection with Total tax reductions 43,259 20.242 36,396 the cancellation of certain power Current tax expense 20,668 2,717 1,693 projects. The CPUC authorized Less taxes allocated to electric rates which permit the com-subsidiaries pany to realize these deferred (6,881)

(997)

Deferred tax efTect of:

charges over four-to five-year Encina East sale 1,682 (1,682)

Sundesert suspension (2,335)

(2.335)

(2,440) 1 J inuary 19,1982, the com-pany sold 3 million shares ofits Regulatory balancing accounts-net (15,453)

(6,216) 5,588 comr stocn with net proceeds of De estment tax credit-net 10,13

( )

been reclassified for comparability.

Total income tax expense (credit)

S 7,860 S (8,486)S 4.723 Certain prior year amounts have Allocation ofincome tax expense (credit):

See Note 6 regarding accounting Operating income:

f r leases.

- Federal Income S 25,656 8 8,069 8 9,304 State Franchise 6,610 3,246 2,857 D 2. Ling-Term Debt Total 32,266 11,315 12.161 t. Additional first mortgage bonds Non-Operating income:

l may be issued under the terms of Federal incoine (20,176) (14,096)

(6,100) j.the bond indenture upon com-State Franchise (4,230)

(5,705)

(1,338) pliance with the provisions thereof Total (24,406) (19,801)

(7,438) and subject to the provisions of the indentures for sinking fund deben-Total income tax expense (credit)

S 7,860 S (8.486)S 4,723 s

tun's. On Janu'ary 15,1982, in an exchange of first mortgage bonds As of December 31,1981, the company's unused investment tax credit, efor sinking fund debentures, the which may be carried forward and applied against future years' federal company modified its sinking fund income taxes, is estimated at 837.1 million (expiring 1993 through 1996).

Indentures to climinate the interest coverage requirements. Substan-tially all= utility plant is subject to

.the lien of the bond indenture, 29

4. Chort-Term Errrcwing) p(r share ranged up to S4, depend-tion and 8214 million, respectively, ing upon the series and the dates at December 31,1980. The effect on As of December 31,1981, the for redemption.

expenses, had such leases been company had various bank lines The company's preference stock capitalized, would not be material.

aggregating S120 million, all of (cumulative) may be redeemed at At December 31,1381, the mini-which are available to support the option of the company upon mum rental payments of the com-commercial paper. Horrowings un-payment of the ntlemption priceto-pany under all noncancellable der 870 million of these lines of gether with accrued dividends, leases were S27.6 million,835.1 credit bear interest at 108% of the provided that prior to certain spec-million,834.2 million,826.6 mil-prevailing prime rate plus a 0.5%

ified dates through November 1.

lion and 824.1 million for the years commitment fee on outstanding 1986, no redemption may be made 1982 through 1986, respectively.

conuncretal paper ain1 a 0.375%

through refunding at an effective The aggregate amount of nonean-fee on the remainder of he unused cost of money to the company per cellable rental commitments at t

line. There are no requirements for annum at less than the respective December 31,1981 was 8370.2 compensating balances. No bal-dividend rates. Depending upon million.

ances were outstanding as of De-the series and Ihe dates for redemp-In connection with the sale and cember 31,1981 and 1980 under tion, the redemption rrices range leaseback of a generating facility these lines. The additional 850 mil-from 8113.50 to 8100 per share for with minimum annual rentals of lion of bank lines are available un-the 89.84, 87.80, 87.20, 87.325, 810.2 million, the company has the der a 360-day credit agreement 88.25 and 89.125 series, and from option to extend the term for 15 bearing interest at various short-832.15 to 827.75 for the 82.68, years beyond 2003 at fair market tenu rate options p,ms a commit-82.475 and 84.65 series.

rates: a gain of S23.4 million re-ment fee of up to a maximum of

!f unpaid dividends on the out-lated to this facility has been de-0.375% on the total of the lines.

standing preferred stock equal or ferred and is being amortized as a The company had, at December 31, exceed eight full quarterly divi-reduction of rental expense over 1981 and 1980. 83 million and 850 dends, then until all dividends in the initial term of the lease.

million in bank loans outstanding default hava been paid, the holders The company has no material at weightnl average interest rates of the preferred stock are entitled to subleases. The amount of rents of 13.9% and 22.8%, respectively, elect a majority of the full Hoard of charged to operating expenses for In January 1982, this ernlit agree-Directors.

the years ended December 31,1981, iiient was renewed for a 365-day 1980 and 1979 was 820.2 million, ect to IWandatory S17.7 million and S16.8 million, Commercial paper is issued at Redemption various discount rates and usually The company is required to set respectis ely.

matures within I to 45 days. The aside annually in sinking funds Fuel Oil Contracts company had, at December 31, 82.0 million beginning in the year The company has entered into 1981 anIl 1980. 840 million and 1983, an add.tional St.2 million be-contracts with suppliers for the S18 million of conuncretal paper ginning in 1984 and an additional purchasc of a minimum of 23.4 mil-outstandlag at weighted average 81.0 million beginning 1985 for the lion barrels oflow-sulfur residual intenst rates of 12.6% and 22.2%,

annual repurchase of its 89.125.

and dicsci fuel oil through June respectively.

87.325 and 88.25 series preference of 1986. The company estimates The company may also borrow stock (cumulative).

that commitments under these up to 8150 million lit bankers' ac_

contracts aggregate 81.0 billion ecptances to finance the purchase

6. Columitments and through June 1986 at current con-of fuel inventory. The bankers' Contingencies tract prices determined by a for-acceptances are issued at the pre _

mula which is based upon the sup-Construction pliers' crude oil costs. In addition, valling acceptance rate plus a placement fee and usually mature The company is engaged in a the company has contracted to pur-within 30 to 180 days. Warehouse construction program under which chase 9.9 million barrels of re-receipts for fuel inventory are expenditures of $277 million are sidual fuel oil froin July 1986

~

pledgni as collateral for this credit.

planned for 1982, excluding through December 1990 at prices to AFUDC and other non-cash items.

be negotiated in the future.

At December 31,1981 and 1980, there were 8135.5 million and Leases Purchased Power Contracts 8117.0 million of bankers' accep-The company is committed un-The company is committed un-tances outstanding at weighted der certain leases which are ae-der long-tenn contracts for the pur-average interest rates of 13.1% and counted for as operating leases in chase of electric power with an 18.4%, respectively, accordance with the Addendum to estimated total minimum commit-Accounting Principles Board Opin-ment of 81.5 billion at current lon No. 2 but which tueet the crite-prices over the liver of the contracts

5. Preferred Stock ria of Statement of Financial Ac-kxpiring 1983 to 1994).

General counting Standards No.13 for capi-At December 31,1991, the mini-The company, at its option, may tal leases. The amounts of assets mum payments under de con-rnleem the wholc or anv part ofits and liabilities that would have tracts were 857.6 million, S/1.8 cumulative preferred' stock out-been included in the accompany-million,8114.6 million,8174.3 mil-standing upon payment of the re-ing balance sheets for such capital lion and S198.8 million for the demption price together with ac-leases approximated 6216 million years 1982 through 1986, respec-crued dividends. At December 31.

and 8227 million, respectively, at tively. In addition, the company is 1981 the redemption premiums December 31,1981 and 8206 mil-required to pay additionalamounts ao

for actual deliveries of electric due from an independent oil dis-ing recoveiy of the collateral and power under the contracts.

tributor for exchange transactions enforcement of personal guaran-The company's total payments.

originally occurring in 1978. The teem. In February 1981 the defen-including electric power deliveries, company in 1978 obtained the dants fiksi a counter claim in the imder these contracts for the years right to certain assets which par-Texas action seeking damages of ended December 31. 1981, 1980, tially collateralized its receivable.

890 million against the company and 1979 vere S25.8 million.

Repayments during 1980 and 1979 and six officers alleging that the 829.0 million and S19.0 million, totaled 83.3 million and 85.1 mil-company had agreed to restructure respectively, lion, respectively, contractual arrangements for re-The distributor had sustained payment of the debt. In October

7. Cuspension o' e nunued I sses and, during Octo-1981. the defendants filed a motion s

Cundesert ber of 1980, requested an amend-to amend this claim to seek treblcof ment of the existing agreement to 845 million damages plus $30 mil-In May 1978, the company sus-provide for more liberal repayment lion in punitive damages. 'l he de-pendec its proposed Sundesert tenns. Also in October of 1980, the fendants also filed counter claims nuclear project and tenninated cer-company received a report by inde-in the Virginia action making sub-tain contracts relating thereto as a pendent mining and geological en-stantially the same claims and result of regulatory and legislative gincem concerning th'e operation of seeking approximately the same developments. In 1979,1980 and a coal mine facility, which was part damages as in the original Texas 1981 rate decisions, the CPUC au-of the collateral for the nceivable.

counter claim. Other defendants in thorized electric rates which pennit 11ased on this report and an analy-the Virginia action illed a counter the company to realize 839.2 mil-sis of the potentialcash return from claim alleging malletous prosecu-tion of non-site costs, includal in the total collateral for the debt, the tion and seeking damages of $10 deferred charges and other assets-company recorded a reserve for a million. The company believes over a five-year period and to in' probable loss of S20.0 million these counter claims to'bc without clude 845.0 million of site-related (80.53 per share, net of taxes). The merit and is opposing them costs in rate base. Unrecoverni site company's continuing investiga-vigorously.

and non-site costs of 83.6 nullion tion of the overall value of the co!-

In February 1981, a class action (80.12 per share) were charged to lateral and nceipt of additionalin-lawsuit was filed against the com-operations in May 1979. All site-fonnation in July 1981 as to the pany alleging inadequate dis-relatal costs, including S2.4 mil-value of the collateral led the com-closure by the company of poten-lion excluded from rate base by the pany to record an additional re-tiallosses associated with the ex-CPUC until the completion of con-serve for probable loss of S4.6 mil-change transactions and seeking struction of a plant on the Sun ~

lion (80.08 per share, net of taxes),

an unspeellied amount ofdamages.

desert site, has remained in plant thereby reserving the full value of The company is vigorously oppos-held for future use.

the cost of S30.6 million.

Ing this lawsuit and, in any case.

In its December 30,1981 rate' de-cision, the CPUC permitted the In November 1980, the company believes the ultimate outcome commenced litigation in federal would not have a materlat elTect on

" " * ' 'E" n i it t

i 1 81 The CPUC has infonned the com-pany that this treatment will be

9. Quarterly Financial Data (Unaudited) discontinued in 1984 if the com-(Thousands of Dollars)

Earnings pany does not have a specific plan per for the proposed use or disposition

@, ""f

["""l,4

in73, T,T."

of the property at that time. The Quarter Ende h company is studying the possible alternatives for use or disposition 1980 of the property. The realization of March 31 8224,799 S23,797 S17,090 80.40 the value of this asset depends June 30 211,922 22.269 16,786 0.36 upon future rate deelstons and, September 30 254.847 27,617 (157)

(0.13) therefore, the ultimate effect of this December 31 268,876 26.653 18.327 0.38 matter on the financial position 1981 of the nunpany is not presently March 51 271,959 33,104 24,024 0.54 detenninable.

June 30 275,852 34,919 32,102 0.72 C. Provision for Exchange September 30 297.278 42.107 28.881 0.61 m

,m m.m 25 m w

Loss The company had approx-Thesc amounts are unaudited but in the opinion of the company reflect imately 2.10 million barrels (cost, all adjustments necessary for a fair presentation. Such adjustments com-839.0 million) and 1.97 million bar-pdse nly n nual recurring accruals except for the establishment in the rels kost,833.5 million) of fuel 011 quarters ended September 30,1980 and September 30,1981, respec-on exchange at December 31,1981 tively, of a 826.0 million (80.52 per share, net of taxes *) and a 84.6 million and 1980. respectively. Of the total (80.08 per share, net of taxes *) provision for a probable loss resulting on exchenge at December 31.1981 from fuel oil exchange transactions (see Note 8) and the effect of the May and.1980. 1.89 million barrels 1981 ree gnition of a 85.2 million (80.13 per share *) gain, after taxes, (cost. 830.6 milliqn) included in de-trom the sale of subsidiary land holdings.

ferred charges and other assets are

• llased on average common shares outstanding during the quarter.

31

S pplementary Inf rmati:n Ta Discl:sc ThJ Effects cf Changing Prices (Unaudited)

The following supplementary information is supplied in accordance with the requirements of Statement of Financial Accounting Standards No. 33 for the purpose of providing certain information about the effects of changing prices, It should be viewed as an estimate of the approximate effect ofinflation, rather than as a precise measure, Ctatement of Income from Operations Adjusted for Changing Prices Iin tho'nands 01 elollars)

Constant Current Dollar Cost Conventional Averare Average litstorical 1981 19H1 l'or the Year Endnt Dn mirr 31,1981 Omt Dollars Dollars Operating Itevent.es 81,159,662 81,159,662 81.159,662 Electric Fuel and Purchased Energy 580,743 580,743 580,743 Gas Fuel 135,455 135,455 135,455 Other Operating 155,625 155,625 155,625 Maintenance 38,368 38,368 38,368 Depnriation and Amortization 58,751 1i1,291 125,877 Taxes 48,597 48,597 48,597 Interest Charges 111,859 111,859 111,859 (79,8921 (79,886)

(79,886)

Other income and Deductions-Net. _ _ _.

1,049,506 1,102,052 1,116,638 income from Operations (Excluding S 110,156 8

57,610'"

S 43,024 Adjustment to Net Recoverable Cost). _.

increase in Specific Itices (Current Cost) of Property, Plant and Equipment Ileid During the Year"'

S 195,975 Adjustment to Net Itceoverable Cost S (98,103) 4,033 Elfret of lucrease in Gt neral Ittee Level (283,515)

Excess of Increase in General Price Level Over increase in Specific Prices After Adjustment to Net throverable Cost (83,507)

Gain From Decline in Purchasing lower of Net Amounts Owed 82.307 82,307 S (15,796)

S (l 200)

Difference n' Int luding the adjustment to net retuverable cost, the innene thms) from operations on a runstant dollar basis would have been S(40.493) for 19Hl.

raat Dntmtwr 31,19H1, runent tmt of property, plant and equipment, net of awumulated depreciation, was 63.441,974, while historical inst or not twoverable not was 81.805.315.

32

Fivo-Ysar Ccmparicen cf Sel cted Suppl m:ntary Financial Data Adju;t d fer Eftet of Changing Pricas (Unnudited)

(In themsands, extcpt per share arrumnts, c4 average 1981 dollars)

For the Years Endni Detember 31 1981 1980 1979 1978 1977 OPERATING REVENUES 81,159,662 81.060,069 8 933,768 S855,429 6811,638 lilSTOR! cal, COST INFORMATION AIMUSTED FOR GENERAL, INFl.ATION (CONSTANT DOLLAR)

Income from operations (exclud!ng adjustment to net recoverable cost)

S 57,610 8 9,052 S 45.067 Income (loss) per common share (after preferred dividend requirements and excluding adjustment to net recoverable cost) 8 0.99 8 (0.31) S 0.78 Net assets at year-end at net recoverable cost S 805,009 8 752,695 8 794,570 CURRENT COST INFORMATION Income (loss) from operations (excluding adjustment to net recoverable cost)

S 43,024 8 (4,572) S 27,460 Incmne (loss) per common share (after preferred dividend requirements and excluding adjustment to net recoverable cost)

S 0.62 8 (0.71) S 0.19 Excess of increase in general price level over increase in specific prices after adjustment to net recoverable cost S (83,507) S f136.675) S(150,574)

Net assets at year-end at net recoverable cost S 805,009 8 752.695 S 794,570 GENER AL INFORMATION Gain from decline in purchasing power of net amounts owed S

82,307 8 107,017 8 108,448 Cash dividends declared per common share 8

1.64 S 1.72 8 1.85 8 1.95 8 1.92 Market price per common share at year-end 8

12.07 8 12.39 8 15.55 S 19.80 S 22.69 Average Consumer Price Index 272.4*

246.8 217.4 195.4 181.5

• 19NI Average Consumer IMee Index mtimated.

Constant dollar amounts repre-indexed plant amounts.

equipment, based on past practices sent historical costs stated in tenns Fuel inventories, the cost of fuel the company believes it will be al-of dollars of equal purchasing used in generation and gas pur-lowed to earn on the increased cost power, as measured by the Con-chased for resale have not been ofits net investment when replace-sumer Price Index for All Urban restated from their historical cost ment of facilities actually occurs.

Consumers (CPI-U). Current cost in nominal dollars. Regulation To properly reflect the economics amounts reflect the changes in limits the recovery of fuel and of rate regulation in the S.Mtement snecific prices of plant from the purchased gas costs through the of Income from Operatians, the date the plant was arquired to the operation of adjustment clauses or adjustment to net pmperty, plant

- present, and ditTer from constant adjustments in basic rate sched-and equipment should be offset by dollar amounts to the extent that ules to actual costs. For this or combined with, as appropriate.

specific prices haveincreased more reason, fuel inventories are the gain from the decline in pur-or less rapidly than prices in etrectively monetary assets.

chasing power of net amounts general.

As prescribed in Statement of owed. During a period ofinflation.

The current cost of property.

Financial Accounting Standards holders of monetary assets sulTer L plant and equipment, which in-No. 33, income taxes were not loss of general purchasing power cludes land, land rights, intangible

adjusted, while holders of monetary lla-plant. plant held for future usc an<l Under the rate-making pre-bilities experience a gain. The gain constiuction work in progress, scribed by the CPUC, only the his-from the decline in purchasing represents the estimated cost of torical cost of plant is recoverable power of net amounts owed is pri-replacing existing plant avets and in revenues as depreciation.There-marily attributable to the substan-was determined primarily by in-fore, the cost of plant stated in tial amount of debt which has been dexing surviving plant by the terms of constant dollars or current used to finance property, plant and llandy-Whitman Index of Public cost ditTering from the historical equipment. Since the depreciation Utility Construction Costs. The cost of plant is not presently re-on this plant is limited to the recov-current year's proviston for coverable in rates as depreciation, cry of historical costs, the company depreciation on the constant dollar and is rel' xted as an adjustment to does not have the opportunity to re-and current cost amounts of prop-net ree' verable cost. While the alize a holding gain on debt and is erty, plant and equipment was rate-mrxing process gives no ree-limited to recovery only of the em-determined by applying the com-ognit' -i to the current cost of bedded cost of debt capital.

pany's depreciation rates to the repl, ng property, plant and 33

Financial Data (in milhons d dollars extrpt per share amounts) l'ot the Mrs Endnt Durmbe r 31 1901 1960 1979 197M 1977 197fi 1971 Common Stock h1arket to ikxik Itatio*

77.2 %

73.2%

75.6%

84.7%

89.3%

86.7%

130 34 Ikx)k Value lYr Share

• 8 16.20 8 16.06 8 17.35 8 17.41 8 17.36 S 16.72 S 16.12 Earnings Per Conunon Share S

2.34 8 1.01 S 1.80 S 2.02 S 2.32 8 2.14 8 1.89 Dividesuls Per Sliare:

l' alt!

S 1.62 8 1.54 8 1.46 8 1.38 8 1.24 8 1.20 S 1.08 Declared S

1.64 8 1.56 8 1.48 8 1.40 8 1.28 8 1.20 8 1.08 Payout Itatio (Declanxi) 71.1%

156.8%

83.1%

71.5%

55.9%

56.5%

57.0%

Dividesul Yich!

13.1%

13.3%

11.3%

9.5%

8.3%

8.3%

5.1 %

Price / Earnings Itatio*

5.3 11.6 7.3 7.3 6.7 6.8 11.1 Capitalization

• Corninon Equity 8 672.4 8 585.8 8 541.2 S 480.4 8 393.2 8 322.5 S 161.2 Preferred Stock:

Not Subject to h1aiutatory thxtemption 161.0 128.5 128.5 128.5 103.5 103.5 63.5 Subject to h1aiutatory lux!cinption 85.0 85.0 85.0 85.0 85.0 55.0 1,ong-Tenn Debt:

First htortgage lloiuls 612.4 615.2 491.2 490.9 491.1 451.8 244.0 Dabentun s 22.2 23.0 23.7 24.5 25.3 26.0 29.9 Other 1,ong-Tenn Debt 92.6 94.I 125.2 57.7 56.2 11.8 2.0 Total I.ong-l' erin Debt 727.2 732.3 640.1 573.1 572.6 489.6 275.9 81.645.6 81.531.6 81.394.8 S t.267.0 81.154.3 8 970.6 8 500.6

'llotal Capitalization _ __ __.

Capitalization Ratios:

Corninon Equity _ _

40.9%

38.2%

38.8%

37.9%

34.1%

33.2%

32.2%

Picferrt11 Stock:

Not Subject to hiatulatory thxleniption 9.8 8.4 9.2 10.2 9.0 10.7 12.7 Subject to hiaiutatory

_ ___ lhxteinption 5.2 5.6 6.1 6.7 7.3 5.7 1,ong-Tenn Debt:

First N1ortgage Ihnuts 37.2 40.2 35.2 38.7 42.5 46.5 48.7 Deb (ntures 1.3 1.5 1.7 1.9 2.2 2.7 6.0

=

_ _Otlyer Igng-Tenn Debt 5.6 6.1 9.0 4.6 4.9 1.2 0.4 Total 1,ong-Tenn Debt 44.1 47.8 45.9 45.2 49.6 50.4 55.1 100.0 %

100.0 %

100.0%

100.0%

100.0 %

100.0%

100.0%

TotaI Capita 1izatton -.-

~ _. _ - _ - _ - _ - _ _ _

Tlines Earned:

Interest on Debt Heforc ineoine 'lhxes 2.06 1.47 2.18 2.25 2.20 2.38 2.85 Interest aint Preferred Dividends Alter income Taxes 1.70 1.31 1.65 1.67 1.74 1.74 2.01 Utility Plant

• Ekrtric S1.960.5 81.735.9 81.547.4 81.343.3 81.281.7 81.076.9 8 529.1 Gas 262.2 246.1 228.0 212.9 201.2 188.3 136.1 Conunon azul Steain 29.0 27.4 25.8 23.4 21.9 26.2 38.5 Total 2.251.7 2.009.4 1.801.2 1.579.6 1.504.8 1.291.4 703.7 Accunmlated Depreciation 458.0 418.6 381.4 344.9 315.6 283.8 175.3 Net Utility Plant S t.793.7 81.590.8 81,419.8 81.234.7 81.189.2 S t.007.6 8 528.4

' At Deu,utrr 31 34

Ctock Pric J IC80-1CD1 l

l 4.10 %

4%%

5%

69 M4 67.80 87.20 M2. tim 82.475 i

19MO Cornnuin IT<fenn!

Preferred Preferrnt l'irfercru e l'referriu r Prefere1ur l'rrieretur lYeferener i

Otrs.

liigh lesw liigh lesw litgh_

liigh _

liigh lasw litch le>w Ilich leiw liigh lesw litch low l

leiw l.ow I st 13 %

11% M%

5%

M 6

9%

7 77% 67% 63 51 60 48 23 Iti% 25 15 2ru!

15%

11% 9%

0%

9%

6%

11 6%

M5 68 70 50 % 65 45 22%

17 20% 15 %

3rd 14 %

13 M%

6%

9%

6%

10 7%

M1 GM W 64 % 51Y 66 49 22% IM% 21 17%

lih 13.

10 7%

5%

7%

6 7%

6%

73 60 59 % 50 % 53 42% 20 15 % IM'h 15 %

4.40%

4%%

5%

89.88 M7.MO 87.20 82.6M 82 475 1981 Conunon Prrfttant Itricrrn!

Preferrn!

l'rrfercru e Prrferrrur Prefercrur l'referetur Preferrrur Qtrs.

liigli Iow liigh low liigh low iligh low illgh lesw liigh low liigh low liigh lesw liigh low

~

I st 13 %

11 7

6 7

6%

7%

6%

70 61% 55 50 % 50 45% IM% 17 17 % 16

~

~

~

~

2 ut 12 %

11 6%

5%

6%

ti 7%

6%

64 % Ol% 54 47% 47 44% IM%

l7 17 15 %

~

3rd 12 %

11% 6%

5%

6%

5%

7%

6 Gl% 60 50 % 45% 47 42% IM%

15% 16 % 14 %

~

~

lih 14 11 % ti%

5%

6%

5%

7%

6%

67 58 55 45 49 43% 19 % 16 18 % 14 %

Quarterly Dividends Paid in 1980-1981 thibhrly sold issues only!

4.40 %

4%%

5%

s9.M 8 87.MO 87.20 82.68 82.475 Oinunon Preferrnt l'rrferrni Preferini l'rrieretur Pirierrsur lYrferrtu e Prefercrur Preferreur 42C' 22t 22 %C 25e 82.46 81.95 81.80 67c 61%c

• 14 ate guild sieur October 15,19Hl. Prior ratrs were 3MC, paid trenn October 15.1979, azul 40C, paid frorn October 15,1980.

lhe a oinpany has paid dividrauls on ns nnurnon st<M k in rath year strur itM)9.

h4 65 hrtrarna v was issunl in (k toinT 1981 at initial prtir of s27.50. Initial chviderul was paid in January 19s2.

i 1

1 4th Quarter Results l

Stat ments ofIncome iln thons.uuls rurpt per share anuutnts]

Thrre Months Eiuint Years Etuin!

Dnriniwr 31 Dnrinber 31 19M1 19MO 1981 1980 j

Ojwrating 14eventms S314.573 8268.876 S1,159,662 8960,444 Operathig Expenses 282,580 212.223 1,017,539 860,108 Ogwrating income 31,993 26,653 142,123 100.336

)

Other tunnue Crnlits 16.046 12.525 61,116 30,840 Intercsl Charges 22,890 20,851 93,083 79,130 Net innnue Ibefore preferreil alivhleint requirrinents) 25,149 18.327 110,156 52,046 Prefere nt 1)ivittraul Itnlutreinents 5.486 4,411 18,718 17,643 Earnings Applicable lo Connnon Shares

=_

= = = =. _ = =

S 19,663 8 13,916 8 91,438 8 34,403 f

Average Connuon Shares Outstatuling 41,414 36,410 39.091 34,135 Earnings lYr Conunon Share S

0,47 8

0.38 8

2,34 8

1,01 I)ivhlends I)<rlarni lYr Coininon Sharc S

0,42 8

0.40 S

1,64 8

1,56 See Managnnent's Discussion and Analysis of Financial Conthtton and thults of Operations and Note 9 of Notes to Financial Statrinents.

35

Board of Directors OfHcers Division Managers Robert E. Morris

• Robert E. Morris Donald E. Felsinger Chairman of the lloard of the Chainnan of the Hoard Division Manager-Gas Thomas A. Page James C. Ilolcombe titi

< tr r t President and Chief 1:xecutive Division Manager-Power Supply Thomas A. Page' Ollicer R. Bruce Liska President and Chh f Executive hnT. h.s N W n Wn w M uMomu Ollicer of the Company Group Vice President-Operations Service Administration Malin Hurnham*

President of John thirnham &

Richard Korpan Company (a mortgage loan, real Gnmp Vice President-Finance estate and insurance lirin)

Jack E. Thomas San Diego Gas Group Vk'c President-Customer David M. DeMotte

& Electric Customer Service Private Investor: Former Pn sident nWs and Chief Executive Ollicer of J. Robert Belt Sea World. Inc. (operators of Vice President-Administrative Beach Cities themed outdoor recreational Services Lawrence T. Imrie. Director

@01 Morena Boulevard Gary D. Cotton an DRgo. CA 92117 Druce R. Ilazard Vice President-Engineering President of R. E. Ilazani Centre City Frank W. DeVore 1,. Clark Siebrand. Director Contracting Company (an Vice lYesident -Goverannental 101 Ash Street engintering cont racting lirm)

Al airs San Diego, CA 92101 William D. McElroy Professor of liiology at the John E. llamrick Eastern University of California at Vice President-Northeni Regiort David L. Ilopkins Director 104 North Jolmson Avenue San Diego R. Lee llaney El Cajon. CA 92020 Gordon Pearce Treasurer Vlec President and General Chris liarlow aul aus m' or Counsel of the Company Vice lYesident -Infonnation 5315 Avenida Encinas Services thirt F. Raynes Carlsbad, CA 92008 President of Raynes EngineerinM James J. Ilolley Northeast Corporation (a mechanical Vice President-Personnel R. Keith liutchens. Director engineering and produt t 750 North Citracado Parkway development firm)

William J. Karnes Escondido. CA 92025 Secretary O. Morris Sievert

• Orange County Vlec Chainnan of Nucorp Energy.

Richard L. Manning UI"'CI"I Inc. (an oil and gas exploration.

Vice President-Public Relations development and pnxtuction hnn)

Alan J. McCutcheon San Clemente. CA 92672 Fred C. Stalder*

Vice President -Metro Region South Bay Chainnan of the Board and II. John Van der Linde. Director Ralph L. Meyer Chief Executive Ollicer of Central Vice Itesident - Regulatory 43G "11" Street

<cdcral Savings and Loan Services Chula %sta. CA 92010 Association arsky Catherine T. Wiggs*

(yo m ontroller E.xecutive Vice I resident -

Personnel and a member of the Gordon Pearce Management Executive Vlec President and General Committee of The Broadway Coimsel Stores. Inc., Division of Carter Ro ld W. %'atkins llawley llale Ston's. luc. (ref all y g, gg, g

department stores)

' Alemtwr or are IM utur cmunuuar 36

Distribution c f CDG&E Service Are]

Record Charch::Iders e w

-~,

j l

> Osunty

}

A 6 of I)rt emlrr 31. IMI oran e 3

l'it ferred columon 4.j

- ruwrside onmiv Total

- onofre 7

Sharehoklers 14,530 83,267 di"8

.]

Class of Investor Nb Women 4,412 25,632

'd Joint Aceonnts 5,1G3 29,996 M >

,'l

< Men 2.662 18,14I Pim -

Securities

^

q Fiduciaries 1,379 8.108 1

Dealers 73 45 San Diego County Nominees 285 432 y

Other Domestle 532 745 i!

Foreign 24 168 Amount 3 Owned pr I to 99 shares 4,191 13,681 100-300 shares 8.I11 47,668 Power Plant i

301-500 shares 1,258 10.881 r Gate Power Plant'

.l A

501-1000 shares 601 7,624 Bay Pw Plant '

Over 1000 Li Natural Gas Plant -

i shares 366 3,413 1

Loc: tion f

Service Area 3.618 16,004 j

Rest of

- - +- - -* -" J Califonita 4.907 26,362 San Diego Gas & Eketric serves communities in San Diego County, Other States &

an adjoining part of Orange County to the north and a small section Foreign 6,005 40,901 of Imperial County to the east.

E Gas Distribution Area San Dl:go Gas & Electric Stock Transfer Agents and Shareholders' Agent for Compazy Registrars Dividend Reinvestment Plan (incorporated in California)

California First Bank First Interstate Bank of California P.O. Address: Hox 1831, 8155 Mercury Court Dividend Reinvestment Service San Diego, California 92112 p.O. Box 2529 P.O. Box 60975 Principal Ollice: 101 Ash Street, San Diego, California 92112 Los Angeles, California 90060 San Diego, California 92101 Transfer agent for common Telephone (714) 232-4252 Transfer agent and registrar for all preferred

( Ann :;_1 Meeting of Shareholders First Interstate Bank of California in accordance with the bylaws e/o Schroder Trust Company of the company, the annual On ' State Street A statistical supplement to the annual report and Form 10-K meeting of shareholders is held on New York, New York 10015 rCPort to the Securities and the fourth 'Ibesday in April at Transfer agent and registrar for chr> "jb a " >.

a 1I a.m. at the principal othee of common Requests should be directed to the company.

Transfer agent and registrar for the Corporate Secretary, San preference only (except 87.325.

Diego Gas & Electric, Post O]Jice Li ting of Stock 88.25 and 89.125 preference)

Box 1831, San Diego, CA 92112.

The emmnon stock is listed on the New York and Pacific Stock Exchanges (Symbol: SDO)

The preferred stocks (except

. 4.60% series and 87,325,88.25 and 89.125 preference series) are listed on the American and Pacific Stock Exchanges (Symbol: SDO) 37

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