ML20148Q328

PG&E 1987 Annual Rept

ML20148Q328
Person / Time
Site:	Diablo Canyon, Humboldt Bay, 05000000
Issue date:	12/31/1987
From:	Clarke R, Locke R PACIFIC GAS & ELECTRIC CO.
To:	Office of Nuclear Reactor Regulation
References
NUDOCS 8804120409
Download: ML20148Q328 (52)

Text

_,.,;..,

pi

^,*,

-_. ~, '. 9 :--

2 a

,74,.i' '.L.7 -.-.

-., y.

- ~

V p.

- ( '

r e

..~ r t

l g

t o

Q e

s

~

.,g.

e.

. y

[< - A;;.

v.pye. 9'

' t - '

e

.ic.

I*

.g3 9 t

- ',- I',*e

.l h

'q

'[

5

. I t.. D. [ i. -

L...

1 we N Ne x? c

i g

.c

,7

,13

.,... a:

.,.,..'.!',(,,

,3 Q,

V. T Wh' ' '..

- \\.,2 l,,, f a g

j j37

/

N 4

3 4

, 4

,~g,,

f

'KL'

- e, s

e, s

. A gp

.4 j

.q,4

,e,

. 4., 1 p.

w

,. p.-

.r' t

... -. f. -

.. / ', t '

-' *,. 4 -4,,.

. s.k. '{ f,

i*s

,.' s.

.',(

..., x

-1

3. -

1--

.A.(,4%

i,

1.

?"

i M.

s s

ti

?.

-e' s

.4 + *.. g.(

1, ; g j...

.,< - l _,

]

{

..,e_-

d. si ' * - -

l t y!: -%

e

-e.

a-

.,s

,,, ~. ). ?..

-x $

> &:y...,.,._

, y

+

f,'-=

g._.

e 9

%t "-.

3..-

t.. %'-

,.. h.

.. t

.',,,?.

-w.

4 -

.. _ g (, -j -

. :s.s,.

sg 3 -

.

• i, y., __

pg.,

a 7

6-

. 9;,

i

- ?

.[*(

~

.,g y.

, (._*.

e,-

y,

-. r S-e

- s

. t 2,

95. >

• fh

_-},

}.

,[

s' g

s

+ <..

d ah ',3 e<

y' 7, ', e

,., g

.3,

s. ' --

g *'

\\, _. ~ Q. l,

.l l l l' f ' &'. ',.,..'.. : ; ' A *rl Q_ g V Q.'; '

, 6

,,fj, ti,

<g Q Y' _,

. ~.

jA;. g,,. y'.

u g y

+g

,, n ; <

. Y 'd

9.,

, *:- q v'. -.

e.~.g $w f.a3 g4;.y t,

5 -

,r.,,

j c.

. q.. ~ -

s.

.g

- w

...A,i'.c Q

... s-.

p.y!

$y.4, t.

.3

%; g., '.c.j g3-ts i

- 'h, p.* 4

,6

.q 2

t, n

,,.g.-

,y,,-

. j,.

-, ;s,.

b

4.-a %. h.

Uh * '. \\

..g

. \\.;= :...

.b

.c c.

v......

wec c I;

%. @k 1

.;. g

.s A.

'Ut 2,'. (.

..., '^,, '; -

[,'1;q' l.., '

6

-<.,=*),.

e,e

, i:

'.'e-.

1

=,. ' - a.

q%,7- ; ?

-* : (. ~ :;..

.;,...,,q.-

.j,.

.Q..*-_'

s ix

,s t 5

T y.

e-1 p,'..

e g.

,s-q E...

g w;-

Q.,

4,.9, '4.. V *.

,.M :ev cg.?,-

N e *. :, y ; y,.,,

p._,-

T 43.- 1_ ;-

_9

{

3N..

y' m

, L g....;.. <. ',-l-

< r.,.#). q,;. y '+,p:-

f s.

. ', s. 4

, - p'.

ce.

s

. W  %,.

e of

• *. l-

. [.iV }.j}.

.. lL -h ;. 4,,..

' 1.[ t.

[

d' $2 Re r

.r t k r 4

,?

.f y.

y e:g'.., '

.,L i

t.

... c'-

• . <. e e

.f...

a....,..

bf x.q y.

.c,,

'. I

\\

3

' q,.'

j_ ',y P.]

.; 8 4

x.

.3..

.e 33.,

(

e

- {,; s

?,

.~[

4 E. g <. : ;y.

gA. p" ;g S..s.NW W. ; *..

p5 yg g,

g

. ! S Mfyf, J.' l, $. %;.- 6

.. '. a g

... :. o

.. me ree

'. ;,i.yr y,- Y;t.

' p* p 4

{ % % N> J Y a

c

.b

'^:

g s.

-y m

1.

hk

. ~ ' E.' [,,

] n[1- -

~ 'jl

-4 g,

1

~j y

• ,. *.W

\\.s 3.

_(<

gs A,

4 - '

.4 gi A,,, ;;.

• ,.. ( f n i,c i

.. h ; '.

'y

-c

%J

1. q: 3...

_, -,g-w' t

s 4,

.f.

9. '. ', '

.7

>.. ' ')

> ' ' ' -. 4.e h r'. }..- \\.

> k,, I-

'l

~

(,

.,. M

[3 [ y' % 81% ~ % @ @qeia'fw.pseM 4 7,.'~} Jf, Q-.c.a.: ;.u.l. %., ;. by:.d.. >,

.[

Mi

...(-

-g

, _.h 3-w

-, sy b,s3 x

f..

T '

s: q; p..,

-; ~

,4..

,y

.y z _.

-w

[,. *j _

,_,".n

. ( "udelpNgeWiR{$$,' h,. ' '.." l._ f ; g...,..,

e,,

..., ',. +. -

g.-

a' t-

- j,.. "2

,q V; g J.-\\

9 r

n. :

8*

f..

.e z..,. * -

_.[n_x s

. ~;

.r...

4.

~~

7

.}

r w.

e j ?.

y.

h y ;.A :.

. mnp%gMMw_ +%y A %

w

}k= - Rw W:f$2V% ? L Ag

df. ; fqM 3

n A;g&w @W. ;

f p p '

N.yM

c. a n w:

w

.]

. f~ s p 9 y n y',

, 4-

~

1.

-C 8804120409 871231 s.

W pJ Av ^34 7 im, m s,

ifg'>m.

4,.

l

' f, y /

PDR ADOCK 05000133 M

M t

T,,.-

~ - g

. s wyggesyn m m w g p w ysm,s s % m p

I DC D "3:

g y

H-

.,a-

,k b., a

,.. 1 I

4'

• ~

4 k.,

t.

.. '* /

5,-

q-

.y

.u-y a.

~..,

.h.,,..*<'

is -

p s.

q, "f.

.s ' [ -

se

[\\..

4

'M

,y

g

{*,.

Mt-4 Q

w

- 4 g- - -. ". - - 4 x-

.n.-------

~~

-+<s--,">:

w

_ 7.

qy.

g

-. g. ~ gg Y

h M

~

M

.g 4 - \\.

h

, h *.hk

[.

~'N.,*

. i,'*'

p

' ; %. '... ~. %... ~

. 7 deinnilpAmeRet$ttirqauignusWeik 1984RSAIW Mq lj[$ k i see;7 M 444 1

g-4 g*

, \\,

I, J

J.;:hashowtwangenhei

+ 1...b. t :

. W.y. '

.' [

' f., ' s',4

_'s.. - - '-..3 w.

.,.,_g.

1,

,, ~. -

n.

I h

y J.

• ,, 8 : 4 i

e k _,

4 5 '. (

jf. Y - '

s

- 5 $

[

l l?

.l I l_

y

.b

},

I

,"g[.=-

[

e -.,

.- i ti

.4 7

E,

g 3

ii

'. * *c

. *h

. - /,.

SIS M S

1. % $$Md+

..,I W.l:

'iskV@vi. P.- 4 U..

4. m.",'NetMeretCummenesm W M w ":-

t

- -.~ h {':.

' ~

i h

~

s'

• .b

r "El j< ' n N, ~

's,- Q 'i,%..T n s.4

• .,y

'1 4

P

=w=48 ri' e"-~%

%%",, l.j ' f.

4*. _3

• bqe

$.' % ',. ',b. *.A f " %j =l '. ' ' f.

, L = %' ' i +-

%-M.c ' ),4,

.0y.'J-s

- t

.'*4'.._

,b 4

8...+..b'(., ].g -S, '. ' N' C.;'.. { $gt,.;. cC,Q '[ -

'.'( h #

t..

v-6 3* ye

' La -.. ', e/ '- -'

..+-

- 6.Y..., ', ~(. 4 e ~ J' ' ?..fc ".j;., Q S ( N. ' '[

..h:3 4Q ' %. f.,

%..+.

. -- n -

j g

I '..j p.

~

e-

,... L b

%e

+,.

..,..,.h

.,:.- ', f,. L t [;%

~g..

y,'.1,.,-

a. m w.K.. y. Q

,,a..v, 7.g + r

.. A s '

.y-f (.a

?

a,,

9 - y.

p

%.,~

e

. +,

p7

.c. -;

. *;..w N,-

-c

.g.s

,4

,, y W. ; 3 '.,

.:,) i w

e t

.g

..,m,

['f$.(-

,h, kf5 - h

• ,Q,g,y, y 4

f'-' : 9 '. ' ',.,9 ' 3. '

"L r y g-, b _.

,,.. s ;,.,. p. u,,:,.

Nw l" k'.

I h

E,

' h. 0 h,h" hh.4.-n. ; 2:k kbh*$ n L n &... h k.

.h..,

v.

. / n,9 1.- J _ '.

c.

.,.,. m 8

'.'x.

.,p

>g-2.- 1, ; '

u,,*

y*

a

• /

a r

k,, * > -

6. e ' p.-

...~..'..,>-i.Y..,.,,..'c.-.. ag

/ A f. c ;. '

,.+..J,*

. <...,.., -... -. -..s.

._s 2

'.?

,[.

2,

'{*p f '

'~

5. 'f

'+*

1 6

~,

f 5-

. WW I *.

,: $ 7*,. ' {

.'?-

.' ~

. y 5 '<

_h_ &.

I,

. ll -

4 ^ hn

~ : '. '.

i_ ^ '

m.

,...,_l'

~

questettp$ c..? 9. ; ;-X}[r.d.;.'

T, ^

. l..:.. ~ ( ?

b f"[,p.

np. -JR..".+.Q

-],,,g }f

.- p u l +.. ", ~

y1 j..

, l D,(' '].,,.p' _I h

4.'_4jd; S hyf.ed phy dpe ye$seyaipW4 s

-.~,- t.,....?.

' ' y.g ::,

g

p. :.-

-D

• d-W. @lkqllW(lE lD-Tj j 5.?y)y.,. $[.N {@.. k:. W l A n, k.# "

,f-(p.aj-Q a

-.

.. w

&i

.n.

g

- + -

.,%,Nl l

' Y ', ;.'.

a:

. u.,

~,

..':. ",f

' ? \\ ' }.,, [

[,,

q,-d l ' (. '- ~

.s-p -.

., ' J '. ".

e y, u :,

_. r. i ~ _

y'.

if.,

Q~: -

t

.A '-

. r.,.

(

. l _ Sh

. ?".A

' W %,;

f,,

'.A h fs

~'d l

.; 4

,b$.

g;

,5 l j.[

?

._', -. C ',' 'b 3 I.. I i. '.

.... '.,' f,_? f , W l Q,lt.h ! ^' k l_;k_ ff']. - ( ' ; h, f~ '

l.

w

• 4

~

sa.

..-y qq v '.

y,'

v.

- - a

.jsm f

h.!

~,[ l',}4-f -

l. $

l.

-s,-,, _. '

c._,

Y.". (,e '

. i l. '

t

'.g.,_

d.Aihe N,. t I'

f

.,.. f

-*J

? o s.

- yo -. %W -:

4 4 -'.

f.'

w

.1 s'

?

l'

. ~ J

.4

. - af!D

(,

,e

(

- NNpM(ams h % gi.'E/4.* 'd

• g f

}h,. '

(,'. * $

l i'

5 n

' ' ' - ".fy-f -

g

.e

~ l.,,

.n l

e 4

we

~

'^'*

q 4

tN'

• ., b.

h

_}.

6..' ' '.'

z;

.' '- Y '.. ? '. ;...

.\\..*

• lf

+

m.

'11 r

.i

.s v.

r -

.u V.+:

a,

~

qe 8-8,M. g-y

,s 4

O.

g

,,, J.,

g.

,yg,..-,

F

. e e.

i 9

4, 1, y -.,.,-

- r

-M M -

. n N* :

J

,, * *

• sg.- _;

gg 9

> =

L --

. *. i

%a.,

1 s

s a

, }> p

_%xp p

f. -

2.:

Y g.

)+Ye.J4 t

- w ',

a,.'

GMW'WYM

^,

'" ",  ?

L

.h g...',,

_.,.'i,'_.

., *, T h

~ -.

y t

l l, i

4 gue-

.p'

-.- ?

y.

~

s

- c q....,.n

,o.... _...

f ' ;.

.. ~

,s n4 a

+. -

....... e,. +

,r,.., _

3 s

s-

un t LETTER T0 S H A R E H Q L D'E R S Pattis takins charee ot itsfutve rapklyadapting i

to e mote competitive

-g l

4 marketplace. As wa reduce g

Sproductofsision costs and improve productivity, we're actively ucce3s is the Both PGA N and Bechtel hase in prtnen fields with ready access seeldng new markets and

-a substantial experience in developing to mWor markets and should lead to

[

saj action.The sision to see the fon es a wide range of pow er projects.We increased resenues and earnings incteased revenues.

K at work around us and how they will behes e this experience, Bechtel's for l'G&E in future years.

d shape the future, and action to pnnide national mar keting capability and value for our shareholders and cus-PG&E's access to capital will make Expandmg Markets tomen now and in the years ahead.

ourjoint senture a strong competitor Ib build our business, we're ako 7

PG&E is taking charge of its future.

In this new market.

seeking opportunities to expand our g2 We recognize and understand the fortes PG&E is also determined to uw its markets. Last fall, w e proposed to b

V that an now reshapir.g the utility assets to build its financial strength consolidate the electric operations j

s industry: new technologies, changing and market position.The actions of the Sacramento Municipal Utility regulation and increased competition.

we're taking in our gas business District (SMUD) under PG&E's

_a make that dear.

ow nership and management.

=

New initiatives A signifierat international esent Our proposal to the SMUD Board We're pursuing a strategy that enaNes recently Imsted the s alue of one of of Dire < tors stressed the need for

]

'M

(

us to manage these changes, rather 10&E's prime awets-its extensise immediate joint efforts to negotiate i

[

than allowing them to manage us.

pipeline system linking gas-rich the terms and conditions of con-We are rapidly adapting to a more fields in Canada to gas-hungry solidation. Iloweser, the SMUD Board

[

competitise marketplace. As w e reduce customers in California.1he new free decided not to enter into serious

==

f costs and impnive productisity, w e're trade agreement signed early this negotiation, and the company withdrew J

actisely seeking new markets and year by President Ikagan and Prime its proposal.

}

increased resenues.

Minister Mulroney will help awure At the same time,10&E has offered 1

_'3

(

Our strategy calls for aggressis e the continued as allability and to sene as SMUD's primary w hole-a I

new marketing initiatises.

competitiseness of Canadian gas.

sale power supplier.We hau entered

-9E

-um

[

In Dnember,IU&E announced It builds on the pricing flexibility into a memorandum of understandmg

-=3

?

7 plan 3 to form ajoint senture with already prtnided b) existing contracts with SMUD that prosides the basis q

Bechtel Power Corporation to deselop negotiated by it&E. And that will for a 10 year power supply agreement

-Tal f

l non utility ele (tric generation enhance our already strong gas between our tw o utilities. Under g

5

{

projm t s nationw ide. We'll be w or king supply unition.

su( h an agreement, l'G& E w ould supply Q

(

w ith pas er purthasers, deselopers, That's w h) we're seeking new SMUD w ith from 400,(00 to 1,000,(00 g

C and others to build, ow n and operate markets in Southern California and kilow atts of w holesala pow er annually

[

power plants in parts of the country es aluating the major expansion to meet Sacramento's growing

]

E w here new energy supplies are needed. of our pipeline s) stem needed to sene energy needs.

}

these markets.

g y

in addition, our NGC Energy Company subsidiary is increasing its pun bases of low cost, high s alue natural gas resenes within the 11 Western states.These resenes are 4.M p

tE PG&Eisincroselas 3 LETTER T0

$ N A R E N 0 L'O E R S sales by earecene maler new buelnesses toits service area. But es we eapend,we remain committed to proviene our And we are pn>moting expanded responded to it sigorously.We industrial gas rates stable after 2 mal sales throughout our senice area with strengthened our marketing force, reducing them by 24 percent in the commercialcustomers a new business deselopment team.

out our omts and worked hard to presiounear.

In 1987, this team helped consince retain or win ba(k mdor customers We'ra capitalizing on this progress m4vr businesses to locatein our by offering mmpetitise rates and by adopting a new internal organiza-enew services, senice territory-btwnting the area's quality senice.

tion that uill help it&E focus economic growth and in(teasing That's crucial because markets dires tly on its markets.The mmpany PG&E's sales.We re working to attract are won by thow w ho pnnide Ihe has been reorganized into fiya market-even more large firms to northern best value-that mmbination of price responsive business units that and central California this year.

and service quality desired by began operating on Jantary 1,19N1:

But winning new markets and new each customer.We understand this Electric Supply, Gas supply, Distri-customers isn't the only way to fundamental reality, and remain bution, Engineering and Constrn< tion succeed-it's also essential to retain committed to cantrolling costs Senlees, and Nun Ytllity llu'iness.

the uluable customers we already have, as we continue to impnn e the variety Diis businen unit sinxiure will in 1956, w e estimated that a m4or and quahty of our customer se olce.

makeit easier for managers to portion of our commercial and 14ptify emts, know their customers, industrial revenues could be Controging Costs undentand the competition and vulnerable to our cong.etitors.1 hat in 1957,10&E built on its 1946 reend to rapd technological ud w as a powerfulchallenge and pG&E successes in contro;iing costo regulatory change.

O We held our 19a7 operating bNget llut as iU&E expands into new to 1956 leu!s. and we plan to do mm ket3 and reorganizes. It remains isEW CU$f0tMits ABOE0 essentially me same w:tn the 19%8 rocused on itu ore market, on small operating budget, mmmenial and trsidential customers.

O We reduced capini spending by We're mmmuted to pnniding them roughly 28 percent.

with value-with bigh quality senice f

nWe reduced our workforce by and a reliable, affordable supply 120 roughly 2,000 positions, priraarily of energy.

through a voluntary earl) retirement Taken together, the interwoven program and normal at trition.

initiatises w e5 e laum hed are paying l

O We reduced our cost of capital by offfmt-cutti:.g and n+rganization l

refinancing $157 million of high mst are honing the mmpan)'s comp (titis e debt and pre' erred stock.

j These emt cutting measures, M

M ' 85 86 67

.kd @ h Mk of Mining oil ad ps prices, base helped 10&E pr(v its product s to meet its mmretitors.

Last ) ear. w e cut our indtStrial electric rates following similar e

redu< tions in ItNk and w e held our i

ff? ** }Qh*

.,'*r

?~

"

• i 'T (f,

? tf Y,

l*

?QIh

M'*-

(y +

o N oc l

4.

"l

~

gj '.

f;-

9l ; 'z

,a p(-

t Jyy vy s g.

).

3

?

p

[;I "i;y

.~

,4 h

b y

<f i

l C

l l

l

4 turidentives are psytag LETTER T0 8 N A R E N O L'B E R S off produdugalooser, more ellident and more tosible PSEWe remain sommined toincreasing he sempany's linencial stronge andits nine edge-producing a leaner, more Evidence from a wide range of compared to 42.60 in 1686. Ilut our efficient and more flexible IU&E.

experts demonstrates clearly that cash flow remained adequate to coser b shareholders.

Our sales figures forlast year the decisions IU&E made in building the current annual dividend at showed that. Total electric sales for the Diablo Canyon plant were prudent. 4132 per share.

1987 were 7,6 percent higher than Their testimony has already shown IU&E is on course toincreaseits they were in 1956 and total gas glaring w eaknesses in t he disallow ance financial strength and to succeed in deliveries (sales plus t. ansport) were recommendation made by the today's highly competitive energy up 31 percent. And weie already California Public l'tilities Commission's markets. IU&E 1.s reshaping itself for reduced by more than 50 percent the Division of Ratepayer Advocates.

the future. But our strategy is firmly m.Mor portion of our revenues we once We believe that we hate presented anchored in the company's traditional estimated could be at risk by 1990.

a strong case for recovering our values-competitive returns for our We're w ell on the way to becommt insestment in Diablo Canyon.

shareholders, high quality senice for a utility of the 1990s-entrepreneurial, lloweser, faced with persistent all our customers, commitment to forward-looking and able to react delays in recosering Diablo Canyon's the well being of the communities in quickly to changing circumstances.

msts, ue are attempting to negotiate w hich w e do business, and a well-lb become that utility, we are man.

a final settlement of the case with trained, highly motivated and fairly aging an immediate and continaing the Attorney General of the State of treated employee team.

challenge-the Diablo Canyon rate ca*.

Calif (enia and the CI't'C Division IU&E remains a strong, vigonius Both units of the Diablo Canyon of Ratepayer Advintes.

company sening a dynamic economy, Nuclear Power Plant rat superbly in and I am confident that we have the 1987, producing needed electricity farnings dedicated w orkforce, resources and i

for the people of northern and central in addition, y e has e adopted a strategy we need to manage change California But the interim rates conservati e accounting approach and to prosper in the decade ahead.

ue're now collecting represent only which better positions the company about half the

• al costs of ow ning for the ultimate rate case dechion.

and operating the plant.

Wechangedthe way we rerd tevenues That's u hy we are working to for the plant so that effective Richard A. Clarke bring the Diablo rate case toa fair January 1,1987, essentially only cash Chtirman of the lloard and timely conclusion.Weie made revenues for the plant are now and ( hief Executhe Officer progress in the past year.

included in the company's income.

This t-hange reduced !ti&E's reported February 5,19%

earnings for the year but it did not affect our cash position.

Our reported earnings for 19x7 were dow n substantially from the previous year: 41.53 per share for 1987,

6 ADAPTING T0 A

C H A. N G I N G G0RLD PGLE faces growing competitionin its com-mercial andindustrial electric markets.We'ra worldng to meet our competitors with t used to seem so simple.

territor),112 operational cogeneration PG&E only for transportation.They we@ makoting and PG&E generateditsow n:lectric projects displaced 617,000 kilowatts hase more freedom to wheel and deal, power, bought natural gas and sent of 10&E electric load.We expect this and we must w heel and deal with them.

compettavely priced, 1:ath on dow n the line to its customers-competitive challenge to intensify, The company also faces rigorous high quallty service.

to customers without real alternatives, and we are working to meet it through competition from other pipeMnes.

Strict regulation acted as a partial a combination of aggresshe market.

Seseral firms hase proposed building substitute for the lack of marketplace ing and competitively priced, high a new interstate pipeline to serve competition. But all Ihat is changing.

quality service.

the lucratise enhanced oil recovery Aday, PG&E faces growing We also face increasing comp (tition (EOR) market in Kern County-competition in its commercial and for the expanding w holesale power a market now sers ed by PG&E and industrial markets. Technological market.10&E h resp >nding vigoniusly Southern California Gas Company.

advances and c hanging regulations to this competition, selling bulk We expect this market to be one of the has e made it economic for large power to several cities in Southern largest in the nation. In 1987, EC&E customen to generate their ou n pmer. Ca.ifornia.

transported up to 150 million cubic M4or gas usen can buy gas directly feet of gas per day for EOR use by from producen and call on utilities Gas iksiness Competition Southern California Gas Company's like PG&E to deliver it. All these This competition for commere ai customen-and sold another 90 changes are being drisen by American and industrial electric marketz 's million cubic feet a day for EOR use industry's increasing need to cut mirrored in PG& E's gas business.

by its own customers.

manufacturing costs to compete both Not long ago, the company's g.n PG&E's gas business must abc userseas and here at home.

supply rnanagers faced a comparatively compete with alternate fuels. Most straightforward task: they bought gas Electric Competition frcm suppliers, moved the gas through Cogeneration remains the major our pipeline system, and then GAS TRANSPORT l

pr:ctical alternatis e to PG&E supplied resold it to our customers.

electricity. Many of our industrial The gas supply business today b l

and commercial customen can build dramatically dJferent and infinitely y

cogeneration plants w hit h projuee more complex. Partial price deregu-120n F

l electricity and use the w aste heat to lation in 19M spurred production, l

produce steam. In addition to the loss pniducing a huge gas supply bubble.'

h b

of thne customers, PG& E h forced by At ihe same time, the Fedoral Energy current regulation to buy their excess

}>gulatory Commission mos ed to open 7 _

j poter-w hether or not it is ne-ded.

interstate pipelines to private, retail n

Through 19C,in iC&E's service gas buy ers, and the Cahfornia Public Ct;lities Commission took similar steps d'

within the state. Man) cor'mercial wm and industrial (ustomets now buy this low pric ed gas dire < tly-relying on

Q ? W[ _.

g { u,

? " W:. L c sc uy.

.y

)

'a

, yQ

__-q%y'y~,

pi;. L.,. y

..y p y: ' '9, ', ;;h;,;\\..

h w.

+h..

y' : ' -

z a.

a

• -Qt: a r

m

<+ :q g r.

, y

- i,

e

-n X L t.y b

~ p &~, %.

y:, ',

L _ '*._ +

p feg, &q v i m

q

%q.

.wr m 1

-nr

,; w _,,

L -

+

,,c. 4, M,x v:

- n %am+-

,. W;; <p

-8: (

g n

xs 3s-y-

.f-

~

f,,...

,y

.. y..

t s.. c..,

= '

3 '.

l yri '

3

. j. -

-tj '. + *.,,

y

.. [7 n

g.

p g_

- ~

.4 ' k *.

L.R )$j-r

- s

' r.

. 7 -.

,

• h p

'..,.,"s_

... ~,,,.

.c.

" _ f ;. " e s

g-1 --

m (--

idj ?.

.- h n-v, a.-

q-

. m+

- - -s g,

3 v

v r.

' ~ ? ).., '. l ' Y., ' {...

. f ;,

,? ; i f i. L.a \\..-~y 1 ',1 ',;

Uk ;

!Q y d)( : ' '.";;. -,

~ ;.,,..; 4.',.f,..; D... j ? [

jI W!:

.O

.-e

~

.....y

. ' -f

); i/

T&

4 g-

-ag,:,;, ',, ?U

.y_.

__ f.

a y

n

" b. #..

r, -. a',v,<.,'".

T -.,

M *,

• j<

+

.; Y.

...t sp-.

..w,,

3,.

-(

~

,s ?

.~

.;a.1....-

. a ru v,3 v..

v..

(

k a

f,,;

3

- -.,.- -.:' - 4 g

p,.

9.,.

. v, r

,8 sz eq

..y w e

t

,y..

c, r.

,.t e.

a.

s 3, n..

t,

j,,

g.

X i.-

1 l ;:

.e m;

a_

w:.

t,,? e/c,

y J

. m.

.e

.s

'+

i N

j'..y., -, y., g,.. ;

, c l

t.

y.

i:

3" ?

.n

.. g,.Q.f ";-- x c '.

W

] ' f ',.i. y k '. t..,l....... ( _

+, '

l-

, 7

~

-j

-~

r p

p*;g 4 ; -

4 t,/

V -.

L.,g.... - -,p,

? r,

. t +. '.f-s r4 s. n v'.., t

-, f: D,<

p,..... -sst,.;

g:.-

3. 3 \\, g,, e _ -

~, ~ 3.a, s - y..

+

l 1

<.e...

t v._

q.-

1 s.

o r

e S.g,.%, -( '?..

J.

. f.. 's Y q :. y,p.N.c, wi m 7

m a 2. 3.o x

<..n 9-

,. ~.-

7.

4,...

q.

h,-

p.

4 -; 'n 3' b $9 ' g.

4.-

he,'&?:Q'.b,.'l^

4 v

1

.:4

~

(.

h,,5 :- Tc

-Q. m.

n

s - %.

f; -

s.

4. 9.. t.es V ' s

n J

~: - s,j - ;+. g,'

4 i

3 1,

, zl

~,,.

q ]

z :.

'_s

,..: cj- <.

v. '. s : " - ;s. -

[ ^...l; ~

q

9?-.'; %e

[

q y :.+ r..

c.T. - 1

.,; - s, gr._,......

.t 4

6 3.. g >

,..a.

1

..,;-1..-:.-.- i -,.

~.p,

_;e

.a.., +. n 1

1. ..,..t

,['# h ]

' )

, _i 9,,#

's,,

~ 2'A%

)

u ?1..

,e

.a a4

)**,-*l.-

m.

'4 O

g 9:.y"* J

, : f'

. l

,w$.O, s:a.g 3

y6,

- [l. -

.r q,, 4

(.

.e-

' 3c ; _;.

'.'~.,a n

e j4>

j

..s.

-r

+

m

)

g.

+,,.

.t y<r-t i

8 g/

2=...

i, l.-

-4

.,a

(,,, *'

• a l

3-

,,gii 5#*

-[

i pm 3,

(

9.,

>a

~..

- y4- ~ a

^

g -

."z' o

.ir i G

h

{

3, c

7,..

p,

' d

. - #1[

j 4

j.

' o

p.,-

,8

b. '4

. g_ ;' i. '.

,, 6 p,.

. Pf

.S

--v

. p-(

i sw

- + -

i n A;

y..

...;.e

%. 4.,

v l

.- j j

9 g y

y\\

-L 4*

L-

.y

a.> q%..,.. '_

,.-.y n

- J,;<

f\\.

,.. ~

p.'

I t

e

.

• D '.q

+

Q s.-

' j

• • g s[t C

[

. h.,*'~;,...

>d-.

'n '.. n.4.

, ?

f. -

.s s.

.b i. m

I I _

• 1.*

u l y..Q}

-,v l

na e,

y j

.g

,e '

I i

s.,

j

'*~

,4j;,.j '

C

[

.b, YT*M, _ "yhQ

.. 4F; L,.2,-

' [#. k'.*

i.I

.h.

' I v'kN([bih -- [ ; [,.

p t

3g

A o.

o

y

, e.n. -

3

, m ; c....

4

' Ap...'

g,,,U, g4 j&

J

.[ -

J rv

(.

J m

a.. ;.

y q

~

w c..

' 4. f,% - ggy

?_

~

' g '

l

.,+

e 1: n.

3

~n

.V..

.%.+ %

-,s.

e

-w.,9. -: -

n

,~.s f

h.

I

. 5 1bi

}

s-P i3 i.

g

.{-

o i

)

7 A9APTlN8 T0 A C H A N 6 i N 8 _,W 0 R t 0 The composts reorgani zelleninto Rye business units and a Corporate Center wt help managers monitor their caseemers and costs better,The new of our m4rindustrial gas customers by reorganizing them into six regions-structure, PG&E is actively pursuing q,,gg,g,,

can burn oil, petroleum coke, coal shifting decision making authority new business opportunities to boost or other fuels. As a result, customers back to the managers closest to the its revenues. All of these business our shitty to And new routinely weigh our natural gas company's customers. Next, w e initiatives build oa the company's prices and transport fees against the instituted stringent cost controls to existing strengths and expertise.

prices for these alternatives-and keep our prices competitive.The if they're not competitive, we kise company's 1987 and 1958 budgets have Corporate Center the bus' ness.

been hdd close to 1986 levels-despite As PG&E moves into the 1990s What's the bottom line for PG&E an anticipated 50,000 new customers organized into flexible, market-wise in the midst of all this increared and cumulative 7.3 percent inDation.

business units, a Corporate Center corapetition? In 1936, we estimated Capital spending was cut from around will bind these units together as a that a mA}ur p>rtion of our commercial 41.8 billion in 1986 to roughly $1J single, strong company.

and industrial revenues could be billion last year, and we intend to keep Slade up of senior management at risk by 19W)-if w e failed pushing capital budgets dow n.

and backed by an array of company.

to tcke effective action to meet PG&E is now taking the next u ide essential servkts, the Corporate our competitors.

logical step in this market-driven Center will ensure that the results strategy. We hase reorganized the produced by each business unit Managug Change com9any into five business units increaw the company's overall financial But PG&E is not sit:ing idly by.

aimed at the primary markets we strength,it will provide strategic The company is aggressively pursuing now serve: Eintric Supply, Gas Suppy direction and will allocate PG&E's o market-driven strategy to succeed Distribution, Engineering and resources in the most efficient and in the competitive, cost-conscious Construction Services, and Non-Ctility most profitable manner. In addition, business environment of the late 1950s Business. Slanagers in these units it will make certain that the company and 19%.The strategy embraces will he able to monitor their costs and shares a common sision end speaks many intertonnectai corpirate act ion s customers better, and they will be with a single, clear voice, to cut costs, increase flexibility and gis en added authority, responsibility Imost revenues, and accountability for results. By As a first step, PG&E streamlined findir.g new resenue opportunities in its distribution operations in 1986 some markets to offset low er returns in ethers, Ihe new organization should aim make it easier to earn a full rate of return in the highly competitive markets of the19%.

Finally, bolstered by corporate cost cutting and a more efficient i

I

8

~

m pot a W

• e ofthe THE P0WER 0F C 0.N N E C T ! O N S oholesale electric powor markstis enormous.

I And Sectric Supply will

?

r aggtessively market power and tranemission G&E's Electric Supply business tw o. year experiment propised by IC&E aggressisely marketing pmer and E

M u to N both

[

unit controls 100-plus pow er called the We> tern Systems Ptm er transmission senices to utilities Inside and outside PG&E's plants and more than 4,000 milesof Puol.This experiment creates a both inside and outside 10&E's I

high-voltage power lines. Backed by computer assisted marketplace for senice territory.

E service territory' t

these farmidable assets,it supplies spot p(mer and transmission senice.

10&E's strategic position in the electricity to the Distribution business it work.s much like a commodities expanding w holesale pmer market is unit to serve PG&E's retail electric exchange-with prices updated daily.

Strong. Our extensive transmission customers. But Electric Supply also Even the construction of electric system links us to low cost energy 4

sells to another market-the fast-generating stations is becoming suppliers in the Pacific Northwest growingandintensely competitive competitive,in California, the and to grtming markets in the w holesale electric power market.

Public l'tilities Commission has Southwest,We also have one of the n

Die potential size of this market is established a bidding system that nation's most relia' le mixes of energy h

enormous, stretching across the will put future generation propned resources.We produce ptmer from w estern l'nited States and from Canada by 10&E in competition with the a vast array of hydro, fossil fuel, down into Northern Mexico.

power supplied by independent nuclear, geothermal, wind, and solar generators w ho qualify under the generating plants.

^

Emerging Market Public l'tility Regulatory Policies Events during 19s7 showedjust Act of 1978.Diese are know n as A Clear Mission p

E how fast this market is emerging. For qualifying facilities (QFs). Now But competitis e pricing, pure and example, the Federal Energy Regulatory FERC is exploring w ays to open this simple,is the key to success in this Commission (FERC) authorized a competition to other utilit es and emerging market.That is w hy 10&E's independent sm er producers.

Electric Supply businew unit is And there's already competition w or king hard to drive dow n the as erage NUCLEAR POWER PLANT PiRFORMANCE for existing w holesale pow er markets.

and incremental cost of its electric m:

tw mruwanar%t Last year the Sacramento Muni(ipal production.

I l'tihty District (SMl'D) asked for 10&E will also continue to play bids on NO,tu m) kilowatts of an actis e role in legislatise and L

e f

w hidesale pmer. It receiwd nearly regulatory initiatises that could shape

[

J M bids offering a total of 6,'MJ u u) our future business ensironment.

F

~

._ f f

F re

{

[M. _-

g kilow att s-more than 16 times As 10&E moses into a new era of w

r t o p

I the amount requested.10&E is competition, Electric Supply's mission ak elready competin g in certain non iu lear. It is committed to a( hieving 5

g a

?

y=

traditional markets-selling more solid. profitable result s for t herompany r-a_

Il than 39JW R) kilou atts of pmer to and its sharehnhlers N

[

E V F R-h #f F

Anaheim and other Southern a ornia rnun@ u tksin N.

atosu(m a nw en.:

And with other utilities bidding for its cunomera, Electric supply will

[

bruaden its w holesale market by y

e a

e

==i--

i---------.---.---.-----

m m

9 WMW v.,

k

.~n, u K,g g j 3 p,

- jj

.w,W. ;l y c-R,. 9

., q.4 4

7 u,

}C J

+.

.s

. 4

)

v. 9

,m, 9.

r (o -,

• 2:

n p

' ?

.Qf* n.h y<f. }.h

,._.,e

,S

.::g

'i e

'4[

I m'l) %." j.a.

_..,l,

- N

^

.m

-Q:J

' a),,'

Q, -

y l

' o;7, +.

+

I i,m :

s.

y i, py }9 s

.m

.y Q,-Qhl<,

3*/e f...

n.g f

'.v.

+l'l)'. - )+

.f.'

r 9.. ~:n s m.

. j,#

• • .j 3 /,

,,f,.

y..,' Q

f,,

+

m' lM

.;; ;. ;,. ; f';.

.+,'

c,. '

J%

+.

g

.. 4-

-..'t

, Q.,,

's V

m

< r.N..,

. @ } ;

.q. y l

, v <

', [...-,' i'

..Y'

• .,/,p

. s:,.',,

+". '+>

c p

.s f,,'

g, 2

, q.-

g, '

.-.' ;. ?.

~

.:l.: -

!..: y.-

. /.-

i..

I i,.,

u%

-F',.

a%ys.::

&_p2,~.f.6j@7;%.,

/

=

I.

.[

g 3 4Qg v.;.... 4 #y ;

s."...

e

. v.

-- e

' 7.f.

.. --.t r r:

.~;.

3.

% '. g<.,. :.g,y r

g.

m..;. '

..e ;,,.-

_( y ;

-v.

),3 9,1

• }

"O_

t e

49

,,,,s;...-

• [=-?q;r(;.*

g $.'

-*C,f 3; :_'...,7.y. - : )'.,..c......,..

'p

_ '. (',1

....v...

4

ff N

. - l *:..l- -f.,. h. n (f. *; l

7..

y,

'h

-Q-

-1 }-*

f.uff ;,

.?

~'

, app,

'e

_ '* i ; L', t -.i yy,f s

y,

-r

.eg

'& y

~

,g g'

e 2

'. ?';. ; 4./

~;

. ' : (.

c

.c.. ;

.- 9

,,y7, e,

?

-t,,'

i, V.

1

~.

g..

.A

/

.k ; '3 g l

l l

l l

!. }

,16 6

f

- ( {; [ V h '

,- _. p,O*;

y q,,

L

. 9 s

i

~

t s

6 I

e.

7 k

.iL+,%.

.3<

s h

YY a

. pts 4

. > y4 l

N &

'I d

4 D w'

-- ( _

1. -M'*--T4+,.gg,

. ~ ~,.,

-5 gi 3

i

.MW

,5 f

. ; g **#

e p p og k

wi.

+. - #

e

.W 3,

) (, -

eg,p+

. t.,

q j'

p t

1 aa y

C V

{

j ls T l -(L, _ li.0 s J

ib, i-g t

g p;;,p s ;.m.,nyn pl)="+e~~~~~z-

^

u

.-~u,

-m m

,c m._ _. ;

yMi

~r 1

te' a-

,..s r, eg t; 4_4

,tgg3

..mm,.,

~-.

4 Mids _ % a p Lp A

a f

/?

-i 4,

e es

- L 4*:

p~h f

I~

sC.AU.,,!;.- [

f.

.k-

,+y -,,, _~,,.[h y

g

-y o..

y [,

h

. f' g.

l

$.,91 j]

%h 7 + ' {* 4 1

. py ht' '

u.

78

,f-M

,LJ :n '~ "nf g' i..

i 6

. I)

,y-r

- [r p

o t

+;

sk

, ;[

p..

. -f sg O.

, { (-.C (4-u 3

t.

g g.

1 4

4 x

j 4-a,

,3

- 4,-

t N5.

v i

g,n._.

)

~'

scwAA,

-a L

li;J.

t,

'-- /s.e 1

ill. _

L.

s.

. i

a L

11 GAS SYSTEM FLEXlBILITY chansins teders and state regJiations have opened up new gas markets. PG&E gas has ASIS &Eenters the rellable, committed supplies end the pipeline needed to transport large s elumes of our prices dow n as gmupplin tighten.

system noeded to succesd the 19Ws, the gas for others w hile still prosiding During a period of en eptionally cold Gas Supply business unit will operate our core customers with the reliable, weather last winter, they helped us in these n3w, more a major interstate pipeline-low cost, total gn sen h es they need.

pnnide emergency gas supplies to competitive markets, connecting North America's largest In 194, PG&E transported 126.2 Southern California without curtailing gas supply sources to the continent's billion cubic feet of gas for customers-senice to our ow n retail gu largest gas market. Gas Supply's 4,noO a 214 percent increase from our customers.

miles of pipeline and its storage transport senice in 194.

Federal and state regulation of fields give it an integrated transmission PG&E is putting its strong market the gas industry is changing-shifting system running all the way from gas position to good use in California's to greater reliance on market forces.

fields in Alberta, Canada to the vast enhanced oil rmnery natural gn PG& E must continue to play an actis e Arizona-California border.

market. Oil producers iriject large role in the legidatis e and regulatory quantities of steam into the earth to debates that uill shape t he future New Markets help extract the beas y < rude oil found course of the g;s business Gas Supply's largest customers are in Kern County and elsew here in the llow es er, with large, attractisely IU&E's Distribution and Electrie state. As these pniducers switch priced supplies in Canada, Cahfornia Supply business units. Both depend to natural gas to fire their steam.

and the Southw est, and w ith an on Gas Supply for gas at prices that producing toilers, t hey are also creating unparalleh d pipeline sptem, Gas enable them to be competitise,in a natural gas market that could es en.

Supply has the flexibility and market addition, changing federal and state tually reac h one billion cubic feet per position needed ta succeed in the com.

regulations hate opened up new mar-day-roughly equal to two thirds of petitise gas and gn transport markets iet s in gas transport for enhanced oil PG&E's aserage daily gas eles in lWi w e fat e in the years ahead. Our task is i

reem ery (EUR) customers and for off-As the Eull market grow s in the to make that sun ew a reality l

l sptem customers like other utilities 1%.10&E's Gas Supply businew Gas Suppl >'s customers fit a common umt w ill be ready to grow w ith it.

i rnold.They need low cost gas to stay Gas Supply is aho weil prepared SOURCES OF GA3 PURCHASED ewro n m j

competitive in their ow n markets. They for other ( hanges that could o< cur in the l

are big and they are concentrated-gn market if espanded demand ff taking dehsery of major solumes of go shrinks the esisting gas supply

• bubble,'

, hM f Q

1. p QgQ at a limited number of points. Gas spot market prices w ill rise and Supply is in a sery strong position to cu torners will want the stability f

/h meet these needs-and to rnpond offered by long term, dnh(ated

I N ~ N 3-e i r; - 6, ' v j 1

e.,

[,

to rapidly ( hanging market conditiont supplies PGAE stands read 3 to meet With gas supplies plentiful and this needEe are the largnt U.S.

prien low, the transportation business pun haser of natural gas from Canada w

{}

}

.I

{[M is booming-as pipelines compete and from northern Cahfornia fields.

1 1

l y

I to carry gas ow ned by others Our and we negotiated iigorously in 19C pipeline sptem has the Desibility to win one year prire caps at sery attra( tise lesels for both these long

• m "m -

i term supp!) soun es.Thne reliable, committnl supphes should help keep i

12 >

Thwels no subetute fw DEPENDABLE ENERGY SERVICE knowing ycar customers, knowing your ccenpetitors, and being ready, witting and able to ses your products. PG&E's efforts he Distribution business At the same time, we strengthened Sales figures for the year reflected gg, unit rnans the front lines the mmpany's marl

• ting efforts, these marketing succenes. Total ing force began paying in IU&E's retail markets. Distribution gising managen in the field more electric sales for 1957 were up 7.6 does eser> thing from hooking up new marketing representatises to learn percent, and total gas delis eries a qg37' residential customers to marketing customer needs-and meet them. In (sales plus transport) were 31 percent

~

the company's sen ices aginst an increasingly competitive businets higher than they w ere in 1986.

competitors eyeing its commercial, ensironrnent, there is no substitute Thanks to our redoubled efforts to industrial and agricultural customers, for knowing your customers, knowing cut costs and rnarket and price our your competitors, and being reaay, products more competitively, It&E Meeting the Competition w illing and able to sell your pr educts.

ha4already managed to reduce by 50 10&E began preparing this Our efforts began paying off in 19s7.

pen ent the substantial revenues w e front-line team for the competithe A powerfut combination of cost-once estimated could be at risk by19R markets of the 1990s back in 1956.

cutting measures and competitise We reorganized 13 divisions into six pricing reduced potential revenue Good Progress stnamlined operating regions.This lowes and increased our sales.

Thati p u=1 progress, but more is cut costs and increased efficiency-Spe< ifically, in 19s7, It&E:

needn!-and more is being done. As all w hile maintaining our commit ment O licld its industrial electric rates 10& E's markets become increasingly to senice and reliability. In 1987, 17.5 percent low er than in 1956.

segmented, the company is developing 10&E once again achiesed an excep-O En California Public 1 tilities a more ads anced sptem for determin-tionally high electric sen ice reliability Commiwion app mal for six negotiated ing incremental costs and overheads fa(tor of 91.06 percent.

electric rate agreements that retained in these new market segments. This 65,WO kilow atts of bad. In addition, will help Distnbution's managen in December w e signed a crucial, five-alhu ate their resources more wisely, PG&E ENERGY RESOURCl3 year contract for continued electric control costs more efficiently, and Plai Esh.E OF fuML 4kt t DiW senice to Chevroni Richmond, es aluat e thei r mar ket s more accurately.

f~p't ~

f Calirornia oil refinery. l'nder this As a first priority, the Distribution I

~

~

agreement, Chevron will defer busiress unit will deselop rate

[ M 1[. -

O 3

w construction of its ow n 100 fab programs that better sen e our markets

{K N L, l-C-Lilaw att cogeneration plant.

and that balance iU&Ei costs of h;h N L

0 Convinced customers to defer sen ice w ith prices that are competitive I ' ',' ', ' g an additional 200W kilow atts of in t<ntayimarLets. And that will t

-i e

ly ' ;' ; g.

planned cogeneration projects. We did enable us to prm ide extra s alue-a E

' M_d '

this by marketing increased salue-combination of competitise price and f y j!:I(

competitis e rates, qua!ity senice quality enica-that cu tomers M)

N' and consen ation.

demand and competiton can't mat ( h.

Cexible pri(ing and supply a nu.ao m

a nwt a ot-nimt

,.m a r m i t-options to gain or retain gas sales of h2 million therms and 869 6 million in resenues.

p y

-.- l _.

,~

lgy Qrb,7{' ;4 7,.. ; i:

\\~p p ; 4 cn,

g}y.

}.y; r g

_.f%

'h t{ = q V[.7 s. i 1

+

.c e

Q. ^ > i o

,+.

j,'

L Q :. f.:' -u

' ?:

/LH_ y

,)

Q...

['i ' 4%)1 2

..,. ': g

• [

>[> n.e[3 '-

W.g

?

M4 i

&}$

'1 r

1 t

~-+

i a

y

)

g

.,x t

~ ~ *

- wt

.n.

, w

+~-,.

4-

. =

1. a.

• f

,,p.

4_

e n

,d.'

s

• y;-

a 7;

s.

~ hy '

Dt.

1 4

- ['

l.

- wf

.. ' f

(.

~

c.

ge '

' t. I

['!~

t 4..

EfKW.

' : f.; : ; :,w

.~9 +g

+ v.

. y..

r#j g, ? i y. 9,,{p

.h.: M ~ b'-

.l }I; ' ' ]'. '... ;.

f.,;;g,, 4... [

(-

I g

' h,. -

3 ~.

7.; '

...y.,

. gg, - j y,g7 s

. g. ' ' '-.

w

. kip 9 '.T.. f " gg. g$..f-Wfg. p

'..:G -if., ^l.'.a. J,,J. y -.' '.

. a, t 5 *- - * *g

, i g.

$w

. ~ ',.

s. :

.,1 2

j

?,4fd j

1.f., F,...,. ]1 o

'j yt.

+S c.

w-m.-

a)> ~e

-. t "A

.ex i -' v..

...,a g...

4 i

'. p-%j.

- -- T-f+ =e.gy

/..

w AM 4

t E

3 4

/

r

.f ;A

-g.

+. <..

y&>Rv i

,i:.

. ~,,, -

ws.

g.., n, yu

,g..y.

,,, y ^.

y n>

y v

g,.

u N '

fs { -

.1 m xm m%: yw.j@.wmm ~e;41f..gfg.h s.-0 '-TM w

m'

~

13-

, n. l.g.4.,. '

q i:.2d WW

= ms m.

c

a..g o 'g.g m.;A;;;;h:syr.Y.;

g.; _ g. c..) 3. ~,

q w

b., ;' ' q.a : ? ; -.

. _ Q~ g,. q :. _.g. '. - v > -

. e f i : g. ;. k ',,,

,g ~5.

+

e.,,

- ;,('.

i~ m

. --. nr.-

n n !

s

,. - y.... y f,. p. a...

.. : 9.oj..

2-

. t.

u-

1. 'a(, W. y

. p 4'

^

.1 d.

.[

./.

~

.g c "

i

.s. -

'N

.. ~

.g J

-'e

.4* C D ' W. +, la H,g qq

b. ; $.g~.. (.'. '.5 j

y,

/> '

-M

[

,, e s, s e j

,t-g.f..

- %A g

y v

A-f;l e

fr g

3

-l 4

}s w

s i

s k

+

.L

+

3 u m%.

,y,

-, w,

-t Q.

k J~

,5 f*

+

1..

.f s ';.

j] }

_y

_,f

)'

2 w

i y

i - *

(

Y 3

f\\

}

R ' ' '

h

16., 4,2

@s,

?

t

' fs i

W

~

(

V M

M,-

n u y f

j h'f x

.) 4 r..e,4

9.,

)

f 1 i

. w

-[

ea t

a t

i 1%

4 s

,e If g!

+

+.b

, i...

L i

T I g

'k 1

a f

I

'l

-t l

h i

2 f t

.. g.;...

4 z

.g 7

f.

A f',

.[S t-=4;,:

1-s

', yi u-

, %.s

=!

etu, q: p,,, -

,A s

3-

. fy [

.- rig lt " R lq

'.+ v..

4 s

g) -

s

]4G

[

)

..f-y o

d= i H -

1 av

• p,,

s

, ', -.i '

.j

.ps Q,

,. ?

3 f

s

=

- no ' i.~. *A i

s.. W '. - e z.

... 3 lC l

gm.

m,-

. - f. ;_n, y

' ? Q.

1

, i.

Q-

' ~ + y

' : -, _a.,]

y;%

+

O,- -

l i

i.

4.

+

2 t

+.

-. F ' " } ( #-..g.,f, ][.' f <

' *j- -

-e i

x -..-.

.. - p.

g-.

.p " -

. f ;;

~t

., j y

7; je

.?

_3 g

g4.....z -

.. 4 9.f. y. _

[ * }, _..-

v. g. ft.-

• r>-

-m..-

y, ir i

y i..I y

, -.,, g...; <,. 5

.C.. ),<

-1

...p ;.

/

g s, u.

.s

=-+-.

t.

... I.3,1 8..,., -,".

• ...4..

... w

' w %.. '0W - i

. pg r-

.. -j es e?

,.R.

'Y '

e.',.,.,-,\\"w%

f o

, D..*. -. s E

.'s c -

z'.

e

.t T

; 97

a. ',1 -

1 q *,1 '

[

[ j f'

gi 4*

.1 - ;t -,.-

4 C

1

,,I 4... '..

~., t...

r

,v g

o. c _.

y.

a 1

.?_"...... ', '. ',,

• t

+

i m.

,}..w 5,.1 1

's

,10, o f 4,' ' r. t,

,4 f.

2 e

3 yn

.t Y.f:

5 M*

4'

' '.', 4

. ?

f-t 2.

P '

.. j '

p.

4,

. x u..s,,..-,

. l~..,...,.,

.s.

.. v y

7x,

., - 4

s.. i.

... tg.

m

7 f, f.,,- - -, -

~+ -

.,,....s.

r y

a

+-

,,.,y.., -,.

y,

y l.,.

&,,,.,:. 4_....,w 4

.c s~ - - 7.. -.

-s

- :,3

..e.-..

f

+

-L ph.

3%. .. ;,. ' ' -

v-7 J.\\.

.,a n.- f:.. _.s.)& y. h L-

-. a4

,;- &.'..y e M

' y.; f,.,

a

.:* g, [.,. ~, '.

j J. ]ya-a x

1

.9,r*

4* -..

4 k.

(

3.,.

7.-p.

-.' s

l g,r. _. _

K'

,, j(; g,, 3 M-q'

_ - :." ; ? - 5y-

'J y

h.,

,.}l y,., y y... ; y s

t.

L f..m

'-g;.

9%s-4.

.l

, - r

,f:'" $f.{

?;f.[,.

m; t

. t.; n +

1,. ;,

.9 3.-.

Q, f Y

'.. 6..

[ ' l !..l 4,

(.?;

. ' k..\\ " <

\\

I-

.,,. g g :

..,.. y t;%g

=

1 7

4. g. -

~

..4h 4

,9.,

? -

_, _y"',,~~

s,

. A, ;

e

+

. Q.',

V N

s

• k

% fr

.I-W g, ',

x

. ' s s.

l

..l{'^

-l J

[,.

k h.

'l s;..,s. ' d' q

p :,e c.

m, 4,. a w

s.,. i _t.,J.. -,

~.. __

.4

,y 3

'4 f,

.2 y.,.

,-.a

..,..-g

-+

_.,m

• Te -,

g

<4..

g

,f

[

• -(

[ '

]

.I '

g'

,b - J']- -

.g.

r k -., =,,

a-

+

y

'l b.&,

'1

~h-Q '.

- rd.,

[

(g,

.. w.

- 5..

.y,,*.

e 4.

.3 g-g.

e_

y';ssQ%g

, j% *

, g '

+ '

l~4s 9,4 v.'

f-

.a 34.

.s.,t-x.

e

• n, v

.. t Ne - \\;

.4.

w -

..'(.-'

c.

,.m g.

\\

v c

./. - -

. ', - "....r u

.z....

'r

\\

+

,f

• ~

!..f- }.n ;

R-g L _ *-

-~L c,*

sg :.,

l t

.l

~;

+,

.g,.

+

7,..... <..

f

- /,,

7;

,y.

. a.,..v. _

.. j

.n ~,

7

-1 s,. -

~. "_ '. <.

9, k,

g 4

).:

n.

y.

r V

.s, k

' u'

• g e-P' m

i 4

I h

p

H 15 BUlLDiNG F0R THE FUTURE M 8' Pea $$ a 3

.baty to produce end moveitsproducts electric power and naturalgas as TConstructionSenices efficientfy and reliably as possible. Engineering and he Engineering and Our remrd is impresshe. Construction Oltepiscing aging gas transmiwion gg ggg crew s hase w orked around the cloc k and distribution lines to enhance business unit has a crucial mission:

to repair damaged transminion lines, safety and reliability.

helps the company provide to provide competith e engineering thded substations, broken gas lines O Ibiewing high temperature and

'Od '

'""IY and construction senins to the and damaged canals and tunnels.

pressure piping sy stems in older km er other business units. This organitation We will continue to suppirt the pl. nts for signs of potential failure.

to our custorners, aho has a clear market focus-its companyi customers by prosiding O Compieting major work at The lagest marketjust happens to be a trained w orkforce able to quit kly Geysers smer plant to retront addi-inside IU&E.

and capably restore senice under tional pollution control aptems, to emergency conditions.

Increase efficiency with new control Expertise in Action liut sun rb emergency serviw isn't systems, and to design and construct Engineering and Construction the only ) ital contribution this unit an on site w aste management facility.

Senice's skilled personnel effectisely makes to the company. ITi&E also O Cpgrading the Divide lempoc de,igned and built the phy sical sptems depends on its ability to produce and ele ( tric transmission line from 70,MI that are the heart of ITi&E today-the move its pn=lucts-ele (tric pmer and to ll5.om solts-increasing IU&E s company's fossil, geothermal, hydro, natural gas-as efnciently and reliably ability to sene the Santa Maria area end nuclear pm er plants, and its as missible. Although the company's and ghing us the ( apsbility to supply electric ar.d gas transminion and capital budget is teing reduced, there pm er to offshore oil platforms, a di:tribution sptems.Their knowledge k still a considerable amount of w ork major new market.

of these sptems, their technical involved in maintaining and impnning expertise and experience, and their Pli&E's pow er plants, dams, trans-Service and $cccess long range interest in IC&Ei succen mbslon and distribution sptems, and Engineering and Construc tion put them in an excellent pmition other facilities. Engineering and Sen kes is determined to proside to help the other busineu unit., meet Const ruction Sen ices personnel has e the high quality support IU&Ei other their objecthn the specialized skith to do the job, business units w ill need as the) face

!Ii&E's rapid respinse in emer-and they're now workinit on a number increasing competition. The unit gency situatior's forms an hnp rtant of essential projects:

w ill help secure Pti&E's edge in the put of the increased s alue we can C Installing high density fuel storage safe and reliable supply of energy offer our customers in an increasingly ra( ks at Diablo Cany on to increase to its customers-and w ill do so competitise bosineu ensironment.

spent fuel storage capacit).

at a competithe prim C Enhan< ing the computer fat ihties at IU AE's fouil pin er plantt C Installing an Energy Nanarment Sptem that will bmst the compan)i abilit) to get real t'me data to and from its substations and pmer plantt

i 16

• a*as our uti*r PURSUlNG NEW 0PP0RTUNITIES businesses competitively.

and prudently developing l

l non-utality act}vities wiB Nonutility l

increase PGAUs tevenue I

andearnings enhaidng ment policy, IO& E consolidated do not plan to pursue alarge number i

the company's value to businesses are nearly allits nonregulated oil and of small initiathes, instead, we plan its shareholders.

ventures that are not regulated by gas exploration and produ(tion to focus up>n and suc< enfully develop government agencies in the traditional acthities into a single subsidiary-a smaller number of m@r initiatives i

cost of senice manner.Just as NGC Energy Company.

that could substantially boost our increasing mmpetition and partial NGC Energy then launched a future earnings.

deregulation pise threats to 10&Ei major expansion, acquiring substan-Mnally, a non utility investment i

utility operations, they may aho bring tial pnn en oil and gas resen es at an must offer the potential for rates opportunities in the non utility busi-average emt of the equivalent of of return higher than thme authorized new se(tor.The Non Utsity liasinew just 57 cents per thousand cubic feet.

by the California Public Utilities unit uill de elop new businesses in Dese acquisitions, together with Commbsion for utility ins estments.

areas w here IUAE can add value and purt hues In>m other PG&E subsid-And these returns must be commen-dnelop a competith e ads antage.

laries, more than quadrupled its surate with the rhks involved in the resenes. As a result NGC Energy now pnipmed busineu venture.

l tahancing Value ow ns the equh alent of117 billion The combination of rnanaging its cubic feet of low -emt, high 4 alue New Ventwo l

utility businesws competitivel), and resenes in the w estern United States.

In December 1987, w e took a m@r prudently dneloping non utility actist-In fact, NGC Energy's resenes and step forward in our efforts to expand ties will increase 10& E's te enues and pniduction place it among the top 10&Ei non utility arthities.ne need earnings and will enhance the com.

20 percent of oil and gas companies for additional elet tric pow er is now pansi value to its shareholders in the country.

appa ent in seseral regions around the in 19s7, as part of its commitment IO&Ei other unregulated sut>

United States r.ad this need is expected i

i to a sound non utility insest.

sidiaries in<lude Angus Petroleum and to grow in the 1990s.

I JWP land. Angui operations focus on Accordingly, PG AE and 11e( htel enhanced oil recos ery in California.

Ibw er Corporation are forming a joint NONREGLAATED SAS RESERVES JWP Land develops real estate directly senture to dnelop non utility ele (trie numr n n nme nurm g

no dn elopers in 10& E's senice area in We twlin e the combination of our Cahfornia. Ibth base been placed financial capabilitin and pmer plant g,

i w ithin the Non i tiht) liusineo unit.

operating experience with one of the 4,

As it n aluates ot her opportunities, nation's leading engineering and l

Non I tihty liusiness has estaNished construction firms will be able to D'

three < ritena w hi< h new sentures capture a significant share of the

(

must meet.

espanding U.S. market for non utility l

g

)

'(

First,10AE must te able to add ein tric generation.

l

+

salue. New businen sentures must be O I y(al s l; i *.)/ h Ut ro IY related to t he companyi esisting l

"I drengths and es}ertiv.

i Scrond.the new sentures must offer the p>tential for making a significant

< ontribution to IC A Ei carnindJe

[

4

.y

~

k 4

>n n Ts,-

r > -;',M pie

-- "'. 7:

pgy-

} jt S7 ',

/[

gl

[ {3 ->s-

^

3 e

4

, +

- 7

,m

_gg g l

>+

s.

wwp, - :lM I

M7

} i.

1[,

4.,.3

]

[

• s r

i t

le, -

<ch,' W

,a, c

.,,,. ^ py,e, g) i - r j;yt

' j ',,$

~

' ' 4 i

p

}

l yh j1 h

,9, t,'.

.f

rt s v.

+

48

... s xt:

• . v:

+ *.

4

- y l(, -..,

i

.[ $...

.T gy i*

q

2

• e

'. NO.. f-

. = -.,

R.

j g1

+ g y, t-q

--N

?*r

- m

- ngg

- ;.'e

.A. m

.,,.,, a

.p..

' w p

1 y,;.

F-

'..3.

[

• . &p e

7 s

p-s.( --

• /

,, y 4

y yCu. ;. me:

. s s..

- y$..

... c.. '

e n.;'

g 1+

,,s

[',.

4

-v

, '., m"f -

' I

- (-

g

' d, g;y t

'% &-yt-u>

ti 4 '

k,

. L.

q, g

.) k.

/.

+ -

k. '- s,

f-

[,. -

9, W

,. 3 i

4

w

- 4 f

.y,

. _.n,*

y 4 ;c

~8

-s

.... w w+,,l..

-,, ~. 9 y

4

,3

-l,ky u

+-

's

(

} ' -

l7

%A a ys

+g.. f, ' " D lq~

Q, l1

%.p s

. s -

• L!

(-

hf;j s

g,-

-'il l

g {-..

.,Q

_..q<

M,p g,

5-v

- ' h6 '

%.',.- 4,'

• fi;, ',

_,fr

-y a '. qs _3=-

. y -s Q,4,V.-N. '.

1'

,. 3 -

~"

g

?-

> v

,o

.t ';

.v o

i

( ; '.,_ - ', ' bi ~ _.

,J

%g,..

.- g

[ '

'g4 i

G~

'_ __y

$f *.h.

~

J,'; z, ;

1 '.. L 1}'c.{j ' y ( L ' f

.t.,,.,.

[f(

y

..} :..i

,,. 9.(/[s i {" I

.a, *}..

W '.} J (g.y a._ _

3.~, - ; i

.b, ; 'n r

3

. +.

/

3

.s,,e i...

c

)

,A

. s

f.. !

4,

..1

.t.

f, g,

3a 4

g s

t

.* 3 A

3

-"j y',..

- n,,y,

.j

+

g..

+...-

j.

e

, h.

e

.3 y

e

.'. ' ',. * [,, (

. ~ ~, -*.

.,k..

,f, l.

4.g p.G 4L<.,

....i,,

.,1 y

h r

- 9 I

e,.-

.- g *.,.

a*3 t

7_ _.,'..,

_. O.

y,;

+,4

- g

+_

.0 6

W

.- -.v 2

r

+g

' 't.

~ t, nl'....,,lg,~*f e.-;.,, * " - *,

s*

s

.. J g

..~!

^8

.f g.

'j.'****(

.a e ',i e.s

.' p;-'

e 4,

3 *i.

t.

N. '}

's--

• -['.f s.

4 y

,, - v,

,; g s ~g 5

5 r. L,*.--

~, '

• a

.J q v..?.

V'

.. +, g i

.e

]-..

J*A S'. ' *..

4, S

+. ' ' *.,

Te,. *.

,2

'7 4..

L@. ; ', o

/,

j*.,,

',./

'g - '

i

• ' >g'II*

j g..

.-l

'

• I al b

'I. /.( Ag, *,,-?

L i *, fi -- -p.

r.

,s

,y

(*

g ['.

• .+.

' P,-

+

(

u y

~

4

,e 2,

e-4 g'

.,,g i

'1 t

--l1

,)

'tt r

,c (i

YY

.l j

1 4x

-Q n

j T

T['

k V

-N 1.

a

'#O-

+. N d.'-c

@, # )(

.o

(

j-s,'J f'

/ *.

'h l.

ip

3. l

• j 1

,@~.., y 4

-r, l

x

-p y.q...,,,

P

,3 g'

!_e j

em.;

w y

kg A + h.,

, %. 2M N **

g 4

I

)

a c.* S

.g>

& sis g

_-p ap.

,_-3j

.+

h

~,.

-'A.

]{

pd o.

,u

.m. v

~a - J-u T

..p y,.m s,

\\ %,

• e

,,3_m s

J 6 h-N ww N -...: x.

y v- _k 1

l w,

4:

.png, m a L>--~

~ ^

cs

( i ;.

.q-s q j v.

As

.m.

N 3

)-

4 s

,'y.,

h I

t

'I s

= 'i r

IS.

SELECTED FINANCIALINFORMATION panfic Gas and Fle<tne Dirnpan) 1987 l'4%

lad int in!

in Thousands (cuvpt pr share inforte suon)

Operating Ibenues

$ 1,185,701 8 7,816,661 8 8,830,MI 4 7,s29,7(t3 8 6,616,699 Operating Innime

$ 1,261,701 8 1,C),625 4 1,3fo,%9 8 1,10rl,3ss 4 959,872 Net Inmme

$ 688,517 8 1,lWi,223 8 1,030 so5 8 974,892 8 767,967 Earnings ltr Common Sh.tre

$1.53 8100

$165

$2.62 82.15 Disidends De(lared Per Common Share

$1.92 81 Jai

$1.%I

$ 1.69

$1.M Ihak Value Per Common Share at Year end

$18.58 819.l0

$18 05 lli,1 *l 816.39 M trket Prite Per Common Share at Year end

$16.25 821/25 820 00 416.3s

$11.8s Total hets at ivar end

$21,733,652 421,(wr2,2fel 819,im,003 817,319,% 9 814,717,357 leng term Debt, Preferred Sto< L, and rapital trase obhgations at Year end

$ 9,521,984 8 9,010,736 8 9,157,957 8 8,223 S68 8 7,05U25 in tM orrer benes we e redu.ed by SMlaUuWperanet Inmme w as redw ed b) 4 8 h,MUn8 and Net inmme m as redamd b) 64038U80 (il BfFr share) due r

to the < hange in reoird rig resenues related to 144t lo ran)on Nude ar Power hant. and Nei ini ome a 4s incre4 cd r>> 89120m (8 04 yr share) due to the < hange m methmi of annunung for un*1Hed resenar$ a druwsed in %nagernenn 14 cum. n and Ana')*in of Lon=4idaicd Finani al fon61,on and bults of Ograuens and in Notes to ron-autated nnans tal st4:ements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOUDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS pmrm ha ar.d De< inc rompan>

Rf 5Ulf5 0F OPERAfl0N5 in 157. In< luded in resenues for 1%7 is $3018 million for n mscry of a tortion of operating eyenws and an amount equal to the Revenues and f arnings Per Share pnyn ted fuel ensts sasni twe ause of thablo Canyon I nits I and 2.

Earnings per common share of the Company in 1%7 det hnnilo 8151 in 1%6 and 1%5, the mrresponding amounts included in nsenum Irom $2 60 in 1%6 and e2 M in 1%5.The 1%7 earnings equal an s.1%

wi re 81 !n? million and s t2!t4 millior,, rnlec,:l) Thne resenun oirl* irate return on weighted ase rage common equity and an Mr $

are subject to fut ure ajustment or refund w hen the CPL C loun n turn on utiFt> rate base.

its drenion on rate reenser), probably in 1%9.%ithout additional interim rate relief, the drferral of nnenun result 3 in a significant tsar tw, IM ddu W @ n ported earnine of the Company beginning in N Tb" w nd' 1%7, lending the final outcome of the broup b aht.1, for a ommon sio, k 8517,735 sc o 'd sw, m CDN1000ATED liiablo t,anyon rate pnmeedingt El In l%7, the rompan) offered an earl) weistted berase Number of t omm.,n sharn out tandma 377.723 m ul?

Ue b retirement plan to quahfied employees.

'the plan mst, w hi< h is included in

1. • $ (* \\

Ibenun in 1%7 dnivawil b) 6611 nulhon fn m 1%6. On Man h 31,

'?g Administratise and General cya'nsn, Pn?. the rompan) t hanged its rn unting of resenun relating to Diablo

( f g, g's w as a;.pn,umatel) $s7.l milhon Canyon Nui trar Power Plant (Diablo Canyon), retniadise to January 1.

n gg 1,cfore inn 1%7, nsentiall> to refin t only the cash amounts aituall) rnrisnt liefore Januar) 1,1%7, resenun were through interim ratn approsed by the Cahfornia Public Plihti"$

rnugniini as custoiners were bdled i

Commission (CPt r). Eu luded Inim earnine before tasn and deferred throughout eai h rnonth. To mat < h are l!!!I milhon of rnt nun and $s76 milhon ofinterulinmme j

roenues and eyensn more <iowl),

in Januar) tw7 the rompan3 began

-j h

antuing rnenun for srrnw pniuded e

n s:

ama soo

l 19 I

i 4

but unbilled at the end of cadi month.he cumuladte effed of this met Iw IW

~ - ~ ~ ~ ~

c:munting change as ofJanuary 1,1987 increwed net inmme by approxi-ta mmoni(n@'pcM tarwmEE) '

mately 691.3 million, net of related inmme taxes of approximately llesense itequirement

$T7 mitilon. If this method had been used in prioryears, mnsolidated

[o mi n peases 8

8 8125

[

net inmme, before the cumulative efrect of the change for the periods

.go, equiry return and t

prior to January 1,198% would not have been materially different, related taxes Mr.s 639.1 232.4 Aa' lie 7mie'IUu~ismInt~

In 1986, revenues de(teased by 8614.3 million from 1965. latt fuel

~ 7 sit ~ its.i l

1.231.s 1

costs passed on to ratepayers through lower rates w ere offset partially Intemt in(eme on lleoivable Rf.6 312 3.3 by revenues related to Diablo Canyon l' nit I w hlch w as in full

!"" Amun(Regag__

664.8 l,231.0 432.t commerdal operation for all of 1966 compared to only eight months 1btal Deferred 8 004.F 4

8 for 1985, and Diablo Canyon l' nit 2 m hlch began full commerdal Etreet onMaiper EarI~

~

operationin March 1966.

~- Amant Regnized 8

.F3 8 1,69 8.65 In 1985, revenues increased $601.3 million over 1984 as l' nit I began

-Income deferrei ~

~

$ 1.28 4

8 full commerdal operation in May 1985.

naased to mafwa te 19e prnentauon.

3 I

Indusion of Diablo Canyon in rate bue would improve the Companyi

{

et a u te leer 1944 1955 cash flow significantly.he Company has applied to the cpl'C for I

[

revery of the msts of owning and operating Diablo Canyon. L'nder rty te ment

(

I the current schedule, final rate recovery probably will not be authorized l

ttbined ronen

.24 CPL'C Auction in rate of until 1989, after reasonableness hearings are mmpleted. By the end Imm'er,eNty

(.04)

(.14) of IM9, tMotal mmuladWAA nwnw nquhment andntemt

[

m'cdi Ilo aanor Nile appr,xtrnately 85.8 billion. Of this total, an ntimated 82.3 eaergy project costs (14) billion u lli le mllected by the end of 1989, subject to refund, through Qent pr6w ynrs' interim rates, assuming mntinuation of the mrrent level ofinterim rates.

~

As of Denmbe* 31,1987, &

.7 million has been exduded

~ Earningsiwr shan impact 8(1.24) 8(.14) 8(.01) from menues and interest inmme. As a rnuit of this exdusion, a disallow ance of the Diablo Canyon plant msts on December 31,1987 Blsble Caeren 18ustear Power Plant of approximately 8500 million would have had no effect on net frome

[

De Diablo Canyon Achustment Account (DCAA)is used to axumulate usuming that the Allowance for l'unds l'aed During Construction the te enue requirement for expenses and return on rate bue (11.44%

(AiYDC) disallowed u as in the same proportion as the A}YDC in the j

in 1987 and il@s effe<tive January 1,19&S) related to l' nits I and 2 for plant and that the disallow anm uould have applied equally to the

}

future rennery in rates. Current cash flow s are not increaseu by the two units. AWDC is the cost of finandng the construction of new l

operation of the DCAA. llowever, the Company has been allowed to facilities. Because AKDC was remrded net of inmme taxes, there collect interim revenues to cover a portion of operation and ruintenan*

would be no addidonal tax benefit recognized if A}YDC w cre disallow ed.

expenses and an amount equal to the projected fuel cuts saud.

As of Datmber 31,1987, AlYDC repenented 35% of total Diablo a

hrough December 31,1956, the Compary natued 8871.1 million Canyon plant costs.

i la the DCAA as unco!!ected revenue subject ta possible a@wtment.

L' sing the same assumptions as aber, from January 1,1987 to i

Effective January 1,1981 as discussed abos e, the Cornpaay deferred December 31,19&f,, approximately $1.7 billion will be excluded from recog'tition of additional uncollected revenues.ne Company tocA this menues and interest inmme, and a disallowum of the Diablo l

c: tion as a result of a number of factors, induding uncersalnty about Canyon plant costs on Denmber 31,1948 of approximately 8900 million l

the level ofinterim rate remvery and the length of time until the ultimate uould hase no efrect nn net income.

[

rndution of the Diablo Canyon rate prowedings. In 19st the deferral pending the outcome of the Diablo Canyon proceedings, from resulted in a decrease in rw t income of $485.9 million.

January 1,1987 to Denmber 31,1982,:pproximately 82.6 billion will l

Diablo Canyon m enues and internt inmme, w hich are subje<1 to be esduded from menues and internt income, assuming mntinuation possible future Muttmerit and refund, and their effect on earnings per of the mrrent level ofinterim revenues. As a result of this exdusion, shan are as follows:

and using the same assumptions as above, a disallow anm of the Diablo Canyon plant costs on Denmber 31,1989 of approximately $1.4 billion I

would have no additional effect in that year on net income, and

)

for e ery 1100 million of disallowed plant costs in exws of 81.4 billion, there w ould be a one time redu tion in net inmme of approximately i

l 8120 mlilion, w hich w ould refle<t a reduction of the plant cuts and the l

related balandng asunt menues already recognized I

i l

r f

J M M (Condnued)

[

racine ces anavic compas I

f i

ne CitC will determine how much of the imestment in Diablo and would not be subjat to refund or further a4ustment. Any inmane Canyon ultimately w lit be permitted in rate base and remered in in bue rates, not offset by a demaw in interim rates, would inmase rates. Because Diablo Canyon represents such a large portion of the earnings because 10&E reavds as inmme essentially only the cash Cocpany's usets, if a disallow anw of msts is signiricant, it muld amounts adually rewived from Diablo Canyon.

have a significant adverse impact on the Company's finandal position.

i Annualinterim resenues for 1958 of approximately 8%3 million MUSC (excluding 853.2 million in decomrnissioning custs) are suffident only AlVDC dedined for the foitrth straight ) ear in 1987, reprewnting only to prwide for remery of all Diablo Canyon operating expenses and

.3% of net income, mmpa'e i to 10.3% in 1986 and 33% la 1985, in 1987, the authorized rate af return on approximately 81.7 billion of the AlTDC was redund by $4 f.2 million, the amount reorded from 1983 Diablo Canyon plant mis.

through August 1987 for the inmme tax effect of the caphalization in August 19s7, the Finandal Amunting Standards Board (FASB) of constru< tion period luterest under the Ax Equity and Fiscal Responsl.

Issued Statement of Finandal Acmunting standards (SFAS) No.92, bility Act of 1982.ne finandal statement irnpad of this reduction is l

Argulated Enterprses kcountingfor Phase in Plans. SFAS No. 92 mitigated entirely by a arresponding reduction in income tax expense spedfies the amounting for pha.e in plans and the capitalization n hkh is induded in Other Net in t he conv>lidated inmme statement.

of equity return and w ill be effnth e January 1,19SS. This statement AFL'DC demased in part due to commercial operation of Diablo Canyon would have prohibited the Company from mpitalizing equity return l'nh ! in 1985 and l' nit 2 in 1986 and in part d ue to shorter construction relsting to Diablo Canyon. Due to the Cornpany's change in rmeding time for Coropany prtdects. AFUDC inmues net income but does i

i revenues relating to Diablo Canyon, w hk h w as effathe January 1,1957 not contribute to cash flow n until construe tion is completed and application of SF AS No. 92 for Diablo Canyon w ould not has e reduced projnts are induded in rate bee.

earnings in the current year nur is it expected to do so in the future.

The California Supreme Court is review ing the CitC's interim Ratemaking dedslon that allowed the Company to retain the pridected net fuel Balandng accounts and m4e fadlity adjustment accounts authorized cost sasings of approximately $334.2 million annus'ly rnulting frurn by the CITC help maintain the Compan)'s earnings stability. Energy.

[

the operation of Cnit I and to inmue eintric rates by 853.8 million twt balandng acmunts are used to accrue for future remvery all mts l

j annually for operation and maintenana expenses for Unit 1. lf the of gas and 91% of the costs of purcha.ed power and fuels used to l

dedslon is res ersed and the Cornpany is required to refund this revenue, generate electridty.

I c:rnings for 19M muld be reduwd.ne Court's ruling is expated ht$t facility a4ustment am>unts such as the DCAA are used in the future. (The unwrtainties su tuunding ultimate rate treatment to anrue for future recovery operating expenses and return on met i

l of Diablo Canyon are disassed more fully in Note 10 to the generation pnjsts from the time they bemme operational until l

1 consolidated finandal statements.)

the CITC apprmes final rates.

l In January 19M,10&E reque ted that non-insestment expenws for Through 19s7, sales fluduation balancing amounts reduwd the r

I Diablo Can)on for 1958 and the perkad sinw commerdal operation frapact on earnings of fluduations in elec tric and gas sales.De CITC be reemered in bue rates.10&E and the CITC's Dishion of Rstepayer bawd ratn on estimated sales; differences betw een revenues bawd l

Advocates (DR4), formerl) called the Public Ftaff Dh hion, hase on thne estimates and actual revenues j

agreed subsequently that the amounts fur 19M and for the prior periods BALANCEIS ACCOUNTS are accumulated la the balancing r.re reasonable expenses.10&E has proposed an inmaw in baw am>unts and are equallzed by subse-

[

rates of 8202 million for the 19M expenses, offset by a reduction of quent rate adjustments. In Nmember l

854 millica in IMerim revenues that is related to such expenses, and 19C, the CitC authorized suc h an electric j

an additional innease of $180 millio.) per year for tw o years to amortize revenue innene of $266.5 million i

the price period expenses (induding interest).The DR4 has opposed

..I h1l cffnth e January 1,19M to offset low er j

r.ny rate inmaw to remver such expenws and the matter he been 2 M than forecasted sales.

l

• ]M ) $

b In 19% the CIVC adopted a new 8*

set for a hearita An innease in baw rates, if allowed by the CITC, t

regulatory framew ork to alter its polides could teflect a final determination of non insestment cxpenses g{W i-O to refint the rapidly changing gas mio NA industr) This CitC dediton separated

[

i I

ss-w*

in met er dered mme e

.t se niumn "Indedes thdie canyun p

%entment Ameist l

I L

i I

i

t 21 gas customers into wee

• and "nonore* danes. Core customers are amiunts prosided rate relief for the impact ofinflation, helping to those with few or no fuel alternatises to natural gu (such a most ns uttalize iti effnt on 10&E Indusion of new assets in rate base residential and smaller commerdal customen). Non mre customen reduas the impad of nplacing old facilities w ith mort costly new ones.

are those with fuel alternathes or the ability, because of size, to nese ratemaking prowdures coupled with the Companyi continuing entract for their own gu supplies.ne new framework allows the efforts to mntrol msts and innease produdhity hase resulted in Company to negotiate w ith non uee customen for the priw of gu and strong earnings from utilit) operations other than Diablo Cany on.

the mst of delisering that gu to the customer. While this new conwpt allow : the Company greater flexibility in mmpeting for some customers, UQUl0fiY AND CAPITAL M50URCl3 in enhange,it loses some of the protection afforded pmiously by the gas balancing accounts. Onder this new structure, w hlch the Diablo tuyon Nuclear Power Plant CPCC authorized in Dewmber 1957, menue requirements for wre As discussed in *liesults of Operations,' the Company changed its mstomers are anticipated to increase May 1,19% due to a foreeasted reconting of rn enues from Diablo Cany on, essentially to reflect the dedine in non-core gu sales and an undermlledion in the gu cash amounts adually rnelsed.nis thange ha no effect on the balancing acmunts. The new rates w ill be determined in May 1938.

cash flow of the Company and has had no effect on the current annual ne Attrition Rate Adjustment (AR4) compensates for changes in mmmon sto( k dhidend of $192 per share, financial and operational expenses in )ean betw een general rate cues to adjust base rates for estimated fut. ire costs of doing business. As Helms Pumped Storage Project a result of strict cost cuntrol and the expected effect of the 19s6 Tax ne llelms pndect w as placed in senin in June 1944. At Dewmber Reform Act, the CITC,in Dewmber 1957, authorized an eledrie menue 31,1957, capitalized expenditure s for llelms totaled approximatel) decease of $117.4 million, effntive January 1,1948, and a gu resenue 8960.6 million. Of this amount,8716 million w as induded in rate base decease t f $16.9 million w hich will be deferred to May 1,194Cihe and $21.7 mil l ion w a disallow ed and charged against 19 A5 earnings.

redudions also reflect a decrease from 114 IS to 11#2*s in authorized Any portion of the remaining $222.9 retllion in msts will be subjnt return on rate base.nis decrease is due to the lower embedded mst to daims against third parties or induded in rate requesto num the of debt and allow able return on mmmon stock equity.

mmmerdal operation date in 1944 through August 1935,855.3 million in 1987, rnenues miluted, subject to adjustment w ere reduced has been plawd in a balancing amunt pending future dalms against by approximately 845.3 million to reflect the estimated effect of the Tax third parties or rate requests. (See Note 10 to the tantolidated Reform Ad of 1936 (the Ad), pending a resicw by the CITC. In the financial statements.)

fourth quarter of 1957, the CITC administrative law judge inued a propmed dedsion w hich caused the Company to adjust the 545.3 million Constnation Expenditures estimate to 866 million ne estimated effed of the Act also has been In the future, the Company's mnstruction projeds will be smaller in^orporated into the Company's request for an is6 million decease and take l*ss time to build; carrying omts should be muc h less for the 1948 AR4.

than in recent > ears The need for new facilities will be redumd by In 1956, the CITC proposed eliminating sales fluctuation balancing signing long term contruts to buy energy from othen and by acmunts and the AR\\ and changing the three year general rate continuing to promote ensen ation. Pr t,ected 1938 expenditures of case qcle for electric utilities to tw o yevs. A final decision is expected

$1.4 billion for IU&E include reinforcing and expanding the trans-la 1948. Proposed thanges in sales fluctuation and energy balancing mission and distnbution system and cnounts u ould put 10&Ei earnings at significantly more risk as sales continucil04 modernizing facilities and equipment.

and or priws fluctuate, but also w ould create an opportunit) for

[$

Expenctitures for IU&E are expected additional earnings. Changes in the AR\\ w ould increase the Compr>i to drop through 1940 from the approxi-risk from inflation betw een general rate (sses.

mately ll 3 billion and $1.8 billion spent p

ne mmbination of balancing amunts and the natur-of a cust-Qk in 19si and 1956, respntis ely.

of seniw regulated enstronment hu helped to reduce the effects of i5 pgi infiation on the Company. Poth the ARA and the enerrost balancing

}

e a

NfM a

c w

• Pw W

I MANAGEMTS MSCM (Continued)

Padtk Gas and Eledric ecmpay Other ins entories and untenwered bal anns in balav ing anvunts. Suc h The Company aho w ill require capital to meet maturing debt and borrow ing prus ides flexibility to meet tapital needs and to u hedule preferred stock issues, long term debt issues.

IN 19w two At Dwrmher 31,1987, the Company had available nedit facilities in gnmn.

totaling 8703.4 million, all of w hi( h w ere available at (wember 31,19si.

Ltunna Debt and preferred ne Company aho had short terrn borrowings of 8554 million at

$r,$"q[g3)N,"g" December 31,1957.When balandng aavunt res enues are under vllected, 8

fund thquirements) lip 8125 4129 as in 1985,1936, and 1987, the Company must burniw until the revenues, plus it,terest it the Compan> % (ummercial papev rate, are Capital is supplied by internally generated funds and by external rnthed, When resenues are us ertvllated, the Company uses the finanomas. External funds from summon stock and debt issued in 1937 funds until they are refunded with lpterest.

suppiled 75% of capital requirements for 1987. As m$r (unstruction It & E seeks to maintain capitalisation ratios avmparable w ith those pndats are plawd into rate base and produm additional cash (te>ond authvrized for its utility operations in the most retrnt general rate interim rate lesels for Diablo Canyon), the Company's reliance on case. In 1936 and 1987, the Company took ads antage of low er interest external financing should continue to denease.

rates by refinancing older, high cost securities to reduse finana on,ts.

I'nweds from financings during 1987,19s6 and 1985, were as follow s:

The authorized and mtual capitalization ration for 10&E only, for ifs 7 and 1986 wcre:

,,, 7 3g g

In Edwns Pnwreds from finandng%

A 46t ed 4 tud Autharued Awl h.mmun Stiw k 44 5%

44.1%

43.73, 4 4 ms, Net olRJundags:

Cominun Shx k

$416 4 679 6 373 preferred Stwk 9.0 7.3 13 A 91 long term !Ot

_ __ 587 475 1.oc I"ng term bebt 48.5 48 8_

433 46.1 Total pn<eeds

$883

$1,1]

gl au Totalfapitalaatior.

100 0%

100 0%

loo m, tuo ir.

Common stock financing has tren accomplished through public in Dewmber 1957, the FASB issued 5fAS No. 96,.4ccouretingfor/come offerings and the Company's dhidend reinsestment and employee Th.rrs, w hich establishes new financial r.ovunting and reporting

s. wings plans. leng term debt has been sold in the Cnited States and standards fur the effe<ts of imume taxes on the Companyi methities.

In Eunspean financial markett De Company currently is es aluating the accountlt.g. regulatory At Dewmbrr 31,1957, 'M Company % common stock w as selling at and financial implications of 5fA3 No. 96, w hi(h must be adopted

$16.25 per share,82.43 below the book value of 81% (A per share. S:Jes by 1%9. It is estimated that the adoption will requ;te that both the of comreon stin k below tmk salue n ay he newssary in the futut, awts and liabilities on the conwlidated balance sheet be inceased to prtalde capital for (unstruction and other pnderts.

equally by two to three hillion dollars.nc impatt, if any, on the Ti.e Company's bond mdenture permits bsuance of rnortgage consolidated income statement cannot be determined at this time.

bonds up to the amount apprused by the Company's Board of Dire (tort At Dewmber 31,1937, the Company had $6.8 billion outstanding in mortgage tainds and may hsue up to 81.2 billion more, subject to indenture prousions on earnings einerage and property availab e as (ellateral.The CITC aho must apprese such financingt (See Note 3 to the consolidated financial statementt)

The Compan) issues shcet term debt-principally nimmercial paper-rnainly for interim tunstruction financing and for general arking capital. Short term debt aho has helped fund fuel oil and gas

L N 6fk Oas and htr6r Compaay bre Ended twemter 31 1947 tw liw to Nwaii(exceg per ihm amnen)

Opersehe Aswomes Ele (tric

$5,133,02C 85,567,435 65,A19,9$1 Gas 2,052,873 2.249

-,.223 2,610,994

. -... - - - ~

T,1 1steitperalhg Assessee

_ 85,701 7,816,f41 3,4303s1

Cost of Electric Energy 1,383,4w i,2'i2,4 I 8 2,072,51s Cust of Gas 859,8V 1,074,DJ i,74v,207 l

1ransmiolon 115 fe34 148,7M 145,C9 Distribution 109,782 IM,499

.173,n81 Customer Anvunts and Servkes 283,965 339,5M 357,189 Administrathe and General 104,200 635,792 591,926 Other 263,585 333,0M 302,326 M:.intenan(e 341,118 3?,2,t10 312,MI Depreciation 815.208 693,675 MSN4 Inn >mebes 603.012 927/>47 652,669 l'roperty and Otherkes 240.21T

!!6,978 IfA012 leselOpersehgtapensos 5,824,000 6,163,rr36 7,061,672 U%

1,261,701 1,653,625 1,369,3 2 Diest laceme and (laceae Bedw.tions)

Alkm ance for Equity Funds Csed Durin2 Construdion 2,584 M,164 247,367

%.mt Income 99,011 120,411 132,9s5 Dis:Jlowed Itojest Costs (8.889)

(5N,M2)

Other Net

_ 10,001, (37,760) 11,763 letal Olhor leseme end (leceme beduetlene) 111,881 151,K15 31),2T) laceme 8efere interest Esponse 1,313,588 1 305,460 1,702,592 laterest tapense internt on long term Debt 898,233 707,975 709,254 Other Internt Charges TT,845 h,802 55,M Allow arwe for ikcrow ed Funds l'aed Duririg Construction 318 (42,540)

(Irl.02)

__ list imeerest Esposee laceae Betere Change h becordeig unhard knenw:

T18,394 724.237 671,7J7 59T.184 1,nx1,278 1,(tK),MG Cumulatise Effect as of January 1,19ht Aaruing Onhilled Resenues, Net of Innime hes of 677,045 91.323 liet income 688,511 1,0s!,223 1,310A05 Prefetred Disidend Requirernent 110,782 156,190 164,239 tarnings Ave 644e ter Commea Stock

$ 57T,735 6 925,titt 8 M,6,575 Weghted Acerage Commen Sewes Outstaa88*6 3?T,T23 35 4 17 326Als Iarnhos per Commen share setere change h naardme ontmed Renew:

$1.2s s2 m sua Cumulatise Effe<t as of Januar) 1,196f Anruing Onbilled Rrwnues

.24 I

Iarninge por Commen Share

$[53 82 60 82 fd Dieldeeds Bociared Per Commen Share

$1.92 81 90 81.81 5

%mge d te c4*fwin to tw? pericatatwa.

'llte amepan) 6nt Mdes 14 Ibnw4s4ated hasartal itatenwett are an note gral part e4 titi stateme at l

l

24 CWWOLEMB84 LANCE NetT r.an,c.a o-w c p,

att low twembre st Asests Mont h Senke (at wiginal out)

Electrie

$17,7H,5TO 816.654,173 Gas 3,664,M0 3,435,255 fxalItant in Senia 21,355,529 19,9'J1,428 Anumulated Depredation-

.(5,466,767)

(4,2M,992)

-....... - -.II A Meet h terAos 15.144,537 14,527,661 CemetrafJoe M h Pragress

$23,744 1,17tt 254 Nocteo Fuel and Other Captallaases 341,378 434,303 miapleratte Costs N,101 235,7Wl

'nasces to Gas Pnducers 334,16T 367,426 cgs Held by1restee 211,226 243,161 levestments H,840 123,062 Customer Conservaties Loans neceivable (net of current 40,045 60 S35 pwtlon 824,142 in 1987; 833,697 in 1986)

~

17,228,644 17,170M1

~

~

1etal Cwreal Assets Cash 8.632 5,Cl3 Short-term Investments (at cust wt t m timates n.arket) 138/h 112,5s6 Am>unts Receivable Customers (induding unbilled amounts of 8:lli,M4 in 1957) 962,922

$14,64%

Other 471,258 4f.0,673 Alkm anw for l'ncollectible Anvunta (8.340)

(8,95 0 i

Regulatory Balandng Acwuste Recchable 533,HF 361,JM inventories (Note 1)

Fueloit 100,$90 223,472 r

Gas Stored l'nderground

!!4,1H 2fd,M7 hlaterials and Supplies 168.246 1%!!3 Itepay ments 34,925

'),Y54 2.133,211 4,910 IntelCursel Asaste Deterred Diarges Diablo Canyon Balandng Accounts (net of deferred menue and interest of $41,667 as of Denmter 31,1957)

IT1,14 i s-Ihject Costs IVrding Rrgulatory Aethe 16,970

.fu l'namortized ittie(t Costs 123,097 1 4,04 Workers' Compensation and Disability Claims Rennerable 91,000 93.501 l'namrttized Debt Expen*

47,218 37,4 2 t*r nyttired loss Net of Ga'n on Reangu' red Debt 305,461 303,M9 i

Other-Net jlf,M7 221,544 1stalSolerted Charges 1,7T3,7$7 1,6 %,750 f

Tatal assets

$21.T33,ls!

821sr2,2m o.,a te _, _ t.t

,.e. _

The anvempamped %tes le feee, Mated ha.noal MWemeate.re on integral part ed thi. statemeet.

E i

25

-)

i

.I i

s December 31 -

194F 1986' inThousands Capitakation and Llateties

- capliskation

. Common Stock -

$ 1,941,543 s 1,840,636 AdQMrial Pald-in Capital 2,611,654 2,319,344 Reinvested Earrge,s 2,699,108 2,855,748 Common Stoc'< Squity 7,252,305 7,015,728 Pref (r:31 Stock Vithnj hlandatory Redemption Provision 1,r)10,195 1,207,865 Pret Ved Stock With Msndatory Redemption Provision 195,000 225,285 ISng term Debt 7,998,265 7,255,956 Total Pnpasarstion 16,455,765 15,704,834 Noncwrent Llateties Capital Lease Obligations 318,524 351,680 Customer Advances for Construction 159,907 125,212 Workers' Compensation and Disability Claims 91,900 93,500 Customer Conservation Loans Payable 59,300 80,300 Other 113,481 34,352

- Tot 9 Nencurrent flamaa 743.112 685,044

..t_.. y._._..._.__

.Cwrwt

's Sb9ft Icrm Borrowings 554,024 1,101,213 Accounts Payable

n

'&ade Creditors 482,938 459,255 Other 244,180 217,104

, y Amruedhes 101,627 49,834

' p, Deferred Incomebxes-Current Portion 275,245 153,168 long-term Debt-Current Portion 71,620 84,314 Capital lease 0bligations-Current Portion 77,874 89,892 g \\InterestPayable 75,228 76,345

- } N Dividends Payable 166,001 176,602 I

c i,,.

'J-Amourt! ke Customers 77,983 59,295 Other 4 t 81,928 76,962 L'

h' '

TotalCurrent im 2,228,648 2,543,984

\\g - - _ __ _ __ __ _ _. y g _ y v._'

-.,s

[

'(

iY Deferred Credits Deferred Inves. ment h Credits 553,481 519,351 1I Deferred incomehes

- s 1,499,155 1,517,194 r Y Sthy__-_ _ - -_

253,491 31,&l6

. _ _ _ Total Deferred Credits.

i*

i 2,306,127 2,068,391

_9_ encies (Note 10' _-

^"

Contin s-TotalCapitakatkerekWd

$21,733,652 s21,002,253 3

[\\y 1l, i

L$

e

[

\\f 4

- m

' 26 E STATEMENT OF CONSOUDATED FUNDS USED FOR CONSTRUCTION Pacific Gas'and Electric Company Years Ended December 31 198F 1936' 1985' InThousands 1

funds From Operstions Net income

$ 688,517 81,081,223 81,030,805 Nonfund items in Net income Depreciation 875,208 693,675 535,6M Allowance for Equity Funds Used During x>nstruction (2,564)

(69,164)

(247,367)'

DeferredIncome hxes 48,381 373,177 252,565 Regulatory Balancing Accounts Diablo Canyon (713,405)

(157,739)

Other (272,517) 17,151 37,252 Deferred Axes Related to Regulatory Balancing Accounts 124,451 356,652 62,657 Disallowed Project Costs 8,689 58,882 Other-Net 301,278 121,299 188,120 Funds From Operations 1,771,443 1,860,608 1,760,829 Funds From Financings Common Stock Sold 415,898 536,299 373,458 Common Stock issued for PGT Sterger 143,159 long term Debt issued 1,085.131 2,(144,300 1,386,726 Itnds Held byDustee 71,089 (176,176)

(37,944)

Net Short term Borrowings (Investments)- - - - -. _ - -.. - -. _ _ _ _..

_-(269,299)

(511,528) 842,227 Total Funds From Financings 1,001,190 3,389,809 1,452,941 Funds From Changesin AcTued bxes 51,793 20,186 (4,198)

Accounts Receivable (388,002)

(20,534) 30,178 Accounts Payable 44,776 (77,442)

(50,792)

OtherWorking Capital (a) 22,728 (32,751)

(42,621)

Fuel Oil and Natural Gas inventories 35,183 60,900 51,643 Other-Net 305,172 (54,308) 47,295 Conservationloans to Customers 11,333 24,340 22,730 Total 0ther Funds 82,983 (79,609) 54,235

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

Total Funds Prtvided 2.855,616 5,170,808 3,268,005 Funds Used for Other Than Construction Preferred Stock Redeemed 268,976 243,242 7,500 long-term Debt Statured or Redeemed 317,359 2,247,050 513,192 long-term Debt Purchased for Sinking Fund 72.205 63,978 56,745 Dividends on Preferred and Common Stock 849,865 835,882 758,771 Customer Conservation loans Funded 21,000 16,100 17,900 Total Funds Used for Other Than Construction 1,529,405 3,406,252 1,354,103 ConsN,bs Expenditures 1,326,211 1,764,556 1,913,897 Allowance for Equity Funds Used During Construction 2,564 69,164 247,367 Total Funds Used for Construction

$1,328,775 81,833,720 82,161,264 (a) Other brking Capital excludes t hanges in current portions of: long term debt: 1987, (812,694); 1956, (810.359); 1985, (8148.123); consers ation loans to mtorners:

1947, (89,555); 194, (810,025); 1985, (8652); and capital lease obligations: 1947, (812,018); 1956, 87,096: 19s5, 823,145,

' Changed to conform to 1987 presentation.

De accompanying Notes to Conmalidated Hnancial Statements are an integral part of this statement.

STATEMENT OF CONS 0U0ATED COMMON STOCK EQUITV AND PREFERRED STOCK Pacine Gas and Dectric Company Preferred Preferred Stork Stock Without With Additional Common Mandatory Mandatory Common Paid in Reinvested Stock Redemption Redemption

_ _ _ Capitaj gyn ngs

,3uy

___Propa-

-Prop Stock Balsace, December 31,1984 81,584,542 81,518,963 82,340,041 85,443,M6 81,427,451 8 260,000 Net income-1985 1,030,805 1,030,805 Common Stock Sold (20,439,834 shares) 102,199 271,259 373,458 Preferred Stock Redeemed (75,000 shares)

(7,500)

Cash Dividends Declared Preferred Stock (164,342)

(164,342)

Common Stock (591,429)

(594,429)

Foreign Currency Hanslation Adjustment (1,563)

(1,563)

Balance, December 31,1985 1,686,741 1,790,222 2,610,512 6,087,475 1,427,451 252,500 Net income-1986 1,081,223 1,081,223 Cor ;>n Stock Sold (23,519,3M shares) 117,597 418,702 536,299 Comnnn Stock issued for PGTMerger (7,i,J9,530 shares) 36,298 106,861 143,159 Preferred Stock Redeemed (9,055,557 shares) 3,559 3,559 (219,586)

(27,215)

Cash Dividends Declared Preferred Stock (156,190)

(156,190)

Common Stock (679,692)

(679,692)

Foreign CurrencyHanslation Adjustment (105)

(105) _

Balsace, December 31,1988 1,840,636 2,319,344 2,855,748 7,015,728 1,207,865 225,285 Net income-1987 688,517 688,517 Common Stock Sold (20,181,371 shares) 100,907 314,991 415,898 Preferred Stock Redeemed (8,209,650 shares)

(22,681)

(22,681)

(197,670)

(30,285)

Cash Diddends Declared Pref.-tred Stock (120,992)

(120,292)

Common Stock (728,873)

(?28,873)

Foreign Currency Dan 31ation Adjustment 4,708 4,708

,Decemk 31,387 J

$1,941,543

$2,611,654

$2,699,108

$7,252,305

$1,010,195

$ 195,000 The accompanying Notes to Consolidat(d financial Statements are an integral part of thf s statement.

28 STATEMENT OF CONSOUDATED CAPITALIZATION Pactric Gas and Electric Company December 31 198r 19%*

In1houunds (exceg percentages)

Common Stock, Par Value 85 Per Share (authorized 800,000,000 shares, issued and outstanding at December 31,1987: 388,308,547; 1986: 368,127,176)

$ 1,941,543 8 1,840,636 Additional Paid-in Capital 2,611,654 2,319,344 Reinvested Earnings 2,699,108 2,855,748

_ _ _ _ Common Stockp4 _ __ __ _ ____ __ _ _ _ _ _ _ _ _ _ _ _, _, __ _ __

7,252,305 44%

7,015,728 44%

Preferred Stock Without hlandatory Redemption Provision Par Value $25 Per Share (authorized 75,000,000 shares)

Nonrsdeemable 5% to 6%-5,785,000 shares outstanding 144,621 144,621 FM 4.36% to 8.24-13,534,000 shares outstanding 338,373 338,373 9% to 10.46%-21,088,000 shares outstanding 52),201 527,201 12.8% to 17.38%-7,907,000 shares outstanding at December 31,1986 197,670 1,010,195 1,207,865 Preferred Stock With hiandatory Redemption Provision Par Value $100 Per Share (authorized 10,000,000 shares) 195,000 225,285 9% to 14.75%-1,950,000 and 2,253,000 shares outstanding Total Preferred Stock 1,205,195 7%

1,433,150 9%

Pacific Gas and Electric Company First and Refunding Stortgage Bonds Maturity laterest Rates 1907-1992 3.375% to 15.375%

151,292 228,456 1993-2016 4.25% to 8.125%

1,632,527 1,633,527 1996-2020 8.2% to 8.875%

1,709,984 1,099,984 1993 -2020 9.0% to 10.0%

1,893,750 1,404,750 1993 -2022 10.125% to 14.0%

1,444,135 1,581,786 IVincipai mounts 0utstanding

^ ~ ~ ~

6,831,748 5,948,5b3

~

L'ncmortized Discount Net of Premium (103,008)

(91,859)_

fbtallfortgage ilonds ~

~

6,728,740 5,856,644 L'nsemred Debentures,5.25% to 12.0%, due 1994 -2000 223,650 223,650 Pollution Control loan Agreements, variable rates, due 2008 -2016 925,000 925,000 36,134 40,263 j

Other long-term Debt,

7,913,524 7,045,557 l

'Ibtal PG&E Iong-term Debt l

Pacinc Gas and Electric Fhance Company N.Y.

Guaranteed Debentures,12.0% to 15.5% due 1959-1991 75,000 180,000 i

Pacinc Gas Iransmission Company Bank Term Loans 51,991 63,106 Natwal Gas Corporation of Calfornia Bank Term Loans 29,370 51,607 I

~

Total Long term Debt of PG&E and Subsidiade:

8,069,885 49%

7,340,270 47%

Less long-term Dek-Cwrent Portion PG&E 42,760 60,237 l

Subsidiary Companies 28,860 24,077 Total Long-term Debt - Current Portion 71,620 84,314 Long-term Debt in Total Capitatzation 7,998,265 7,255,956 Total Capitatzatkm

$16,455,765 415,~04,834

• Changed to conform to 1987 prewntation.

The acmmpanying Notes to Conwlidated Financial Statements are an integral part of this statement.

29 SCHGULE W CMSOLBATE SEGMDIT MFMMATlWI Pacific Gas and Electric Company latersegment Years Ended December 31 Electric Gas Eliminations 1btal Inhousands 1987 Operating Revettues

$ 5,133,028

$ 2.052,673

$ 7,185,701

[ntersegmynt Reyenuega)_ _ _, _ _ _ _ _ _ _ _ _ _ _ _

7,724 631,981

$ (639,705) lbtal Operating Revenues 5,140,752 2,684,654 (639,705) 7,185,701 l

Depreciation 674,135 201,073 875,208 l

Income Axes (b) 444,607 158,405 603,012 l

0ther Operating Expenses (b)______

3,007,856 2,077,629 (639,705) 4,445,780

._. Jota [ Operating Expenses __

4,126,598 2,437,107 (639,705) 5,924,000 Operating 1ncoms

$ 1,014,154

$ 247,547

- $ 1,261,701 Funds Used for Construction (c) __ _ _ _ _ _

$ 948,080

$ 380,695 8 1,328,775 Net Plant in Service and Construction Work in Progress (c)

$13,900,331

$ 2,169,952

$16,070.283 Other identifiable Assets

$ 2,974,335

$ 1,595,121 4,569,462 Corporate Assets 1,093,907 TyAssyts. _,

$21,733,652 1986 Operating Revenues 8 5,567,438 8 2,249,223 8 7,816,661 Intersegment Revenues (a) 7,817 515,293 8 (523,110) _ _ _, -

_1bta10perating Revenues Depreciation 5,575,255 2,764,516 (523,110) 7,816,661 550,205 143,470 693,675 Income hxes(b) 745,397 182,250 927,647 Other Operating Expenses (b) 2,910,313

__ 2,154,511 (523,1l0) 4,541,714

. 1bta10peratiijg Expenses __

4,205,915 2,480,231 (523,110) 6,163,036 Operating laceae_ - _ _,

8 1,369,340 8 284,285 8

8 1,653,625 Funds used for Construction (c)__

8 1,502,105 8 331,615 8 1,833,720 Net Plant in Service and Construction Work in Prograss(c) 813,689,094 8 2,016,821 815,705,915 Other Identifiable Assets 8 2,607,302 8 1,565,655 4,172,957 Corporate Assets

_ 1,123,381 Total Assets

$21,002,253 1985

~

Operating Revenues 8 5,819,983 8 2,610,998

$ 8,430,981 Intersegment Revenues (a).

8,190 1,351,806 8(1,359,996)

_1btal Operating Revenues Depreciation 5,828,173 3,962,804 (1,359,996) 8,430,981 399,825 135,829 535,654 income hxes(b) 463,415 189,254 652,669 Otl:er Operating Expenses (b) 3,909,483 3,323,812

. (1,359,996) 5,8_73,299 lbta10peratirig Expenses 4,772,723 3,648,895 (1,359,996) 7,061,622 Operating laceae 8 1,055,450 8 313,900 8

8 1,369,359 Funds Used for Construction (c)

$ 1,784,784 4 376,480 8 2,161,264

~

Net Plant in Service and Construction Work in Progress (c) 812,827,123 8 1,875,483

$14,702,606 OtherIdentifiable Assets 8 2,141,339 8 1,514,800 3,656,229 Corporate Assets _

739,168 Total Assets 819,098,003 (a) latersegment Electric and Gas Revenues are acmunted for at tariff rates presmbed by the CPt'C.

(b) lamme hues and general corporate expenses are allocated in acmrdance with the FERC l'niform System of Annunts and requirementsof theCPt'C.

(c) Includes allocation of com mon utility plant, he semmpanyleg Notes to Consolidated Financial Statements are an integral part of this schedule.

30 NOTES TO CONSOUDMED FINANCIAL SWEMENTS Pacific Gas and Electric Company For theWars Ended December 31,1987,1956 and 1985 IIGH h SUMMANif 0F $10ll1FICANT ACCOUNT 518 POUCits On Alarch 31,1987, the Company changed its recording of operating revenues relating to DiaHo Canyon, retroactive to January 1,1987, Accounting llecords essentially to reflect only the cash amounts actually received through ne accounting records of Pacific Gas and Electric Company (PG&E) interim rates approved by the CPUC. De Company took this adion are kept in accordance with the Uniform System of Accounts prc cribed as a result of a number of factors, induding uncertainty about the level by the Federal Energy Regulatory Commission (FERC) and adopted ofinterim rate rece' ery and the length of time until the ultimate by the California Public Utilities Commission (CPCC).

resolution of the Diablo Canyon rate proceedings.

Principles of Consolidation Utility Plant ne consolidated financial statements indude PG&E and its wholly.

De costs of additions to plant, including replacements of property owned and mdority.ow ned subsidiaries (the Company). All significant retired. are capitalized. Until an addition is pla d in servlw, its intercompany transactions are eliminated.

costs-induding labor, material ana similar items and indirect charges 514or subsidiaries are: Pacific Gas TransmisAn Coopany (PGT)-

for such items as engineering, supervision, and transportation-are transports and sells natural gas outside California; Pacific Gas and accumulated in construction work in progress. Such costs also indude Electric Fmanw Company NX (Finan ), organized in Netherlands AR'DC at rates conforming to FERC requirements. AFUDC is the Antilles-borrows funds outside the U.S. and lends them to PG&E cost of financing the construction of new facilities. Costs of depreciable and subsidiaries; Alberta and Southern Gas Co. Ltd. (A&S)-buys gas plant retired are eliminated from plant in service accounts, and in Canada and arranges transport to the U.S. border; NGC Energy such costs plus removal expenses less salvage are charged to Company (Energy)-performs oil and gas exploration and production; accumulated depreciation. Costs of repairing property and replacing Pacific Conservation Senices Company (PCSC)-made loans to minor items of property are included in maintenann expense in PG&E residential customer s for conservation and weatherization.

the consolidated income statement.

Alberta Natural Gas Company Ltd (ANG), PGTs largest subsidiary, oans and operates a pipeline in Canada, w hich transports natural Depreciation gas for A&f,, the U.S. border, and a plant which removes hydrocarbons Depreciation of plant in seniw is computed for financial statement from the gas stream. ANG owns 100% of ANGUS Chemical Company purposes on a straight-line basis based on the remairJng estimated (ANGUS) which produces and sells nitroparaffms. ANGUS has facilities useful life of the related asset. For federal income tax purposes, the in the U.S. and Europe.

Company generally uses the uost liberal depreciation methods allowed The investment in ANG, a less than 50% owned subsidiary, is by the Internal Revenue Code.

accounted for in accordance with the equity method of accounting.

Income Taxes llevenues PG&E files a consolidated federal income tax return with those Revenues include billings to customers, anrued unbilled revenues subsidiaries in which its ownership is 80% or more. For financial and changes in regulatory balancing amounts.

reporting purposes, income taxes are allocated to PG&E and its Before January 1,1987, revenues were recognized w hen customers subsidiaries on a separate tax return basis.

were billed on a cycle basis. Beginning in 1987, the Company began Income tax expense indudes the current income tax liability ac ruing revenues for senice provided but unbilled at the end of each resulting from operations during the year, plus deferred income taxes l

month to match revenues and expenses more clowly, if this accounting on most of the m4or !iming differences betw een financial statement

(

method had been used in p: tor years, consolidated net income before and income tax reporting, to the extent permitted for ratemaking l

the cumulathe effect of the change for the periods prior to January 1, purposes.nese timing differen&s are shown in the deferred tax 1997, would not have been materially different, section of Note 8 to the consolidated financial statements.

By CPUC order, the Company has established balandng accounts Although the tax effects of most m4or timing differences are for electric energy costs, sales and m4or plant additions, and gas deferred, the tax effects of wrtain differences are remrded currently.

j costs and sales. 0perating revenues indude changes in these accounts Rese timing differences, for which flow throagh acmunting is utilized, for amounts authorized by the CPUC to be deferred for future recovery indude certain capitalized overheads, percentage repair allow anws, from or repayment to customers. nese accounts kept changes in excess depreciation for state tax purposes, and removal msts and scles, cost of sales of electricity and gas, and regulatory lag related federal tax depreciation on property acquired prior to 1981.

to returns on mdor plant additions from affecting the Company's Prior to 1982, w hen the CPI'C authorized that certain deferred e&nings significantly.

income taxes be induded in the determination of utility rates,ITi&E l

used flow through amounting for most timing differeices. Consequently, timing differences exist for w hlch PG&E has not pnwided deferre<l inmme taxes. ne cumulative net amount of the timing differences for l

31 chich deferred income taxes have not been provided at December 31, NOTE 2:PMfERIED STOCK 1987 is approximately $2.5 billion for federal purposes and 83.1 billion for state purposes, the tax effects of w hich are expected to be recovered ne nonredeemable Preferred StockWithout hiandatory Redemption through rates in F.he future.

Provlsion (Issued at $25 par) consists of a 5%, a 5.5%, and a 6% series, w hich have rights to annual dividends per share of 81.25,81.375, Debt, Premian, Discount, and Reisted Expenses and $1.50, respectively.

Long term debt premium or discount and related expenses are amortized ne redeemable Preferred Stock Without blandatory Redemption.

over the lives of each debt issue. The gain or loss on reacquired Provision (issued at $25 par) is subject to redemption,in whole or rnortgage bonds is amortized over the remaining life of each reacquired in part, !f the Company pays the redemption price plus accumulated Imnd, consistent with ratemaking.

and unpaid dividends to the redemption date. De redemption -

premium per share declines in anordance with terms of the specific Gas Explerstion Costs issue. Per share information is as follows:

Under the regulated gas exploration program, the majority of series Anani Dividend Redemption Price gas exploration costs before 1987 were capitalized under a modified 4.36% to 8.2%

81.09 to 82.05 s2535 to 82835

• full-cost

• method of accounting, as authorized by the CITC.

9% to 10.46%

82.25 to s2.615 425.85 to s29.25 Unsuccessful project costs, current operating costs, and the financing costs of regulated gas exploration were recovered through balancing The Preferred Stock With Standatory Redemption Provision (issued at accounts and therefore did not affect the Company's income. ne CITC 4100 par) consists of a 9% and a 10.17% series, each of w hich is entitled terminated regulated gas exploration in 1985, but liquidation costs to a sinking fund providing for the retirement of stock outstanding at are being recovered through the existing balancing accounts over

$100 per share plus accumulated and unpaid dividends.The total redemp-a 60 month period effective September 1987.De sucassful efforts tion cost, excluding any anumulated and unpaid dividends, for 1988 is method of accounting is used to determine the profits and losses 47.5 million, and for each of the years 1989 through 1992, is $12.6 million.

on the continuing unregulated oil and gas exploration, development in addition to the sinking fund retirements, the 9% series, and and production program-after August 14,1993, the 10.17% series, may be redeemed at PG&E's option for $100 per share plus acctmulated and unpaid dividends Workers' Compensation and Disabinty claims and a redemption premium. At Denmber 31,1987, the redemption Workers' compensation and disability claims are recorded in noncurrent premium for the 9% series was $6,00 per share, liabilities in accordance with Statement of Financial Accounting During 1987, PG&E redeemed for $269 million a portion of its Standards (SFAS) No. 71, Accountingfor the Egerts o/Certain 7kpes preferred stock having a par value of $228 million at a net loss of ofRegulation. De corresoonding amount to be r* covered through 829.5 million.ne series redeemed ranged from 9% to 17.38%. In 1986, future rates is shown as a deferred charge.

PG&E redeemed preferred stock at a gain of $11.2 million.nese net gains and losses realized from reaalulring the preferred stock include Nonearning Assets adjustments for premiums and issuance costs.ne gains and losses Certain project costs are being amortized over a period set by the are recorded in deferred charges and will be amortized consistent CPUC while other projed costs are pending regulatory action. nese with ratemaking.

costs are not in rate base and, therefore, are not earning a return Preferred stock dividends are cumulative. All shares of preferred on PG&E's investment.nese projects are discussed further in Note 10 stock have equal preference in dividend and liquidation rights; to the consolidated financial statements.

however, different classes and series of stock have different dividend and liquidation payments. Upon liquidation or dissolution of PG& E, inventories holders of the preferred stock would renive the par value of such shares Inventories are valued at average cost ex&pt for low sulfur fuel oil, plus all accumulated and unpaid dividends.

w hich constitutes the major portion of the fuel oil inventory. Effective January 1,19S7, the Company reduced the carrying value of its low NOTE 3:LONG-TEllM DEST sulfur fuel oil inventory from average cost to then current market value, ne redudion is being amortized and recovered through rates, as Mortgage Bonds approved by the CITC, over twenty-four months beginning in January ne First and Refunding hlortgage Bonds of PG& E are issued in series, 1987. PG&E also changed its method of valuing low sulfur fuel oil bear annual interest from 3.375% to 14.0% and mature from February to a last-in, first out (LIFD) cost, effective January 1987. Fuel oil other 15,1988 to August 1,2020. Additional bonds may be issued up to a than low sulfur fuel oil is carried at average cost.

maximum total outstanding of 88 billion, assuming compilance with indenture convenants for earnings coverage and property available as security. The indenture requires that net earnings not including depre-clation and interest be at least equal to 1J5 times the annual interest l

32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PacificGas and Eledri Company charges on PG&E's mortgage bonds outstanding.The Board of Directors In 19S4,10&E issued 7.0% Debentures for 20 billion 3 en due of IU&E may increase the amount authorized, subject to CPCC September 12,1994. 'Ib protect the Company from future Ductuations approval. All real properties and substantially all personal properties in the exchange rate, principal and interest payments due in yen are are subject to the lien of the indentu e. Stock representing 10&E's mvered by a curreng exchange agreement that secures the exchange inv;stments in subsidiaries is pledged as collateral for 10&E bonds. '

rate over the term of the debentures resulting in an effective interest PG&E is required by the indenture to mrke semi-annual sinking rate of approximately 12.0%. De transaction results in a IU&E liability fund payments on February I and August I of each year for the retirement of $$1.25 million.

of the bonds.ne payments equal 1/2 of1% of the aggregate bonded indebtedness outstanding on the preceding November 30 and $ lay 31, Long-term Debt of Subsidiaries respectively. Bonds of any series may be used to satisfy this require-Finan e's $75 million of Guaranteed Debentures due October 15,1991 are ment. In addition, holders of Series S4 D Bonds maturing on November 1, unsecured and unsubordinated, do not have sinking fund requirements 2017 have an option to redeem their bonds on June 1,1995, and are unconditionally guaranteed by PG&E The debentures may be During 1937, PG&E issued 8750 million in First and Refunding redeemed at Hnance's option at specific times and prices. During 1987, Stortgage Bonds, Series 87A through 87C with interest rates ranging debentures for $45 million and $60 million with interest rates of 15.5%

from 8.5% to l0.0% and with maturity dates from February 1,2020 to and 14.75% and due dates of 1989 and 1990, respectively, were redeemed.

August 1,2020. Proceeds from these bonds w ere applied to construction PGT's bank term loans are to be repaid in five annual payments expenditures and to the redemption, repayment or retirement of through 1992. The effective interest rate on the amount outstanding indebtedness or preferred stort outstanding. Of the 8750 million of at December 31,1987 w as 8.66%. Bis interest rate is subject to bonds issued,8253.9 million of 'oceeds was used to redeem 8.1 redetermination under the credit agreement.

million shares of Redeemable Preferred Stock ranging from 12.8% to NGC has a term hian requiring repayment in equal quarter!)

17.38% with a par value of $213 millicn. A total of $139 million of bonds installments through Slay 1,1990. De loan is semrer by pipe and outstanding with interest rates ranging from 12.375% to l5.375%

tubular goods held in insentory. The interest rate on the IW ls based was redeemed at a loss of 89.3 million, w hich will be amortized over on the prime interest rate or the certifimte of depd : ate at the the remaining life of the bonds redeemed.

option of NGC. At Dewmber 31,1987,812.5 million is outstanding at an effecthe interest rate of 9.25%.

Debentures and Unsecured Debt NGC also has a term loan requiring quarterly payments of 8.8 million PG&E has loans from an agenq af the Stat e of California to finance until December 31,1959, plus a payment of $1 million on Demmber 31, air and water pollution control, sad new rge and sJid w aste disposal 1989. In November 1987, this loan was increased by 89.6 million to repay facilities. In December 1987,1h ' owed $265 million at 8.875%

the remaining balance on the $20.6 million loan mentioned below.

and $50 million at 8.75% to mature < 4 January 1,2010 ar,d January 1, ne additional 89.6 million is due on February 1,19sS.The loan is secured 2007, respectis ely, to finan new facilities. In June 1987, PG&E by a negative pledge on attain producing properties.The interes6 rate borrow ed 845 million at 8.2% to mature on December 1, 2018 to redeem on the loan is based on the prime interest rate. At December 31,1987, previously issued bonds. De abos e loans are secured by 10&E's

$16.9 million is outstanding at an effecth e interest rate of 9.25%.

Hrst and Refunding Stortgage Bonds. IU&E has additionalloans with During 19S7, NGC repaid a note for $20.6 million with a fixed interest the ageng totaling $925 million w ith annual aserage interest rates rate of 14.82% and secured by certain gas properties.

r* aging from 4.4% to 4.6% during 1987 and maturities from Nosember 1, 2003 to December 1,2016. Interest rates on the 8925 million in loans Repayment Schedule are variable and may float on a daily, w eekly or term basis or may for the years 198S through 1992, the Company's mmbined aggregate be converted to a fixed rate at PG& E's option. Such loans are subject amount of debt maturing and sinking fund requirements, as of to redemption by the holder on demand under wrtain circumstances.

December 31,1987 are 871.6 million, $112.8 million. 8116.3 million, ne Company's obligations for such demands are secured by irrevocable 8205.7 million, and $104.4 million, reverthely.

letters of(redit terminating in 1993 and 1994, unless extended.

PG&E % sued 5.25% Debentures in 1985 for 150 million Swiss francs NOTE 4: SHORT-TERM BORROWINGS due Nosember 1,1995. As u ith the 7.0% Debentures described below.

the Company has a for*ign arreng exchange agreement.nis results IU&E has credit facilities with 24 banks to suppor: the sale of in an effective interest rate of l0.Sl% and a PG& E liability of 867.4 million.

commercial paper and for ot her corporat e pu rposes.These credit facilit ies PG&E issued 875 million in debentures at 12.0% in 1985, maturing are renewed annually for a three-year period and total 8640 million.

J:nuary 9,20(0. These debentures may be redeemed at PG&E's all of w hit h w as available on December 31, If67. The facilities require option at any time on or after January 9,1997 and at the holder's option compliance with certain msenants, the most restrictise of w hi(h on January 9,1992.

require that the Company maintain a pmithe balance in its reinsested earnings amount. lH& E made no torrow ings against these facilities.

L but for a brief period during the year, the Company borrowed directly 160TE 5:LIAMS -

from one of these banks using a separate money market facility, ne usual maturity for commerdal paper is 10 to 90 days.

Nuclear Fuel A&S maintains a $35 million (Canadian) line of credit with a PG&E leases nuclear fuel from PET for use at the Diablo Car. yon bank to support the sde of commercial paper for take-or-pay payments Nuclear Power Plant (Diablo Canyon). Two capital leases, with on gas contracts. PG&E has executed guarantees not to exceed $350 substantially the same terms, were entered into with PET in 1981 and million on commercial paper and a bank line of nedit. (See Note 9 1984 to meet Diablo Canyon't fuel requirements. ne first lease expires to the consolidated finandal statements.) A&S also maintains lines of in 2030 and the secondin 1989.

aedit with four banks totaling $25 million (Canadian) for operations.

PErs total investment in nudear fuel is limited to $600 million.

As of December 31,1987, A&S had no significant borrowings outstanding (See Note 4 for short-term borrowing information related to PEE) If the against either of these lines of credit.

nuclear fuel leases are terminated, PG&E must reimburse PET for PGT redeemed all commerdal paper outstr.nding and cancelled all all costs of nuclear fuel ownership.

lines of credit as of December 3,1987.

Under these leases, PG&E owns the spent nudear fuel. PG&E has PG&E also has an agreement with Pacific Energy '&ust (PET) which a contract with the United States Department of Energy for its disposal.

permits borrowing of an amount up to the difference between $400 he lease payments are based on the cost of the nudear fuel million and PErs investment in nuclear fuel with a maximum of 8160 burned plus the daily fbance charges on PErs in-core net investment million. PG&E had no borrowings outstanding under this agreement.

during the period.ne daily finance charges on the in-core fuel a:e I

ne Company pays fees to the banks for credit facilities and other paid even when Diablo Canyon is not producing electrie energy.

)

banking services.

During pre-commercial operation, lease payments were capitalized Short term borrowings and their interest rates were as follows:

as part of the cost of the plant. After commerdal operation, lease Decamber 31 isst 1936 fuel expense and recovered through balancing accounts. Diablo Canyon

",c',',"#',,,)

Units I and 2 went into commerdal operation in May 1985 and March g

t, Balonce of Short-term Borrowings 1986, respectively. De nuclear fuel lease payments capitalized and Commercial Paper

$554.023 81,093,212 nuclear fuellease expenses for Units I and 2 were as follows:

Other 1

8 3,001 Weighted AserageInterest Rate

~'-

1947 19A6 1985 CommercialPaper BJ%

7.0%

InThousands Othu 9.8%

8.5%

Nudear Fuel Lease Payments Capitalized 8 5,308 816,591 Interest Portion of Payments 8

4 1,918 8 5,581 IlOTE 5: CllBT00ER CWISERW10ll LOAll PR00RAll Nuclear Fuel Lease Expense

$110.130 895,481 842,797 Pursuant to a CPUC decision, the Company terminated its Zero

'~

~

~ ~ - '

$ 11,027 8 9,584

~~

later*st Portion of Expense 4 5,311 Interest Program (ZIP) offering loans to residential customers on nese leases have been rewrded on the consolidated balance sheet Denmber 31,19S6. These interest free loans financed the installation as an asset in the line item, NtMear Fuel and Other Capital Leases.

of several conservation measures and require repaymer.t nwr a ne related noncurrent (,blir,an n has been recorded in Capital lease specified time, not exceeding 100 months.

Obligationsin the Noncurren" bilities section.ne asset balances Pacific Conservation Services Company (PCSC) was formed as were as follows:

a t? holly owned subsidiary to assume responsibility for the customer gg, g

g consenation loan program. Although the ZIP has ended, operating and g-debt service expenses continue to be incurred and are recovered Nuclear Fuel

$ 536,355 8 521,543 through the Conservation Rnancing Adjustment (CFA) tariffs. PCSC Ammutated Amortization (166,423)

(103,716) has contracted with PG&E to administer the loans.

Net

$ 369,932 8 417,825 Dese loans were funded by a revolving line of credit with ten banks. De line of credit ended on June 30,1987, and the remaining balance was mnverted to a term loan with a final maturity of December 31,1994. Interest is based on PCSC's choice of a floating rate determined in acmrdance with the agreement or a fixed rate based on average artificate of deposit or Eurodollar rates. ne agreement has various covenants and conditions, induding the continuing existence of the CFA tariffs. On Denmber 31,1987, the balann outstanding is 859,3 million at an average interest rate of 9.0%.

o

34 NOTES TO CONSOUDATED FINANCIAL STATEMENTS (Continued)

Pacific Gas and Electric Company Ollier Lesses Net pension cost included the following:

tes7 De Company has various arrangements to lease real property

- ~ ~ - -'~ - -' ~ ~ - ' ~ - InThousands and equipment.The leases are accounted for as operating and capital leases in acmrdan with SFAS Nos.13 and 71. Annuallease Sen la cost-benefits earned during the period

$ 92,812 expenses are not material.

Interest cost on projected benefit obligation 184,774 Actual return on plan assets (80.044)

Net amortization and deferral (87,235)

NOTE 7:IIETilEMENT PLAN ANO POST llETillEENT BENEFITS Net periodic pension cost 101,305 Cost of early retirement benefits 87,052 Aetkoment Plan Total pension cost

$184,357 The Company prosides a defined benefit retirement plan covering substantially all employees.ne retirement benefits are based on years of senice and the employee's base salary. The Company's funding As of December 31,1987, the weighted average discount rate and plicy is to contribute eash ) ear no more than the maximum amount rate of increase in future mmpensation levels used in determining that can be deducted for federal income tax purposes and not less the actuarial present value of the projected benefit obligation than the minimum required mntribution under the Employee Retirement were 8.5% and 7.5%, respectively.

Income Security Act of1974.ne cost of this pisn charged to expense Beginning January 1,1988, pension benefits for management and utility plant was $188 million (8S7 million of w hich was the cost employees are based on final average pay.nis change in the pension benefit formula did not affect the Company's complian with the of the early retirement plan),8107 million and $97 million in 19S7, 19S6 and 19S5, respectively. In 1986 and 1955, these amounts include requirements of SFAS No. 87. With respect to nonmanagement employees, the Company historically has amended the retirement plan amortization of past service cost.

ne 1986 actuarial present value of accumulated plan benefits,using nery two to three years so that pension benefits are based on the most current salaries. Subjed to collective bargaining, the Company a discount rate of 7.0%, was 81,645 million ($1,574 million vested).

intends to continue amending the plan in the future so that pension ne net assets available for benefits were 81,867 million, based upon mar ket value as of January 1,1986. Actuarial present values were based benefits will be based upon the most current salary levels. Thus, future amendments to the plan for nonmanagement employees hase on historic pay.

Effective January 1,1987, the Company adopted SFAS No. 87, been anticipated and are rededed in the projected benefit obligation Employers'kcountingfor Pensions. De statement requires use of and pension expense.

the projeded unit nedit actuarial method for the calculation of pension Ea W k m eman expense. The projected benefit obligation as of January 1,1987 was determined using a weighted average discount rate of 7.5%, weighted.

In January 1987, PG&E offered an early retirement plan to &rtain verage expected long term rate of return on plan assets of 8.0%

employees who had reached age 50 and had at least 15 years of service and a rate of innease in future compensation levels of 6.5%. In prior with PG&E.The present value of the expense of the early retirement years, the Company used the entry age normal actuarial method.

plan in 1987 was $87 million, w hich w ill be funded over the next ten years.

The $87 million is included in total pension cost.

De adoption of this statement had no significant impact on earnings.

Pension expense for prior years was not restated.

1. " 8"*'

The following tatie sets.Seth the plan's funded status:

Life insurann benefits for substantially all retired employees are Decemtier 31 1947 prosided by the Company. ne Group Life Insurance benefit is available initmsands to all retirees.This benefit is provided through an insuran& company A1uarial present s alue of acumulated plan benefit

• w hose premiums are based on total claims paid in the prior year.

$**d The Post Retireme nt Life Insuran& Plan, w hich is available to certain sted 9

1. 1. 8' "

'lbtal actuarial present valuc of actumulated plan benefits 1,847,519 assumptions as the funding for the Retirement Plan. ne annual con.

Effect of projected future salary increases 738,732 At tuarial present value of projected berefit obligation for wrvice rendered todate 2,366,251 actuarial liability. The cost of providing both the Group Life and Plan assets at fair value-primarily listed common stocks.

the Post Retirement Life benefits is charged to expense and utilit:

_ ' S. gosernmept and agency senrities, and real estate 2,205,153 plant and totaled 82.2 million, $2.3 million and 83.8 million for l

Projected benefit obhgation in excess of plan assets 181,098 1987,1936 and 1985, respectively.

l*ntecognized ret gain from past expedence different from that sssumed and effetts of.aages in assumptions 84,802 L'nrecognized net obligation (197,661)

Net pension liabihty

$ 68,239

E 35 MedcolBenefits ne reasons fo. the lifference between the statutory federal income ne Company also provides certain medical benefits for substantially tax rate and the Compariyi effective tax rate are as follows:

all retired employees. De benefits are provided or administered by

,7 medical care providers whose costs are based on benefits paid during each year. The cost of providing these benefits for retirees cannot Feder income tax r 40.0%

46.0%

46.0%

t2 separated from the mst for active employees. De medical costs Allowance for equity and the number of retired and active employees are as follows:

and oorrowed funds used during construction

(.1)

(2.5)

(9.5) 1987 1956 1985 Insestment tax credits (1.1)

(2.8)

(2.3)

EedicalCosbI

$87,000,000 50000k)0 861,000 Oy State income tax (net Retired Empio3ees 8,400 7,300 7,000 f federal benefit)

SJ 4.2 3.7 I*

.Mive Employees 28,900 30,70n 30,200 d

s of taxdepreciation 9.2 6.0 4.8 NOTE 8: INCOME TAXE5

@t prior yean (24 (2.6)

Other-net (1.8)

(4.1)

(2.8)

Income before tax expense for the years 1987,1986 and 1985 was 81,320,991,000,82,033,141,000 and 81,643,914,000, respectively.

'O*"8'd '

• • "f"'" ' 188 7 ""'i "-

P Income tax expense is included in the consolidated financial In December 1987, the Financial Acmunting Standards Board (FASB) ctatements as follows:

issued SFAS No. 96, AccountingforIncome Th.res, which establishes "I

1h6 19 %

new financial accounting and reporting standards for the effects in7heand$

ofinmme taxes on the Company's activities.

hn[d [{raung ex 89 8

'j The Company currently is evaluating the anounting, regulatory and s

9, included in acmunting change 77,045 financial implications of SFAS No. 96, w hich mu>t be adopted by 1989,

-^ ggggg,-

g,3,,474 8951,918 8613,109

' ~

It is estimated that the adoption w ill require that both the assets and liabilities on the consolidated balance sheet be inneased equally ne detail ofincome tax expense is:

by two to three billion dollars The impact,if any, on the consolidated income statement cannot be determined at this time.

mr 19 %

19 4 Current hues NOTE 9: COMMITMENTS Federal

$313,144 8132,444 8113,667 Staw and other 111,835 75,268 84,909 Fonds Used for Ceastruction

'IbtalCurrent Taxes 424,979 207,712 198,776 Funds to be used for utility construction during 1988, including AR'DC, Ibferred hres are estimated at $1.4 billion.

Federal Ganges in regulatory Natural Gas Take-or N Payanats balancmg accounts 80,077 259,759 50.902 Depreciation 202,840 259,782 227,756 The Company's gas purchasing subsidiary has mntracted to make I.oss on reacquired debt (1,545) 134,059 14,135 take-or. pay payments to Canadian natural gas produ&rs if it does not Fuel oilinventory (30,942) take certain quantities of natural gas during a mntract year.ne of nstructi >n (30,379) mntracts permit make-up of the prepaid gas and provide for reimburse-Capitalized interest (31.247) ment of take or. pay payments if make up ofIhe gas prior to the Cnbilled revenues 31,811 expiration of the contracts is not possib'e. Tbtal advances by A&S to Early retirement inantive (30.079) producers as of De&mber 31,1987 are $333 million. Advances unreim-

)

bursed by A&S's gas customers are finan&d by short term borrowings.

Sta 0

3, 0

~

Total Deferred Taxes 172,832 729.565 309,010

$3 ~)0 million on commercial paper and a standby bank hne of nedit for investment tax (vedits-net 34.843 14,641 105,323 A&S to coser take-or pay borrowings.

Tbtallncomeht Expense

$632,474 8951.918 8613,109

'chan ged ia confura to lni presentati<m.

During 1981 and 1982, A&S negotiated a reduction in take-or pay liabilities under it a contracts through June 30,1984 w ith Canadian gas producers. For the mr. tract years beginning on July 1,1984 and there-after, A&S has negotiated additional take-or pay reductions. Most

36 NOTES TO CONSOLIDMED FINANCIAL STATEMENTS (Continued)

PacificGas and Dectric Company of the producers have signed the amended contracts. Negotiations cost, however,is a return of the benefits the Company meived through with a few remaining produwrs are continuhg. Additional payments its purchases from WAPA since 1%7 (due to the pricing mechanism under any contracts not amended would result in additional Advances desnibed above), which were passed on to ratepayers at that time.

to Gas Producers. Such additional amounts could aggregate approxi-The total cet of the energy resold to WAPA would be induded in mately 899 million through the contract year ended June 30,1987, the Energy Cost Adjustment Clause (ECAC) balancing account and none of w hich was recorded as of Dewmber 31,1987.

is expected to be remvered from ratepayers.

Stock Option Plan Merger of Pacific Gas Transmission Company In 1986, the Company's Board of Directors and the shareholders in 1)S6, the Company issued 7,259,530 shares of its mmmon stock approved a Stock Option Plan (the Plan) granting nonqualified stock valued at $143 milliun to increase to 100% its ownership of Pacific options with associated stock appreciation rights (SARs) and dividend Gaskansmission Company.This amount includes goodwill of equivalents to key management employees of the Company.

839 million which is being amortized over 8 years on a straight-line A total of 1.5 million shares of the Company's 85 par value common basis. As of Dewmber 31,1987,89.1 million has been amortized.

stock has been authorized for award under the Plan. Common stock may be obtained from either authorized but unissued shares Quattying FaciRties or from shares that have been purchased on the open market by Under the Public Utility Regulatory Polin Act of 1978 (PCRPA), the PG&E. Costs associated with awards will not be recoverable in rates.

Company is required to purchase energy and capacity produced by During 1987,40 employees were granted stock options on 91,500 Qualifying Facilities (QFs). De CPL'C established a series of contracts shares under the Plan w ith an option priw of 826.625, the market value which set the applicable terms, conditions, and price options.

on the date of grant.The options may be exercised during a period Under the mntracts, sellers rewire payments for the energy of up to ten years and one day, and vesting of the right to exercise the delivered at a calculated rate equal to the Company's own marginal option is as follows: (a) up to one-third may be exercised in the second costs for const ructing new facilities or purchasing pow er, or at forecasted year following the year the options are granted; (b) up to two-thirds rates negotiated in the individual contract. De total mst of the QF mzy be exercised in the third year following the year the options are purchase payments are induded in the ECAC balancing account and granted and (c) all the options may be exercised in the fourth year are recoverable from ratepayers.

following the year the options are granted. 0ptions also become vested Approximateiy $360 million was paid to QFs for 6,718 million kw h and exercisable upon retirement or death.

of energy and associated capacity in 1987.

As of December 31,1987, stock options on 14,900 shares were vested.

No options or SARs have been exercised. Dividend equis alents accrued NOTE 10: CONTINGENCIES r.s of December 31,1987 are not material.

In January 1988,36 employees were granted stock options on Diablo Canyon Nuclear Power Plant 85,150 shares under the Plan with an option price of 81635, the market ne Diablo Canyon Nuclear Pow er Plant (Diablo Canyon) consists value on the date of grant.

of two units, each providing approximately 1.1 million kilowatts of capacity to the Company's electric system. Diablo Canyon experien&d Western Area Power Administration Energy Agreement significant delays and substantial cost in(teases during its con-De Company has an agreement with the United States Western Area struction period, w hich began in 1968. De units began commercial hmer Administration (WAPA) to purchase energy from WAPA and operation in 5!ay 1985 and 5! arch 1986, respectively.

resell the energy to WAPA upon WAPAs request. Energy purchased he construction msts for Diablo Canyon, including additional prior to 1967 must be resold ioWAPA at a fixed contract priw that capital costs incurred during the twelve months following commercial is substantially below the Company's current cost of production. Sin operation, are approximately $5.8 billion. This amount, net of ISS7, the energy under contract has been purchased by the Company awumulated depreciation, represented approximately 25% of the from WAPA at favorable prices based on WAPNs cost of generation.

Company's total assets and 35% of net Plant in Serviw as of Dewmher hat energy must be sold back to WAPA at a pd& equal to the Company's 31,1987. Under tradithnal ratemaking principles, all invest ment current thermal production mst at the time of delivery to WAPA in new facilities such as Diablo Canyon is subject to review by the l

less the Company's savings that resulted from the purchases at the CPUC to determine w hether such msts were incurred reasonably and lower WAPA priws.

will be allowed recovery in rates. De Company has filed w ith the ne enntract will expire on January 1,2005. As of De&mber 31, CPUC for recovery of the msts of ou ning and operating Diablo Canyon.

1987, the Company's total cost to return the amount of energy currently Under the current schedule, final rate remvery probably will not be available to WAPA is approximately 5518 million, sssuming WAPA authorized until 1989, after reasonableness hearings are wrnpleted.

requests the retum of all the energy prior to the contract's expiration date, w hich the Company believes is highly unlikely. Stost of that

37 iYnding the final outcome of this promeding, the CPUC has granted in Slay 1987, the CITC's Division of Ratepayer Advocates (DkA),

IU&E Interim rate recovery for Unit 1, subject to refund, to cover a formerly called the Public Staff Division, released its report to the CPUC prtion of operation and maintenance expenses and an amount equal in w hich it recommended that the Company recover only $1.15 billion to the projected fuel costs saved. The CPCC also has approved a of the 85.5 billion cost of Diablo Canyon at the date of commercial stipulation for Unit 2 to allow the Company to mllect revenues equal operation and that 84.4 billion of the plant costs be disallowed. The to the projected fuel costs saved. The Company is collecting these DRA contended, among other things, that (i) the Company did not interim revenues, subject to refund, to recover a portion of the revenue conduct adequate geoaismic studies which would have disclosed the requirement for Diablo Canyon. In 31 arch 1987, the Company changed existence of the llosgri earthquake fault at the time ofinitial design its remrding of operating revenues relating to Diablo Canyon, retro.

of Diablo Canyon, (ii) from 1972 through 1976, the Company failed active to January 1,1987, essentially to reflect only the cash amounts to mnduct studies to evaluatc fully the llosgri fault's significance and actually received through interim rates approsed by the CPUC.

to redesign the plant to w ithstand the earthquake potential of the llosgri Diablo Canyon revenues and interest, w hich are subject to possible fault until ordered to do so by the Nudear Regulatory Commission future adjustrnent and refund are as follows:

(NRC) in 1976, and (iii) the Com pany's quality assurance program was not adequate to prevent a series of major design errors in the plant, ind uding the ' mirror image

• problem, w hich resulted in the suspension "8

Resenue Requirement f the plant's low pow er operating license in 1981. ne DRA conduded

-for operating expenses 8 4151 8 367.7 8125.0 that, as a result, operation of Diablo Canyon was delayed beyond 1976

-for interest 218.3 192.9 72.0 unreasonably and remmmended that sabstant! ally all msts incurred

-for equ return and after 1976 (ex&pt approximately $360 million for certain plant upgrades required by the NRC) be disallowed.

n[

mdnt

$i2 j

$1.2 8 97 The DRA is a mnst.mer advocacy brand; of the CITC staff and 3

lass Amount Rewgnized 504.8 1.231.0 432.7 its recommendation is not a CITC decision. Ti.e CITC can accept all, part or none of the DRVs remmmendation.The Company strongly Total Deferred 8 8041 4

8 -

disagrees w ith the DRTs contentions and will pursue vigorously n.anged to conform to 1987 presentation ^

remvery of the cost of the Diablo Canyon plant during public hearings The Company is mllecting approximately $505 mill. ion annually before the CITC currently scheduled through early 1989.

(exduding $53.2 mil! ion in decommissioning costs), subject to refund in 1986, following a remmmendation by the administrative law or adjustment. The Company had requested interim rate relief of judge (AIJ) of no disallowan, the CITC disallowed $345 million 8800 million annually for Diablo Canyon. In October 1987, the CITC of the $4.5 billion cost of the San Onofre Nudear Generating Station denied any additional interim rate relief. Further interim rate recovery Units 2 and 3 ow ned by southern California utilities. In its decision, the would have mitigated the impact on earnings which resulted from CITC used a *nitical path method

• to evaluate the reasonableness of the change in remrding resenues. PG&E w as ra.thorized to implement the plant's costs and disallow ed expenses associated with unreasonable target capacity factor ranges of 55% to 75% for Unit I snd Unit 2. De delays, in July 1987, the CPUC redu&d the disallow ance to 8265 million.

shareholders and ratepayers will share a portion of any fuel sasings if in Demmber 1987, the CITC ruled on three motions filed by the the units exwed the 75% capacity factor and a portion of the California Attorney General (AG) in the Diablo Canyon reasonableness additional fuel costs if the units fall below the 55% capacity factor.

review. The CitC agreed to exd ude evidence on the financial impact Within the performanm range of 55% to 75%, no savings or penalty of a disallowance from the reasonableness phase, ne CITC supported cill result. While applicable to each fuel cycle, the target capacity essentially the same high standard of care adopted in the San Onofre factor will be based on a capacity factor for a three-fuelgde period Nudear Generating Station case. De CITC also denied the AG's motion (approximately 15 months per fuel Ocle), currently expected to to disallow the costs incurred during the suspension of the plant's 12 gin in 1988.

Iow-power operating license from 1981 to 1984, estimated t,y the DRA The California Supreme Court is reviewing the CPUC's interim to ex&ed 82.5 billion. The CPUC mnduded that noncomp:lan&

decision that allowed the Company to retain an amount equal to the with the NRC's regulations does not necassarily establish that any estimated net fuel cost savings of approximately $334.2 million annual'y of the msts w ere unreasonable for ratemaking purposes, but has allow ed resulting from the operation of Unit I and to innease electric rate 3 the parties to file briefs on the issue.

by 853.8 million annually to remver the operation and maintenance As of December 31,1937,8S015 million has been excluded from expenses for Unit 1. lf the decision is reversed and the Company revenues and interest income. As a result of this exdusion, a disallow-is required to refend a portion of this revenue, earnings in the year ance of the Diablo Canyon plant costs on December 31,1987 of of the disallowance could be reduced. A Supreme Court decision approximately $500 million w ould have had no effect on net income is exlmted in the future.

.. Se NOTES TO CONSOUDATED FINANCIAL STATEMENTS (Continued)

Paciric Gas and Electric Company assuming that the AFUDC disallowed was in the same proportion Hohne Pumped Storage Proket as the AETDC in the plant and that the disallowance would have applied ne llelms Pumped Storage Project (llelms), which was delayed equally to the two units. AITDC is the cost of financing the construe.

due to a water conduit rupture in 1982 and various start-up problems, tion of new facilities. Because AITDC was recorded net of inmme became commercially operable in 1984.

taxes, there would be no additional tax benefit if AITDC is disallowed.

De total cost of the project is 8960.6 million, of w hich 8716 million Asof December 31,1987, AtTDCrepresented35%of totalDiablo has been included in rate base and $21.7 million has been disallowed Canyon plant costs. Using the same assumptions, if the disallowance by th< CITC.ne remaining $222.9 million in costs may be recovered were to exwed $500 million, there would be a one time reduction through litigation or future ratemaking applications. (his matter in net income, which would reflect a reduction of the plant costs and is included in the Nonearning Assets section of this note.)

the related balancing account revenues already remgnized.

The CITC has indicated that PG& E will bear a hean burden of proof in view of the foregoing, it appears reasonable to exped that in establishing the reasonableness of these costs. In addition,if the CITC will disallow some portion of the Diablo Canyon costs and IV&E seeks to recover in rates the (osts related to the water conduit the related balancing account revenues. Because Diablo canyon rupture, the CETC intends to consider an offse t to revenues to reflect lost represents such a large portion of the Company's assets,if a disallowanm or deferred capacity benefits due to the delay in commercial operation.

of costs is significant, it could have a significant adverse impact Notwithstanding the above, the Company believes that all on the Company's financial position, llowever, the Company currently llelms msts not recovered through claims and litigation should be is unable to estimate the amount of such disallowance on predict recoverable through ratemaking and that any costs disallowed by the w hether such disallow ance would have a significant adverse impad cpl:0 would not have a significant impact on its financial position on its financial position or results of operations.

or results of operations.

The CPUC also is considering an alternative ratemaking mncept In its 1985 llelms rate case decidon, the CITC declined to include for Diablo Canyon which would provide revenues based primarily in rates the revenues anrued during the time llelms was out of senice on the amount of electricity generated by the plant, rather than due to the replawment of certain generator parts.Dese revenues, t

on more traditional mst-based ratemaking mncepts. The Company with interest antued through Dewmber 31,1987, amount to $55.3 currently is evaluating the accounting, income tax, and financial million.10& E will be allowed to file a separate application for recovery implications of this alternative concept.

of this amount after claims against third parties are resolved.

In 51 arch 1987, the CITC granted the Company a 853.2 million ne Company believes that any revenues disallowed by the CITC annual rate incase to provide for the future costs of decommissioning would not have a significant impact on the Company's financial position Diablo Can)on.This rate increase is based on the most rewnt esthnate or results of operations.

of the decoramissioning mst of 8578.6 million (computed in 1985 dollars) w hich indudes a mntingeng factor of 50% for expected Husholdt Bay Nacisar Power Most changes in regulatory requirements and w aste disposal cost inneases.

In 1983, PG&E elected to decommission the ilumboldt Bay Nuclear As required by the Department of Energy the cost of one-tenth of Power Plant Unit No. 3 (Unit 3). In 1985, the CITC disallow ed 822.6 one cent per kw h generated is included in nuclear fuel expense for the million of AFTDC and 814.5 million of direct costs and permitted future storage and disposal costs of spent fuel. De cost of nuclear fuel recovery through rates of approximately 844.3 million of the $S4 million is recovered through the ECAC As of Denmber 31,19S7, approximately net investment in l' nit 3. He disallow ances w ere charged against 837.4 million has been deposited into an external trust fund to be used income, ne decisions permit recovery oser a four. year period with exclusively for the decommissioning of the plant for the benefit of the no ra.e base treatment for the unamortized balance. (his matter ratepayers and the general public and is included in Funds IIeld by is included in the Nonearning Assets section of this note.)

"Irustee in the consolidated balance sheet. Funds may not be released in 1985, the CITC authorized IM&E to remver the estimated 89.7 from the trust fund until authorized by the CITC.

million of msts associated with the Company's custodial safe storage in August 1987, the FASB issued SFAS No.92, RegidatedEn/crprises-plan w huh the CITC found reasonable, j

Accorndingfor Phase-in Plans. SFAS No. 92 specifies the acmunting in June 1987, the CITC directed the Company to nellect additional l

for phase-in plans and the capitalization of equity return and u ill revenues u hich, after tax, w ill be deposited in an external trust fund be effective January 1,19SS. Dis statement would have prohibited to pros.de for the future funding of decommissioning costs.The amount the Company from capitalizing equity return related to Diablo Canyon.

of the resenues collected is computed based upon tax deductibility l

Due to the Company's change in remrding revenues relating to Diablo of a portion of contributions to the fund. The tax qualifying portion l

Canyon, w hich was effective January 1,1987, applimtion of SFAS is approximately 50% of the total decommissioning cost.ne most recent l

No. 92 for Diablo Canyon would not have reduwd earnirigs in the current estimate of the decommissioning cost is 858 million (mmputed in j

year nor is it expeded to do so in the future.

1986 dollars) w hich includes a contingenn factor of 25% for expected changes in regulatory requirements and w aste disposal cost inneases.

l r

1 i

l

39 Collection of these revenues began July 1987, subject to refund or leuclear lueuranse adjustment, pending further commission review of the current decom-PG&E is a member of Nudear Mutual Limited (NML) and Nuclear missioning study for ilumboldt, due to be completed shortly. In its Electric Insurance Limited (NEIL I and 11). In the event of property ruling, the CITC authorized the total amount requested by the Company damage to a nuclear plant of a member utility or increased cost to b remvered over a four year amortization period. As of December 31, of replacement power due to prolonged accidental outage of a member 1937, approximately 88.3 million has been deposited into the external utility's reactor unit, PG&E may be subject to maximum assessments truct funds to be used exdusively for the demmmissioning of the of $60 million (property damage) or $8.6 million (repla& ment pow er),

plcnt for ths. benefit of the ratepayers and the general public and is respectively, in each case per policy period, iflosses exceed premiums, included in ibnds IIeld by lustee in the consolidated balan& sheet, reserves, and other N3tL, NEIL I or NEIL 11 resources. With respect The authorized revenue requirements w ere 814.3 million for July to property damage at Diablo Canyon, the NML coverage is limited 1987 through December 1987; will be $26.9 million in 19S8,19S9 and to $500 million and the NEIL 11 mverage provides an additional 8775 1920; and $13.4 million from January 1991 through June 1991.

million in excess of that provided by NML ne maximum public liability for daims resulting from any nudear liensernhg Assets incident is limited to 8720 million per incident under provisions of im&E has several assets which are not earning a return on investment the Price Anderson Act. In the event there is a nudear incident invohing currently, but for w hich some rate recovery has been authorized.

any of the nation's licensed reactors, PG&E is subject to a retro.

Project msts mrrently not earning a return on investment indude:

specth e assessment of up to 85 million per incident for each of its nd Rah M an aMak amssment y mkMayear Decemtier 31 Ine?

1946 of 810 million per reactor with payments in ex&ss deferred to the g

llelms Puniped storage Project

$222.s 8218.1 next mlendar year.ne expiration of the Price-Anderson Act on August 1, ilumboldt Bay Nuclear Power Plant 20.1 34.0 1987 did not affect mrrently li&nsed facilities, although legislation Liquefied NaturalGas Projed 37.8 56J currently is pending in Congress that, if passed, would set the N

• 1. • • *"## #D"*"*"'

Ie"asIb$y"s'tud$ and Roao Project costs- -----

$2ne sm8 3'l*C _

Sacramente Munidpollamy District (SMUD)

PG&E has a contract with SMUD to purchase surplus energy and Of the $299 million of nonearning assets above, PG&E has been capacity from the Rancho Seco Nudear Power Plant (Rancho Sec4 granted rate recovery of $56.5 million. Acardingly, the Company has w hich ceased operations in Denmber 1985. As a result of the shutdown, amortized and recovered 850.9 million during the twelve months ended PG&E stopped accruing a liability and paying SMUD for surplus December 31,1987.

capacity effective De mber 19S5.The total of the suspended payments In 19S4, the CPUC disallow ed $46.6 million of AFUDC for the Liquefied a

stments fmm NnmM, NSho Janary 1,1987 is approxi-Natural Gas (LNG) hchet, and the Company provided a reserve against mately 835.5 million excluding interest. SM UD offset this amount against its investment for that amount. Included in the LNG costs are 819.6 amounts it ow ed to PG& E for energy deliveries in 19S6.

million in losses on tangible assets sold and remaining assets to be sold.

Under an agreement betw een the parties, for 1987 transactions, During 1987, PG&E and its partner in the LNG Project completed a l'G&E is paying into an escrow account, but not expensing, an amount plan for the disposition of the remaining assets. In Denmber 19S7, the SMUD dalms it is ou ed for surplus capacity, and SMUD is paying to CITC authorized recovery of 86 million through rates for the costs PG&E, and PG&E is anruing as revenue, the full amount owed PG&E associated with their plan. As of December 31,19S7, approximately f Mnergy deliveries.The amount paid into escrow as of December 31,

$18 million of the LNG costs induded in the $37.6 million above remain 1987 is 88.6 million. PG&E also has submitted a daim requesting SMUD to be amortized. De four year amortization period began in 1985.

return 827.5 million in payments made for the period January 1,19S5 Steps to conclude the affairs of this abandoned project are continuing.

thuMowmW, Monapady mWhdnMat W PG&E requested recovery in the 1987 General Rate Case for the The matter has been submitted to the ERC for resolution. De costs of theTen Sedion Field. In De mber 1956, the CITC granted FERC has conduded its hearings and has not issued a decision yet.

rate recovery of those costs over a four-year period beginning in 19S7.

If the FERC denies remvery from SMUD, the Company would expect In December 1987, the Company adopted SFAS No. 90, Regulated to apply to the CETC for and expects to renive recovery of these Enterprises-Accountingfor Abandonments and TXsallottances of amants fmm ratepayers.

Plant Costs. SFAS No. 90 requires that disallowed costs be recognized As part of a long-term power supply arrangement, PG&E and SMUD as losses and that abandoned assets being recovered in rates but have tentatively agreed to settle all disputes under their existing earning less than a full rate of return r e recorded at their present mntract by the payment by SMUD of $75 million (Inciding the amounts value. De assets listed above, w hich w ere granted rate recovery but in escrow), am rtized over four > ears. The agreement is subjed to are not earning a rate of return, have been redu&d to their present

• EE**

vdue to reflect this change. The effect of this change on the Company's In September 1987, the Company sent a letter to SMUD suggesting financial position and results of opvations was not significant.

l l

40 NOTES TO CONSOLIOATED FINANCIAL STATEMENTS (Continued)

Pacine Gas and Electric Company that consideration be given to a combination of the SMUD and PG& E requesting damages in excess of 820 million for breach of contract, operations in the Sanamento area. Here was no formal response negligent misrepresentation, breach of covenant of good faith and from S3tCD. Under the Company's proposal, PG&E would acquire all fair dealing, and negligence, of S31rD's properties and facilities; close permanently the 900 megaw att The Company plans to defend these lawsuits vigorously and believes Rancho Seco nuclear facility and arrange for its decommissioning; that the ultimate outcome of this matter will not have a significant stabilize electric rates to the SS!UD customers for an agreed upon period impact on its financial position or results of operations.

of time and offerjob security for current full-time S)!UD employees.

De amounts in dispute, as discussed above, would be resolved in FERC-Hydroelectric Licensing connection with the combination. On January 14,1988, PG&E withdzew in October 1956, the Electric Consumers Protection Act was enacted its proposal due to S5trD's failure to give it serious consideration.

bytheU.S. Congress,eliminatinganypreferenceforgovernmentally run utilities in the relicensing of hydroelectric projects. Certain of these Litigatica-Geothermal $ team Contracts governmentally run utilities had challenged the Company's relicensing In January 1987, two law suits were filed against the Company relating of three hydroelectric projects with expired licenses.

La the sale of geothermal steam to the Company for use in the ne new law will require the Company to pay to these challengers generation of electricity at the Company'sne Geysers Geothermal a' reasonable

• settlement consisting of their costs incurred to pursue Power Plant (The Geysers). In total, the lawsuits claim damages the licenses and a potential further amount ranging from 0% to in ex&ss of $120 million for breach of contract, improper calculation 100% of the Company's remaining net investment of between $124.5 of the steam price and inadequate operation of The Geysers, million and $126 million in the projects as of October 22,1985.

De Company has filed a cross-complaint against the plantiffs, The Company expects to recover in rates any costs incurred.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS Pccific Gas and Electric Company To the Shareholders and the Board of Directors of Pacific Gas and Electric Company:

We have examined the consolidated balance sheet and statement of mnsolidated capitalization of Pacific Gas and Eledric Company (a California wrporation) and subsidiaries as of Dewmber 31,1987 and 1956, and the related statements of consolidated income, funds used for construction, mmmon stock equity and preferred stock, and the schedule of mnsolidated segment information for each of the three years in the period ended Dewmber 31,1987. Our examinations were made in accordance with generally ac&pted auditing standards and anordingly, included such tests of the anuunting remrds and such other auditing procedures as we considered necessary in the circumstan&s.

l As discussed more fully in Note 10 to the financial statements, the Diab!o Canyon Nuclear Pow er Plant experienced significant delays and l

substantial cost inneases. In mnnection with the California Public Utilities Commission (CITC) revie. ofinterim rates for Unit I and a stipulation l

for Unit 2, the Company has recrrded through December 31,1986, the revenues for operating expenses anu a return on rate base and recognized l

cs a deferred asset the amounts not allowed in current rates. Effective January 1,1987, the Company has recorded revenues reflecting essentially cash amounts renited through interim rates for both units.The allow ed interim rates, aarued resenues and deferred asset are subject to adjustment or refund pending the CPCC reasonableness review of plant costs. In siew of the events discussed in Note 10, the Company believes l

it appears reasonable to expect that the CITC will disallow rate remvery of some portion of the Diablo Canyon plant msts and the related revenues.

The Company is currently unable to estimate the amount of such disallowance or predict w hether such disallow ance of the Diablo Canyon plant costs and related revenues and deferred asset would have a significant adver se impact on its financial position and results of operations.

In our opinion, subject to the effects of such adjustments as might have been required had the outcome of the un&rtainties referred to in the preceding paragraph been know n, the consolidated financial statements and schedule of consolidated segment information referred to above present fairly the financial position of Pacific Gas and Eledric Company and subsidiaries as of December 31,1987 and 1946, and the results of its l

oprations and funds used for mnstrudion for each of the three 3 ears in the period ended De&mber 31,1957 in conformity with generally anepted acmunting principles w hich, except for the change, with w hkh we conmr. in the method of acmunting for unbil!ed revenues as described in Note I to the consolidated financial statements, w ere applied on a consistent basis.

AlffilCR ANDERSEN & CO.

San Francism, California February 5,19ss l

1 l

41 MSFWISBlUTY FWI FBIANCIAL STATEMENTS

. Pacific Gas and Electric Company i

The responsibility for the integrity of the financial information included support their opinion on the consolidated financial statements.nelt

- in this annual report rests with management. Such Information has been auditors' repor;, whlch is qualified with respect to Diablo Canyon prepared in accordance with generally accepted accounting principles matters dismssed above, contains an independent informed judgement appropriate in the circumstanws, and is based on the Company's as to the fairness of the Company's reported results of operations bst estimates andjudgements after giving consideration to materiality.

and financial position.

PG&E maintains systems ofinternal accounting controls supported in a further attempt to assure objectivity and remove blas, the by formal policies and procedures which are communicated throughout financial data contained in this report have been reviewed by the audit the Company.nese controls are adequate to provide reasonable committee of the board of directors.The audit committee is composed assurance that assets are safeguanled from loss or unauthorized use of five outside dir*ctors u ho meet regularly with management, the and to produce the records necessary for the preparation of financial corporate internal auditars and Arthur Andersen A Co., jointly and information.There are limits inherent in all systems of internal control, separately, to review internal awounting controls and auditing and based on the recognition that the costs of such systems should not financial raporting matters.

exceed the benefits to be derived.The Company believes its systems The Company maintains high standards in selecting, training and provide this appropriate balance. In addition, the Company's internal developing personnel to ensure that management's objectives of auditon ;,eh audits and evaluate the adequacy of and the maintaining strong, effective internal controls and unbiased, uniform dwrence to these w.trols, policies and procedures.

reporting standards are attained.ne Company believes its policies Arthur Andersen & Co., the Company's independent public and procedures provide reasonable assurance that operations are acmuntants, review and evaluate the Company's internal acmunting conducted in mnformity with applicable laws and with its commitment control systems to the extent they mnsider newssary in order to to a high standard of business conduct.

QUARTERLY CONS 0UDATED FBIANCIAL DATA (Cnaudited)

Pacific Gas and Electric Company Quarterly financial data for the four quarters of 1987 and 19S6 are 19S7 was 304,000. Dividends are paid on a quarterly basis, and there shown h the table below. Due to the seasonal nature of the utility are no raaterial restrictions on the present ability of the Company business, operating resenues, operating income, and net income are to pay dividends, Despite the change in recording operating revenues not generated esenly by quarter during the year.

for Diablo Canyon discussed in Note 10 to the mnsolidated financial ne Company's mmmon stock is traded on the New York, Pacific, statements, the Company's cash flow from operations is adequate lendon, Amsterdam, Basel and Zurich Stcd Exchanges. ne approxi-to cos er the current annual dividend.

mate number of common stockholders of remrd as of December 31, 4th 3rd 2nd 1st 1987 Operating Revenues

$1,830.920

$1.827,919

$1,114,112

$1,752,150 Operating income

$ 327,313

$ 384,706

$ 323,415

$ 248.207 income Before Change in Recording l'nbilled Res enues 8 148.89 T

$ 204.539

$ 153,482

$ 90,296 Net inmme

$ 148,897 8 204,539

$ 153,442

$ 181,810 Earnings Per Common Share Before Change in Rmerdingl'nbilled Resenues

.32

.47 J3

.17 Earnings Per Common share

.32

.4 F

.33

.42 Disidends Declared Per Common Share

.44

.48

.44

.48 Common Stock Prin Per Share High 19.88 20.88 22.75 27.88 1,ow 15.00 18.13 19.13 23.88 1956 Operating Revenues 81,927,405 82,000,896 81,876,724 82,011,636 Operating inmme 8 396,699 8 461$97 8 419,415 8 375,614 Set income 8 235,993 8 299,578 8 265,339 8 286.308 Earnings Per Commnn Share 8

.54 8

.73 8

.63 8

.70 Dividends Declared Per Common Share 4

.44 8

.4 %

8

.43 8

.46 Common Stmk Price Per Share liigh 8

26.13 8

27.50 4 23 39 8

23.63 lew 8 23 2 %

8 22.25 8 21.no 8

18,75 In e first quarter of 1987 the company rm gnized the et of the early retirereent plan af appruimately 847 i millk.n tiefore tases.

l l

42

. P8&E COMPARMIVE STMISilCS (t'naudited) heific Gas and Electric Company Wars Ended December 31 1947 19 %

1985 Doctric Statistics Net Area Output (Millions of KWil) 88,444 84,633 85,398 Net Area Output-Percent lipiroelectric Plants 10.2%

17.4 %

13.3%

Thermal Electric Plants (excluding Nuclear) 38.2 28.7 40.2 Nuclear Plants 15.8 14.5 7.6 Other Pn)ducers 35.8 39.4 38.9

. Total 100.0%

100.0 %

100.0%

Area Capability-31W (at annual peak) liydroelectric Plants (adverse conditions) 3,938 3,875 3,913 Thermal Electric Plants (excluding Nuclear) 9,070 10,250 10,012 Nuclear Plants 2,164 1,073 Other Producers (adverse mnditions) 6,554 6,978 6.866 Total 21,726 22,176 20,791 Net Area Peak Demand-MW 16,202 15,439 16,507 Reserves Capacity 31argin at Peak-Percent 19.3%

25.7%

11.6%

Annualload Factor-Percent 62.3%

62.6 %

59.1%

Average Annual Residential Consumption-KWH 6,489 6,343 6,533 Average Residential Revenue Per KWil 7.80s 7.824 7.88e Average Annual Residential Bill

$506.26 5496.28 5514.57 Tbtal Customers (end of year) 3,951,474 3,8'>4,787 3,760,521 Plant Investment Per Customer

$3,565

$3,592

$3,407 Customers Per Mile of Distribution 1.ine 40.0 39.5 38.8 Ses Statistics Gas Purthased for U.S. Operations (Thousands of MCF) 681,421 586,135 778,318 Source of Gas Purchased-Percent From California 18.3%

24.4 %

21.9%

From Other States 27.T 33.7 39.3 From Canada 54.0 41.9 38.8 Average Cost of Gas Purchased Per MCF (U.S. Operations)

From California

$1.71 82.20

$2.88 From Other States

$2.16

$2.58

$3.61 from Canada

$1.87 82.26 81.14 Average

$1.92 82.36

$3.27 Peak Day Sendout-MMCF 3,00 3,107 3,603 Average Annual Residential Consumption-MCF 66.0 61.6 75.1 Average Residential P,evenue Per MCF

$4.55

$1.75 85.38 Average Annual Residential Bill

$300.48

$306.93 4401.15 lbtal Customers (end of year) 3,245,051 3,158,426 3.082,935 Plant investment Per Customer

$631

$595

$555 Customers Per Mile of Distribution Main 100.3 99.8 98.9 Misco8eneous Statistics Customers Served Per Employee 264 240 231 Depreciation and Amortization as a Percent of As erage Depreciable 11 ant Electric 3.6%

3.5%

3.6%

Gas 5.7%

4.2%

4.3%

PG&E Composite (includes Common l'tility Plant) 4.0%

3.8%

3.8%

m 43 l

.4.-

~ 984 1983 '

1982~

1981 1980 1979 1978 1977 1

1 84,227 78,879 78,399 80,606

-76,747 77,511-74,538 -

72,255 17.0%

22.9 %

19.9% -

13.2 %

17.3%

15.3 %

18.1%

8.4%

36.8 28.9 -

31.7 48.8 46.0 53.6 44.9 65.5 a

7 45.0

' 48.2 48.4 38.0 36.7

'31.1 37.0 -

26.1 100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

- 100.0 %

100.0 %

100.0 % -

I

- 3,723 2,658 2,518 2,517 2,491 2,485 2,491 2,435 j-

- 8,926 8,923 8,699 8,815 8,694 8,629 8,311 8,304 7,561 7,617

'6,673 8,732 7,180 7,307

.6,320 5,933 l-20,210 19,193

-17,890 20,064 18,365 18,421 17,122 16,672 16,225 15.156 13,907 15,542 15,336 15,065 14,948 13,815 6.2%

8.8%

9.6%

5.9%

0.0%

12.1 %

8.4%

10.6%

i 59.1 %

59.4% '

64.4%

59.2 %

57.0 %

58.7%

56.9 %

- 59.7%

6,557 6,386 6,252 6,489 6,535 6,811 6,553 6,408 6.754 6.034 7.33c 5.77e 5.16e 3.54e 3.934 3.814 8442.88 8385.18 3458.46 8374.21 8337.43 8240.88 8257.66 8243.86 3,686,179 3,594,124 3,545,923 3,515,099 3,417,739 3,365,950 3,270,302 3,179,362 83,157 82,847

$2,554 82,310 82,199 82,032 81,869 81,755 i

38.3 39.4 39.1 39.2 39.1 38.9 38.5 38.1 i

t 690,455 621,539 698,166 835,684 781,613 843,381 711,052 817,745 24.0%

23.1 %

18.2%

19.5%

16.0%

16.8%

16.4%

16.1%

42.4-36.9 15.4 49.2 43.7 37.0 35.1

' 36.2 33.6 40.0 36.4 31.3 40.3 46.2 48.5 47.7

[

100.7o 100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

$3.60

$3.40 83.09 82.60

$2.16 81.74 81.59 41.12

$3.9S

$4.02 8154 82.57 82.30

$1.79 81.35 81.10

$4.21 84.49 85.14 84.86 84.34 82.61 82.22 82.00

$3.96 84.07

$4.04 83.29

$3.10

$2.16

$1.81 81.53 3.205 -

3,025 3,133 3,144 3,275 3,398 3,244 3,186

+

69.6 73.0 78.3 72.7 81.6 90.4 86.9 90.5 85.43 84.84 84.39 83.91 83.70

$2.37 81.97 81.85

$377.94 8353.42 8344.07 8234.20 8301.67 8214.17 8170.97 8167.45 3,020,803 2,948,9*;0 2.914,977 2,897,455 2,858,129 2,805,471 2.738,767 2,674,890 8500 8171 8474 8475 8467

$450

$141 8441 98.4 97.2 96.8 96.9 97.0 97.2 97.4 97.2 236 240 249 241 229 230 228 230 3.7%

3.5%

3.5%

3.3%

3.3%

3.1%

3.0%

3.0%

[

4.3%

4.3%

4.2%

3.5%

3.5%

3.1%

3.1%

3.1%

3.9%

3.7%

3.7%

3.4%

3.4%

3.2%

3.1%

3.1%

l i

..... ~ ~ - -,--,

I' 44 3 m N AlW SALES (Unaudited)

Padfic Gas and Dectric Company hars Ended December 31 1981 1986*

1985*

-. - ~ -. - -.... - - -.....-- -...

Electric Department Revenues Residential.

$ 1,711,031 4 1,ti39,108 8 1,659,401 Conimercial 1,955,721 1,918,093 1,952,531 Industrial (1000 MV demand or over) 980,773 1,184,217 1,381,346 AgrlculturalIbwer 239,204 220,462 287,226 Public Street and liighway Lighting 40,803 45,149 46,997 Other Electric Utilities 122,349 63,915 93,473 aliscellaneous 77,102 73,839 92,737 Other 3,492 3,504 5,305 Regulatory Balandng Accounts 2,'oS3 419,151 300,967 Total Electric Revenues

$ 5,133,028 8 5,567,438 8 5,819,9S3 Residential 21,932,544 20,949,230 21,067,234 Commercial 22,621,071 21,286,100 21,452,853 Industrial (1000 DVdemand or over) 16,061,922 15,972,091 17,042,349 Agriculturallbwer 3,154.373 2,500,390 3,252,215 Public Street and Ifighway Lighting 341,909 344,276 336,736 Other Electric Utilities 2.446,371 725,397 1,576,215 Total Electric Sdes to Customers 66,558,190 61,83f,484

~64,E27,002 Gas Department Revenues Residential

$ 901,326 8 899,039 8 1,156,002 Commercial 435,618 435,351 562,590 Industrial 299,870 437,677 800,651 Other Gas Utilities 88,861 28,962 38,322

.\\liscellaneous 1,073 976 6,069 Regulatory Balancing Acmunts 119,848 220,840 (233,064)

Subsidiary Companies (U.S. and Canada) 136,922 207,883 280,4'8 Gas'11ansport 69,155 18,495 Total Gas Revenues

$ 2,052,673 8 2,249,223

$ 2,610,li98

~

Sales RACF Residential 197,882 189,120 214,935 Commercial 80,144 78,087 89,415 Industrial 99,719 128,854 178,407 Other Gas Utilities 46,977 9,832 9,247 TotalGas Sales to Customers 424,722 405.893 492[0M

~

PG&E Use (primarily electric generation) 239,815 153,563 263,017 Subsidiary Companies (U.S. and Canada) 46,229 56,027 62,184 Total 710,766 615,486 81I,205 changed to conform to is presentauen.

E 45 19W 1943*

1982*

~ 1981*

19'30*

1979*

1978*

'1977*

InThousands 8 1,400,148 8 1,192,997 8'1,401,267 8 1,128,851 8 998,130 8 693,368 8 720,112 8 661,502 1,580,192 1,326,406 1,530,542 1,233,564 1,067,198 752,359 852,265 789,401 1,105,750 914,786 1,078,493 860,577 699,073 461,653 531,593 498,462 239,644 157,528 ^

235,164 241,221 212,770 142,727 149,986 212,419 41,970 48,320 53,224 41,498 38,225 30,491 34,179 33,501 99,350 129,992 172,819 117,791 71,926 67,740 69,855 103,8 %

116,050 40,350 56,256 70,094 58,568 50,111 43,584 42,075-7,113 7,890 8,008 7,313 5,336 4,115 3,814 3,664 567,948 87,545

-(687,171) 204,964 (223,385) 261,281 (308,455) 9,989 8 5,158,165 8 3,905,814 8 3,848,603 8 3,905,873 8 2,927,841 8 2,463,845 8 2,006,933 4 2,355,133 20,730.060 19,778,553 19,107,415 19,575,283 19,329,190 19,605,541 18,314,721 17,383,011 20,626,467 19,259,758 18,662,382 18,722,954 18,283,154 17,891,820 17,166,973 16,771,2M.

16,108,571 14,986,722 15,843,646 16,401,293 14,801,260 15,253,371 14.815,289 14,354,359 3,309,155 2,304,205 2,922,511 3,890,088 3,540,022 3,715,026 3,120,644 5,113,726

~ 329,378 339,823 365,119 401,930 431,561 455,445 485,725 491,558 2,230,163 3,341,984 3,544,563 2,676,998 1,906,465 2,807,249 2,232,543 3,957,141 63,333,794 60,011,045 60,445,666 61,668,546 58,291,655 59,728,452 56,135,915 58,071,027 8 1,058,995 4 972,150

$ 935,996 8 764,468 8 799,307 8 555,017 8 432,865 8 414,087 596,107 651,332 681,520 607,417 626,611 406,497 346,229 365,623 732,875 648,832 712,341 794,786 708,259 499,242 340,546 366,293 37,410 39,202 52,589 158,433 148,074 85,867 18,384 14,349 3,686 5,469 8,835 2,290 (6,560) 7,128 4,315 4,773 (107,521) 91,820 149,817 (276,749)

(133,807) 176,354 193,960 (19,477) 349,956 332,080 395,395 238,057 189,174 170,519 136,141 128,749

$ 2,671,538 8 2,740,885 8 2,936,493 4 2,288,701 8 2,331,058 8 1,900,624 8 1,472,410

$ 1,274,397 195,092 200,774 213,031 195,631 216,184 234,295 220,076 223,732 90,027 100,637 124,622 128,758 146,827 143,707 144,162 163,828 137,178 114,310 132,789 171,769 161,060 186,165 138,975 162,529 8,281 8.532 12,021 35,135 34,821 36,013 9,926 7,810 430,578 433,253 482,463 531,291 558,892 000,180 513,139 557,899 242,985 170,773 201,219 280,990 202,964 216,062 125,636 217,272

_ __61,400 69,417 96,330 73,166 72,608 77,411 61,633

_65,515 734,963 673,443 780,012 885,449 834,464 893,653 703,408 840,686

' 46 6 m 0FRM Pacific Gas and Dectric Company 80ARD OF DillECTORS Pete A.Magowan PERMANENT COMMITTEES Compensation and "- "

Chairman of the Board and 0F THE BOAllO OF DHIECTORS2 Deniopmmt Comasta flichard A.Ciarke Chief Executive Officer, Remmmends compensation Executive Comnuttee and employee benefit policies Chairman of the Board and Chief Safeway Stores, incorporated Exemtive Officer, Pacific Gas Withinlimits,may exercise powers and practi&s. Reviews planning and Electric Company George A.Maneatis and perform duties of the Board.

for executive development President, Pacific Gas and Richard A. Clarke (Chairman)

Harry M. Conger Electric Company g,wis S. Eaton leslie L Luttgens (Chairman)

Chairman of the Board and Chief leslie L Luttgens liarry M. Conger Executive Officer,llomestake Mary S. Metz Richard B. Madden Mehin B. lane Mining Company President, Mills College Itter A. Magowan Richard B. Madden George A. Maneatis William E Miller Lewis S.Eaton Frederick W. Mielke,Jr-John B.M. Place Chairman of Guarantee Savings Former Chairman of the Board Audt Committee end lean Association and Chief Executive Officer, Review s f nancial statements and Advisory Nominating Committee PacificGas and Electric Company internal aemunting and mntrol Recommends undidates fra Michael Heyman pro dures with independent for nomination as dire (tors.

Chancellor, University of WRiam F. Meer public amountants.

California, Berkele)

President and Chief Executive Richard A. Clarke (Chairman)

Omcer SRIInternatior.al lewis S. Eaton (Chairman) llarry M. Conger Robert B. Hoover 1 (research and consulting)

Ira Michaellleyman leslie L Luttgens Former Chairman of the Board, Peter A.Magowan Peter A. Magow an and Chief Executive Officer.

John B.M. Place Mary S. Metz Frederick W. Mielke,Jr.

Wils n C. Riles John B. M. Plaw

'the Pacific Lumber Company Former Chairman of the Board and Chief Executhe Officer, h ee h n*tu MeMn B. Lane Crocker National Corporation Chairman of the Board, and Crocker Nstional Bank Recommends long range Lane Publishing Company financial policies and objectives (Sunut Magazine)

Carl E. Reichardt and actions required to Chairman of the Board and a(hieve those objectives.

Leste L Luttgens Chief Executive Officer, Richard A. Clarke (Chairman)

San Francism Bay Area Wells Fargo & Company and Richard B. Madden community leader Wells Fargo Bank, N.A.

William E Miller John B.M.Plaw Richard B. Madden Wilson C. Riles Carl E. Reichard'.

Ct. airman of the Board, President, President, Wilson Riles and StanleyI Skinner and Chief Executive Officer, Associates,Inc. (educational Potlatch Corporation development and consulting)

(diversified forest products)

Stanley T. Skinner Vice Chairman of the Board, Pacific Gas and Electric Company 1 artm Qril gft th4 2 Weniter.bep effree e tehturi 17.19st

_______________]

E 47 l

OFFICERS Norman L Bryar.

Robert J.Haywood James D.Shlffer Vice President Vice President Vice IYesident Alchard A.Clerkei Redwood Region Power Contracts Nuclear Power Gmeration Chairman of the Board and Chief Executive Officer George F.CEfton, Jr.

Jess R.Herrera Gerden R.Indth Vice President Vice President Vice President I

StanleyT.Sidanarl East Bay Region General Construction 11 nance and Rates Vice Chairman of the Board Russet H.O n ? :

ThomasIV.High James B.Seestamere George A.Manestist Vice President ViceIWsident and Vice fYesident fYesident lluman Resources Corporate Secretary Gas Supply Operations Eels L Langley, Jr.1 John C, Danielsen Grant N.Hurne Wulam itWagace Executive Vice President and Vice Itesident Vice President Vice IYesident General Manager, Distribution Computer Systems and Services Corporate Communications Engineering Busi ess l' nit Richard A.Draeger John C. Keyser Jack F.Jenkins Stark John A.Sproull Vice President Vice lyesident Deasurer ExecutiveViceIYesident and General Serviws Maketing and General Manager, Gas Supply Customer Services Brien L McGrsth Business l' nit GeneG.Bam Assistant Secretary Vice President and John L Koehn MasonWIlricht Comptroller Vice IYesident KathL1en Rueger Community and Assistant Senetary ExemtiveVice IYesident Daniel L Gibson Governmental Relations Densid A Brandi Vim President Jusa LVerk SeniorVice President and General Ibel Resources Jack LaRue Assistant Deasurer Manager, Engineering and Vice fYesident Construction Business l' nit Robert D.Glynn,Jr.

SacramentoValley Region ViceIYesident I

Gregory M. Ruegeri Power Generation C. Robert Martin lYesident

~

Senior Vice IYesident and General VicelYesident NGC Energy Company Mmager, Electric Supply Howard V.Golub San JoaquinValley Region Business l' nit Vice President and Stephen P. Reynolds General Counsel Jackalyne Pfannenstiet Itesident and Chief Exemthe Vice IYesident Omcer. Pacific Gas toland M. Gustafson Corporate Planning Dansminion Company Vice President Golden Gate Region Grant N. Radford Vice President MissionDail Region Virgi G. Rose Vice President Gai and Electric Technical Senices t u..w v.ue.m c

.w.

l

48 5 SHAREHOLDER INFORMATION Pacific Gas and Dectric Company SHARENGLDER SERVICES OFFICE REPLACEMENT OF MULTIPLE DMOEND CHECKS STOCK EXCHANGE Ll8 TING $

Dm0ENO CHECKS ANO DUPLICATE MAKINGS 77 Beale Street, Room 1550 10&E'scommon stockis traded San Rancisco, CA 94106 Ify udonomcciveyourdividend Some shareholders hold their on the New York, Pacific, London, check within five business days stock e our records in similar Basel,ZQrich,and Amsterdam (800) 367-7731 after tbe payment date, or if but different names (e.g. Robert stock exchanges.The official New Drvl0ENO PAYMENT a check is lost or destroyed, you A. Johnson and R. A. Johnson).

York Stock Exchange symbolis DATE31988 should notify the Sharaholder When this occurs,thelaw requires

.PCG* but the Company's common 1

Common Preferred Senices office so that payment that weneate a separate account stock usually is listedin the Stock Stock may be stopped on the check for each name. Esen though the newspaper under *Pa6E' January 15 February 15 and a replr& ment issued.

mailing addresses are the same, The Company has 21 issues April 15 May 15 we are required to mail separate of preferred stock, most of July 15 August 15 DMDENO REINVESTMENT PLAN dividend checks and annual and which are listed on the American October 15 November 15 You may automatically reinvest quarterly reports to each account.

Stock Exchangeand the Pacific your dhidends from common and How to Consoldate Acc.oug Stock Exchange.

STOCK NELO IN BROKERAGE preferred stock in r.e4 shares if you want to consolidate Newsparer ACCOUNTS (* STREET NAME*)

of10&E common stock through yWT separak anunWnhe Inw symW When you purchase your stock the Company's Dividend Reinvest.

and the stock is held for you ment and Common Stock Purchase First Preferred, Cumulative, by the broker,it is listed with Plan, nrough an

• optional ParValue 825Per Share I

"'""*'I the Companyin the broker's name, cash investment

• feature, Plan Redeemable:

or

• street name' PG&E does participants also may purchase 10.4G%

PGEpfS

• • I

"*""I not know theidentityofindividual additional shares of common 10.28%

10EpfW shareholders who hold their stock, subject to lirnitations set 10.18 %

10EpfT ttock in this manner-w e simply forth in the Plan prospectus.

How to Eliminate 9.45%

IEEpfR know that a broker holds a certain if you hold certifimtes in >our Duptcate Ma3ings

937, 10EpfV number of shares w hich may own name(rather than through if you want to maintain more 9.28%

10EpfJ than one amunt but eliminate 9.00 %

PGEpfL be for any number of customers.

a broker))ou may obtain the Plan If you hold your stock in orospectus and enrollment form additionalmailingsof annuw

837, 10EpfP street name, you are not eligible by contactingthe Shareholder and quarterly reports, you may 8.16%

PGEpfK to participate in PG&E's Dividend Seni&s offi&. Ilowes er. if your do so by sending the labels 8.00%

FGEpf0 Reinvestment Plan. Also,you certificates are held by a broker (or a mpy of the labels) from 7.54 %

10EpfM rec +ive all dhidend papnents, (in ' street name'), then you are a Cw. pany mailing to the SWe PGEpfD annual and quarterly reports, not eligible to participate in Shareholder Senims office, 5.00 %

Series A 10FpfE cnd proxy materials through your the Disidend Reinvestment Plan.

Indiating the names you wish 4We 10EpfG broker. Derefore,if you are to keep on the mailing list for 4.50".

PGEpfil re&iving unwanted duplicate LOST OR STOLEN CERTIFICATES annual and quarterly reports and 4.36 %

10Epfl mailings, you should antact your if >our stock certificate h lost, the names you whh to delete.

Non-Redeemable:

broker, not PG %E, to eliminate ste'en, burned or in some other nis will nly affect these 6.00 %

10EpfA the duplications.

w ay destroy ed, you should notify mailings; disidend the(ks ana

537, 10EpfB the Shareholder Senices office proxy materials willmntinue 5We 10EpfC to be sent to each account.

A00RESS CHANGE in w riting immediately.

4100 Fint Preferred, Eu should adsise the Shareholder Cumulatise, Par Value Servkw office in writing SHAREHOLDER HAN0000K 10 K REPORT 8100 Per Share immediately of any change in PG&E has prepartd a helpful If) u would like a capy of the 10.17 %

Cnlisted address. Please include the old shareholder's handbook prosiding C mpany's 194 Forni10.K Report 9me i niisted address and the new address.

information on the Company's to the Securities and Evhange If possible, also enclose a rupy shareholder services, sto( k Commlulon, please conta< '

of a recent mailing label.

certincates, and strxk transfer the Shareholder Services off,ce.

sptems. Copies are as allable from the shareholder Senices office.

'r

J,

6. ;

- A j,W-7 g $ ',,

' i

,,4

.C

- y 7..

_;.,,',, - ! {,.,y a j.

7, I,

,f I-

'. ?

' (' '.. j ' I ',

, :h,.

~ ~i.[ *. g ^,, '

.[f'

~

3, 4 g;..' e

, I. -

'..(( [. 5 ', } f I. r. '.

'I T

' ~

. si c..- :- w.. r

. 8.. >, e..v : A

- ~

s' '..w

., :~., s.

m

' :. y.. -

~

~

g v-i~"'A,; Q q. 5,.,

, f. 4, ;L, * +

y.

~

.Q.. %,

..,e'p: - :-

d 2

.rn n.

css v e.

2 y.4.? y y 2,9

+,s v. '

v 1 1 r

a

,s..a. t,,,. c. ', t. $

~g, *., fx h

4 n

w 3

h...;

o.,,

s

.'d I.

".N-[.

'k,

k'j-

' ('

' f.

'N /'

"6, 4

f

.,h. !. Dg% r.2.. &s, & p.#.b $ $. $...?.'.

• ~ ' L l g & Yf >ll~ ik '. - %$ c. -

' W ',~' %,%.v+., R..'(5 %.. U~%**%

' q;. ',. '- -

b,$.f.,q e:

%.:q.'~b y E lp sh

r. _y.. n, ~g. n,.... $,'%lq. P r - %, *;...,,.. y yl t f;s? -., i &g

%.T s

' T. : -'

i p.n.,R, n... y

, W Q,-

.[^

?

.s: ;< j

'y a z 'Q. L

.D

.K :,>, ;j;,, ' ~. g. ?

.,;,. 3 :'

%.g. y,.g. g. m..v. w. ~9. >

. ;~.. ? f.:' e n.:.,

f,: '%)n... '

r s-' 2 :

..e,

o. -

.- g..

9 a

c 1

', i - :-

. t e....

,, :. :g e",

- e._. ' _, r\\.,..' n.-* 'l ~'. ', l.. ' * ** h + f t-

.._r

/- 1 -' '..

e j.. f.. V, *',2.T, . '. r, '

u

• ,.'. N -

l..T y ':

=

,.' - l ',, f,

'.. e 1

-. ; $ ',' ', ' _{4.,,g % '.

t?N,;#e~.

,.k'l:,4 f ;

l,

Ja T -

. #y p."

.(+5,[,[,5

, M.

ps s.

[i"..

..s <-, e c

• ] b ' y., ~ l, -_ { '.>.

-;j - '

,'J

.q[' '

- g/

(

- - ; yqrpomiquendessiwr J.

? ; -.,

'.c; ;j..

3.-

. n*,e s.

7.._.

^#

1-I '... ' '. '.., p a, " ( ;.mI esceMkMMak$ ).i*.i y.-

1 g

. i. l '., c

... y,

,. %..,. Q.

..f. f

..( :. M98L, 'l"-

esqpnessujt$spee9 Mar J J.1:,

G

,e q';

7 y

q c

.-U'.,..'.

~

?,

L

-}-

nibhl8%R$W9lrStn6':

In

• I

a*-

• 4),

+-

^

$M%./,

[.,*,

' 'l?^ i

_,l %i- '., -- ?:

• j.<

-;.&nt

' f ' ' ;',

+'-

./,

,;,..' f ( ;

W

i. f 2,

.- 7 t,

' s

. z u.

<t l.s.;'? h,4'. y*,f.

a. -

1, ' :.'.f)r ( i,.

\\. Raf '..

,e ' '

.'.. g.

, l#

_p.

g L 4,,,

..,,> -;M y k

) ((. Q M..",:

. o. -

?

- A >

w.. y.1

.1 s

a. A

,,,.,5

j.,. ;

,(,-

,g,,-,#t Y, * [ ' ;.f h.d,, '_

• 4,f g.,'f 5,_

c-f.

u

,.h,.

4.

I

,; y.,.f c,'* L

' se s.*

-s G _

' g ',=

j,. -7 p:i-/ M. p,)- D,l:g.

g' ia

. y; ' s le '; }, :p w. g.!,.$,k ' 1. ' ',) g * *",.G.,,..- W. ';

e.

$ %. y l@

si N.'.*'..;, J s,

, ?: (,

i&

. e\\,._

Y-i f.n v. ',s%.. ~y '

fj

- th,,,.*~,Q

.; g-l.s,

.+

.u

+ - 1,

..my,-

../;,

-. 3.f.t M, aD J,.,...., b,, 5 ".(.i *. *.>,. ' h[ k

,[v. p ?

~,.. d '.#y p,, N

, *N' e

y

(.Q De' { M# j*,5 U-

i..". ' ', ' [,' '

.5,.

cf.. -.

,3 y, % -

-A-

]

4 4

n.

,...,..,,..(p. e 7

i.

. ;;..y,,

t.a:..e_

-.... 'I

'[d^

.d.[-:

.h.

e.

j

l W )i '.,,'i M'J

• D.,, s j

~

_ y; Y f i[j

~~ s

,. Q ( v. ' i ::

F l_.3. T, %,~ l h kn & stenaa g d e>lg N i..'.

h l.I

~

5

(

. L enannanteknats '

$69~ V, A _ ;

&' r i n

, l.,, l v '. l. :

. }' ' - ' -

g'

., ' 3,-

~~ _l.

_y l_~

', n,.. =.. lp_*, *'_.m

- c. _ ngc3,~~A.

l y_

+

y,

.,,. 'I" $ 4

. t

%g -

,s 8

,j 1

.-.'.,v.

g,y.

v,.

4.,

,g.

, 4.

e

),g.,

'3,

,,.s A

, s.

m

-o

. u..: m

, ? -9 x s..

.p,

..,.: y 2 n

n

.n

( S g), *7i 3, ['3.: n. :.,S V. T. ~~

".c*:~k

'.'ts.

-f.

"*E e[j[.4 l t-h [

,/

['

' de ',+ ' ',.:,,, #

b

, "( :

L'.

4-:H '...i [r e it. ".

i,y,, " '

!./ 4 i a '4.

p

f. T, -

- 3

.yn

-J.

,...'a......:

. r

..n.-

..r...

. s

.2.L 7. _....,,

- "' y b.,. 4:...

1<9:.b. s -'

.p*

,-% y 3

.?

p,.y v,._

J.

'-w....

s

, y' e %

-w v. +

w t

..++.,.,...!

,2 e, 7

.'I,"6

- ? z y"-

^. f,1..

Y 4

a

' -Q, e. /.%_e V

j,,

,,f:..

• h q),...

y y, "

er, f. '

1 a

.$.. _y,

,r, 3

,,A.-

y l,,w

..f

(

3

, z

.s

l. *

'^'.,.'.',*:3,

' ;sl-l _

y

=

s g g'li,. k

LS ' *:.

, '. ' *,,,p,k

'Q

.'P

^

.f :,.

• y,. ' ;",.*}- e '.

1,{.

~

w

.T..,*/--. ;,, b, Q ',**. L.. ' --,,

?.s

. D.,.' '- ^

- j gc,.',',4.

+Cs

+,,;

/.,.,,. if s 3

a t

4.

...?..

q t% _ -

n,,- y'

?.,,.

4 g-

.4

,.~

' 49,

3. a jsy, g *.

s m.,

q__,+.,,.(.,

,fw;.

,c

.f,,~,

.,...,.,,s,-

g r,

..+

y-o.

' y e.,,,.,. - r, m.- (

~..

-:g

. $.g.

% j,.,,..g.

- f., ~.,C,,. A... 4..a

..m@

g

.4

...e 3

+

c

. ],

. m,,, 3. r

.,/ 7,%,, ;s'?,- y p q ; 'i s:,. ".' ;,,

, g y, i 1.;g.'y,.g \\

-,Jg',p.

c 4

(,

.g..

.s

, 1 N [4 g.og

,, *.; L '.i.c-r.

.. ',.. 5. + 7

(.I,f

. i,

' {'

.i +

.4.'

- f,(

g j

n

~

~ ?

. -f d".e-

- - g

. v ia ;p,u. W.,%?.g;g.. w,

- > a

.v.

3 r< t.:.-);.. s g ~4

~ -

• t.x

.. + c.w...

- Q..2 p '. p%e %

~ -

.q e

r;W* - 3,r.gM; 6, ~,f Qg@;. p.. s #[s[.4,,k f.%y',

5 w ;-

, g. i. ' e o.

c..

' e i,. W.

...sv-o w

ag s -p

.. i g

...r

-; [^ A,.-Wf,}.g.f. g '; $.- y.01 y s,

&h'.,:.'.ty.-[.'~T"?QJj,j,1,7N.f=.f#PihbJ 9-

.e ni _ *

.hn.*.-

a

- y.

.v,

- 5M -

.. %Q:. n.f, ' }. _, * '.. ',.

I,p, (

~

,hy.-

/.

$,~ %s MpMs Qs$<t6 g u,; y f l E.. M.a v.

m-g&Q@ggM$&@%p,:w.Wr

$4 j

+Q

~

~

n

~

lN ?

~

yN

~.

k.g.

~_ 2 ; (T

• i{l t

p

_=

)_,

W:7 u hl$f

? h{k,1-&k

{

_y. %

y_

% WN.w-r i[;

h,fk,lgl faMM &,?, NYWW:[yNff>1kN ~ k W? ?%& Tf+,f% l&[& f_hW ^$$?Q

~

b %Q i,-

n v

~9 g

+

n y4 w

te

- a 2,

7.=

w

" l 1

o l

4 p,p

.W v

L 4 d4

c.. -.

u 3x

._o y

y

=

m%__--.....

[

L

E b

g I

}

j

,,./', r,

,e.,

u

. 13

, k.,

4 I

I g

, (

,..,.Ng F

f k~

E y

I g

A 4

h

, i 1

t)i;

-t'-

-3A 3

'w s

. 'f

/

.I m

.l

'-(,

.).

a 4

g i',

4

,F I

2 1

s s

5, r

'sb

,..' I h 'l

'Q a.,

4

.s-j.]

y' t

e a

k_

.?

,' f

., a y

y s

s

---E

+

f r

d a

k L

b d

k i

Y K.,

h i

2

'M i

1r-

'A T

3. i.([.?,.

t.

<~i.:

. <^

..4 -Qa.

i + *,,.\\, i'

'2-

...<,o

_ y

,,y,..' z %g y.::' N l s - :

v'

~,

. * :.; ~.. -

y '. )) ;) y..,..)*A.. K.* % V * '*

'-\\Mn? W'f^,y.^"

?

E'

~

k.,3 i.'

_W ~

..'Nn. % ?. ';

e g.x,'

. g,s ^;. +y\\

. ~.

.,,.,y -

n

.Ju.

_4 3

g -

.,. L j.}.. -

y

\\

a

.s g,' ' '

1*mnicGasahi p W.~-

'y p

gro

.,.. ;: ;g

. nganges m,.

_.- _, (,. -

' f.

g,' ' }. h ;,s 9. Q?

-l San.home h dA SIIO6 j

i_

s

?

yy i

g.

p

%g.

g, 3 __ f, e.

~L gy,,.8.);x. _,

4 01 ].yi 4

s. m??)?

' a o

, Q,.

-.c - Y s ~.

o.

6

. y - '. -.

[.'..[e.'., ;.. ;,d f ' Y.. l.: /I,

.d',

m o n)/ }

. '. ~

.s Y.'

y 6.f.

s d'.,' j * ".,

J. ' '

e 7'

..I

• • '[1

_5

' o gy {, L. _, fyL ^ ' :.,,cwm b

u&.

. [* Q ~ ' l s

-1

.*'* q l s',

g.,. 3... -

_ j y,'

,Q ss ss' 4, %.- ^ ;. 5f,y.; -

.%&..y ;

.y'

g..

..m

. i

".g%

v

. y y

1. g.., <

. G,";,,

.Og"

.\\,

-a1

, ; <.,k..t s

',,., - [

• ' A >

lo..'..e.,9.t a ' - r' ".' l.'89"g'.'j'.',.'4. f,*~

• '.*.Q o' Ml.

,. 'd.9 e ~ '\\ a *

....,w,,.)%.

.,,#(

E,.,

aan Q,a a

- g if.g.,..;. i., 3,..... a'. '. -

..-e

. 3 q..' u.n...d,.

- nt.&'s\\'.

......... ~.

,U"

i

__ a 4w

. v.

.' =,

. y% %Q* l?;',4);.

s,_

-.. La. s - gs.,Q.g

, k.;;;.,..

3 W :. g;f'k,,..

.g y 8 g.w '4.;

.e

+ Gs g ' w pr'_ f 6,; a g j "} 3E

,+

.,. :. f : +.3. v."~..

. y :. ;

..,';.  : y ;,.. E ;,,.

~

,'_ -. j'

}._'.

jh; *M, y ' _-f,fp K. [ *

- y _7 WJ.7 l3;,.

. o". s,tp.7.x..m.

.<a

,, i. o ;..g.

. #. < p. g.,*3.,.

.u.,k

+

,3,y...

i+ ;.. t,..

n

.,9,0 s

..y.,...;s...... <... 'N ',, j y

-l> w s c' <

,u... ;.

m. ;j m..;.

g a,.

o yw..s.. 1,; '.f, y i

, ':' ~..

.g t,#.

.~.a y,

, A; -

-(L e q:,,Q k '.

?

. )$ ' k. * '. '

h

[f..

g..

a.

. p n..

b g f

,.f"t h.7. '

, i..

(& :w'. w %. b ' ' ' i Y h@

S u.. ma% y> g. %-u:".;; th.e.

w.8g.WFr. %.f,A{ -

mn 1

,.. n. ~

....w;

~

. by a

. m,, u...."V., -ls ;..

w ac s,o '. : ;, _.

ein.

n..:;

,e..' lm., yp,.,,.

6>

v y.

,t..

. f.p

' r og 1 m

4, n.

..e

[.'.

-h.,,,

. p

.,, ]

. [.,

j,' [f

. M. ).j, c n pa..

j-y. ' 9.q...

.w.

.c

-,. m.

.x v y,,, :,

m..

,3....

9 9 '. q, v..-

• . 4

$, a,,; ;,.

-.. b.

, :n.,

g

} L h.:. &.s :.g R;,

. ; 7g..

g y

,',Y; *V l "U %' f.l

n.,1,~ 1.;5. -

n...

3. a....

v s.

.. m

?$lh.h_v",Q -

h,. SW%l bl[h,h, k )y&,..

. ? 4 'W AN ^ kl-

. - ^'

x,h,W.AYk_

~~

m

,,jf; m.;, V. %

, m x

.b,~ap ip. yh.

m*

s' x. ~...

X

?. T e

9

";.3.,.

4....

..a-

- -... p #

i 4 m... w-r (. y;t..

.w,

.. f'. p?.y, 7 " d.,,.

., ". n

- /

a3 Y,r w..

'1 %,

.,'~:p h.,. y.> :L"..t

4....;

v-V,L.

. V U ;% r

.. g %.f, ^

.}, 3 1' ' i-vf@,,.,...

.l~.

l

, j,',.

s.?

i 7..J e

1

,.. :, 4'

N Q.l,

.s,;, e.g g '.d,,' h.

.[.kN., ~.. '......Np o k.c.

s

. ~ _. '"K,h.... '%g

[' { ?, y,f.

[a,g q,,.

3,4 '0,,,

$; f

' ?. 3 - " '. '.

~7. _. '- ~. i.h. c ~

,gs -

. l-T l, 9.,

e

.m

~

.m s.

e.

l*

, ~.. ' - @v. >. il

,,,;g,.;;n..:qm@.c..

_.s"

,3

y..;. y v ;

y L.

P.,

s,

A

7. ' ~ *

=f, ?..%

r.

.,A 4

'" g E5 p'

. h.

)'

y

{.

., ' y o t4 't ::

g s' h

- e

').,' ~.,..g-

' np,'

,.g 7 QP,. - '

.l.

j

'%W g, %. I s

,h

'., y' _ #. e py.

g a

. e 1

g

. - 3, a

. g; y eg[* [ f l +,( "

2.

g C

.h'.l

, f-

y"t ",,,

~ '. /J. 4,*

U 'a

..'l

"\\-

~..

s,p.

m.

t.

. y!

v I...

y

.4,.-.,,, i..,s y-. g

.N

,,N ' d.

• a,O't.# mA. #x:

.~

. ~.,b,.N.g.gcf [ t t '-

p. *

n.,, i 1

• • \\ 1.h..

r,

.' 3

k.. a

• 7

.e m

.,f,k

• s D,, m'.,, ". ' + N

.y s-.w q

'g' i \\.-,"

.u 4-

%,r 4. V y" pe. '/g;.' 8/f E,,

5

,f-

' g#(

' ', (g 3,

6

. p f D,f *

- f g,

>! 67 g,t

,,,vg O. c&. Mu..

Q. l %,

e Q

q y,y#

^

.a fe

. ;g,,~n.

o,,.

<... y. e W,,.

j

,N, -

g t.

..,.s s

.p.Jp'..,,d,y $,2 & 'a.'g%

M, "qei' Q: +<r '.npgM. % %..,

.4.(%

• x>

.".,l.,.

',, ;. N$-

in

'1, n-% La. '.

r yA. a.4 &jM g m

^ -a 4

. y@,,6, y,M

( 4, ;)"_V,<-c &.

.w :en.

g.

~. 1,.

a-p

&. G '..gfy;,,. q;.,}'

W-

,,;0 c..

., n y&,y > Q'(g "

qN;q. y,.. :

4

,[. n s

j f%;

f,.

a np

- 3.a g

. p.$ '

y

.7. $p&'"v

.y 4

~

w, pp...g,} h@T c; _ 7

\\ ';

v.. :. ;..,'.

2

.g U y ^ :

f

e.. l. u., m,%. m,A %a y

m m

o N'..

[3 fk g a 4 -[;4s.3. m?

4,%g&o g

h e

p pa:

e., y

,. w p m e

hs a

.gr 2.

l_ l

• • (-

ff; f gk n

hl!lk?k_$ffl

'lf l, f l

~y j

w

,,wawmwx.su,

7 t

PACIFIC GAS AND ELECTR,IC C O M PANY

?? BE ALE STREET, SAN F R AN CISCO, C ALf FORNI A 941C6 TELEPHONE (*1$) 972 6615 i

P. O. 80x 7442. SAN F R AN fASCQ, C AliFO RNI A 94120 TELECOPIER (415) 543 7813 RICHARD F. LOCME I

atroeure at en s

April 6, 1988 Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C.

20555 Re:

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

Dear Sir:

Enclosed are ten copies of Pacific Gas and Electric Company's annual report for the calendar year 1987.

Very truly yours, o

RFL: sis cc:

Mr. Jerome D. Saltzman Enclosures C

m.

.<