ML20138C552
| ML20138C552 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon, Humboldt Bay, 05000000 |
| Issue date: | 12/31/1985 |
| From: | Crane P PACIFIC GAS & ELECTRIC CO. |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 8604020529 | |
| Download: ML20138C552 (52) | |
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LETTER TU SittRE110lSERS 2 Year of solid accomph>hments M B %EME.%T filBGES d Experienced trio takes conunand MEET 1.\G Tile .%EW COMPETITION 7 A -Mitive spirit
, FIN BCE.BD RATES h A year of tinancial firsts ;
FAflLITIES h Diablo Umyon begins comn crcial operation NtilRAL GAS Rol3Dl'P h lower gas prices in 1985 ELECTRiflTY/RESBROI & DEVEIDPMENT 15 ^>i-time nee' aemena met l PRODLITI)lTY/REORGA.NIZATION/frSTUMER SEiWifE h I'reparing for the future COMMl3lTY INTOL)EMENT h Our responsibility to the community DIRECTORS, OFFifERS .OD REGIONtt M 0 tGERS h Company leadenhip for 1986 l SilAREh0LDER INFORMLTION h Your inve4 ment in l'G&E l [- Mi,i@ iM5.M.).lE 7@
! Selected Financial Information 19 Management's Discussion 19 Statements of Income 21
! Balance Sheets 2i Statements of Funds 26 Stockholders
- Equity 27 __ _ _ __ _ _ j i Statements of Capitalization 28 Segment information 29 Note to Financial Statements 30 Financial Responsibility Statement 39 Auditcrs' Rep >rt 39 Supplementary infornution to
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! Comparative Statistics 12 Revenues anr Sales .11 _ _ _ _ _ _ _ _ _ _
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1 x AYEAROF ACCOMPLISHMENT (ias htlSilleSS pick 5 Up, I)iablo OURUH Starts tlp, callllllgS SUly lip.
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TEA U M ED Successors to Mielke and Shackelford are skilled. experienced utility veterans.
sea soned e so ut n n in mr y \ Rmi .n is ius ac ac w ho hau pLn cd Les min m pr nuirn' n a !.n du ics .u,' ib n n re picparUlc li,N E 'I la'c! t ht w ilH t t ijt s t h qvilent a llj r e jil,p e- ( l,irkt chahenen or t he ' urc wW e pr n n:c ' . u < >n \l.n 1 T hree s.
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l LTILITIESE3TERERA0F GROWINGC011PETITI0X As big customers seek cheaper energy sources and new companies jockey for position, PG&E moves to meet the challenge.
1 tered a new and challenging wyg '; in the EOR process, oil pnxlucers in '
g AF- . ject steam into their wells to nuke thick, era of stiff-and growing- e_ * " "7 tarry oil ik)w more easly. Oil or natural Lv S. energy utilities have en-competition.
Traditionally, utilities have been accorded the exclusive right to serve customers
- "s 3
-T gas is burned to nuke the steam.
As the price of natural gas has dropped.
and as air pollution regulations have inhib-ited oil use, natural gas has become at-
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.g within designated areas in return for their % tractive for enhanced oil recovery.
commitment to provide service to all who PG&E and Southern California Gas want it. Strict regulation tcok the place of =. ,
Company both serve central California competition to ensure that utility services and, together, are capable of serving the were provided at fair prices. # entire EOR nurket. Ilowever, three out-Today, however, rising costs combined h >
of-state companies want to build new with rate regulatory policies have forced 4 pipelines to serve the market.
utilities to increase the price of services Because PG&E and SoCalGas already to major industrial and commercial cus- _
have pipehnes in place, we each caa serve tomers, causing these customers to seek EOR producers less expensively than l other ways to meet their energy needs. ((*'"','",,',d]'[*"
, , *g *** could out-of-state suppliers, who would New technology, changmg government have to include their pipelire construction regulations, and competition from unreg- PG&E is responding vigorously to costs in the price of gas. The out-of-state ulated energy suppliers are providing this challenge by: suppliers argue that they can provide many major customers the gas and elec- 0 Negotiating lower gas prices, more stable prices and supply because tric service alternatives they are seeking. O Improving the efliciency of our energy they are not regulated by the California Some major industries have substi- supply and dehvery systems, Public Utilities Commission (CPUC).
tuted oil or other fuels for natural gas pur- 0 Maintaining strict cost controls, The CPUC favors allowing PG&E and chased from their local utility. Others n increasing productivity. SoCalGas to serve the EOR market. The have purchased their own gas supply and n Aggressively marketing and pricing our increased gas volume handled by the util-have sought to have interstate pipelines services in specialized markets, and ities in serving this market would spread and their kical utility transport it for them. O Exploring new technologies that will re- the companies' costs over more units of A growing number of industrial and duce the cost of energy. gas and lower the delivery cost per unit of commercial customers are generating Most importantly, PG&E is continuing gas to all Cahfornia customers.
their own electricity through increasingly our long history of providing resp >nsive To help meet the competition from out- i efficient cogeneration projects. energy service tailored to meet our cus- of-state pipelines, the CPUC has ap-( This new competition has serious im- tomers' changing needs. proved a transportation rate for PG&E plications for other utility customers, and _ and SoCalGas that will allow the two com-in particular residential customers. If ma- ypg [1 A 0 M A Wprp p:mics to transport gas to EUR pr xtucers jor industrial and commercial customers D L TT Un0 HinnnL1 at low prices on a firm, long term basis.
leave a utility's system, the utility must The largest new gas market in Ca!ifornia Accordingly, PG&E now is able to offer spread the costs of its delivery system is the enhanced oil recovery (EOR) mar- EOR producers two attractive service over fewer units of sales. As a result, the ket in central California. In fact, with a po- choices: sales of gas at competitive rates price per unit goes up and the remaining tential sales volume of up to one billion or transportation of gas purchased from customers must pay higher prices. cubic feet per day, roughly half of PG&E's others. Heing able to offer both options average daily sales, it is expected to be strengthens our ability to compete suc-thihties face competition to serve new energy marksts such as enhanced oilrecovery.
Amer [ican continent.the la gest new gas market on the North l cessfully for this mark wwom l 7
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COSTC0HROLSKEEP EARMESHEALTHY Strict adherence to fiscal restraint has brought good financial results for the fourth straight year.
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/- KY n 1985, for the fourth [ @1 to redeem two high-interest tmnd issues straight year, earnings due ((j totalling $273 million, one carrying a to PG&E's utility operations C' t 16.25 percent interest rate and the other Ireached substantially the 16 percent. These were refunded at an level authorned by the Cali- -
. ) average interest rate of about 12 percent, fornia Public Utilities Commis- , \ *"'I -f resulting in substantial savings over the sion (CPUC). Earnings per share dg' > remaining lives of the redeemed bonds, in 1985 were $2.65, up from $2.62 in a 1984. This healthy state of earnings stems from rigorous cost controls and our V,
6j ( IMTE ACTION Aggressive negotiation of lower prices comprehensive budgeting system. We s from our U.S. and Canadian natural are committed to keeping expenditures g h, gas suppliers meant significant savings for both our natural gas and electric within levels authorized in rate decisions of the CPUC. \U a 4 8 -
customers.
The company's common stock sold k' h 7A During 1985 the compimy reduced gas close to or above book value throughout AC rates by more than $502 million annu-
^
1985. On December 18 it sold at $20W. ally. including $197 million in January and Adjusted for stock splits, this is the high-est point in company history. (That level p $26 million in August. Ia December the CPUC authorized a further decrease of 4 $223 million, effective January 1,1986 was exceeded early in 1986.)
At the end of 1985, our stock ekssed at 4 g bringing the total decreases to $725 mil-
$20, a significant increase over the $16% lion annually.
at which it closed at the end of 19&l. In August the company was authorized Total return to shareholders in 1985 (in- g"[jdy" N '"d ** to reduce electric rates by about $290 mil-crease in the price of the common stock lion. This was the net reduction from a plus dividends) was 35 percent, continu- 1984 and 17 percent in 1983. $319 million rate decrease because of ing the upward trend from 24 percent in PG&E's capital requirements remain lower costs of natural gas used to ger.er-
- - _ _ , , _ _ . _ - , high. In 1985 the comp;my had the largest ate electricity and a $101 million rate de-financing year in our history, consisting of crease because of other lower cost s. This g gggMgggdgg we , total reduction of $420 million was par-
, a u 2. 2 .& about $1.4 billion in bonds and more than
$300 million in common equity. Although tially offset by increases from two other m we are not now building large power CPUC decisions issued at the same time.
plants, construction expenditures to up- One of those decisions allows the com-g . , ~ '
grade electric and gas transmission and pany to increase electric rates by $119 70 distribution systems, and to strengthen million annually, effective September 1, to systems related to customer service, will recover $716 million, or 97 percent, of the u ' ,
$738 million we requested for construc-total about $11 billion over the next five n" tion costs of the llelms Pumped Storage years.
O To help hold down the cost of raising Project.The other allows an increase of a these funds, during 1985 the company $11 million annually, effective January 1, took advantage of favorable interest rates 1986, for recovery of $11.3 million, or 51 3 percent, of the $31 niillion net investment G in the nuclear unit of the ilumboldt Hay Power Plant, which is being retired after a si u as as asookwh o ioo merms 13 years of operation.
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3 "In 198E kr the karth in December PG&E re- straight year, sam- average monthly usages of ReensielHrst '
ceived " attrition" gas and ings...teachedsah. our residential customers.
electric rate increases to gg gg, y As of January 1,1986, cover increases in non-fuel the totalcombmed monthly expenses during 198a and bill for these quantities of 1986-the two years fol- krnia Pt66c h gas and electricity was lowing the company's Gen- Comunission...This $80.27, lower than the eral Rate Increase in 1984. heakhystate of earn- combined bill of $82.68 for These attrition rate in- , g the same quantities onjan-creases amounted to a net uary 1,198a.
of $137 million for 1985 and oss costcontrols and In December, in accord-
$190 million for 1986. our f:-;;i-.Gd ance with CPUC rules, For a residential cus- hedgeting system" PG&E tiled our request for tomer, the overall result of a General Rate Increase, these rate decisions was a reduction by covering both gas and electricity, of $972 January 1,1986 of $4.00 in the monthly bill million for the year 1987. General Rate in-for 100 therms of gas and an increase of creases are decided by the CPUC every
$1.59 for 500 kilowatthours of electricity, three years and are intended to compen-or a reduction of $2.41 in a combined bill sate the company for increased costs for these quantities. These quantities are other th:m fuel-related expenses.
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_ . N _ _ __ __ building and operatingit as PG&E has re , being sought by government-owned util !
, quested under traditional rate-making ' ities could cost PG&E customers more !
concepts. ' tlun $110 million per year in higher elec j During the early years of the plant's , tric rates. Rates would rise further if i life. .value-based pricing would result in j other facilities coming up for relicensing l customers paying less for the electricity ; were lost. j produced by Diablo Canyon than they ' For two years PG&E and other inves- i would under traditional, cost-based rate tor-owned utilities have joined with a ; making. Ilowever, in later years, assum- j broad coahtion of business, labor and I ing the plant operates as planned over its j consumer groups to urge Congressional j lifetime, value-based pricing could result ' action preventing application of the in customers paying signdicantly more. . government-owned utihties' interpreta ; 1
._ tion to the ti3-vear-old law. Thousands of !
HY nUgA[vp}pgrpy U 11 Y 11 1
! shareholders have written to U.S. sena- !
tors and representativesin support of the l For 1983. less than normal rain and snow l legislation, w hich has strong bipartisan i helddownourhydroelectricgenerationto i sponsorshipin tmth houses of Congress l 11.9 percent of our tot:d mix of genera- The recent confusing court decisions ' tion, down from 19.9 percent in 1981. i underscore the need for corrective leg-That, in turn, was down from 25.3 per- t islation, which we hope will be enacted cent in 198't The reduced hydro gener ; carly in 198ti. 1 ation required increases in PG&E's
% electric rates to pay for the added cost of [1pgrPIIUMI AI UE'PE generating more expensive electricity l ULU111LILITina; l'L1L j
s < from the company's fossil-fueled plants. Ceremonies on October 23 marked the F PG&E's operation of this low-cost hy ' 25th anniversary of Unit 1 of The Gey-dro system was imperiled by an adverse ; sers, the first commercial geothermal court decision involving the Federal ' plantin the U.S. and now the world'slarg ! Power Act of1920, under which almost all l est geothermal complex. ! of our hydro projects are licensed for Just days before the ceremonies, Units ! terms up to SO years. A three-judge p;mel ' Ifi and 20 came into prmh'ction, adding ' of the U.S. Court of Appeals ruled on Oc- 113.000 kilowatts each and raising The ! tober 22,1985, that the Federal Power i Geysers' total capacity to 1,3GUMM) kil- j Act gives government-owned utilities a ; owatts. The two new units were six j v.. preference to have hydro projects li ! weeks ahead of schedule and each was l censed to them instead of to the origin:d i about $30 million under budget.
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non-government licensee w hen the licen ; Construction of an even larger unit ; ses for the projects expire. That decision ' 110,(xN) kilowatts-is scheduled to begin ' was vacated onJanuary Ifi,19Ai, pending ' in 19Wi and be completed late in 1988. a rehearing by the full Court of Appeals. Electricity produced from geothermal 1.oss of the hydropower from projects steam is PG&E's least expensive source covered by four PG&E licenses now of power, except for hydroelectricity. In 1983 geothermal steam generated about ; Diablo Canyon B!oiogical Research Lab divers 11 percent of our electricity. { conduct studies on marine plant and animal hfe. j . rs oux1zum v 9
T r _q;; Y - I' N.N N @ M N N b h - GASSALESSOAR NNWi O .O - l ASPRICESFALL M.; 7 . Q
!j g Tough bargaining with suppliers pays off in lower *jq, ,
7 .0 o y o, $ prices; aggressive search for new customers .
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h ower prices due to hard bar- Our gas requirements in 1985 were g, g0 ; t gaining with suppliers, inno- supplied 38.8 percent from Canadian . / j vative rate designs, ard an sources. 39.3 percent from southwestern : 1 B h aggressive search for new U.S. sources, and the remainder mostly j/ ' il- [ [ [% business combined to dramat l from Cahfornia sources.
- n P icallv improve PG&E's natural l During the year, an attractive " spot" i gas sales in 1985. PG&E sold i market for natural gas emerged, enabhng % [*[' ,/
[ 492 billion cubic feet of gas to customers j us to purchase a portion of our gas sup- / ,
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in 1985, up from about 431 billion in 1968. ; plies at very low prices under short-term C A' l C Until this year, sales had dropped every ; contracts. We became one I year since 1979. l of the nation's largest buy- "PG&fohtamedhoth - This turnaround in sales is largely a re- g ,, g [ sult of the reduction in our average purmilhon; erscubicof spot feet gas. We bought r i up to 100 chase price of natural gas from $3.96 per ! per day, more than 10 per. favorahk contract p(i .
"/ s thousand cubic feet in 1984 to $3.27 in ' cent of our daily sendout terms hem sspp#ers .
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- I 1985. This permitted us to lower gas rates this winter, on the spot by taking advantage ;
to our customers by more than $502 mil- market or from our regular of Ms huyer's mar-tion during 1985. helping us to win back suppliers at spot market lost industrial customers and gain new he gas and hae prices. These prices were ' ones. well below the cost of gas gaining aggressive &." , g PG&E obtained these lower prices, , under our long-term gas / F along with more favorable contract terms ; purchase contracts. h from suppliers, by taking advantage of 1985's buyer's market for gas and bar-We will continue to purchase a substan-tial portion of our gas supplies under ,. 1
;;; ~ $ gaining aggressively with our suppliers. these spot market arrangements as long i
g l as it continues to be in our customers'in-A 20-year gas pipelme replacement program is part [ terests to do so. At the same time, we re- -
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of a major effo-t to upgrade PG&E facilities. . mam committed to preserving reliable .
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Lower-cost, reliable gas supplies are ; just part of the package we have to attract : Q[, f h yf p [. y # g . 3 - D$ ' S.4"b . .*g* 1 increased sales. We have developed and - ti. n Q%6 J;g g[ b P yM5A' @Ra*$ the California Public Utilities Commission has approved a number ofinnovative rates [Q e
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p j g of sale, thereby lowering the delivery cost f each unit. f.~^_ . 4 or Gas market conditions, along with the J
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Pacias Geo Denendosies Company and PSSE p- ) ayend . a muger in Seteher mEL eder which
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f .. - i . The mesper seemes sessiemed POSE seatsel~ E / + I~ ' ever PSTs gas lesmeminalen om which pse , videstovitelgessuppi EnhbeauseseCasadoand t a .
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POSE sesek of equivalent voies, sablestto sostein s i d- Nudendens.
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Canada, and Callierais is PSTs main business. y i la recent years the pipeline has carried sheet e percent of PS&E's assuel gas. Thsengh scheid-
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[ % % ifiR % e W W W 1 DIVERSEELECTRICGENERATING SYSTEMPROVIDESFLEXIBILITY Diablo Canyon and Hehns enable PG&E's electric generating , system to meet easily the highest peak demand in company history. R&D program strengthens company.
- "With the capacity pro- .-
9P nit 1 of Diablo Canyon and the Another 330,000 kilo- wdedby the Nehns in a California state ofrice llelms Pumped Storage Proj- watts of purchased power and &ablo Canyon building. The fuelcells have ect helped the company meet could come from PG&E's been oper ting successfully , an all-time peak area demand plam and the aker-participation in the building for more than a year. oi16,507.000 kilowatts onJuly of a 1.600,000-kilowatt naWe energyp@- Among the alternative 9,1985, with an 8.1 percent transmission line from the acts thatindependent energy projects contnbut-reserve margin. A reserve Pacific Northwest to producers are hadd. ing to PG&E's energy mix margin of 5 percent or less triggers state- California. is the nation's Lirgest solar Ing, PG&Ewi#not wide energy emergency plans. Without The company forecasts a photovoltaic ptmtin central IIelms and Diablo, those plans could have l need for some capacity ad- needto construct anI California. The plant pro-been triggered. I ditions in the late 1990s for large, centralstation duces electricity directly The company sold about 65 billion kil- which no projects are yet electricpowerplants from sunlight. owatthours of electricity in 1985, better- planned. for the near term." The company is evalu-ing l9Ms previous record by 2.2 percent. ! This need, if it occurs, ating the performance of The power was produced by one of the j could be met by increased conservation, the project to help design more advanced most diverse generating systems in the ' additional alternative energy resources, photovoltaic plants. We also have devel-country, including hydro, nuclear, fossil, l buying more power from others, or build- oped one of the most advanced photovol-geothermal, cogeneration, wind, biomass ! ing new central station power plants. The taic test facilities in the country, at our and solarfacilities. PG&Eleads the nation i solid base of the current generating sys- San Ramon research facihty. in the use of alternative energy sources to tem and tirm plans for the immed ate fu- Now and for the near future, fuel cells provide electricity. ; ture gise us time to choose among these and solir photovoltaics are too expensive With the capacity provided by IIelms j resources. ; to be commercially attractive. When a and Diablo Canyon, and the alternative i market does develop, however, PG&E energy projects that independent pn>duc- DUQU ADCH DWq l intends to be ready to serve it. ers are building, PG&E will not need to HLuLnnbH I ni o l PG&E also has done extensive re , construct any large, central station elec- ! Innovation and technological expertise j search in other alternative energy tric power plants for the near term. have enabled PG&E to succeed during sources, such as solar thermal and wind About 6,700,000 kilow,tts of new ca- changes in business environments since { energy. In 1985 the compan) won an pacity for the PG&E system are forecast our founding as a corporation. To i stay in l award from the American Wind Energy to come from a variety of cogeneration, the forefront of new technology, in 1985 I Association for aur studies of wind geothermal, small hydro, wind and other the company expended $32 million in sup- technology. alternative energy projects. Much of this port of research, development and dem- In addition to new energy sources, the will be developed by independent entre , onstration projects. company researches ways to improve preneurs with whom PG&E already has Two interesting technologies PG&E I performance of existing facilities-such contracted to purchase the power. is investigating are fuel cells and solar as by hnding ways to increase the capacity PG&E-constructed projects expected ph >tovoltaics. Iloth are dispersed systems of power knes and by testing coal and to come on line by 1995 include about -that i;, they could be installed in or water mixtures in existing boilers. 315,000 kilowatts from three more geo- near homes or commercial buildings and l The company also has extensive re-thermal units at The Geysers. not require the long transmission lines ; search programs into conservation and through which utilities supply electricity l cogeneration options for use by our cus-from central station generating plints. PG&E olectric customers benefited from a tomers, and into environmental and l' Fuel cells consume natural gas wit hout safety advances for our operations. j new method of working on live lines developed comhuMim pdring electricity, heat I 5 in Hceerfield Helicopters; the method saved and water. As a pilot project, PG&E has l , K Cahfornians t35 million in 1985. installeda 40-kilowatt pakageof fuelcells ! d ___L_ l 15
IMiliWhnM@%hewm*mE I CLST0MERSERVICE KEYTOCOMPETING Conservation, load management, productivity and reorganization are part of PG&E's competitive strategy.
" Conservation and improved scheduling of Joadmanagement pany's Productivity En-of any strategy to compete ef- home energy audits and programs are cost. hancement Program, un-fectively in the energy market- use of hand-held com- ,g,ggy, ,,y, g, der a Productivity Council C ustomer service is a vital pa place of the future.
PG&E has in place, and is constantly t.xpanding and refin-ing, a wide range of conserva-puters in 1985 doubled the number of audits done and saved about $1 mdlion. These and other conser-head a# customers andshareholders by stretchmg existing composed of top manage-ment, lus set up comp;my-wide systems to identify, implement and assess pro-tion, load management and other vation and load manage- Anwer-cost energy ductivity improvements. customer service programs. l ment programs are cost- l'hroughout the company a These programs help keep customers I effective ways to benetit all s andbW network of productivity co-the need to develop ordmators helps analyze bills lower. They also reduce the need to l customers and sharehoki. build electric generating facilities. By the j ers by stretclung existing costfernew supp#es" our work and tird new and year 2001 the programs will reduce our lower-cost energy supplies lower-cost wap of per-need to build new power plants by atxiut and lessening the need to develop rostlier forming it. 1,900,000 kilowatts-nearly the equiva- new supplies. One example of a productivity improve-lent of the two Diablo Canyon uruts. PG&E's Agricultural Energy Maruge- ment is the use of hehcopters to inspect During 1985 PG&E's conservation ment Program won awards for energy in- and replace hardware on electric trans-financing programs helped customers novation from the U.S. Department of mission and distribution hnes. On just one weatherize more than 300,000 homes. Energy and from the state of California. major transmission hoc project use of Our Zero Interest Program tZIP) of- The program gives agricultural custom- this method in 1985 saved more than $30 fer= interest-free loans, Cashback gives ers free evaluations of potential energy mdlion. rebates and liELP weatherizes homes savings and offers rebates for savings. Another example is an improved sys-free for low-income customers. PG&E also offers industrial and com. tem for replacing the company's network Since 1978 PG&E has made k>ans and mercial customers k>ad management pro- transformers. This wdl help us finish the grants of more than $300 million for home grams. These programs provide lower replacement 18 months ahead of s( hedule energy-efficiency improvements. The rates for electricity used during off-peak and under budget. IIELP program has weatherized more hours, when the cost of generating elec- To streamline our customer service , than 100,000 homes. tricity is lower. One experiment, called operations, on January 1,1985, we reor- I I g . - -- real-time pricing, offers industries hourly , anized g our longstandmg 13 operating ! , ; quotations on the cost of power 21 hours i divisions into six regions. s , in advance. This lets users schedule pro , This new regional structure moves i duction for times when power costs least. decision-making authonty closer to the j ForresidentudcustomersPG&Eseeks , customer by giving regional managers to make it easier to pay utihty hills The I greaterauthority fordecisions previously p' :
; Balanced Payment Plan evens out pay- l nude at corporate headquarters. It also
) j ments among high- and low-use months. j consolidates previously separate service and the Automatic Payment System al ! functions to improve their coordirution.
lows customers to have huis paid directly l The aim n to improve still further the from their checking accounts. Electronic meter reading byservice u c of to customers. ;l cfticiency and responsiveness hand-held computers cuts processing , time and is expected to save $5 nullion a per year when fully in place. 5 A PG&E meter reader shows a customer the new N&E constantly seeks to improve pca g ,,,,,,,, ,,,,,,,,,,, ,, ,sc,,,, ,,, ! time-saving hand held computer introduced in 1981 sersice by lowering our costs. The com- of energy te non Engiish speaking customers j g 16
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- COMMDITYACTIVITY:
l ARESPONSIBILITY ( PG&E and employees strive to enhance the quality of life i in the communities we serve with electricity and gas. r h. E 5 1 or PG&E, " service" means ..- has been developed with the California [pc.%.4 E .
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- more than providing electric- . . jf ~ ~.g 5.]> - State University system.
E ity and gas with courtesy and i e 4 . . K 1 . c + .) Through these partnerships the com-E efficiency to 10 million people l. . M pany provides broad assistance to Cali-m the 94,000 square miles of T ; h VVM A[. (?. ' ' $~j fornia colleges, including scholarships, ( 'J .'i~.j b_u .[ '; Mr
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i . ; . l California we serve. It also . research grants and teacher training. r means caring about the com- 4 31 - PG&E's longstanding university schol-l munities we serve-and helping to en- '* / -gg i h;;.; , arship program each year provides 22 q' "_ hance the quality of hfe in them. g .}; O - four-year scholarships of $4,000 and 44 g We feel a responsibility as a corporation p gg hW{p . one-year scholarships of $1,000. [ p to support our communities, and our em-ployees feel the same responsibility as % i r %y j '; . ? k(
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The company's Safety Education Pro-gram sends out experts in electric and gas g individuals. PG&E employees are involved in
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safety to speak to police and fire depart-ments, schools and civic organizations. In i every type of civic and charitable en- @Y - '*'% 1985 they spoke to 250,000 people. i deavor. They are mayors and elected of- . .
- - - PG&E's corporate contributions pro-
[ 7 ficials, little league coaches and volun-teers helping senior citizens. They tutor
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4 l gram gave about $5 million in 1985. More than half was for health and human serv- {r children, support fund drives and engage , ,C,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, M, w M gg a h Md % senior citizens organizations, child-care m literally thousands of other activities in - East s., wenien s shelter lower energy costs. g their communities. agencies and individual charities. Nearly [ The company encourages employees' leaders and k> cal government through- one-third went to education,10 percent to P volunteer work. For example, we regu- out our service territory. civic activities and the balance to support $ larly lend executives to activities such as The panel meets regularly and makes the United Way, the Bay Area Black recommendations direct to PG&E's sen-cultural activities. The largest single contribution is to F United Fund, the San Francisw Mayor's ior management. The panel has made 61 PG&E's REACil program, which pro-Summer Youth Program and many others. recommendations, of which 52 have been vides emergency help to low. income res-j! PG&E has created a separate Com- adopted. The rest are pending. None has idents of our service area who have no y munity Relations Department to provide been rejected. other source of funds and are unable to h a company-wide focus on community re- Fourteen k> cal consumer advisory pan- pay their energy bills. lations activities and programs. els have been set up throughout PG&E's Under the REACil program, now en-As a result of this department's efforts, service territory. tering its fourth year, the company solic-b in 1985, for the first time, we conducted PG&E also sponsors extensive energy its contributions from our customers, a company-wide United Way campaign. education programs. The company pro- matching their contributions dollar for g b The campaign raised more than $2.25 mil. vides elementary, secondary and college dollar up to a maximum of $1.5 million. lica 30 percent more than the amount teachers a wide variety of pamphlets, The Salvation Army administers the pro-f_ E raised in 19M when the campaigns were films and curriculum units. gram. PG&E pays The Salvation Army's conducted separately in each region. A significant feature of the company's administrative costs. [ education program is a partnership with Over the past three years, more than E PG&E's Community Relations Depart-f ment also coordinates activities and California's community colleges. This $9 million has been made available $ schedules meetings for PG&E's Con- gave rise two years ago to the Chan- through REACl!. Last year,45,000 cus-IT sumer Advisory Panel. The panel's cellor's Committee on Energy Education tomers contributed to the program, and g membership is drawn from community which promotes energy education and 25,000 families were helped. helps community colleges practice en-ergy conservation. A similar partnership h $ 18 b L . . _ .
FINANCIALDATA l l l lWNb pl%(INO.OihIPif I.Mik - ] Pacsc Gas and Elettrr Company tw3 l IWI 19&Fl 1982l 1981 I In Thousands (except percentage and per share infornutum) Operating Revenues S 8.130.9sl $ 7.829.703 $ 6.616,699 $ 6.785 w5 5 6.198.575 Operating Income $ 1.369.359 $ 1.103.388 $ 959.872 $ 913.214 $ 687.209 Mt Irrome 5 1.0.M G $ 974.892 $ 787.967 $ 810.178 $ 568.6n6 Earnings Per Common Share 52.65 $2.62 $2.15 $2. 46 $1.71 Dividends Declared Per Common Share $1.81 $1.69 $1.58 $1.17 $1.36 Ikok Value Per Common Share at Year-end $18J G $17.18 $16.39 $15.88 $15.15 l f Market Price Per Common Share at Year-end $20 $16% $11% $14 w $10% l Divblend Payout Ratio 68.31 68.51 73.54 59.74 79.89- l Total Assets at Year-end $ 19.09M u u $17.319.359 $11.717.357 $13.635.318 $12.3e4.659 Long-term Debt. Preferred Stock, and Capital laase Obligations at Year-end S 4.187.957 $ 8.223.968 $ 7.055.825 $ 6.509M18 $ 5.819.705
- Changed to conform to 1985 presentatum.
The at:me table displays data whah are discussed in the Management's thscussum and Analysis of Cormhlated Financui Conditum and Results of Operatums. i l: f,Qf*th:itytiCbKlg M fi M iif M Wt ( O W I ( U/.i t i s 4 h f ( k fj M t t O tliih i 9. i t 9 a :Q ).Q @ E.d jif M l It:6c Gas and Eicctnc Company l RESIIJS OF OPERtT10\S charge against income of $37 million for the CPUC jurisdictional Earnings per share of the Company in 1985 were $2.65, as com- portion of the costs disallowed. pared to $2.62 in 1981 and $2.15 in 1983. The 1985 earnings are The CPUC also acted in 1985 on PG&E's request to include equivalent to a 15.119 corporate return on weighted average in rate base $738 million of capital costs of the lleims Pumped common equity. Storage Project. These are the capital costs estinnted to have been the final costs prior to a water conduit rupture in 1982. The 19xtl 19m ! 19sa decision allowed $71ti million in rate base. Earnings for 1985 In Thownd" have been reduced by $22 million (before tax) for the CPUC Earnmgs Availab:e for
$628,113 k% 57 ~,
jurisdictional portion of costs disallowed. Common Stock $810.576 Earnings for 1931 and 1983 were decreased by a disallow-rc tta$1g 292.107 am.36, n.w ance pertaining to a deferred liquefied natural gas (1,NG) proj-ect. In 1981. $1(i 6 million of financing costs was disallowed The corporate return for 1985.1931, and 19Ki was reduced be- by the CPUC and was written off. A reserve against some of cause certain energy project costs were disallowed by the Cali- the financing costs had been made in 1983, prior to the CPUC fornia Public Utilities Commission (CPUC). Cost disallowances decision. reducing earnings by $58.8 m.!! ion. in 1985 were offset by an adjustment of prior years' federal in- A reserve against the Company's investments in an Alaskan come tax benefits, which increased earnings by $42 million. natural gas pipeline project was increased by $7.5 million in 1985 in 1983, PG&E elected to decommission the Ilumboldt Ilay and $10.4 million in 1981. The reserve was established in 1983 Nuclear Power Plant Unit 3 Ulumboldt Unit 3). In 1985, the for $45 million. C PUC a!! awed PG& E to recover $44 million of its remaining $nt Earnings in 1983 were further decreased by a $70 million million net investment in llumboldt Unit 3. This resulted in a write-off of other project costs denied rate recovery by the 19
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, NWM@NUSNMl@0DUsM - ' l l Ewi6c Gas and Electric Gunpany l l 1 CPUC. These reductions were partially offset by an $18.1 mil- in 1983 were authorized by the CPUC. In December 1985, lion net gain from the sale of coal properties. The CPUC re- PG&E filed a 1987 test year general rate application, asking versed its decision on the coal properties net gain in 1984. for a $972 million increase in electric and gas revenue require-requiring a refund to ratepayers. ments. A decision on this application is expected in December . l 1986. Dese rate increases, in combination with management's g g rigorous cost controls, have strengthened the ongoing opera- 1 Major A4ustments: 19 0 l#4 Iwc;
$- 1 ions of the Company.
IMorhar tax a4ustment $- $ .13 um llalancing accounts authorized by the CPUC also contribute Iluncoldt t%t 3 - - to the Company's earnings stability. Energy-cost balancing ac-fielms Pumped storage Prdect - - um counts accrue for future recovery costs of gas and 914 of costs 1.NG project reserves an L15) - of purchased power and fuels used to generate electricity. An
.uaa pene pront April 1985 revenue increase of $291 million annually for in-reserves tow tol) m creased electric energy costs was more than offset by several Other praect costs wnte-off L24) UG) - electric and gas revenue decreases totaling $1 billion primarily Net gam frren coal sale w um - due to reductions in the cost of gas.
$t4n, $t22) som Major facility balancing accounts accrue for future recovery operating expenses and return on major generation projects Net income for 1985 increased to $1.031 million from $975 mil- from the time they become operational until final rates are ap-tion in 1984 and $788 milhon m 1983. Net income increased from proved by the CPUC.
19&l to 1985 mainly due to increased operating revenues asso- The Company also has sales-fluctuation balancing accounts. ciated with additional plant m- These accounts ehminate the impact on earnings of electric and f TD vestments and because there gas sales fluct uations. Rates bilk d to customers are determined were fewer project cost disal- by the CPUC based on an estimated sales volume. Any differ-lowances and lower reserves ences between revenues calculated using these estinutes and 9 y against investments. revenues billed on actual volumes are accumulated in the bal-8 Contubuting to higher oper- ancing accounts and equalized through subsequent upward or 7 yy ]j atmg revenues is the Attrition downward rate adjustments. _ .%qF y q Rate Adjustment (ARAh The The Company has an inflation-related rate mechanism, the
;j ARA was designed to offset the ARA, discussed above. This provision for timely and adequate !
6 + >
- u. n : effects on earnings ofincreased i=n rate relief contributes to the Company's financial stability. The 5 i.
q q financial and operational ex- Company has prepared certain required information relating
-g penses incurred m the years
,' j ,;;
; to inflation and changing prices in accordance with Financial a between general rate cases- Accounting Standards lloard Statement (SFAS) No. 33, as l3 h ,.
+
3 J The CPUC had granted a $185 amended by SFAS No. 82. Such information is contained on F 1 'k U 1 million rate increase under the pages 40 and 41.
?44 [ ; ; 1985 ARA, subject to refund.
j The CPUC ruled in December All of these ratemaking procedures, coupled with manage-ment's commitment to operate within the revenue and expense 1 m. , , , M M ' n g g' 1985 that the Company should limitations of general rate decisions, have contributed to the 81 M u M u refund to ratepayers an amount soundness of the utility opera-anurm aus based on thedifference between tiTte 05 LTitm nm BtSE tions over the past several forecasted and actual weighted "- ~ years. This is reflected in the average rate base. At December 31,1985, this refund was es- is percentage of the authorized timated to be approximately $18 million and 1985 revenues were m l%R*A rate of return earned on utility reduced by that amount. This is the first time the CPUC has or- u p! .
!l investment in the accompany-dered this type of adjustment; the Company may be subject to ,,: d ng chart.
similar adjustments in the future. ir i The allowance for equity and The C PUC granted a total 1986 AR A rate increase of $190 mil- N ' l borrowed funds used during lion, subject to refund pending additional reasonableness hear- a construction (AFUDC) declined ings. The CPUC also indicated :n its 1986 ARA decision that it h 4
* ]h for the third straight year, would open an investigation to determine whether changes 6 . ,
' y should be made in regulatory procedures including rate adjust- F' j ment mechanisms and rate case scheduling. 4 7 Basic utility operations remain sound due to several factors. E H General rate increases of $427 million in 1981 and $202 million -7 g v N, $
9i - o ]yg a Al M K1 4 % anno auwm 20
[. ]_ vtC m u m uTu2 still represents a significant of construction work in progress (CWIP) costs or a return on NN part of net income. For 1985, such costs in current rates. Only when construction is com-AFUDC represented 33.04 of pleted and the project is placed m service can it contribute to the net income, down from 19.34r Company's cash ilows. In recent years, two nujor projects have 7% and St.59r in the past two years. been included in CWil'-lielms and Diablo. h This is due primarily to the size In June 1981, the IIelms hydmelectric project was pbced in 50 4( ! of the Company's construction service and its costs included in utility plant. This plant had twen
,1
, j program. AFUDCincreases net j under construction for a numtwr of years and conunercial op-9 income but does not contribute eration was delayed due to a water conduit rupture in 1982 aml
^ to cash tiows until construction various start-up problems. In August 1985, the CPUC decided 30 ? - 4 is completed and the project is to allow in rate base $716 milhon of the requested $738 nullion
! placed in ser vice, included in of the capital costs related to llelms prior to the conduit rupture.
20 a utility rate base, and the asso- l Recovery of the post-rupture costs not recovered through k " 4 4 ciated revenues billed to cus- claims and litigation will be reviewed by the CPUC after the lit-tomers. With theinclusionof the igation process is complete. Costs of owning and operating the 30 1 3 IIelms Pt.mpal Storage Project pbnt from the date of commercial operation in June 1988 to the j s - , j (llelms) in rate base and the August 1985 decision were accumulated in a babncing account. si c n 4 n commercial operation of the A pirtion of these costs wdl be recovered in rates in 1986. Diablo Canyon Nuclear Power inclusion of Diablo Canyon Nuclear Power Plant Unit 1 Plant (Diablo) Unit 1. AFUDC began to decrease in 1985. With and Unit 2 in rate base would sigmficantly improve the Com-the commercial operation of Unit 2 of Diablo in 1986, the Com- pany's cash flow. A decision on final rate base treatment wdl not pany expects a continued decrease in AFUDC, although the full be made until after the completion of hearings on the prudence effect of Diablo on the gaality of earnings may not be felt until t he of Diablo's capital costs, w hich is not expected before 1988, completion of a construction cost review. I Commercial operation of Unit I began on May 7,1985. Unit The decrease in the AFUDC contribution to income for 1985 j 2's full-power operating license was issued by the Nuclear Reg-was offset by increased revenues from the Diablo Canyon Ad- ulatory Commission in August 1985, and commerci;d operation justment Account (DCAA). This mechanismaccumulates Diablo jl Unit I expenses and return on rate base for future consideration i is expected by early spring of 1986. The initial stipulated ad-of cash recovery. Current cash flows are not increased by the l At December 31,1985. Unit 2 represented 759 of total CWIP. operation of the DCAA. The DCAA went into effect on the com ' The uncertainties surrounding ultimate rate treatment of mercial operation date of Unit 1, and as of December 31,1985. Diablo are discussed more fully in Note 10 to the financial had accumulated $t29 million in revenues, of which $197 mil- statements. lion was return on plant in service. Interim rate relief gi anted in Future const ruction expenditures are anticipated to be mainly December 1985 permitted accumulated fuel savings to be off- for smaller projects with a short construction pe riml. Capital will set against this account thereby reducing the balance in the still be required, but the carrying costs of such construction DCAA to $158 million. Allinterim amounts granted are sub- should be much less. The Company also pl.ms to minimize its ject to refund. capital requirements by signing long-term purchase contracts The CPUC has been conducting ratemaking workshops for energy from projects where participants are exploring different methods for pncing rmmitTim Elml>rrt Rt.s developed by others and Diablo Canyon production. The focus has been on Value liased o"o m=" " _ by continuing to develop Pricing, which would price Diablo Canyon production as if the M conservation programs. plant were owned by an independent power producer. _ _ _ . _ _ _ _ Projected construction
% T ' ,. , m expenditures in 1986 in-LIQilDITV 15D CAllTAllitSol RCES .
ciude the above smaller The Company's capital requirement s st em from the nced to build 1.s - projects, and outbys for expanding or reinforcing facilities to meet anticipated demand for electric and gas serv-ice, to replace worn-out facihties and to comply with pollution ;d.I
~
the capacity of our trans-cont roi regulations. The C PUC's p dicy is not to permit inclusien ! mission and distribution
,I d ' ' 3
' system. and tumlernizing facilities and equipnient.
06-52 M M S6 57 'M 59 O 'VM S 4 I IM P P QNFAfuMNDw
! OdelHFR D lil AH 4.
Pr.,n cit e _ _ _ _ _ _ _ _ .m _ _ _ - - - 21
h MdON1%jtMINI%Kp _
]
Pacine Gas and Electne Company The Company will also require capital to meet maturing debt gives the Company flexibility to meet all capital needs and to and preferred stock issues. schedule k>ng-term dt bt issuances. 1% l 1% l 1987 IW l 19x4 ( 1% in Nidlacs in NIhos Funds Used for Net Short-term Borrowmg Constructon Projects $11r $2 M t* $2.128
- at Wared $295 $116 $116 y
- Projected lanes of Creda Stamtamed Staturmg Debt and Preferred at War-end $607 $611 % 11 and (a g The regulatory balancing accounts authorized by the CI'UC also affect cash flows. When revenues are overcollected, as was the Fund Requirements) $ 77 $ 102 $ 116 case in 1983, the Lompany uses Capitalis supplied by a combination of inter nlly generated funds auwtw AmnTs the funds untilthey are retunded and external financings. External funds tr ?m the issuance of u noonus with interest. When revenues common stock and debt were the source of 657r of the Com- " " " "
are undercollected, as has been pany's capital requirements for the year ended December 31, 3" s the case in 1981 and 1985, the 1985. As major construction projects continue to be placed in 200 Company must borrow funds utility rate base and begin to generate cash, the Company's re- O; until the revenues, plus inter-liance on external financing should decrease. It" est, are received. 1983 l 19stl 1% 0 i4 g Management believes a hal-in 3:3,ns i' anced capital structure helps Proceeds fran Fnanc ng. , p provide the financ2al flexibility to maintain gocxl credit ratings and Common Stock $244 $ 232 5 r.1
*io{J -
[j Pn terred stock 74 - - e ccess to ca@al madets at rea-Long-term Debt I "" # Sn3 1AG 1.D7 , Total Pnxeeds $x86 $1.267 sim n *" :I' In fundng its totalyapital re-1I quirements, l'G&E seeks to Important sources of common stock financing are public offer- S' " ' maintain capitahzation ratios ings and the Company's dividend reinvestment and en playee comparable with those author-savings fund plans. Long-term debt and preferred stock have been sold in the United States through pubhc and private offer- [ j,"']
,,. .i o % , o ized in.the most recent general rate case (GRC) decision. This ings. The Company also obtains capital in the European finan- objective was met in 1985 and cial markets. 1988. The 1931 and 1985 GRC capitalization ratios compared to At December 31,1985, the Company's common stock was the ratios at Decemtwr 31,1981 and 1985 were:
selling at $20.00 per share, $1.95 above the book value of $18.D5 - per share. Sales of common stock at prices below book value U"idl; may be necessary in the future, as has been the case in recent
*'$ D" j,y, g g ,y g years, to provide capital for planned construction and other projects.
P w I u u The Company's bond indenture permits the issuance of first "" " " " # "
*'I '"'" 3 "' " '""'
mortgage lxinds up to the amount approved by the Company's Board of Directors. At December 31,1985, the Company had Funding requirements are also helped by adequate and timely
$6.1 billion outstanding in such mortgage bonds and may issue rate increases. These increases meet operational requirements up to an additional $1.9 billion subject to indenture provisions as and permit external financings of construction at a reasonable to earnings coverage and property available as collateral. Each cost. In recent years, the CI'UC has allowed such increases. As financing must also be approved by the CI'UC prior to issuance. noted above, it is uncertain what will happen with the Company's The Company's short term debt is issued for interim financing Diablo rate requests.
of the construction program and any unrecovered balances in the This year, the Company attained one of its main financial balancing accounts. This debt is primarily commercial paper goals: a common stock market price in excess of book value. The supported by bank lines of credit. This additional f'mding facility Comp;my continues to review the means of maintaining this goal j and achieving a quahty double-A debt rating. The continued use I of a cost control plan, budget system, and employee incentive plan has allowed the Company to hold expenditures substantially within the levels adopted by the CI'UC. 22
hUMiX1pDiMdflitkilNN D ff D -
~
fj INctfr Gas and Electne Company Fo the Years Ended December 3t, 1% l 19s4 l 19&$
In Thouunds teurpt per share anwunts)
Opcrating Revenucs Electric $5.819.983 $5,158,165 $3,ta)5,814 Gas 2.610,W8 2,671,538 2,740,865 TotalOperatingRetrnues 8,130.ts t 7,829,Dxt 6.616,6tv3 Utnrattng Exprns
Adminis+sative and General 591,926 510.015 439,43ti Other 257,025 118,000 21,811 Total Operation 5.319.155 5,169,078 4,322,842 Maintenance 312.531 287,882 250,478 Depreciation 5;G,658 415,690 391,105 Gos Exploration 45.:9 0 48,977 41,193 Income Taxes 652, *
- W tsl7,674 555,323 Property and Other Taxes 1**i,012 137,014 125,516 Total operating Expenses 7.061.622 6.726,315 1 5, tim 6,F27
~ Upcratmc Income l 1,:4i9.:04 l 1,103,388 l 959,872 Oths r hwome and tincome hedtutwnsI Allowance for Equity Funds Used During Construction 217,:Du J65,625 :L18,3Mi Interest Income 132,935 59,771 71,287 Mmority Interest in Net Income of bubsidiary Comparues < 13,525 > (18,123) (12.552)
Reserve-Construction Projects ui,7!21 (59,137) (103,858) Disallowed Project Costs ( X 8321 (16,ti5:1) (70,220) Other-Net 32.1 m 101,4 lei 101.428 Total Otherincome and (Income Deductwnst ,La 2.Ct 136,929 321. 5 Income urtort Interrst Ex,vnse l 1.702,592 l 1.550,317 l 1,2M,titsl , Inn rest Exprnse f Interest on Long-term Debt R 0,258 in),086 525,456 l Other Interest Cha ges 55. 5x.4 70, thio 62,201 l Less Allo.<ance for Borrowed Funds Used During Construction i 9.t.07 o (111,621) (40,1 Nil) Totallnterest Expense 671,787 565,4;& 4mi,tyni Ne t /ncome 1,ujo. m 974,892 787,967 Preferred Divitiend Requirements 161.230 165,316 159,821 Eanungs Arail6 for Comm,m Nta k $ Nei,573 $ 810,576 $ 628,143 Mrtchird Attrage Cumman hharrs outstanding l 326. MM l 393,3til l 2'J2,107 l Eanungs i'cr Cunman Share W! e6 l $2,62 l l $2.15l Dit udend< Declared Prr Common Sharr l $l.81 l $1.tn l $1.58 l The cIcompanying notes to consoixiated financial statements are an integral part of thew statements. t L
ElMl)bIMDIENM_DMN[$
' + 4I ,d l'acific Gas and Ekrtric Cisupany thremter 31. IM3 l _ IN8
- in heatuis Assets Plant in Smict (at orional cost)
Electric $13 Siil.itil 5 9.373,lti2 Gas 3.0f 6.t u d 2,813.970 Total Plint in Service Iti.tGei,170 12,187,132 Accumulated Depreciation ( l.siti.2551 ( s,:J1 t,088) Nrt Plant in Serrace 11.819.915 7.873.nlI Construciton librk in Procress 2.852.ti91 l 5. 471.7 t i Nutlear Furt and other Caputal f.ei.scs 1 13ti.376 l t30.417 Gas Ext!vratzon Costs i 2 tis.Ni5 1 2ti2.ti72 Advances to Gas Produccrs l Wil.2.~D l 35ti.220 Constructwn Funds litid tv Tnutre l t*i.tMS l 29.011 investnwnts LNG Partnerships 1.310 1.310 Alberta Natural Gas Cornpany Ltd 45,Ni2 12,7tK1 ANGUS Chemical Company 32,981 28,979 Other Investments 2ti.275 Iti,291 TotalInvestments i 1Ini.3ts 89.2KL Custanar Conserratwn Iwas RunraN< (net of current porthm $43,722.t n o in 1985; j l
$13.070.tN o in 1961) 1 75.250 1 98.ti32 Current Assets Cash 7,759 3.220 Short-term Investments (at osst whKh approximates market) 371.u35 75 'i2ti Acwunts Receivable Customers 721.sni 705.197 Other 285.20ti : Ell,1II Allowance for Uncollectible Acounts (9. M!N) (10.970)
Regulatory Balmcing Accounts Receivable 378.531 415,7Kl luventories (at average omst) FuelOd 257,105 2t80,131 Gas Stored Urxlerground 290.178 36,091 Materi.ds and Supphes 170.3i11 12ti, tal Prepayments ___ } 2 Del 7 2.5n.t.025 ! 18.tiOS 2.2 tit. t3"> T>tal Current Assets l f)efctred Charges thabloCanyon Adjustment Acaent 157.739 - Project Costs Perahng Regulatory Action to.710 liti.7to Unamortized Project Costs 137,Ni5 121,Kl7 Workers' Compensation and Disabihty Claims Recoverable 73.u o 7(i 0io Unamortized Debt Expense 18.13ti 15,100 Other-Net 153.828 98.121 Thrallieferred Charges 5M1.278 123.851 71,tal Assrti i $19.In8.twG l $17.319.359
' Changed to unform in 1985 presentata c.
The acornpanying ruden to conwiststed finant ial statenwnts are an uitegral gurt of thr*e statrnients. 21
- .1 ' - E , s
~
]
December 31. Iv5l int
- In "Ihnusarxis Capitali:atwn andLusbihbes Capitah:atum Oxumon Stock $ 1,tisti,7tl $ 1.568,542 Additbnal Paid-in Capital 1,na),222 1,518,imi3 Reinvested Earnings 2,610.512 2,3to.nl1 Gunmon Stock Equity 6,oM7,175 5,413.546 Preferred Stock Without Mandatory Redemptim Proviskm 1,127,151 1,427,451 Preferred Stock With Mandatory Redemptkm 1%iskm 252,500 2tio,tA z) laing-term Debt
{ 7,Iti.. M i ti,143,070 l ThtalCrettaliaatwn 14.914.292 13.274.oti7 I l 1 Customer Consaratiam Lwss Funding 'i ni. tno 11 t,30t> ) OtherMr. current Lsabthtws Capital Lease Obligathms 361,Ito 393,487 Customer Advances for Constructkm 119. I:n 117,16'l Workers' Compensathm and thsabibty Claims 73i m 76,000 Other 19.677 18,131 Th!al Other Mncurrent Liabshtws 573.252 fa>S,as1 Current Liabshtvs Short term Ik>rrowings 520. 8:G 191,'t25 Accounts Payable-Trade Creditors 517.308 613,fdit Accants Payable-Other 2t ni,197 114),99 , Accrued Taxes 29, tits 33,8 tei Deferred Income Taxes-Current Portion 157, lia.) l'wi,89 8 lamg-term Debt-Current Porthm 94.673 212 hki Capital Lease Obligations-Current Porthm 82,714i 59,651 Interest Payable t*i, to : 85,190 Dtykierxis Payable 155,302 13ri,172 Arounts Due Customers 73,3 0 89,213 Other llW UG8 <r),362 Thtal Current Liabihties 2. mt.870 2,239.2 t2 l l l><ferred Crrdits l Deferred investment Tax Cre6ts 501.71o atr>,449 l Deferred income Taxes 783,3 t ei 43t,8 to l Unamortized Gain Net of less on Reacquired Debt evi,769 68,603 Caer 22,:105 82,141 7htalIMcrred Crrdits 1.:U7, It x > 98 t,tr.Ni Minorstv interest in subsidiarv Companirs ! 113.o.89 l 10l,713 Contingenrus tNote lo) l l 7htal Capitahratwn and Lsabrhtus i $19.I768.tWtt i $17.311),359 1 25 1 ..
l:d N d_N W N $ Y M lNil N elj N $*IOL8iN h h N ii$?ik'il kiIlif , _] I'acific Gas and Electric Cornpany For the Years Ended December 31. loru l 1984*] 19Kl* In Dumands Fuseds From ONratitms Net income $1.10196 $ 974,892 5 787,967 Nonfund Items in Net income Depreciatkin (including charges to other accounts) 583.198 451,149 ' 396,fol Allowance for Equity Funds Used Dunng Construction C 17.367) (365,625) (358,706) Deferred Taxes 252,565 167,434 53,638 Reserve-Construction Projects 6.712 59,137 103,858 Disallowed Project Costs 5A 882 16,653 70,220 Other-Net 1 %.UJi 144.280 151,fa3 Funds From Operations I,791.885 1,407,920 1,225,271 Regulatory Balancing Accounts: DiabloCanyon Adjustment Account (157,739; - - Other 37,252 (183.h70) (174,289) Deferred Taxes Related to Regulatory Balancing Accounts lu.657 287,885 89,208 Net Operationalfunds 1.737.(6 i 1,171.935 1.140.190 Funds Front Finannng Common Stock Sold 373, 45x 232,196 244,205 Preferred Stock Sold (Redeemed) < 7. W n - 74,135 Long-term Debt issued 1.3.91.726 1,038,908 567,770 Cor,struction Funds lleid by Trustee (37,9 t h 20,868 1 9,9'12 Net Short-term Borrow:ngs (Investments) CeW,2 % 120,3N) 308,758_ Funds from Finanang 1,lla,i11 1,408.352 1.214.N x) Funds From Changes un l Accrued Taxes 0, tw 1 (45,223) (231,377) Accounts Receivable 30,178 (322,417) M,078 Accounts Payable (50,792; 150,280 (297) Other Erking Capital *' H2.ti21p 32,681 fo,900 Fuel Oil and Natural Gas Inventories 31,613 42,ral 128,850 Other - Ne t 17,295 Int,573 (58,918) Custonwr Conurtats. n lains Funds J t 17,v n 17,300 72}_n)_ 7btalotherFund: 1:wG L20.lTD 36.236 7htalFunds l>rrnided l 3. I% 1ol l 2,Stio,115 1 2,391,226 Funds Uwdj< r Other 7han Constnn tion Is>ng-term Debt Matured or Redeemed M a, lim (77,42 0 (72,73 0 Ising term Debt Purchased for Sinking Fund (at cost) CMI.1971 (57,117) (45,619) Dividends on Preferred and Common Stock (758,77D (688,9:ti) (620,5NO) Conservation Isians to Customers 22.7.m (17,5#U) (58,174) e l. tn 6.47b t (ntl.nl3) (797,407) Totid Funds Used for Other Than construc tion
- 1. N a i.123 1,719,072 1,593,819 Constitu turn Intvnditan s 338,706 Allowance for Equity Funds Used During Construdion 217.:W7_ 365.625_
7htal Funds Cvd t"r Con <trru tion $2.1:17. Im $2.048.697 51,932,525 (a) Other Wstking Captal en ludes dunges in current partions of: long term debt; 1985, ($11M 123JuWH; 1948, $1.11.MlJm, I A1, ($4.173Jann; conservatum loans to customers: 19M5. (M52.is#n; 1944, ($10.432JW80; 19Kl, t316,fi38J#s9: and captalleaw eMigatuens: 19MS, $41,Il5Junt.19Al. $59,fi51Jm
' Changed to conform to 1985 prewntatwe.
The accompanying rustes to conv>hdated brurrul statenn nts are an integral part of thew statements. 26
bijd PM Nibill NISNb k IlMNii>[lMNIDh (IIM h} N NO(IT% M > @ ) d [U l b1(II# k d Paanc Gas and Electric Cannpany Preferred l'rrierrest St<=k Wittunut Stan k With hlarulatury ht.umlator y Ctemum Additamal Reinvested C<ennwm R<stenytam Redemptum Stisk I'aml-in Capital Earnings St<xk EqtutL Prmisam Prmise n in lbNrNI$ Balance, DarmkrJ1,1!At', $1,422,625 $1,2t6,3 t l SI,8M,456 $8,516.425 $1. 427,451 $185,(n) Net income for 1983 787,tni7 787,967 Preferred Stock Sold (750,(n) shares) (865) (86'i) 75,(n) Comrra Stock Sold (15,16i,l'JI shares) 79,831 Itil,'174 284,205 Cash Dividends Declared Preferred Stock (158,851) (158,851) Common Stock (4til,Ta) (461.Ta) Foreign Currency Translation Ad)ustrnent (8 tan muu Balance, Durmkr31,15A93 1,Str2,19i 1,368,833 2,051,953 1,92ti,262 1,127,151 260,000 Net income for 1984 978,892 978,892 Common Sta k Soki (16,417,292 shares) 82.08ti 150,110 232,11*i Cash Dividends Declared Preferred Stock (168,31ti) (Itil.316) Cornnwn Stook (528,617) (521,617) Foreign Currency Translation Adjustment (871) (871) Balance, DarmkrJ1, l!A41 1,5Al,582 1,518 !wi3 2,3to,nl1 5,t13.586 1,127,851 2tH,(n) Net Income for 1985 1,030, s n 1,03o. N 6 Cononon Stock Sok! t21),139,831 shares) 102,199 271,25'8 373,138 Preferred Stock Redeemed (75,(n) shares) C,Soni Cash Dividends Dedared Preferred Stenck i161,382: (161,312i Common Stock t:n I,17.0 cat,Ifo Foreign Currency Translation Adjustment ( 1,wn (150 hatana, Darmheral. /!M $1. w ,781 $ 1. 7m 222 52.610.512 56ts7,l:5 <l.in.831 engani Tlt3 Crunnpanying tvites to ameAnlated hnanci,d statements are an integtal part of these statena nts. l 27
hMIMNNUMtNOkiMjUIs$5Wj@ONi[ s_
'd Padric Gas and Ekstric Company December 31, 1% l les
- In Thouyrmis (excetd p nentages)
Curnnum Stock, Par Value $5 i er Shre tautim> rued 4m.too,tm sbres, issmi armt outstanding at December 31,1985: 337,318,282; 1968: 31fi908,413) $ 1.6-A7II $ 1,588.582 Addititmal Paul-in Capital 1.7.o.222 1,518,tMi3 Reinvested Earnings 2dlo,yl_2 2,340.n81 Common Stak Equitv eU i87.17 *, 41's 5.4 :1.56ti los Preferred Stock Without hiandatory tMlemptne Prmisam Par Value $25 Per Share (authorued 75,(nx),tm o shares) Nonredennable 54 to 61 -5,785.tx o shares outstandmg Ili.tel 144.621 r RedamaNe 4.36% to 8.2%17,225.tnU shares outstanthng O k,ti33 63).629 9% to 10.4ti4-21.088Jno shares outstaruhng 527.311 527,201 12.MT to l7.33Ol't.imjuo shares nutstarwhng .5253 n o 325,i8 0 1.627.451 1,ll7,151 Preferred Stock With 5tandatory Redemptic Promam Par Value $100 Per Share f authorbed 10,1m.tn o shares) j in to ls.75L2,525.t00 and 2. tim,(m stures outstarwhng Pri.'. rm 2twuun 7htall'n tened Ata 4 1.6N %1 1 l'+ I . tim 7. 451 134 lucoc Gas and Electnc Compmy First and Refundmg hlortgage ikexts Statunts interest kates 3.3751 to U.51 161.742 367,118 1985-19 0 4.251 to 8.01 1.'t .% M 1,'t M 397 1931 2011 1931 2019 M.254 to 10.1251 1.572.2.11 1,172,23l
- 1. 'il M.t W 928,725 2011 2022 10.74 to 12.754 IW b2017 12.8754 to 16.254 1,'.15 npi 1,7ti2,2edi ti.i n > l.t m 5,Nir.!,7tdi Prirx1 pal Arnounts Outstarwhng Unanvrtized thscount Net of Premiim ist8Jn i 12.3 wis
'lotal Stortg ge ikods 6.010.270 5.7tn. leo (Jnsecured Ikbentures, 5.254 to 124, due IW 8 -am tal,nro 81. 2.'n Pollutkin Contnsi loan Agreements. varubic rate, due am-a m %5.im -
Other layng term Debt 12.tos (Mt7_1_t Total PG& E long term ik bt e, 8 81 Ji '8 5.w o.42t iUc$c Gas and Eltrtrv Fsnance Compms N.V Guaranteed Ikbentures,121 to 161, duc 19W)-1991 a o,(m :ns.Im Unamortbed l>iscount G88i Total PG& E Finance N.V. lenv-term ik bt 2mam 338Jilti ila the Gas Transmasum Comtvrny 9.194 16,229 Afortgage florwis, 5.254 arul M4, duc 198ei.19'o Unarnortised thscount ti1) (19) llank Term imn _ 73.1 m FI,lm Total PGT lorut term ik bt x2 2:~7 Im.310
}lly 8 Natural Gas Corferatmn 4 Calsfarnua atf.er long term I teht 7:dal1.ome tu rm lh bt ut l*G,0 and Subn,liano s
{ _ 7.281'm tn-__ _ tu,5I ti.385,Medi ti .til_ f.ess: 1.cmg krns ikbt- Current 1%rtune 71,611 218,313 PG&E 2.tJ wu 26,l&l Sulalary Compann . 48 hTl 2 tl,Pn > V~7ht:Ilinne term ikht. Current l'urtwn lsme to rm ikbt on 1;>tal Cafutatuaturn i 1. l 16 m m l ti.I13.070 i $1141 i ^.N2 l $ 13.27 tJ Wi7 7;dal Catistatuarmn
' Changed to omform to 1985 prewnfatmm.
Tir aonop.uning rv,tes to omw.lulated hnaru i.d statenrnts are an interral surt of tirw statn ine nes. 28
h >lDljld X $1! M M il3l M 151 N kl:th di b ([ U Ih1Il W g . ML; . _ , d 1%fic Gas and Ekvttr Cienpany
} Interseginent For the Years Ended December 31, Ek ctri- ( ; Gas Twal
; Elunmatnes in h usands IMS f Operathg Revenues $ 5,81953 '
$2,610,938 5 8,1:pt.wl Intersegment Sales" 8. l!M) 1.351,N ti $(1,359.?
- O -
Total Operating Revenues 5,828.1fa_ 3.thi2,Mn1 t I. 69,y.*i> 8,4:9),981 Depreciatx>n 3W.825 l 135,829 - 5,% 651 Incorres Taxes
- Idl. t 6 y 8.25 - 652.rw;9 Other Operating Expenses
- i 5,873.2 r) 3,tos,4.c :U23.812 i t.LR 9 *i>
Total operating Expenses 4.772,7.'3 ' 1,6 7,895 il :n9pe 7,u,1,622 ; f Wratznfinconw $ 1.tWi,450 $ 313y) $ -l $ 1,:ki9,:D!h funds Used for Constnutwn - I $ 1,788,78 8 I ) .G2. fi i i $ 2,137,4W Net Ibnt in Servre and Constructm en Erk in Progress " $r,827,123 $ 1875,883 $18,702 edvi j Oth:rIdentifiable Assets $ 2,181,li9 Y,518.840 3,656,229 Corporate Assets 739,168 7htalAsuts l $19p>3.nxil l l l IMP , j Operating Revenues $ 5,158,165 52,671,fs% $ 7,829.703 l Intersegment Sales " 6 ~63 1,379,,4 % $(1,386J49) - Total operating Revenues 5.168.928 8.051,02 11.386,2814 7,829,7t ti ( Depreciatu>n alo,ti38 ' 135,052 - 415,690 ! Irrome Taxes + tit,175 , 19.1,19) - 617,67i I 3,:d A5'lo 5.682,951 Other Operating Expenses
- 3.629.670 (1,3,%219)
Total Operating _ Expenses L l.354,783 l 3,7U,781 (1,3.%,2 89) 6,726,315 l Oprrahnt /nmme ! $ 7NI.!15l $ 32't.2 3 $ - $ 1,1f tl.3M Funds Ilsed tur Constrwtwn" l $ 1.2*i.07 i i > 2M.6ZI l l $ 2,031.697 Net Plant in Service and C4cstructrin brk in I rogress $11.fG8,589 $1,706.199 $13,38 t,7M Other identifiable Assets $ 1,715,551 $1,798.7fd 3.510,311 Corporate Assets 16t,2aL 7hta/ A m ts $17.319 359 I IMP . Oprrating Revenues $ 3,905,811 52,7 0,M5-- $ 6,686,W 3 Intersegnwnt Sales + _ 5_760 g 9IJdi5o_ $ d*sidlo) - Total operating Revenues 3,911.571 g 3,701,5'15 ensi,4 to) ti,686,W) Depreciat>>n 2t>t,010 127,095 - 391,105 income Taxes
- 371,361 1* % 59 - 555,3I1 Other O[rrating Extenses* 2.twis,985 3,100 821 M*si,4los t.7to,399 Total Operating Expenses 3."18,:0 9 3,108,878 e=Wi,4 top 5.686,827 Operating Incrmw $ 667,215 $ 292,ti57 $ - $ 959,872 F nds flud for Con <trurtwn'" l $ 1.tuis,t*M I $ 2Rt 559 l $ 1,932.525 Net 1%nt in Service and Construction Work in Progress'" $10.250,317 41,041,076 $11,h53,4rl O her Identifiable Assets $ 1,173,280 $1,331.701 2, W7,981 Corporate Assets %5,953 7htal A sut.t $18. 717,357 l
' Changed to omform to 1985 presentatwn, (a) Intersegnwnt Electric and Gas Sales are ai onmted for at tariff rates prew rded by tir CPUC, (b) Irrrne Taxes and gercralorporate expi nws are alha ated in a< cordance with tir FERC lindorm Sotern of Amarts and recrurenent* of the CI'lfC.
(c) Irriudes albra:wo of urnnnn utihty plant. ( The aconnpanpng notes to ainsohdated hnaru bd statenwnts are an integral part of tirse !wledules. 1 l 29
h hltN N h N h N h M D b hOk N M *
]
Paane Gas and Electne Company For the Years Ended Decenber 31 t%. t%4. and tatt NOTE 1: SLMMARY OF SIGNIFICANT ACC0l'NTIM POLICIES paraftins. ANGUS is currently involved in a joint venture construction project of a chemicals plant located in Ireland. ALT 0lNTi% RECORDS The investments in ANG and ANGUS, which are less than The accounting records of Pacific Gas and Electric Company 5(mowned subsidiaries, are accounted for in accordance with (PG&E) are maintained in accordance with the Uniform S) stem the equity methai of accounting. of Accounts prescribed by the Federal Energy Regulatory Com-mission (FERC) and adopted by the California Public Utilities RDblES Commission (CPUC). Revenues consist of billings to customers and changes in regu-latory balancing accounts. Billings to customers are included in PRi\flPLES OF CONSOLID \ TION rever.ues as meters are read on a cycle basis throughout each The consolidated financial statements include the accounts of month. In accordance with orders of the CPUC, the Company PG&E and its wholly-owned and majority-owned subsidiaries has established regulatory balancing accounts for electric en-(the Company) for all perials presented. All significant inter- ergy costs, sales and major plant additions, and gas costs and company transactions and accounts have been eliminated in sales. Operating revenues include changes in these regulatory consolidation. balancing accounts. These changes represent amounts author-PG&E's major subsidiaries are Pacific Gas Transmission ized by the CPUC to be deferred for future recovery from or re-Company (PGT), a 50.24 owned company (See Note 9) which payment to customers. The effect of using these regulatory transports and sells natural gas outside California; Pacific Gas halancing accounts is that clunges in sales and cost of sales of and Electric Finance Company N.V. (Fhance), which was organ- electric energy and gas do not significantly affect the Company's ized in the Netherlands Antilles to borrow funds outside the earnings. United States and to lend such funds to PG& E and its subsidiary companies: Alberta and Southern Gas Co. Ltd. (A&S), whose lTillT) plt \T principal functions are purchasing gas in Canada and arranging The costs of additions to plant in service and replacements of for its transportation to the U.S. border: Natural Gas Corpo- retirement units of propert) are capitalizexl. Until an addition is ration of California (NGC), which is a natural gas exploration and placed in service, the costs are accumulated in Construction pr xiuction company; and Pacific Conservation Services Com- hk in Progress. Costs include labor, material and similar items pimy (PCSC), which provides loans to PG&E residential cus- and indirect charges for such items as engmeering, supervision, tomers for installation of conservation and weatherization and transportation. Costs also include allowance for funds used I measures. Other subsidiaries include Mission Trail Insurance during construction (AFUI)C), at rates calculated in conformity (Caynun) Ltd., which was formed in 1985 to provide habihty in- with FERC pronouncements, for the imputed cost of equity in-surance: PG&E Gas Supply Company, which is a gas exploration vestment and a net after-tax amount for borrowed funds. The company; JWP Land Company, which acquires, develops, and equity component of AFUDC is included in other income and the otherwise holds real property; and Standard Pactfic Gas Line borrowed funds component, net of federal and state income Inc., which transports natural gas within California. taxes, is recorded as a reduction of interest charges. Costs of Subsidiaries of PG&E engaged in projects currently in de- depreciable units of plant retired are ehmmated from plant in ferred status include Calaska Energy Company, a memtwr of the service accounts, and suc h costs plus removal expenses less sal-partnership to construct the Alaskan portion of the Alaska Nat- vage are charged to accumulated depreciation. Costs of repair-ural Gas Transportation System for the transportation of natural ing property and replacement of mmor items of property are gas from Alaska to the continental United States; and Alaska Cal- included in the income statements as nuintenance. ifornia LNG Company, Pacific Gas LNG Terminal Company, Pacific Gas Marine Company, and Pacific Indonesia LNG Com- DEPim I\ TION pany, which were formed in connection with the Company's proj- For financial statement purposes, depreciation of plant in serv-ect to import liquefied natural gas from Alaska and Indonesia. ice is computed using a straight-line remaining life method NGC Production Company, whose principal function is the at rates based on the estinuted usefullives of properties. For production of oil and gas, is a wholly-owned subsidiary of NGC. federalincome tax purposes, depreciation is generally com-Alberta Natural Gas Comp;my 1.td (ANG)is the largest sub- puted using the most liberahzed methods allowed by the Internal sidiary of PGT. ANG owns and operates a pipeline which trans- Revenue Cule. ports natural gas for A&S through Canada to the border. In addition, ANG owns and operates an extraction plant near Cochrane, Alberta, which removes hydrocarbons from the , gas stream. ANG and PGT own ANGUS Chemical Company ' (ANGUS), which is engaged in the production and sale of nitro-30
l U l\foilE inES MORMRS' foilPE\S \Tloi BD liis thil lii (1.11415 PG&E and its 80% or more owned subsidiaries file a consoli- The liabihty for future workers' compensation and disability dated federalincome tax return. claims is recorded in noncurrent liabilities in accordance with income tax expense includes the tax liability generated from Statement of Financial Accounting Standards No. 71. The cor-the year's opcntions plus dderred taxes on most major timing responding amount to be recovered through future rates is differences between financial and income tax reporting to the shown as a deferred charge. extent permitted for ratemaking purposes. These timina differ-ences include balancing recount revenues, property taxes \0\fARW \SSETS charged it major projects under construction, gzs expkstation There are certain project costs which are being anmrtized over I costs, property depreciation under the Accelerated Cost Re- a period set by the CPUC as well as prcject costs that are pend-covery System (ACRS), and interest on nuclear fud financing. ing regulatory action. These costs are not in rate base and, Defcrred taxes are also provided for the benefits recognized for therefore, they are not earning a return on PG& E's investment. Incestment Tax Credits (ITC). These projects are discussed further in Ncte 10. Although the tax effect of most major timing differences is de-ferred, the tax effect of certain deductions is recorded when NOTE 2: PREFERRED Sit)fli paid. These include overhead costs capitalized, removal costs, The nonredeemable Preferred Stock Without Mandatory Re- . pre-1981 federal tax depreciation, and state depreciation. demption Provision (issued at $25 par) consists of a 59, a 5.59, Because the reco,tnition of most tax deferrals was allowed and a 69 series, which are entitled to annual dividends per share , only recently, timing differences exist for which deferred taxes of $1.25, $1.375, and $1.50, respectively. I were not provided and, therefore, have not yet been recovered The redeemable Preferred Stock Without Mandatory Re- { through rates. At December 31,1985, the cumulative net demption Provision (issued at $25 par) is subject to redemption. l amount of timing differences for which deferr(d income taxes in whole or in part, solely at the option of the Company upon pay-have not been provided is approximately $2.0 billion for federal ment of the redemption price plus accumulated and unpaid div-and state purposes, the tax effects of which are expected to be idends to the date fixed for redemption. The redemption recovered ii future rates. premium per share declines in accordance with terms of the spe-cific issue. Per share information is as follows: DEHT PREill!11. IISfol3T, BD RELtTED EXPENSES Long-term debt issuance premium or drount and related ex' g, g g, gj 4.362 to 8xi swEs2.os sasastos2xJs ' penses are amortized over the lives of the issues to which they
, 94 to 10.4a $2.25 to $2.6t5 526m to sn25 pertain. Tl e gin or loss on reacquisition of mortgage bonds is ,, g3 g, amortized over the remauung hfe of the respective issues. The federalincome tax on such gain is recognized over the life of the The Preferred Stock With Mandatory Redemption Provision remanung property, and tax on the loss is dderred and recog. (issued at $100 par) consists of a 99, a 10.179, and a 14.754 {
l nized over the remaining life of the issue. series. Each series is entitled to a sinking fund providing for the j retirement of outstanding stock at $100 per share plus accrued 1 MS EXPU) RATION COSTS dividends. The combined aggregate amount of redemption re- ) The majority of gas exploration costs are capitalized under a quirements, excluding any accrued dividends, for the years 1986 modified " full-cost" method of accounting to reflect cost recov. and 1987, is $7,500f00, and for 1988,1989, and 1990 is ery procedures authorized by the CPUC. Unsuccessful project $9,250,000, $11,372.500, and $11,3"2,500, respectively. costs, current operating costs, and the financing costs of the gas in addition to retirements through the sinking fund, the 99 exploration program are recovered through gas exploration de. series, the 14.75% series, and after August 14,1993, the velopment balancing account procedures and, therefore, do not 10.17% series, may be redeemed at the option of PG&E at $100 affcct the Company's income. Pursuant to its own investigation, per share plus accrued dividends and a redemption premium. At the CPUC terminated the gas exploration program effective Au- December 31,1985, the redemption premium for the 99 series gust 4,1985 and issued guidelines for the liquidation of the prop. and the 14.759 series w as $6.75 per share and $14.75 per share, erties acquired under such program (i.e. sale, abandonment, or respectively. production phase-out). Allliquidation costs except for certain fi- Dividendsonpreferred stocka ecumulative. Allsharesof the nancing costs will continue to be recovered through the existing preferred stock rank equally with regard to preference in divi-balancing account procedures. dend and liquidation rigits, except that shares of different The successful effo-ts method of accounting is used to classes or series thereof may differ as to the amounts of divi-determine the profitiand losses on certain operations not dends or liquidation payments to which they are entitled. Upon accorded the balancing account procedure by the CPUC. liquidation or dissolution of PG&E, holders of the preferred stock would be entitled to receive an amount equal to the par value of such shares plus all accumulated and unpaid dividends thereon. 31
hij l Xhl i f Ml! IIP k t )l h D O M bh li Kp k ,W ) Pnc Gas and Electnc Gunpany NOTE 3:lANG-TERM DEBT a daily, weekly, or a term basis or nuy lx converted to a fixed rate at l'G&E's option. The kian agreements are due on April 1. MORTGEE BO\DS 2tuiand November 1,2m8, respectively. Additionally, the loan The First and Refunding Stortgage thinds of PG&E are issued agreements are subject to redemption prior to maturity under in series, bear anmul interest from 3.3759 to 15.3759, and certain circumst mces by the holder and PG&E. mature from February 15,1986 to June 1, 2022. Subject to in- PG&E issued 5%9 Debentures in November 1985 for denture provisions as to earnings coverage and bondable prop- 150.000,000 Swiss francs with a matunty of November 1,1995. erty available for security, additional bonds may be issued up to As with the 79 Debentures described above, the Comp;my en-an outstanding aggregate amount of $8 billion. The th>ard of tered into a foreign currency exchange agreement. This results Directors of PG& E may, from time to time, increase the amount in an effective mterest rate of 10.819 and a PG&E liability of authorized. All real properties and substantially all personal $67.400,000. properties are subject to the lien of the indenture. Stock rep-resenting PG&E's investments in subsidiaries is pledged as col- ID%G-TERM l>EBT OF St BSIDI\kiES Fmance's Guaranteed Debentures, which are unsecured and un g lateral for PG&E bonds. I IC&E is required, accordhg to provisions of the First and I subordinated obligations of Finance, do not have sinking fund Refunding hlortgage, to make semi-annual sinking fund pay I requirements and are unconditionally guaranteed by PG&E. ments on February 1 and August 1 of each year for the retire l The Debentures are subject to redemption, at specified re-mert of the bonds of PG&E equal to % of 19 of the aggregate ' demption prices, during specified periods at Fin mce's option. bonded indebtedness outstanding on the preceding November Tlw 169 Guaranteed Debentures which were to mature in 1988 30 and hlay 31, respectively. Bonds of any series may be used w-re redeemed in July 1985. The 15h9 Guaranteed Deben-to satisfy this requirement. In addmon, holders of Series 8tD tures which were due in 1989 were redeemed in January 1986. Bonds maturing on November 1, 2017 have an option to redeem The First Alortgage Pipelme lh>nds of PGT are issued in se-their bonds on June 1,1995. ries, bear annualinterest of 5.254 and 67r and mature in 1986 In December 1985 PG&E redeemed its Series 81A ikinds, and 1990, respectively. Substantially all of PGTs real properties 16%9, which were to mature in February 2011. I (except for oil and gas production properties) and certain per-In January 1986, PG&E issued $200,000.000 in Series 86A sonal properties are subject to the lien of the mortgage. Long-Bonds at 10.59, to mature on February 1, 2019. In addition, term gas purchase, gas sale, and gas transportation contracts PG&E announced it intends to redeem its Series 80A Bonds, are also pledged as collateral. 12%9, and 80B Bonds.12%9. These issues would mature on PGTs First Alortgage Pipeline lionds, which are solely the February 1, 2013 and August 1, 2013, respectively. obligation of PGT, are subject to redemption, at specified re-demption prices, through the operation of sinking funds or in DEBENTlRES larger increments at PGTs option, depending upon the series in December 1961, PG& E issued 79 Debentures in the amount and redemption date. of 20 billion yen to mature in 1991. To protect the Company from PGTs bank term k>ans are to be repaid in seven remaining an-future fluctuations in the exchange rate, principal and interest nual payments through 1992 The effective interest rate on the payments due in yen are covered by a currency exchange agree- amount outstanding at December 31,1985 was 8.674. This in-ment that secures the exchange rate over the term of the de- terest rate is subject to redetermination in accordance with the bentures resulting in an effective interest rate of approximately terms of the credit agreement. 129. The transaction results in a PG&E liability of $81,250,000. During 1985, NGC converted a $25,000,000 revolving line of PG&E issued $75,000,000 in Debentures at 129 in January credit into a term k>an requiring repayment in equal quarterly 1985, maturing in 2000. These Debentures are subject to re- installments through 51ay 1,1990. He k>an is secured by pipe demption at PG&E's option at any time on or after January 9, and tubular goods held in inventory. The interest rate on the kun 1997. Additionally, they are subject to redemption at the option is based on the prime interest rate or the certificate of deposit of the holder on January 9,1992. rate at the option of NGC. At December 31,1985 the effective in April and November 1985, PG&E entered into kaan agree- interest rate was 10.09. ments with an agency of the State of California for $65,000,000 In July 1985, NGC entered into a $12,500,000 revolving hne and $500,000,000, respectively, to finance air and water pollution of credit that converted on January 1,1986 to a term kun. The , control, and sewage and solid waste disposal facilities. The k>an line of credit required interest-only payments through Decem- ! agreements carried initialinterest rates of 4.759 and 4.559, ber 31,1985. The term loan requires equal quarterly payments respectively. From the day ofissuance, these rates may ik>at on through December 31.1989. The kaan is secured by a negative pledge on certain producing properties. The interest rate on the line of credit and the term loan are based on the prime interest rate. At December 31,1985 $12,500,000 was outstanding at an
, effective interest rate of 10.09.
l ____..__i . - _ . _ _ _ _ _ _ - - . _ _ _ _ _ _ _ _ 32
[ 4 % , d " t ,
]
NGC~also has a $22,500,000 note with fixed interest rates NOM 5: Ct'S10MER CONSERufl0N IMN l'ROGRAM ranging from 14.57% to 15.079. His note was originally for The Company will continue tu offer Zero interest Program (ZIP)
$35,000,000 but was reduced in July 1985 by the $12,500,000 huns to residential customers until December 31,1986. These revohing line of credit described above, %e note is secured interest-free loans can be used for installation of several con-by selected producing gas properGes. The note requires servation measures and require repayment over 50 or 100 interest-only papnents through May 1,1986 and equal quarterly months.
installments through November 1,1991. Pacific Conservation Services Company (PCSC) was formed as a wholly-owned PG&E subsidiary to assume responsibility REPAYMENT SCHEI)llE for the customer conservation loan program. Operational ex-For the years 1986 through 1990, the Company's combined ag- penses and debt service expenses are recovered through the gregate amount of debt maturing and sinking fund requirements, Conservation Financing Adjustment (CFA) tariffs, proceeds of as of December 31,1985 are $94,673,000; $108,732,000; which are collected by PG&E and transferred to PCSC. PCSC
$97,664,000; $267,445,000; and $171,019,000, respectively. has contracted with PG&E to obtain the administrative senices needed to acquire and process the customer conservation kuns.
NOTE t Sil0RT TERM BORROWINGS - These loans are funded by a revolving line of credit with 11 PG&E maintains lines of credit with eighteen banks, principally banks. He line of credit, which is not guaranteed by PG&E, to support the sale of commercial paper. These lines of credit permits PCSC to borrow at any time through 1986 up to the have varying dates of renewal and vary from $135,000,000 to lesser of $100,000,000 or 80% of customer conservation kuns
$530,000,000, the total available on December 31,1985 At no outstanding at its choice of a floating rate determined in accord-time during the year were the lines of credit used for direct bank ance with the agreement or a fixed rate based on average cer-borrowings. The usual maturity for commercial paper is 10 to tificate of deposit or Eurodollar rates. PCSC must pay a 90 days. com.nitment fee on the unused portion of the conunitment equal A&S maintains a $35,000,000 (Canadian) line of credit with a to % of 19 on the first $50,000,000 not used and % of 19 there-bank to support the sale of commercial paper for take-or-pay after. Itorrowings under the agreement mature on December payments on gas contracts. On December 31,1985, this line of 31,1994. The agreement has various covenants and conditions, credit was unused. including the continuing existence of the CFA tariff. On Decem-A&S also maintains lines of credit with four banks totaling ber 31,1985, the balance outstanding was $96,400,000 at an
$24,000,000 (Canadian) for operations. As of December 31, average interest rate of 9.29.
I
~ 1985, A&S had no significant outstanding borrowings against '
these lines of credit. NOTE 6:IDSES PGT maintains lines of credit with eight banks for direct bor-rowings or to support the sale of commercial paper. On Decem- M G B RF1EL br 31,1985, these lines of credit totaled $25,000,000. At no PG&E leases nuclear fuel from PET for use at the Diablo Can-time during the year were the lines of credit used for direct bank yon Nuclear Power Plant (Diablo). Two capitalleases, with sub-horrowings. stantially the same terms, were entered into with PET in order PG&E also has an agreement with Pacific Energy Trust to meet Diablo's fuel requirements. The first lease, signed in - (PET) which permits borrowing of an amount up to the differ- 1981, expires in the year 2030; the second lease, signed in 1931, ence between $150,000,000 and PET's investment in nuclear expires in the year 1989. fuel with a maxunum of $180,000,000. As of December 31,1985, PET's total investment in nuclear fueI is limited to PG&E had no outstanding borrowings with respect to this $600,000,000 (see Note 4 for short-term borrowing information agreement. related to these leases). If the nuclear fuel leases are termi-The Company compensates banks for lir.es of credit and other nated, PG& E is obligated to reimburse PET for all costs of own. l banking senices by fee payments. ership related to the nuclear fuel. Short-term borrowings and interest rates thereon were as These leases provide for the ownership of the spent nuclear follows:
~
fuel by PG&E. A contract has been entered into with the United fi)ecember1: 19c l 19 s States Department of Energy for the disposal of the spent Imsans nuclear fuel. . (except percentages) The lease payments are based upon the cost of the nuclear fuel Balance of Short-term lbrrowmgs burned plus the daily finance charges on PET's in-core net in-Commercial Paper $51s. n $ 91.0s: vestment during the period. The daily finance charges relating other s 2.m1 s 161 to the in-core fuel are paid even when Diablo is not producing Weighted Average Interest Rate electric energy. Commercial Paper & 59 10.04 Other R99 12.34 33 1
. _. _ _ _ _ = . _ = -. _ - _ - __
i l EM140UtMIW0dlMhk'NtiWMIMiW Md%2fM M M M W % '
'J l Pacific Gas and Electric Company During pre-commercial operation, lease payments are capi- The assumed rate of return used in determining the actuarial talized as part of the cost of the plant. After conunercial oper- present value of accumulated plan benefits was 74 in 1985 and ation begins, lease payments and spent nuclear fuel disposal 19&l. The actuarial present values are based on historic pay as costs are charged to nuclear fuel expense and recovered through prescribed by the Financial Accounting Standards Ikiard.
balancing account procedures. Diablo Unit I went into commercial operation in May 1985. LIFE INSIMCE Diablo Unit 2 began generating electric energy into the system Life insurance benetits for substantially all retired employees in October 1985. Lease payments capitalized during 1985 per. ' are provided by the Company. The Group Life Insurance benefit i taining to Units 1 and 2 totaled $16,591.000 of w hich $5,581,000 is available to all retirees. This benetit is provided through an rerresented interest charges. Nuclear fuel ! ease expenses re- insurance company whose premiums are based on total claims corded du-ing 1985 for Unit 1 totaled $42,797,000 of which griid in the prior year. The Post Retirement Life insurance Plan,
$5,311,000 represented interest. which is available to certain marugement employees, uses the Dese leases have been recorded en the balance sheet as an same actuarial methods and assumptions as the Retirement asset in the line item, " Nuclear Fuel and Other Capital Leases" i Plan. The annualcontribution is equal to the normalcost plus the i
The related noncurrent obligation has been recorded as " Capital amortization of the unfunded actuarial liability. De cost of pro. Lease Obligations" in the "Other Noncurrent Liabilities" see- viding both the Group Life and the Post Retirement Life benefits tion. The asset balances were as follows: is charged to expense and utility plant and totaled $3,800.000 ] $3,800,000, and $3,400,000 for 1985,1984, and 1983, December 3t. 19 0 i Iml
$473.818.000 respectively.
i Nuclear Fuel $439.722M o Less: Accumulated Amortization 49.985M U 2.230M U ggg gg73
! Net (in Nuclear Fueland Other captal Leases > $423.873.s n Sf37.492su The Company also provides certain medical benefits for sub-stantially all retired employees. The benefits are provided or ad-ministered by medical care providers whose costs are based on 0 tiler LEASES ,
benefits paid during the year. The cost of providing these ben-The Company has entered into various arrangements to lease etits for retirees is not separable from the cost of providing the real property and equipment. The leases are accounted for as benefits for active employees. The medical costs and the num-operating and capital leases m accordance with Statements of ber of retired and active employees are summarized as follows: ' Financial Accountmg Standards h,os.13 and 71. The annuallease l* 1984 1983 expenses are not significant.
. slesal costs salannn $n7pnan saannan NOTE 7: RETIREMENT PLO AND POST RETIREMBT BENEFITS Retired Empbyees 7# o 6eo 6,4m Actwe Employees 30.280 28.7:n 27.9 0 REREMBT M .
The cost of medical benefits for the Company is charged to ex-The Company provides a retirement plan covering substantially pense and utility plant. a all employees. The cost of this plan is charged to expense and - ^ utility plant and was $97,000,000, $89,000,000,~ and $74.000,000 NOTE 8: INCOME TAU 3 for 1985,1984, and 1983, respectively. These amounts include Income before tax expense for the years 1985,1981, and 1983 amortization of past service cost. Costs of the retirement plan was $1,643,914,000, $1,519,673.000, and $1,271,784,000,- t are accrued m , accordance with an actuarial cost method (entry respectively. age normal method). The Company makes contributions to the Income tax expense (credit) is included in the consolidated plan equal to the amounts accrued for pension expense. A com- linancial statements as follows: parison of accumulated plan benefits and plan net assets for the ' 19 ' I 1988I 1983 Company's defined benefit plan is presented here: In Thousands
~
January 1. 1985l 1984 In Thousands expenses $652. red $ti37,674 . $555.323 Actuarial present value of accumulated included m other inemne f39.9'm q92,893) (71,9wil Pl an bendts Total $613. !'O $581.781 $183.817 Vested $1.433#n $1.2W# o o Nonvested 939 0 909 0 Total actuarial present value of accumulated plan benefits $1.526M o $1.3xopo
} Net assets available for benefits I $1.498Mo I $1.40lSO 34
he detail of income tax expense (credit) is: MilllAL GAS inE-OR. PAY PA)MENTS 39g. { The Company through its gas purchasing subsidiary, A&S, is re-1933 l 39s3 g g, quired to make takes >r-pay payments to Canadian natural gas
%. producers if it does not take a certain contractual quantity of nat-
- Federal $113.867 $ U2.644) as Ming a conM p. W ahWMe Canaba
$ 57.691 producers permit make-up of the prepaid gas and also provide state and other M 909 S2.277 93,396 for reimbursement by the producers of take-or pay payments if make-up of the gas prior to the expiration of the contracts is
[",Y not possible. Total advances by A&S to pnx!ucers as of Decem-Federal 50.90s : 201,392 72.476
, are WM,M Myanm unreWsed by state 11,752 ' A&Ss gas customers are 6nanced by short-term borrowings.
46.493 16.732 ACRS 227,756 i G&E has executed guarantees to assume liabilities r.ot
!!4.469 35.684 to exceed $350.000,000 on certain promissory notes and a I"*'"*"#"
standby bank Ime of credit of A&S to cover A&S's take-or-pay M.uor constructkm projects ss,71o 64.504 135.5ns borrowings. Other construction projects 70.989 44.294 36.9M During 1981, the Company negotiated a reduction in take-or-r1$ (x 376) pay liability under its contracts with Canadian gas producers. In
~(2u.lo4 06.540) 1982, gas purchase contracts covering a substantial portion of the Company's Canadian gas supply were further amended to N eral 1 698 16.7m 38.822 extend the redustion in take-or-pay liability through June :X),
state au 3.865 8.962 1984. In connection with contract years beginning onJuly 1, Oti:er net 14.o45 33.493 4.M2 19&l and thereafter, the Company is negotiating for additional Total $6 3.109 su4.781 54e3.817 take-or-pay reductions in the contracts with the Camdian pnduc-
' Changed to confonn to t985 pre-ntation. ers. A number of pnx!ucers have signed amended contracts, The differences between the statutory federat income tax rate and luve been paid the take-or-pay r;oounts for the contract of 46% and the Company's effective tax rate are reconciled as year ended June 30,1985. A favorable conclusion to negotia-follows: tions with ti'e remaining producers is expected which would -
L 1985 19 s
- 1983 result in payments to these producers at the reduced level. No Federalincome tax rate 46.09 46.0% 46an. provision has been made with respect to such payments nor the increases (reductions) dditional payments which might be required by any contracts resulting from: not amended. Such additional amounts aggregate approximately Allowance for equity and $185,000,000 for the contract year ended June 30,1985.
borrowed funds used dunng construction (9.5) 04.5) (15.5) MERGER OFFER 1U PAflFIC GAS TRANSMISSION COMPANY Investment tax credits (2.3) (2.0) n.4 In October 1985, the Company agreed to acquire 100 percent stat: income tax (net of ownership of its subsidiary PGT through a stock merger. The ) federal benent) 3.7 3.7 s.3 Company currently owns 50.2 percent of the outstanding PGT BwA depreciation i" l ' shares. d pre il 4.4 4.t 3.3 Under the terms of the offer, a wholly-owned subsidiary of the Overhead construction Company would be merged into PGT and each out standing slure costs (1.9) (1.8) (1.6) of PGT stock would be converted into the right to receive shares common Diablo canyon of PG&E's common stock having a value of $30.50. The exact carrying costs - u.1) .- - number of shares of PG&E*s common stock to be exchanged will [. Disallowed prosect costs as- a1 2.5 depend on the market price of the common stock at the time of Adjust prior years - (2.6) - - acquisition, but in no event would it be greater than 1.9092 nor Reserve for investment less than 1.5621 shares of PG&E's common stock for each share in 1 NG (a3) 1.4 2.1 of PGT stock. other-net at u.l> (2.7) The proposalis subject to approval by regulatory bodies, in-
~ Effective tax rate 37.3 % 33.94 38.0 % cluding the CPUC, on terms acceptable to the Company; De
- changed to conform to 1985 presentation. proposal was approved by a majority of the slures of PGT com-mon stock, other than those held by PG& E, at a special meeting NOTE 9:COMMITNEVIS of shareholders held on January 22,1986. The merger is ex-pected to take place in 1986.
FUNDS LSED FOR CONSTRllTION Funds to be used for construction for the year 1986, including AFUDC, are estimated rt $2.0 billion. 35
NIIhi k N OjDI N O N H @ 4?4 N 4 j Pacific Gas and Electric Company PGT's principal business is the operation of a natural gas pipe- resulting from the operation of Unit 1. Those savings will be line between Alberta, Canada and California. PGT's pipeline car- approximately $331,200,000 annually, based on PG& E's last ries about 40 percent of PG&E's natural gas supplies. Through ECAC proceeding. He total annualincrease in revenues of ap-subsidiary companies and aftiliates PGT is also engaged in nat- proximately $388,000,000 resulting from this December deci-ural gas transportation in British Columbia, gas exploration and sion is subject to refund based on the CPUC's reasonableness development, extraction of ethane and natural gas liquids, en- review of Diablo Canyon construction costs. Pursuant to the hanced oil recovery, and the manufacture and sale of specialty CPUC decision of December 18,1985, the DCIA for Unit I was . chemicals. terminated and the balance transferred to the DCAA, thus re-ducing the balance in the DCAA to $157,700,000 including NOTE 10 CONTINGENCIES interest. Final rate recovery of the deferred DCAA amounts will not be DIABlJD CANYON N1CIIAR POWER l' LOT authorized until after prudency hearings are completed, prob-Commercial operation of Diablo Canyon Nuclear Power Plant ably in 1988. If the CPUC should disallow recovery of a portion Unit 1 (Unit 1) bega 1 en May 7,1985. A full-power operating li- of the plant investment, a portion of the accumulated revenue, cense for Diablo Canyon Nuclear Power Plant Unit 2 (Unit 2) was net of tax effects, would be charged against earnings in the year granted on August 26,1985, and commercial operation of Unit disallowed along with the disallowed plant investment. 2 is expected by early spring of 1986. At full power, which was in addition to the rate mechanism. the stipulation approved by achieved for Unit 2 during full power testing in December 1985, the CPUC for Unit I also contained an interim provision for a Units 1 and 2 add about 2,200,0(X) kilowatts of capacity to the one-year target capacity factor. The Company's operating rev-system. enues at the end of one year would be reduced by an amount in March 1985, the CPUC approved a stipulation between the equal to one-half of the replacement power costs if Unit 1 op-Company and the CPUC Public Staff to set up a rate mechanism erates at less than E54 of its capacity and be increased by an for Unit I which would go into effect upon commercial operation amount equal to one-half of the extra fuel costs saved if it op-and remain in effect until an interim decision. A similar stipula- erates with a capacity factor above 804. Adjustments for this tion for Unit 2, effective upon conunercial operation, was ap- target capacity factor will be made in 1986 after the end of the proved in January 1986. The rate mechanism consists of two first year of commercial operation. In the first eight months of components: 1) The Diablo Canyon Adjustment Account commercial operation during 1985, Unit I has operated at an (DCAA) recognizes revenues for expenses incurred and a re- average capacity factor of 859. ; turn on nuclear plant in service: 2) The Diablo Canyon Interim The CPUC has also indicated its desire to consider an alter-Adjustment (DCIA) accumulates the value of the fuel saved due native ratemaking concept-Value liased Pricing-for energy to the actual operation of the plant. Current recovery of the fuel produced at Diablo Canyon. It has scheduled a series of mect-savings was permitted through the Energy Cost Adjustment _ ings to consider this concept. The financialimpact of Value liased Clause (ECAC). For Unit 1, the DCAA revenues through De- Pricing, if adopted, has not yet been determined. cember 31,1985 were $429,400,000 ef which approximately Approximately $3.3 billion of Unit I and common facihty costs
$197,100,000 is return on plant investment. The DCIA fuel sav- have been transferred to plant in service since the start of com-ings totaled $275,000,000 through December 31,1985. mercial operation of Unit 1. The C PUC has determined that one-In August 1985, PG&E applied to the CPUC for an interim half of the common facility costs (approximately $600.000,000) increase in rates for Unit 2 of $236J)00.000 and revised an earlier will not be included in rate base until Unit 2 begins conunercial request for Unit I to $206.000,000. These increases are in ad- operation. Until that time, the C PUC will allow depreciation, ad dition to the fuel savings recovery through ECAC. The CPUC valorem taxes, and carrying charges on those co nmon facilities i Public Staff, which was created expressly to represent the con- to be deferred. These costs amounted to approximately sumers' interests, had recommended an interim rate reduction $55,500,000 in 1985 and are in other deferred charges.
in connection with the Unit I application primarily based upon As of December 31,1985, total construction costs for Diablo its recommendation that the Company not recover in interim Canyon remaining in Construction %rk in Progress were rates the return on $2.5 billion in potentially disputed construc- $2.1 billion. Accrual of AFUDC of approximately $16J)oo.000 tion costs. On December 18,1985 the CPUC granted PG&E an per month will continue until Unit 2's commercial operation. interim rate increase of $53,800,000 annually to cover operation With continuing accrual of AFUDC and other costs associated and maintenance expenses for Unit 1, effectiveJanuary 1,1986. with regulatory approval for Unit 2, it is currently estimated
.I The CPUC emphasized that this rate increase in no way reflects that the investment for Units 1 and 2 of the plant will reach ap-prejudgment of the reasonableness of the construction costs proximately $5.8 billion, based on the commercial operation associated with Unit I and that the reasonableness of those of Unit 2 in late February 1986 and giving effect to the value construction costs will be addressed in future proceedings. The of the power produced during the testing program. This figure CPUC will also allow PG&E to retain the net fuel cost savings represents 30% of the Company's total assets as of i)ecember 31,1985.
The Company believes that all costs for the Diablo plant, in-cluding AFUDC, should be allowed for ratemaking purposes and 36
~ ,y
~
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T] intends to pursue full recovery of all such costs, llowever, all this outage. These revenues, with mterest accrued through De- i investment in Diablo Canyon is subject to determination by the cember 31,1983, amount to $18,400,000 PG&E was directed CPUC as to whether all such costs ultimately will be permitted to tile a separate apphcation for recovery of this amount and ex-to be included in rate base and recovered in rates. Ilecause the pects to do 30 in 19Ni The CPUC will iequir e tlut PG& E make Diablo plant represents such a large portion of the Comp;my's a clear and convincing showing which demonstrates that these assets, a significant- disallowance of costs for ratemaking pur- revenues should be charged to ratepayers but the Company be-pses could have a significant effect on the Company's financial lieves that these revenues will be granted through the ratenuk-psition. 'lle Company is currently unable to predict whether ing process. The remainder of the balancmg account established any prtion of the costs and the related DCAA an ounts will be by the interim rate procedure will be recovered in rates in 1986. disallowed or whether any such disallowance would have a sig-nificant impact on its tinancial position or results of operations. IILMBOLDT BW M(LEAR POMR PLOT in 1983, PG&E elected to decommission the Ilumboldt llay Nu-IIELMS PDIPED SR) RAGE P301&T clear Power Plant Unit No. 3 (Umt 3). In decisions issued in Au-The llelms Pumped Storage Project (llelms), which was gust and November of 1985, the CPUC disallowed $22.t'o),000 delayed due to a water conduit rupture in September 1982 and l of AFUDC and $14,5m),0t)) of direct cost $ atx! permitted re-various start-up problems, became commercially opetable on l covery through rates of approximately $44.300,000 of the June 30,1984. Totalcapitalized expenditures on llelms are ap- { $34,000,000 net investr,.ent in Unit 3. 'lhe disallowances were proximately $967,000,0u) of which approximately $22,0u),00() j charged against income. The decisions pernut recovery over a has been written off due to a C PUC disallowance in August 1985, I four-year period with the unamortized balance not receiving rate
$34,C00,000 consists of part of the claims against contractors base treatment.
and insurance companies and $911,000,000 is recorded as plant In December 1985, the CPUC authorized PG&E to recover in service. The CPUC has allowed rate base treatment of ' the estimated $9,700,000 of costs associated with the Com-
$716,000,000 of the $911,000,000. A total of approximately pany's custodial safe storage plan which the CPUC fmnd rea- $229,000,000 has not yet been submitted to the ratemaking sonable. It further authorized the Company to establish a precess. decommissioning fund for the nuclear unit at the ilumboldt llay Recovery of some of these costs can be expected through Power Plant to collect approxvnately $53.000,000 over a four-claims and litigation. Ilowever, certain costs are not subject to year period. This amount rettects the cost of deconunissioning
! litigation and have not been sought through litigation: therefore, the prudently constructed plant. The Company's shareholders recovery of these costs must be through rates. will bear the cost of decommissioning plant facilities that were Any costs not recovered from third parties will be included in disallowed as imprudent expenditures in previous CPUC deci-a future ratemaking application to the CPUC. The CPUC has in- sions. This cost has not yet been determined, but is not ex-dicated that PG&E will bear a heavy burden of proofin estab- pected to be significant. lishing the reasonableness of these costs. In addition, if PG&E seeks to recover in rates the costs related to the water conduit DEFERRED DD AllBDONED PROJE(TS rupture, the CPUC intends to consider an offset to revenues to PG&E, through a wholly-owned subsidiary. .is a member of the ! reflect lost or deferred capacity benefits due to the delay in com- partnership which was organized to construct the Alaska Natural I mercial operation. Gas Transportation System (ANGTS). ANGTS is a proposed Notwithstanding the above, the Company believes that all overland pipeline system running from the Alaskan North Slope . ilelms costs not recovered through claims and litigation proc- into the continental United States. Ilecause of financing and gas ! esses should be recoverable through the ratemaking process market cm.siderations, completion of this project has been de- l and that any costs disallowed by the C PUC would not have a sig- ferred. As a result, in 1983, PG&E provided a $45,000,000 nificant impact on its financial position or results of operations. before-tax reserve against its investment in the ANGTS project Subsequent to commercial operation, the CPUC established and continues to reserve against subsequent investments in an interim rate procedure to allow PG&E balancing account the project. treatment for the costs of owning, operating, and maintaining PG&E's Liquefied Natural Gas (LNG) Project is a joint un-IIelms prior to a decision on the prudence of costs relating to dertaking with Pacific Lighting Corporation for construction of IIelms. Under terms of the interhn rate procedure PG& E could facihties to import LNG. Construction work on the facilities was have been required to reduce the balancing account when a unit suspended in accordance with an October 1982 C PUC decision. was out of service for more than thirty days during the first two PG&E applied to the CPUC for recovery of approximately years of commercial operation. Following commercial operation, $195,000,000 of its investment. Subsequently, the request was it was discovered that replacement was required for certain reduced to retlect a revised AFUDC rate and a reserve of parts of the generators. Work was completed during the winter $58,800,000 was established in 1981 against PG&E's invest-low demand period and all units were returned to service by the ment in the LNG project to reflect this reduction. beginning of the 1985 summer peak season. In August 1985, the CPUC declined to include in rates the revenues associated with 37
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. z ~3 ,
a a Pacific Gas and Electric Company in September 1984, the CPUC issued a final decision on Also on December 18, 1985, the CPUC granted an increash the LNG Project. This decision allows PG&E to recover of $190,000,(xx) annu dly, effective January 1986, in electr ie and
$74,200,000 of costs in rates over a four-year period, beginning gas revenues undt r the ARA. These revenues are also subject in 1985 and defers an additional $21,iMM),lKM)in tangit:e assets, to refund.
to be sold. As of December 31,1985 approximately $55,600.000 of costs remain to be amortized. To the extent that the sale pro- MTLEAR INSIRANCE ceeds do not recover the booked costs, the decision also allows PG&E is a member of Nuclear Mutual 1.imited (NML) and full recovery of the assets' recorded costs. If the sale proceeds Nuclear Electric Insurance Limited (NEIL i and IIL NML and exceed booked costs, the net gain will be distribated te the rate- NElL 11 were established by the utility industry to provide in-payers. Neither the direct costs nor the tangible asset costs surance coverage against property damage to members' nuclear were allowed rate base treatment. The renuining AFUDC of generating facilities whether under construc tion or in operation.
$46,600,00() was disallowed. PG&E accordingly increased its NEIL I was established by the utility industry to provide insur-reserve against its investment in the LNG Project in September I atre coverage against increased cost of replacement power dur-19&1 and the Company continues to reserve against subsequent ' ing prolonged accident;d outages for reactor units in commercial investments in the project. operation. In the event of property damage to a nuclear plant of a member utility or prolonged accidental outage, PG&E nmy OTIIER PROJECT LOSTS l'ENDING REGl'LATORY ACTION be subject to a maximum assessment of $71,000,000 iflosses lleginning in 1980, PG&E, in partnership with Pacific Lighting exceed premiums, reserves and other NML, NEIL I and 11 re-Corporation, began development of an underground gas storage sources. As ofJanuary 16,1986, the NMI. coverage was limited facility at Ten Section Field. Due to changes in gas supply and to $500,0 n000 and the NEll coverage provides an additional prices and the cost of des elopment, the partners determined in $550,000,000 in excess of that prmided by NML 1983 that the facility was no longer needed and stopped work on PG& E's maximum public liabilit y for claims resulting from any the project, The property was sold in November 19&l. In De- nuclear inndent is limited to $650,000,000 under providons of cember 19&1 the CPUC addressed the rate treatment of this the Price-Anderson Act (Aco. The coverage for public liability property in our partner's general rate case. The CPUC disal- is provided by insurance, assessments and government indem-lowed all AFUDC on the project and allowed recovery of the re- nitication under the Act. PG&E is subject to a retrospective as-maining project costs over four years. The unamortized costs sessment of up to $5,mE000 per incident for each of its licensed will not be included in rate base during that period. Based on that reactors over 100,000 kw in the event there is a nuclear event decision, PG&E in December 1981 wrote off the $2,100,000 of involving any of the nation's licensed reactors. He aggregate AFUDC. PG&E believes that it will recover substantially all of assessment per calendar year is set at $10.000,000 per reactor the remaining costs of $31,700.000 in its next general rate pro- with payments in excess deferred to the next calendar year. As ceeding. These costs are not currently included in rate base. of December 31,1985, PG&E has two reactors subject to this assessment.
NO.NEARMNG ASSETS Project costs not currently earning a return on investt ant LITIGtT10%GE0TilEKiltL STEAil CONTRMTS ! include: In September 1985, two related lawsui's were tiled against the Company seeking damages for alleged antitrust violations of the - i Decemtwr31. Iw i Iw l Sherman and Clayton Acts and damages for breach of contract, ' I" # breach of the implied covenant of good faith and fair dealing, and Iteims Pumped storage Project smre $2o7,rm. unfair business practices. These lawsuits arise out of the sale of flumboldt Pay Nuclear Power ihnt 45,19i nl.570 geothermal steam to the Company which uses that steam in the LNG Protect 77.071 M.168 generation of electricity at The Gevsers Power Pl;mts. Iloth l Ten Sect on Field 31.703 32.22" lawsuits allege that the Company has' improperly exercised mo-l l Feasbthty Study and RD&D Prmt Costs M.973 1 51371 nopoly power in the market for geothermal steam and both com-Total ui9.r.it l u s.nli plaints allege that beginning in at least 1982 the Company l breached the geothermal steam contracts by failing to purchase l i RETEM~ES SLRJECT TO REF13D geothermal steam as required by the contracts. In addition, both ! In December 1984, the CPUC granted an increase of lawsuits allege that the Company has improperly calculated the
$185 000,000 annually, effectivejanuary 1985. in electric and gas method of payment for the geothermal eteam, resultingin an un- ,
revenues under the Attrition Rate Adjustment (ARA). These derpayment of at least $1,200,mn revenues were subject to refund. On December 18,1985, the lioth lawsuits request compensatory damages of at least CPUC ordered a refund based on the difference between the $23,000.000 and as a result of the alleged violation of the federal weighted average rate base used by the C PUC to set 1985 rates, antitrust laws, request that those damages be trebled. The and the actual weighted average rate base computed using re- Company plans to vigorously defend against these lawsuits and corded data. This refund was estimated to be approximately believes that the ultimate outcome of this natter will not have a
$17,900,000 and was recorded as a reduction to December significant impact on its financi;d condition, revenues.
l L
l EMIMSidOlMMM.NMMWOR 1 - 2 _ d - 3 l Paatic Gas and Electne Gnomy l l The responsibility for the integrity of the financialinfornution accountanS, review and evaluate our :nternalacoiuntingointrol included in this annual rep >rt rests with nunagement. Such in- systems to the extent they consider necessary in order to sup-formation has been prepared in accordance w:th generally ac- port their opinion on the consolidated financial statements. Their cepted accounting principles appropriate in the circumst.mces, auditors' rep >rt below. contains an independent informed judg-and is based on our best estinutes and judgments after giving ment as to the fairness of the Company's reported results of consideration to materiality. operations and financi;d position. Pacific Gas and Electric Company nuintains systems of in- In a furthea attempt to assure objectiv ty and remove bias, the ternal accounting controls supported by formal policies and pro- tinancial data contained in this report have been reviewed by the cedures which are communicated throughout the Company. audit committee of the board of directors. The audit committee These controls are adequate to provide reasonable assurance is composed of five outside directors who meet regularly with that assets are safeguarded from loss or unauthorized use and management, the corporate internal auditors and Arthur to produce the records necessary for the preparation of financial Andersen & Co., jointly and separatel> to review internal ac-information. There are limits inherent in all systems of internal I counting controls and auditing and finarxial rep >rting matters. control, based on the recognition that the costs of such systems The Company nuintains high standards m selecting, training should not exceed the benefits to be derived. We believe the and developing personnel to ensurr that management's objec-Company's systems provide this appropriate balance. In addi- tives of maintaining strong. cffective intemal controls and un- i tion, the Company's internal auditors perform audits and eval- biased, uniform reporting standards are attained. We believe our uate the adequacy of and the adherence to these controls, policies and procedures provide reasonable assurance that op-policies and procedurcs. , erations are conducted in conformity with applicable laws and Arthur Andersen & Co., the Company's independent public ! with our commitment to a high standard of business conduct. 1 W iE B M IM 3 W @ h M lf @ M MISil h ,
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l t To the Stockholders and the P>oard of Directors ; of Pacific Gas and Electric Company We have examined the consolidated balance sheets and statements of consolidated capitalization of Pacific Gas and Electnc Company (a California corporation) and subsidiaries as of December 31,1985 and 1981, and the related statements of consolidated income, l funds used for construction, common stock equity and preferred stock, and the schedules of consolidated segment information for I each of the three years in the period ended December 31,1985. Our examinations were nude in accordance with generally accepted l auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we con-sidered necessary in the circumstances. , As discussed more fully in Note 10 to the financial statements, the Diablo Canyon Nuclear Power Plant has experienced significant delays and substantial cost increases. In connection with the California Public Utilities Commission (CPUC) review ofinterim rates for Unit 1, the Company has recorded the full revenue requirement and recognized as a deferred asset the amounts not allowed in current rates. The revenue requirement and deferred asset are subject to adjustment, if any, pending the CPUC review of plant costs. The Company is currently unable to predict whether any portion of the plant costs and the related revenues and deferred asset will be disallowed by the CPUC for ratemaking purpmes or whether any such dis:diowance would have a significant impact on its financial position and results of operations. I In our opinion, subject to the effects of such adjustments, if any, as might have been required had the outcome of the uncertainties discussed in the preceding paragraph been known, the consolidated financial statements and schedules of consolidated segment [ information referred to above present fairly the financial position of Pacific Gas and Electric Comp;my and subsidiaries as of l December 31,1985 and 1961 and the results of their operations and funds used for construction for each of the three years in the period ended December 31,1985, in conformity with generally accepted accounting principles applied on a consistent basis. San Francisco, California February 7,1986 ARTilUR ANDERSEN & CO. t .
N U 9 'M II .TI N N(IMIMl(l O NM$il$li@h$1[ . d Paahe Gas and Electric Company INFORM \ TION REQLIKED BY STATEMENT OF FINOfltL Aff0LNTlw STBDtRDS Mill. AS AMENDED 1 Financial statements presented in accordance with generally struction Costs wa pplied to historical cost of surviving plant. l accepted accounting principles tradttionally reflect historical As prescribed by Statement No. 33, as amended, inanne tases costs, which may not adequately measure the effects of inflation were not adjusted. on a business enterprise. In an effort to provide information Also required is the disclosure of any purchasing power gain ; to assess the effects of inflation, the Financial Accounting or loss on net monetary items. This gain or loss is based on the 1 Standards ikxtrd iasued on an experimental basis in 1979 State- concept that an enterprise experiences a holding gain in times ment No. 33. Finarcial Reporting and Changing Priccs requir- of inflation when its monetary liabilities (for utilities, primarily ing certain disclosures. In November 1981. Statement No. 82. long-term debt) exceed its monetary assets (cash, receivables. Financial Reporting and Changing Prices: Elimination of Cer- etc.). Theoretically the gain sill be realized u hen the liabilities tain Disclosurcs, amended the requirements to those set are paid in the future with cheaper dollars. forth below. The tive-year summary recaps certain amounts from the sup-The supplementary income statement shown below attempts plementary income statements of the past five years and also to compare the Company's operating results as reported in the shows required per share data. primary financial statements, which are expressed in historical The Compan) has serious reservations as to whether the re-dollars, with the results adjusted for changes in the specific quired supplemental financial information is appropriate for prices of resources (current cost). As required, the only measuring the tmpact ofintiation on a utihty regulated, as IG E amounts adjusted in arriving at the net income amount s adjusted is, on a cost-of-service basis. This information is presented for current cost were net utility plant and depreciation expense. solely because it is required to be ptesented. It should be clearly Depreciation expense in terms of current cost, a measure of understood that the required informatton is complicated, difficult the amount necessary to replace plant, is calculated by applying to understand and because of the permitted subjectivity inherent the Company's depreciation rates to an amount representing in developing this prescribed information, unwarranted com-the cost of replacing the Company's utility plant at today's prices. parisons and inferences may result. For this purpose the Ilandy-Whitman Index of l'ublic Utility Con-CONSOLIDATED STtTEME.NT 0F INCOME FRoil CONTIM i% OPERAT10NS ADJi'STED . FOR CHA%I% PKlfES REQUIRFD BY SFAS .NO.13. tS AMENDED. For the Year Ended December 31.1985 f' Com entiortil ilistoncal Cost Current Cost In Timusarxis Operating Revenues $ 8,.131.000 I~ C$ 8J31.ooo Operation, Maintenance. and Other 6,Wil.o x) 6.siloix)l Depreciation 5%to) i 1,187,000 Total I 7,itMuno j 8.051,1 M M) Income from contiriuing operations texcludum adjustment to net recoverable cost) $ 1.031.000 ' C$ 3N).000 Decrease during the year in specific prx es of utthty plant
- C$ (780,1 n))
Adjustment to net recoverable cost 1,796.1p) Effect of increase in general price level t926 tu)) Excess of change in general price level over changes in specific pnces af ter adjustmerit
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to net recoverable cost 90,to) Reduction of purchasingpower loss through debt tinancing 330,000 Net I C$ 120.t u x) C5-IMlars having approximately the same purchasing p,mer as the real dollar had tn mubl985.
- At December 31.1985, current cost of utdity plant (net of accumulated depreciatu>ni and constructon work in progress was C$21112Jun um o whde historical cost or net cost rec (verable through depreciation was $11.3Gju uUM o.
40
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[ 3 ] FIVE4 EAR COMPARISON OF SELECTED CONSOLIDtTED Flmfl\L DATA ADASTED FOR EFFECTS OFCllA%ING PRICES REQl' IRED BY SFAS 50,33, AS AMENDED. Far the Years Ended December 31, 1955l 1981l 1983l 1982l 1981 In husands (except per share anumnts: Operating Revenues C$8,431,u io C$8,143,000 C$7,178,000 C$7,531,000 i CS7,310.0lo Current Cost Information income from continuing operations (exchxting adjustment to net recoverable cost) C$ 380,03) CS 361,0 0 C$ 185,000 C$ 260,000 C$ 2,00 Income Coss) per common share (after dividend requirements on preferred stczk and excluding adjustment to net recoverable cost) CS .66 C$ .61 C$ .01 C$ .33 C$ (.61) Excess of change in general price level over changes in spe inc prices after adjustment to net recoverable cost CS 90.9 0 C$ 129,90 C$ 179,0(o C$ 75.000 C$ (218,000) Net assets at year-end at net recoverable cost C$5.M.uM C$5,552,000 C$5.222,000 CSI,968,000 C$4,474,000 GeneralInformation Reduction of purchtsing power loss through debt fir.ancing CS 330,000 C$ 308.000 C$ 282,000 C$ 333,000 C$ 568,00 Cash dividends Ueclared per common share C$ 1.81 C$ 1.76 C$ 1.71 C$ 1.63 C$ 1.60 Market price per common share at year-end C$ 19.60 C$ 16.70 C$ 15.77 C$ 15.47 C$ 11.97 Average consumer price index l l l l Base year 1967-100 l 322.2 1 311.1 1 298.3 {1 289.1 l 272.4[ i C$-Dollars having approximately the same purchasing power as the real dollar had in mid-1985. Ql'AhTERLY CONSOLIDATED FINANCIAL DATA Quarterly financial data for the four quarters of 1985 and 1984 are cific, London, Amsterdam, liasel and 20 rich Stock' Exchanges. shown in the table below. Due to the seasonal nature of the utility he approximate number of common stockholders of record as business, operating revenues, operating income, and net in- of December 31,1985 was 297,000. Dividends are paid on a quar-come are not generated evenly by quarter during the year. terly basis, and there are no material restrictions on the present The Company's common stock is traded on the New York, Pa- or future ability to pay dividends. 4thl Erd } 2nd! Ist in Thousands (except per share amounts) 1985 Oprating Revenues $2,066,862 $2,167,401 $2,024,196 $2.172.522 Oprating income $ 345.438 $ 415,513 $ 331.253 $ 274,125 Net Irsome $ 234,281 5 278.175 $ 266.146 $ 252,200 Earnings Per Common Share $ .58 5 .72 $ .70 $ .66 Dividends Declared Per Common Share $ .16 $ .46 $ .16 $ .43 Common Stock Price Per Share liigh $ 20 % $ 20 $ 20 % $ 17 % Low $ 17 6 $ 17 % $ 17% $ 16 198-I Operating Revenues $2,105.0G) $2,026,723 $1,813,300 $1,881.620 Operating income $ 283,755 $ 314.037 $ 247,136 $ 258,160 Net income $ 241,339 $ 232,338 $ 248,717 $ 252,452 Earrugs Per Common Share $ .63 $ .61 $ .68 $ .70 Dividends Declared Per Common Share $ .43 $ .43 $ .43 $ .40 Common Stock Price Per Share fligh $ 17 % $ 15 % $ 11% $ 15 % Low $ 11% $ 13 % $ 12 $ 12 6 41
hM[hhb dNNhbINNbi)%NMI[ -
^ ~d Pacnie Gas and Electric Company For the Years Ended December 31. Iws 1st 1983 1982 Eintric Statutics Net System Output (51ibus of KWlu 76.29a 4 5.5Gi 71.614 71.311 Net System Output-Percent flydroelectric lhts I l.94 19.99 25.39 21.9 9 Thermal Electric thts 51 6 41.1 31.8 34.8 Other Pnxiucers 31.5 39.0 42.9 413 Total 1(h109 100.09 Ituuri 100.09 System Capability-KW (at annual peak) ,
Ilydroelectric lhts (adverse conditions) 3,693,700 3,6 tit.!N N) 2,374,700 2,362,700 Thermal Ekrtric Plants 9.!07,700 8,921,700 8.923,(n u n 8,675,(u n) Other Pnx!ucers (adverse conditions) 2.933.600 3,29i.tN)o 3. 46ti.N x) 3.245.100 Total l 16.625.t M m) 15.886.5d a) 14.7til.5(W) I I.282.W M) Net System Peak Demand-KW I 4. to3AM M) 11.221.600 13.213,100 12,214,t4 x) Reserves Capacity Alargin at Peak-Percent 11.69 6.29 8.89 9.69 Annual Load Factor-Percent 6L59 61.19 61.79 Gi.79 Average Annual Residential Consumption-KWil 6.533 6.557 6,386 6,252 Awrage Res&ntial Revenue Per KWil 7.oSe 6.75e 6.03e 7. .n-Average Annual Residential Bill $514.57 $412.88 $185.18 $158.16 Total Customers (end of year) 3,79),521 3,68ei179 3.598.124 3,515.923 Plant Investment Per Customer $1.407 $3.157 $2,847 $2.5'11 Customers Per Alile of thstribution Line 38.8 38.3 39.4 39.1 Gas Statistics Gas Purchased for U.S. Operations (Thousands of AICF) 778,227 690.455 621,539 698,166 Source of Gas Purchased-Peretnt From California 21.99 21.09 23.19 18.29 From Other States 39.3 42.4 :Wi.9 45.4 From Canada 38.8 33.6 40.0 36.4 Total Itxtos 100.09 100.09 i Ifxun Average Cost of Gas Purchased Per 31CF (U.S. Operatims) From Cahfornia $2.88 $160 $'I. 40 $109 From Other States $161 $ L98 $1.02 $3.51 From Canada $111 $1.21 $4.49 $5.1 Average $3.27 $3.96 $1.07 $1.nl Peak Day Sendout-h!CF 3.527.028 3.205, tux) 3.025,371 3,111.028 Average Annual Residential Consumption-51CF 75.1 69.6 ,3.0 78.3 Average Residential Revenue Per 51CF $5.36 $5.13 $tEl $1.39 Average Annual Residential Bill $1M.15 $377.94 $1TL12 $341.07 Total Customers (end of year) 3,082,935 3,020.s G 2.918,950 2,911,977 Plant Investment Per Customer $555 $500 $171 $17i Customers Per h!ile of Distribution Siain 98.9 98.4 97.2 !Wi.8
.Viscellaneous Statistics Customers Served Per Empkiyee 231 216 2to 219 Depreciation and Amortization as a Percent of Average Depreciable Plant Electric 3.69 3.79 3.59 3.59 Gas 1.39 4.39 1.29 4.29 PG&E Composite (includes Common Utility Plant) 3.69 199 3.79 3.79 42
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[ y - l 1981 1980 1979 1978l 1977 197ti 1975 72,829 69,9ti2 70,339 67.Gi9 65,428 66, t16 (ILO78 14.6 % 19.09 16.89 19.99 9.29 12.29 22.79 58.0 50.5 59.1 49.5 72.4 62.0 43.9 31.4 30.5 24.1 30.6 18.4 25.8 3'L 4 100.0 4 1(0.09 ItW).tn 100.09 Ituun It MI.09 100.09 2,377,200 2,351.600 2,3G),000 2,331.9 0 2.350,914) 2,419,tk o 2,39ti,1=10 8,&l7,000 8,751.000 8,612,000 8.291,0iM) 8,298.010 8,261,(.X O 8,0.IL(RIO 5.621.300 3.971.000 4.112,9t o 2.791.100 3.3tr2,140 3,783,400 3,79i. it o 16 &l5,500 1 15.079.tKO ' 15.061,144) 13.43ti,0lO I 13.987.8(N) 11.421.3 0 14.216,000 13,680 100 13,440,400 13.215.200 12.970,600 12.191,8 0 12,245,8 0 11,632,R1) 5.99 9.0'r 12.19 8.19 10.ti9 5.09 15.59 60.89 59.3 9 60.89 59.69 61.79 ti2.29 t>,489 6,535 61.39 l 6,811 ti,553 ti,408 6.509 ti,162 5.77e 5.16e 3.5te 3.93e 3.81e 3.02e 2.81e
$374.21 $337.43 $210.88 $257.Gi $243 8ti $1!Mi.48 $181.51 3,515,099 3.447,739 3.365.950 3.270.302 5.179.362 3.087.3 0 - 3.005,518
$2.310 $2,199 $2,032 $1,869 $1.75i S1,Gi6 $1,598 39.2 39.1 38.9 38.5 38.1 ' 37.7 37.2 I
835,6&t 781.643 813.381 711.052 852,935 876.721 817,745 j l I , 19.59 16.09 16.84 16.4 4 16.19 Iti.59 15.99 49.2 43.7 37.0 35.1 36.2 37.5 40.7 f 31.3 40.3 1 46.2 18.5 17.7 4ti.0 43.4 100.09 100.04 I 100.09 1(Nun 100.09 1(Mun 1(0.09
$2.60 $2.16 $1.74 $1.59 $1.12 $.!Mi $.57
$2.57 $2.3) $1.79 $1.35 $1.10 $.83 5.73
$1.86 $1.38 $2.61 $2.22 $2.00 $1.75 $1.23
$32) $3.10 $2.16 $1.81 $1.53 $1.28 $.1r2 3.143,516 3,275,016 3.398.231 3.213,552 3 lRi,229 3.318.348 3,352,881 72.7 81.6 th), t 86.9 90.5 100.8 111.1
$1.91 $'L70 $2.37 $1.97 $1.85 $1.71 $1.55
$288.20 $301.67 $214.17 $170.97 $167.45 $172.(13 $172.37 2.897,455 2,858,129 2,805,171 2.738,7ti7 2.671.810 2.611,551 2,555.216
$175 $167 $150 $111 $111 $139 $137 96.9 97.0 97.2 97.4 97.9 ' Ni. 8 14i.4 s
l 241 '29 2 230 228 230 232 223 3.39 3.39 3.19 3.04 3.trl 3.09 2.99 3.5% 3.59 3.19 3.19 3.19 3.29 2.89 ' 3.49 3.44 3.29 l 3.19 3.19 3.14 3.09 43
l l liF,iMil#IN,tpisjiM!N!!M,NiN )D8if , ,L 4r os -l Pacific Gas and Electric Company
' 193 i Fe the Years Fnced December 31, -
PA3 l 1984l 19M l Ekctnc Deputment Revenues Residential $ 1,ti39,401 $ 1,400,148 $ 1,192,997 $ 1,401.267 Commercial 1.!G2,531 1,580,192 1,326,406 1,530,M2 Industrial (1000 Kw demand or over) 1,381.316 1,105,750 914,786 1,078,493 ' Agricultural Power 287,22ti 239,644 157,528 235,164 Public Street and Ifighway 1.ighting 16.997 41,970 48,320 53,224 Other Electric Utilities 93.473 99,350 129.992 172,819 Miscellaneous 92,737 116,050 40,350 56,256 Other 5.305 7.I13 7,890 8,008 Regulatory Balancing Accounts 300. % 7 567,948 87,M5 (687,171) Total 5 5.819.9M $ 5,158,165 $ 3,905,814 $ 3,818,602 Sales-KilH Residential 21,067.2.11 20,730,060 19,778,553 19.107,415 Commercial 21.852,63 20,626,467 19,259,758 18,f42,382 Industrial (1000 Kw demand or over) 17.612.319 16,108,571 14,986,722 15,&l3,f>l6 Agricultural Power 3,252.215 3,309,155 2,304,205 2,922,M1 Public Street and liighway 1.ighting 3 % 736 329,378 339,823 365,119 Other Electric Utilities 1.576.215 2,23),163 3,3ril,9&l 3,M4,563 Total Sales to Custczners 64.727.m 2 63.333,794 60.011.015 60,445,666 Gas Deputment Revenues Residential 5 1,156.002 $ 1,058,995 $ 972,150 $ 935,996 Commercial 562.5!m 596,107 651,332 681,520 $ Industrial s o.631 732,875 f>t8,832 712,341 Other Gas Utilities 38,322 37,410 39,202 52,589 Miscellaneous 6.069 3,686 5,469 8,835 Regulatory Balancmg Accounts c33,061) (107,521) 91,820 149,817 Subsidiary Companies (U.S. and Canada) 280.428 349.986 332,080 395,395 Total S 2.610.tw $ 2,671,538 $ 2,740.885 $ 2.936,493 Sales-MCF Residential 211,933 195,092 200,774 213,031 Commercial 89.115 90,027 109,637 124,622 Industrial 178,107 137,178 114,310 132,789 Other Gas Utilities 9.217 8,281 8,512 12.021 Total Sales to Customers 192,00 t 430,578 431,253 482,463 PG&E Use (primarily electric generation) 263,017 242,985 170,773 201,219 Subsidiary Companies (U.S. and Canada) 436 563 362 345 Total 755.457 674,126 fot 388 6&t.(r27 h 44
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{ 1981l 19 8 ) [ 1979l 1978l 1977 I 1976j 1975 f In 1kusands I l
$ 1,128,851 $ 998.130 $ 693,368 $ 720.112 $ fdil,502 $ 517,578 5 465,818 1,233,5til 1,067,198 752,359 852,2ti5 789,401 536,937 4 43,G)1 f
8tio.577 699,073 461,6fil 531,593 198,4ti2 277,691 197 221 211.221 212,770 142,727 149,986 t 212.619 115,952 87,(R ui I 41,498 38,225 30,191 31,179 ' 33.501 24.537 20,451 117,791 71,92ti 67,710 ti9,855 103.8tn 61,fdil 52,478 70,091 58,5ti8 50,111 13.581 42,075 33,727 23,713 7,313 5,33ti 4.115 3.811 3, 04 i8 3,757 3,210 204,9til (223,385) 2til.281 (308,155) 9.989 219,106 -
$ 3,905,873 ! $ 2.927,&ll i $ 2. Iti3.885 i $ 2,09ti,933 i $ 2,355,13'l I $ 1,820.918 $ 1,293.551 i
l 19,575,283 ' 19,329,190 19,G15,581 18,314,721 17,3&l.011 17,117,610 16,582,796 18,722,954 18,283,151 ' 17,891.820 17,1fdi,973 16,771.212 17, lti2,2 88 16,571,989 16,401,293 11,801.2G) 15,253,371 11,815,289 11,351,359 l 11,258,119 12,811,653 3,890,088 3,540,022 3,715.026 3,120,till 5,ll3,72ti ! 4,601,117 3,781,8til 401.930 431,561 455, t 15 485,725 191,558 4ti5,387 418,046 2.676,998 1,14.Mi,4ti5 2,807,219 2,232,fdi3 3,957.111 2.925,285 2,5to,095
, 61,668.546 i 58,291.655 59,728,152 I 5ti.135.915 t 54.071,027 i 59.82ti i 52,786.113 l I l
1
$ 761,468 $ 799,307 $ 555,017 $ 432,865 $ 111.087 $ 116,69) $ 107,181 607,417 626,611 406,497 386,229 365,ti23 130,878 11/,692 791,786 708,259 199.242 3titi,293 502,912 395,381 l 158,431 148,074 85,867 310.516l 14,319 l 18,381 [ 13,192 11,938 '
2.290 (6,fdiO) 7,128 4.315 1,773 10,914 7,608 (276.749) (133,807) 176,351 (19,477) 35,fdi5 - 238,057 189,174 170.519 193,iMio! 128,749 117,047 136.111 107.054 5 2.288,702 1 $ 2,331,058 i $ 1,900,621 l $ 1.172,110 I $ 1,271,397 $ 1,227,598 $ 1,nl6.874 I I 195,631 216.1&1 231,2 % 220.076 l 223,712 213,258 2ti2,3fil l 128,758 116,827 113,707 111.162 I 163,828 74,718 83,286 171,769 161,0 6) 138,975 l INi,lti5 162,529 2&l.261 315,799 l 35,135 31,821 36,013 9,926 i e,810 8.716 9,459 . 1 511,293 558.892 fd10.180 513,139 557,8 W 610,953 670,Nis l 280,990 202,9til 216,062 125,fiDi 217,272 19-1,919 159,135 I 259 'M 518 259 78 78 103 812,535 762,079 816,7tio fim,031 I 775,219 805,980 KWI,103 1 1 1 j
I 1RH1DitS, GITICERS .6D Rail 0NAL HANAGER$
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BOARD OFIHRECNRS1 COMWTMS OF THE B0tRD OF IHREC1bESI Richard A. Clarke: . . Milham E Miller , hecutne Committee Compensation and Management President Pacific Gas and Elec- President and Chief Executive Within limits, may exercise pow. Deselopment femmittee tric Company Officer SRI International. ers and perform duties of the Recommends compensation ami (research and consulting) Ikiard. employee benefit policies and liarry M.fonger practices. Reviews planning for Mi# #* 3 Chairman of the Board, President executive development and and Chief Executive Officer, John IL M. Place ~ Former Chairman of the lhiard' ff """#8"5""- Richard A. Clarke llomestake Mining Company and Chief Executive Officer. Alfred W. Eames, Jr. Robert II. Ihiover (Chairman) Crocker Natm>nal Lorporatn>n gg g g, gg g g , Richard B. Madden Richard it Madden Former Chairman of the Board Carl E.Reichardt
"* '" A**
and Chief Executive Officer Del Chairman of the Ik>ard and Chief I* '" 8"*"" Monte Corporation (food prod- Executive Officer, Wells Fargo John B. M. ' Place ucts and related services) Bank, N. A., and Wells Fargo and fi i statements and Aduwr, P "I internal accounting r.nd control %minabag femmittee procedures with ind(pendent Recommends candidates for nom-f the Board. Guaran- Hilsan f. Riles p a ac m untants. smtx>n as drators. tee Financial Corporation of Cali- Pre <ident. Wilson Riles and Asso-fornia (savings and loan holding ciates, Inc. (educational develop- Lewis S. Eaton (Chairnxm) Frederick W. Mie!ke, Jr. compny) ment and consulting) llarry M. Conger (Chainnan) Ira Michaellleyman liarry M. Conger fra Michael Reyman$ Stanley T. Skinner
- Wilham F. Miller Leslie L Luttgens Chancellor, University of Cahfor- Executive Vice President and Wilson C. Rdes Peter A. Magowan nia, Berkeley Chief Financial Officer, Pacihe John B. M. Place Gas and Electric Company Finance femmittee John Lyons Sulhvan Rebert IL llamer Recommends long-range financial Chairman of the Board. The John Lpns Sullivan policies and objectives and actions Pacific Lumber Company Rancher and Chairman Emeritus, required to achieve those J California Canners and Growers objectives.
attgens Frederick W. Mielke, Jr. San Francisco Bay Area commu-(ChaiM nity leader AMISORY DIREC1DRS) Richard A. Clarke Richard 11. Madden Richard IL Madden William F. Miller Chairman of the Board and Chief Melvin IL Lane John B. M. Place Executive Officer, Potlatch Cor- Chairman of the lloard and Pub- Carl E. Reichardt poration (diversified forest lisher, Lane Publishing Company products) (SUNSET Magazine) Peter A. Magewan Mary S.Metz
- Chairman of the Ikiard and Chief President, Mdis College Executive Officer Safeway Stores. Incorporated DIREC1Dils EMERITl'S' '
feerge A.Maneatise Executive Vice President. Facili-ties and Electric Resources John E IWnner Development, Pacific Gas and Former President and Chief Electric Company ExecutiveOfficer PacificGasand Electric Company Frederick W. Mielke,Jr. Chairman of the lloard and Chief Richard 11. Peterson ExerutiveOfficer PacificGasand Former Chairman of the ik>ard, Electric Company Pacific Gas and Electric Company 8 As <4 February 19,19Wi 2 Elected November 1,1985 JEletted l>ecember 18.1% 8 Ekcted February 19,19Wi 5 Appointed in anticioation of electkin as a director when board vacances occur 46
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OFFICERS R1110ML M MERS Frederick W. Mielke, Jr.u Donald A. Brand Stephen P.Re3nalds East Bay kegon Chairmanof theIkutroand Vice President Vice President Floyd C. Mar ks l Chief Executive Officer Engineering Rates Oakland Richard A.flarkeu George E Chfton, Jr. Virgil G. Rose Gilden Gate Region President Vice President Vice President Owen II. Davis Custonx r Operations Ekstric Operations San Franci*o Stanley T.5kinneru Executive Vice President and blan IL Daines James D. Shiffer Mission Trail Region Chief FinancialOtticer Vice President Vice President Grant N. Radford Planning and Research Nuclear Power Generation San Jose l George A.Maneatisu Executive Vice President Joseph Y.Dehung Gwdon il Smith Rednood Region Facilities and Electric Vice President Vice President James IL Stoutannre Resources Development Community Relations Finance and Treasurer San Rafael Malcolm IL Furbushi Richard A.Draeger Wilham il Wallace Sacramente hilev Region Executive Vice President and Vice President Vice President Ihrt J.12 Rue, Jr. General Counsel General Services Computer Systems and Services Sacramento John A.Sprouli Daniel L Gibson Thomas W. Ilich S.n Joaquin \ alley Regwn Executive Vice President Vice President Corp > rate Secretary C. Robert Marta Fuels and Gas Resources Fuel Resources Fresno Development Alan %. Beringsmith i Jeu R. llerrera Assistant Treasurer l Joho S.Coopert Vice President l Senior Vice President General Construction Paul Smith c Personnel Assistant Treasurer , Grant illorne j Elmer E haprieliant Vice President David IL Allison Corporate Communications l Senior Vice President Assistant Secretary Power Generation John L hochn Brian L McGrath Ellis IL Langley. Jr.' Vice President Assistant Secretary Senior Vice President Governmental Relations Operations Gary E. Lasering Malcolm A.Machillepi Vice President and Senior Vice President Comptroller Corporate Relations ilonard M.Whinley Mason Willricht Vice President Senior Vice President Gas Operations Corparate Planning Robert Ohlbach Vice President and General Attorney l l i I I I Member Management Conunittee 1 2 Retires May 1,1% l-3 Chairman of the lioard and Chief Executive Officer effective May 1. ! 1% ! eVke Chairman oft he Ikard effectise l May 1,1% { 5 President effective May 1.1% 17
D U M(IMl)N M l}lM MlD E !@ w " i A y h g. 4 N) N d ANAL MEETI% OF SittREHOLDERS MlLTIPLE DlilDDD filEfhS DD ST0fh Ufilt%E LISTI%S FOR MORE l%FORUT10%. The annual meeting of sharehold- DiPLifATE M tittwS PG&E's common stock is traded Sharelmiders who have questkms ers of Pacitic Gas and Electric Some shareholders hold their on the New York, Pacific, l.on- about their accounts, stock cer. Company will be held at the stock in different but similar don, liasel, Zarid, and Amster- titicates, daidend chet ks, par-Masonic Auditorium,1111 Cali- names (for example. as Robert A. dam stock exchanges. The official ticipation in the Dividend fornia Street, San Francisco, Cali- Johnson and as R. A. Johnsim). New York Stock Exchange sym- Remvestment and Common fornia, on Wednesday, April 16 When this occurs, it is necessary bol is "PCG' but the Company's Stock Purchase Plan, or other 1986, at 2:00 p.m. A notice of the to create a separate account for common stock usually is listed related subjects should write the meeting, proxy statement, and each name. Even though the m the newspaper under "PacGE" Stock Transfer Agent at the proxy form are being mailed with mailing addresses are the sanw, 'The Company has 25 issues of address below or call one of the this annual report to all share- we are required to mail eepa- preferred stock, most of which followmg numbers: holders of record on or about rate dividend checks and annual are hsted on the American Stock Stock Certificates: missing or February 27,1986. and quarterly reports to each Exchange and the Pacific Stock destroyed certificates; changes
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A report on the annual meeting account. Exchange. or correttions in the registered will be included in PG&E's first Shareholders who want to name shown on certificates: quarter report. mailed to share- eliminate multiple dividend Newspaper (115)972-2991 holders of record in early May. checks and mailings should con- Issue symbol IWem! Payments: bmt or miss-tact the Stock Transfer Agent to First Preferred. Cumulative 10-h REPORT ing checks; changes in payce: mquest Mccwnt unsolidatiim Par Value $25 Per Share A copy of the Company's 1985 (115) 972-3528 Fo Form 10-K Report to the Securi- Dividend Re' investment Plan: ties and Exchange L,ommission ha eholders who want to M PGEptF ehminate duplicate mailings but 16.249 PGEIZ may be obtained by contacting the . P - wish to continue receiving multi- 12.8tn PGEpfY Internal Revenue dervice Tax Corporate Secretary's Office' pie dmdend checks should send to, n;q PGEpfS Form 1999. SilARE110LDER ilubliO0h the Stock Transfer Agent the 10.289 PGEpfW (4151972-3528 PG&E has prepared a helpful labels (or a copy of the labels) 10.184 PGEpfT All other quests ms-shareholder's handtxxik providing from each mailing to the Stock 9.484 PGEpfR U15) 972-3691 information on the Company's Transfer Agent, indicating the 9.309 PGEpfV Sharehdck rs w ho have general shareholder services, stock cer- name they wi3h to keep on the 9.289 PGEpfj questh>ns about PG&E or infor-tificates, and stock transfer sys- mailing hst for annual and quar- 9 uyi PGEpfL mation in the annual or quarterly tems. Copies are avadable from terly reports and the names they g,3og Iq;EpfP reports should wnte the Office of the Stock Transfer Agent. wish deleted. This will only affect 8.164 ITiEpfK the Corporate Secretary or call these maihngs; dividend checks 8.u W 14iEpf0 DDIDDD PAiMBT DtTES:INi 015) 972-28m and proxy materials will continue 84 9 PGEpfM s Common Stock Preferred Stock 'ec y anai . portb1m-to be sent to each account. 5.un PGEpft3 managers and other representa-am ry 15 W ary B 5.u n Senes A PGEpfE DnIDBD RElWSTilDT PLO tives of the investment commu-
'I Sharehdders may automatically 4.8(M PGEpfG nity should write the Financial
^"*"" - reinvest their dividends from IM PGEpfil Services Department at the
* # 4.369 PGEpfl common and preferred stock in address below or call 015) 972-1.1)ST OR S1DLB CElfflFICATES new shares of PG&E common Non-Redeemable: 2671.
OR filEfhS stock through the Company's 6.0tM PGEpfA Corporate Secretary Shareholders whose certificates Dividend Reinvestment and 5.504 PGEpfil
.; g,,
or dividend checks are missing or Common Stock Purchase Plan. 5.un PGEpfL
,3 g destroyed should notify the Stock Through an "optionalcash invest. 1 irst Preferred. Lumulative Transfer Agent immediately so I ar Value $100 Per Share FWm WM ment" feature. Plan participants Redeemable: Stock Transfer Agent that a "stop"can be placed on the also may purchase additional old certificate or check, and a new shares of conumn stock, subject 11.754 Unlisted Daniel T.12mey certificate or check can beissued. to limitations set forth in the Plan 10.179 Unlisted 77 licale Street, Room 1580 prospectus. 9.009 Unlisted San Francisco CA 911mi ADDRESS filBGE Dividends and cash invested Manager-Financial 5,ervices Shareholders should advise the through the Plan during.the last John F. llelms Stock Transfer Agent immedi, 12 years by owners of some 62 77 Ileale Street. Room 810 ately of any change in address.
million shares now total nearly San Francisco, CA 91106 Please include the old address , and the new address. If possible, $50I million- Registrar of Stock ) also please enclose a copy of a A PI n prospectus and enroll-First Interstate llank of Cahfornia recent mailing label. ment form m y be obtained by 105 Montgomery Street All changes of address must be contacting the Stock Transfer San Francisco. CA 91 Int Agent. provided in writing. __.__._m _ __. _ 48
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l.. PACIFIC OAS AND E LE C T RIC C O M PANY
, 77 BE ALE STREET, SAN F R ANCISCO. C AllFO R NI A 94106 TELEPHONE (415) 972-2768 8
P. O . BOX 7 4 4 2, S A N FR A N CISCO, C ALIFOR NI A 94120 TELECOPIER (415) 543 7813 PMILIP A. CRANE. JR. ATTothtv AT law e March 26, 1986 t . l ! Director Office of Nuclear Reactor Regulation US Nuclear Regulatory Commission Washington DC 20555 Re: Docket No. 50-133 Docket No. 50-275 l [ Docket No. 50-323 F
Dear Sir:
Enclosed are ten copies of Pacific Gas and Electric Company's annual report for the calendar year 1985. Very truly yours, Nf ( PAC:nl Enclosures c w/ encl: Mr. Jerome D. Saltzman h, . o- . .}}