ML20236E058
| ML20236E058 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon, Humboldt Bay, 05000000 |
| Issue date: | 12/31/1988 |
| From: | Clarke R PACIFIC GAS & ELECTRIC CO. |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 8903230427 | |
| Download: ML20236E058 (53) | |
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- HIOHLIOHTS I Pacific Cas and Electric Company 1988' ~1987 ' % Clunge Operating revenues $ 7,645,748,000 $ 7,185,701,000 6 -
Operatingincome . $ 1,297,372,000 $ 1,261,701,000 3-Net income $- 62,127,000 L :$ 688,517,000 , (91) . j Earnings (loss) per common share - '$ (.10) . $ ~ 1.53 (107) : -
- Dividends declared per common share $ . 1.66 $f. 1.92) _(14) .. j '
Total assets at year-end $21,067,685.000 $2.1,733,652,000 - (3) :
Construction expenditures S 1,316,654,000 -$ 1,326,211,000 (1).j Sales of electricity to customers (kwh) 68,537,208,000.. 66,558,190,000 '3 :
. Sales of gas to customers (mcf) 461,292,000 '424,722,000 ~ 9 j
. Total customers 7,327,000. ;7,197,000- 2 :
- Number of shareholders . 387,703
- 393,274 - (1) ' :
Number of common shares outstanding 411,443,226 - '388,308,547 6i :{
.J
. Number of employees 26,600- 27,300 (3) j -)
.j in 1988, net income decreased by $576 million ($1 A3 per sharej as a result of the Diablo Canyon Nuclear Power Plant rate case settlement and .
j j i
adjusunents for various non-Diablo Canyon costs.'in 1987. net income included 591 million (5.24 per share) due to the change in method of accounting '
for unhilled revenues.These items are discussed in Management's Discussion and Analysis of Consolidated Financial Condition and Results of :
Operations and in Notes to Consolidated Financial Statements. -
4 p,
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a PACIFIC OAS & ELECTRIC COMPANY '
j 1
s PG&E is one of the nation's largest investor-owned gas Power Plant; and from alternative technologies, wind - l and electric utilities, serving more than 10 million power, solar power and biomass. Our natural gas comes j people in northern and central Califomia. . . from Canada, the U.S. Southwest and Califomia. The :
Our electricity comes from widely diversified area PG&E serves is also diversified, with a robust - :
resources-fossil. fuel plants; hydroelectric stations; a economy based on technology, agriculture and industry. *:
major pumped storage plant; the Diablo Canyon Nuclear i
. _ _ _ -_n_-__________-
...s LETTER TO SHAREHOLDERS my hj"M GRE is well positioned to succeed in an increasingly competitive business climate, y h0988, we moved aggressively to retain and build market share in our traditional gas ynd electric business. We acted decisively to seize new, unregulated business opportunities afforded by the restructuring of our industry. And we reached a landmark when the California Public Utilities Commission approved a settlement of the Diablo Canyon rate case.
All of these actions propel PG&E into a new era, and none more so than the Diablo Canyon decision it enables us to look to the future, not litigate the past. More importantly, it frees us to focus on management's top priorities: providing dependable energy services to customers at fair prices and increasing the value of shareholders' investment in PG&E.
In the short-term, the decision, although still subject to regulatory and possible judicial appeals, carried a significant price for PG&E and its shareholders.
It resulted in an after-tax write-off of $512 million to clear our books of uncollected Diablo Canyon revenues and other costs.That, combined with other write-offs totalling $64 million, reduced net income to $62 million for 1988. Afrer payment of preferred dividends, PGNE reported a loss last year of $.10 per share compared to earnings of
$1.53 per share in 1987.
In addition, our estimates of future earnings indicated that the previous
$1.92 dividend would not be sustainable during the settlement's early years.Therefore, the Board of Directors reduced the dividend to $1.40 per share.
We are convinced that the sett!cment was the best way to resolve the long outstanding issue of recovering our Diablo Canyon investment. Instead of risking the disallowance of a major portion of our investment, as proposed by some state officials, we have the opportunity to earn on our entire investment.
Now, we're ready to move PGRE forward into a more prosperous future.
Our strategy is based on several key objectives:
We're committed to keeping Diablo Canyon operating safely and reliably
-producing power for PG&E's customers and earnings for our shareholders.
We're determined to earn a full authorized return on the equity invested in our utility business, set at 13 percent for 1989 by the California Public Utilities Commission. Clearly, increasing competition make:, that more difficult. But it remains essential. Our basic gas and electric business will always be the major source of our earnings.
PG&E does business in a diverse and dynamic economy. Standing alone, our service area ranks as the world's ninth largest economy. And we intend to earn our full utility return in this powerful market by selling value: quality energy services at fair prices.
To do that, we are rigorously controlling costs to achieve competiHve prices. In 1988, PGNE's operating budget was again held close to 1986 levels. We reduced the size of our workforce even further-down a total of nearly 9 percent since 1986. We continued to offer customers in competitive markets a wide array of gas and electric service options at negotiated rates.This helped us retain $50 million of sales to 2
industrial customers considering cogeneration. In addition, we again negotiated vigorously to secure attractive natural gas prices from suppliers in Canada and California.
These efforts-combined with the area's strong economy-resulted in increased electric sales and total gas deliveries in 1988.
We are also moving to expand our markets. In 1988, we took the first steps to expand our gas transmission facilities from Canada and within California. These pipelines are the only direct link between the gas fields of Western Canada and utilities in the growing .
Southern California market.Their expansion is a promising investment opportunity for shareholders.
Managing our basic utility business is vital to our success. But it is also important to extend our business .
horizons beyond PG&E's regulated utility markets. Changes in' state and federal regulations are dramatically restructuring our j .,
industry, creating new opportunities to use our expertise and j experience in unregulated ventures.Through PG&E Enterprises,
.; 7 our unregulated subsidiary, we are making investments that offer our shareholders the potential for significant earnings growth in the 1990s.
We have entered the growing independent power generation marke' 'brough a joint venture with Bechtel Power Corporation. We w f he designing, building. financing, vice Chairman t and operating power plants nationwide to supply electricity to industrial customers star. ley T. skinner and other utilities. In 1988, our joint venture broke ground in Montana on its first power Oeft), Chairman plant project.
and Chief EunUn We also continued to boost our NGC Energy Company's holdings of proven natural gas reserves by baying Wessely Energy Company cf Dallas, Texas. We Officer Richard A.
believe we can produce this gas at low cost and market it profitably. Clarks and Presi-PGRE's strategy in the years ahead is clear and uncompromising. We ,,,,,,,,,,,, l intend to contmue providing our customers with high-quality electric and gas services at Maneatls.
fair prices. We will seek profitable unregulated business opportunities. And we are committed to operate Diablo Canyon as we have in the past-safely and efficiently. I am convinced that we have both an effective strategy to build shareholder value and the talented, hardworking people to make clos strategy succeed.
luchard A. Clarke Chainnan of the Board and Chief becutive Officer Februaq 2,1989 3
f t...........................................................................
O P E R ATIO N S REVIEW p rm .
gg Bgij othing stays the same forever. Businesses, organizations, and other
' mid$tdtens must all change to meet new times, new circumstances,and new 4 vm .
gononops. Even electne and gas utih. . ues.
l Put simply, the world in which we do business is changing
^g and we must change with it. New regulations, new technologies, and new 4
f 7' customer needs have all combined to open our once secure markets to a host of competitors: cogenerators; other gas suppliers; and even other utilities, d]
public and private.
PG&E saw this new, more competitive business climate
~
coming and began taking the steps necessary to transform itself from a regu- .
lated monopoly into a flexibic, fast-moving, and entrepreneurial company-a company ready to meet and beat its competition.
And we've made good progress. We've reorganized PG&E-first into regions and then into market sensitive and cost-ccuscious business units. We've cut our costs. And we've cut our prices in markets where we face competition. We've strengthened our marketing efforts. And we've taken major steps to increase our involvement in unregulated busi-nesses where we have experience and competence and which offer higher potential returns.
Now, with the costly, time-consuming, and protracted Diablo Canyon rate case behind us, we're ready to move even faster into the future. But one thing about PG&E will never change: our finn commitment to increasing this company's value to our shareholders. We're determined to offer them a solid combination of stock price appreciation and dividend yield.
PG&E's ability to make good on that promise rests on our ability to run the Diablo Canyon nuclear power plant well, to earn our full authorized return on basic utility operations, and to successfully expand our investment in unregulated businesses.
DIABLO CANYON O P E R ATIO N S p,n jN{ iablo Canyon plays a crucial role in our ongoing effort to build *"
Shardh61 der value. The reasons for that are clear. First, Diablo Canyon n x4 ""
gesents a major portion of PG&E's assets. And, under the settlement approved by the California Public Utilities Commission, we're paid primarily
~
for the power the plant actually produces. The arithmetic is simple and the conclusion inescapable. If the plant runs well, PG&E's revenues rise. If the plant runs poorly, revenues suffer.
84 M1 N6 II 87 88 sources of Gm Purch.twd lidlum.s ofCulu Int E Caldornu 5 Other Suin E Caula
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Given that fact, PG&E is working hard to maintain and even improve on Diablo Canyon's superb performance to date.
We've invested prudently to provide the plant's operators with one of the nation's most extensive training programs. And we've backed the expertise of our operators with an operations, maintenance, and man-agement computer network so advanced that it has been purchased by other utilities in the U.S. and abroad.
in addition, we've amassed a spare parts inventory of approximately 50,000 different line items. That helps us cut the time needed to make repairs, boosting the number of days Diablo Canyon is on line earning money for PG&E's shareholders.
in late 1988, Diablo Canyon's superior performance was recognized for the second consecutive time by the Institute of Nuclear Power Operations (INPO). The plant is currently one of only nine in the nation to receive INPO's top rating.
Clearly, our investments of time and resources are paying off at Diablo Canyon paying offin added safety and higher power pro-duction. At the close of 1988, both units had lifetime capacity factors of nearly 70 percent-higher than the national average for other nuclear plants of their type. With only one refueling outage scheduled next year, we hope to achieve an even higher combined capacity factor for the two units. That would result in a significant increase in plant revenues in 1989.
UTILITY BUSINESS g.m p , junning Diablo Canyon efficiently is essential to PG&E's financial
[ ffuturb, but running the plant efficiently cannot, by itself, secure that future.
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yrhat's why we remain committed to earning our full authorized return in our basic utility business. In 1988, the business of selling gas and electricity to customers provided revenues of $7.6 billion.There's a saying in the business world,"You go where the money is" And for PGRE, most of the money is and will remain in our basic utility operations. The key to long-term success m this part of our business is providing our customers with a combination of high quality service and price that our competitors can't match, m
In 1989, we will work to earn our utility return while continuing our drive to succeed in an iricreasingly competitive marketplace.
And controlling our costs remains the key to meeting both goals. Our progress in this area last year was dramatic.
For the third year in a row, PGNE held its operating budget m nearly flat. Since 1986 we've absorbed more than 314,000 new customers hv 84 81 26 87 88 Custonms IYr Employee Owest Fwwes)
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and cumulative 10.1 percent inflation without significantly increasing spend-ing on operations.The 1989 budget is also lean as we focus on services that customers value.
At the same time, our workforce reduction program continued to streamline PGRE, save money, and eliminate unnecessary work.
Since 1986 PG&E's total workforce has been cut by nearly 9 percent.
Management and staff support positions have been reduced by 11 percent.
Overall productivity gains can best be seen in the number of customers we serve per employee-up sharply from 240 in 1986 to 275 by the end of 1988, a 15 percent increase. And that ranks us among the most productive utilities in the country.
Despite a severely constrained budget and a significantly .
smaller workforce, our Quality of Service ratings from customers in 1988 were among the highest we've ever received. In 1988 PG&E once again achieved an exceptionally high electric service reliability factor of 99.968 percent. High-quality, dependable service continues to be a strong selling point as we compete vigorously for market share.
Workforce reductions and tight operating budgets weren't the only cost-cutting initiatives we took last year. During 1988 we reduced our cost of capital by refinancing $287 million of high-cost debt. All told, we've refunded over $3 billion of high-cost debt and preferred stock since 1985
-cutting the company's annual revenue requirement by about $110 million.
These savings, which are passed on to our customers, make us more compet-itive and help us retain our larger customers.
1988 also saw the introduction of an array of new systems designed to drive costs down and keep them down. For example, we devel-oped a new management compensation system that ties pay for all man-agement employees much more closely to PG&E's financial performance and business goals.This new system took effect onJanuary 1,1989.
VIG O R O U S MARKETING nyn%
p q ut costs are only part of the business equation. You still can't earn phoney for your shareholders unless you can sell your products and do so at ,,
{a pN> fit. PG&E understands that. That's why we're vigorously marketing our gas and electricity against an expanding array of competitors while also *"
pursuing new markets for our products. ,
During 1988 we used competitive pricing and aggressive marketing to avoid the loss of $50 million in sales to industrial customers. "
The negotiated electric rate contracts we signed last year retained 120,000 ,,
kilowatts ofload. Also during 1988, a new gas rate structure forlarge 0
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industrial and commercial customers went into effect. Under these new rates, customers have more choices: they can buy transport service,long-term gas, or spot-market gas-all from us. Between April andJune 1988, our access to low-priced gas supplies paid off as 600 large customers signed one-year contracts with PG&E. And whde we worked to hold onto our current custon.ers, PG&E's area development program helped bring new industry into our service territory and helped expand existing facilities-adding 42,000 kilowatts ofload and $11 million in annual revenues. Our sales figures for the year reflected continuing success. Total electric sales were up 3 percent in 1988, and total gas deliveries (sales plus transport) were 2.4 percent higher than they were in 1987.
- And we're determined to boost those sales even more in the years ahead. PGRE and its subsidiaries, Pacific Gas Transmission Company (PGT) and Alberta Natural Gas Company Ltd (ANG), are moving ahead with plans to expand their gas transmission pipelines from Alberta to California. PG&E plans a corresponding expansion ofits transmission system in Califomia. This expansion would let us dramatically increase deliveries of Canadian natural gas to Southern California utilities and the Pacific Northwest. In December 1988, PGT applied to the Federal Energy i Regulatory Commission for a Certificate of Public Convenience and Neces-sity-the first step in the regulatory process. In early 1989, PGRE expects to file with the California Public Utilities Commission for a similar certificate.
We've already accomplished a portion of the needed engineering and envi-ronmental work. If approved by regulators, the project could be in service carrying gas to South:m California by late 1993. UNREGULATED 8U$1NE55 rm a pdarning a full retum on our utility business can help secure PG&E's d[afue to shareholders, but we're determined to gc further. We're determined hto build shareholder value, not just to hold the line. And that's why we're u an actively seeking new, non-utility business opportunities. As we do that, we're being guided by three principles. First, PGRE will invest in unregubted businesses where we can add value through our expertise. Second, our ventures must have the potential of becoming large enough to contribute significantly to camings. And third, our investments
- have to offer the prospect of retums greater than those available in our regulated m utility business. Although these investments will not have an immediate u, impact on our earnings, we expect them to begin adding value to PG&E during VX) the mid-1990s.
50 0 l l 84 85 ' 86 87 88 Nonregulated Gas Reserves Bdiums of Cubw Fett
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At the end of 1988, PG&E's unregulated business unit, PG&E Enterprises, was focusing on several areas: PGRE Enterprises' wholly-owned subsidiary, NGC Energy Company, moved aggressively to buy more proven natural gas reserves during the year. With the purchase of Wessely Energy Company's sizeable U.S. oil ar.d gas assets, NGC Energy's proven gas reserves now stand at about 250 billion cubic feet, and further acquisitions are planned. We believe that we can produce and market these resources efficiently, resulting in increased profits for PGRE. Through our joint venture with Bechtel Power Company, PG&E Enterprises is entering the rapidly growing independent power pro-duction market, in 1988 financing was completed and construction started on our first project-an $80 million Montana plant fired by waste coal. Other projects across the nation are under review. PGRE is also preparing for an energy future that may be dramatically different and infinitely more varied-a future marked by wide-spread use of small-scale energy technologies like photovoltaic and fuel cells.
. In 1988, PG&E Enterprises acquired interests in two companies that are leaders in these advanced technologies. The "rst, Chronar Corp.,is develop-ing and merketing solar panels and products. The second, Energy Research Corporation,is developing fuel cell technology and advanced batteries. Our investments in these two companies offer shareholders the opportunity to participate in what may be the growth energy technologies of the next ten or twenty years.
Finally, we're looking at ways to maximize the return on one of our largest resources-our landholding. During the coming years, PG&E Enterprises expects to profitably develop certain properties which are surplus to the needs of the utility business. AN ERA OF CHANGE llearly, things have changed. A new era is opening-an era marked both y greater risk and by greater opt.ortunity. And PGRE has the strategy it
- pef to succeed in this new era. We have both the flexibility needed to adapt to changing times and the wisdom to rely on strengths we've always had: 70 dedicated, experienced employees; a devotion to high-quality customer services; and a determination to reward shareholders with superior returns 65 on their investment.
60 ss so l 84 85 86 87 88 Electric Sales adtous ofMrH
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DIABLO CANYON RATE CASE
'S E T T L E M E N T AGREEMENT
# hk/hn 12 December 191988 , , the California Public Utilities Comrrission
. ;,( CPUCQpproved a settlement of the Diablo Canyon rate case. This decision
$~sul,kd from a settlement recommended by the CPUC's Division of
. Ratepayer Advocates, the California Attorney General and PGRE. Some rate case opponents have filed applications for rehearing with the CPUC and may seek judicial review.
The settlement represents a significant shift from the way utilities have usually been paid for their investments in new power plants. It establishes a performance-based pricing mechanism for power generated at Diablo Canyon. Under the settlement, PGRE will collect revenues from the plant based primarily on how much powerit produces. And the company assumes the risk of running the plant safely and efficiently. The agreement sets a 1989 price of 8.34 cents per kilowatt-hour for Diablo Canyon power, with a fixed price component of 3.15 cents and a variable component. The variable component escalates at 11.5 percent a year through 1993, and by 9 percent in 1994. Thereafter further adjustments will be based in part on the Consumer Price Index. Essentially, increases in operating costs and capital additions must all be funded out of that price. The agreement reinforces PG&E's firm commitment to running Diablo Canyon safely. Safety has always been our first priority and the settlement is consistent with that commitment. It creates the strongest possible economic incentive for PGRE to operate the plant at the highest possible levels of safety, efficiency, and effectiveness. Put simply,if we don't, the plant won't run, and our revenues will decline. Finally, the settlement avoids rate shock for PG&E's cus-tomers with an initial average electric rate increase of about 5 percent in 1989. For the five years after that, the annual price adjustments awarded under the agreement are expected to raise electric rates by only 1.6 percent a year. 100 80 40 rill 9 20 0 ! 84 85 86 87 88 Energy Resources krcentage o(Total Aru Load WHydro RFossiland Geothermal - E Nudear EOther 14
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- S E L E CT E D 1 FIN A N CI A L lN FOR M ATIO N -
Pacific Gas and Electric Company.
- _ In Thousands (exceptpershareinformation) 1988 1987 1986 1985 1984 1 s
- .Operatingrevenues ' $ 7,645,748 $ 7,185,701. S 7,816,661 . S 8,430,981 . $ 7,829,703 - '
j Operating income $ 1,297,372 $ 1,261,701 $ 1,653,625 . $ 1,369,359 $ 1,103,388
; Net income ' $ 62,127 $ 688,517 $ 1,081,223 $ 1,030,805 $ ' 974,892 a 1 Eamings (loss) pei common share $ : (.10) $ . 1.53 ' $ 2.60 $- 2.65 - $ - 2.62
- Dividends declared per common share $. 1.66 $ 1.92 ~$ 1.90 ~$' 1.81 ~ $ 1.69'
. :At year-end
;- Book value per commbn share - l$' .16.79 - $ ' 18.68 $ 19.06 5 ' 18.05 5 .17.18 3j. ! Market price per cornmon share $ 17.50 $ .16.25 $ 24.25 $ '20.00 $ 16.38
- . Total assets _ $21,067,685 . $21,733,652 . $21,002,253 - $19,098,003_ $17,319,359 -
l Long-term debt, preferred s't ock, and capitallease obligations - $ 9,126,798 $ 9,521,984 $ 9,040,786 $ 9,187,957 . $ . 8,223,968 <
. 1 j . In 1988, net income decreased by 5576 million ($1.43 per share) as a result of the Diablo Canyon Nuclear Power Plant rate case settlement and -
- ' adjustments for various non Diablo Canyon costs, in 1987, operating revenues decreased by $717 million, operating income decreased by
$438 million and net income decreased by $486 million ($1.29 per share) due to the change in recording revenues related to Diablo Canyon; ,
- net income for 1987 increased by $91 million (5.24 per share) due to the change in method of accounting for unbilled revenues.These items are 1
- discussed in Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations and in Notes to Consolidated [
-;- Financial Statements; 1
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' O A N A.O E C E N T ' S SI5CUSSION A N B. A N A L Y S I 5 0F' CON 5OL1DATE3 j FINANCIAL CONDITION AND R E S U LT S OF O P E R ATIO N S Pacific Gas and Electric Company j
Results of Operstless _ In approving a settlement, the CPUC explicitly :
!l affirmed that Diablo Canyon costs and operations no . j Res enues and Earnings PerShare In 1988, the .
Company reported a loss of $.10 per common share I nger should be subject to CPUC reasonableness reviews. j compared to camings of $1.53 in 1987 and $2.60 in - The CPUC cannot bind future Commissions in fixing : 1986. The loss per share in 1988 was due to recording rates for the Company, but to the extent permitted by law :
' the effects of the Diablo Canyon Nuclear Power Plant intends that this decision remain in effect for the full j -l
- (Diablo Canyon) rate case settlement (discussed below), term of the settlement. : !
which reduced net income to a level insufficient to cover Applications for rehearing challenging the decision . j .
preferred dividend requirements. were filed by interveners inJanuary 1989 with the . : l Revenues in 1988 increased by $460 million from CPUC.These interveners may appeal any CPUC deci- j 1987 primarily due to the recovery ofincreased fuel costs sion to the California Supreme Court.The Company is j. and higher Diablo Canyon revenues. tmable at this time to determme the ultimate outcome . ,
' in May 1988, the California Public Utilities Commis, of an appeal,if made, or whether such appeal,if j sustained, would have a significant adverse jimpact on its~ g : ine j
- sion (CPUC) granted an additional interim rate increase for Diablo Canyon. On December 19,1988, the CPUC financial position or results of operations. _ :.
approved a settlement of the Diablo Canyon rate case. Under the settlement, the Company retained all interim j - non, and operating This decision resulted from a settlement recommended revenues received for energy provided throughJune 30, :: inume was su by the Company, the Califomia Attorney General and 1988, The settlement has no effect on the existing : the CPUC's Division of Ratepayer Advocates. decornmissioning trust fund and associated rate recovery. j nunon TheCom.
= The settlement, effectiveJuly 1,1988, adopted alter. As a result of the settlement, the Company charged : , q
"I""'
native ratemaking for Diablo Canyon by basing revenues to earnings approximately $871 million of Diablo Canyon j :j primarily on the amount of electricity generated by the revenues previously recorded but uncollected through : : earn the return on - i plant, rather than on traditional cost based rate- rates, as well as approximately $150 million oflitigation l l and other Diablo Canyon costs. In addition, the Com- j '""'U"*"' making. Under this " performance-based" approach, the l Company assumes a significant portion of the operating pany charged to earnings various non-Diablo Canyon j i authorized by the l
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risk of the plant.The extent and timing of the recovery costs, including the cost of discontinued energy projects : CPUC, excludinD
- of actual operating costs, depreciation and a return on and a reduction in the carrying value of certain oil and :
the investment in the plant depend primarily on the gas pmperties. The effect on earnings of the above j otable Canyon. l ' l amount of power produced and the level of costs incurred. charges was a decrease of $576 million after tax. : The Company's future earnings will be affected directly Primarily as a result of the adjustments necessitated j W by plant perfonnance and costs, by the Diablo Canyon rate case settlement, the Company : reported a significant reduction in earnings in 1988. : , However, the settlement provides the potential for' j j increased eamings if the plant continues its outstanding : performance and if costs remain as expected. . j f 9 In 1988, the Company reduced the quarterly common : j stock dividend, based on estimates that near term earn- : 1 ings would not be sufficient to sustain the higher ! f dividend. On an annualized basis, the new dividend is j j
$1 A0 per share compared to the previous dividend of :
$1.92 per share. 1 in 1987, revenues decreased by $631 million from j i 3
1986 because effectiveJanuary 1,1987, the Company : j changed its recording of revenues for Diablo Canyon - j l essentially'to reflect only amounts actually received : ) o through interim rates approved by the CPUC. Revenues
'" " " " " recorded for Diablo Canyon were $505 million in 1987 !
commi.ned compared to $1.2 billion in 1986. ;
+
Operating Rcwnues [k&m tm %ms)
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MANAOEMENT'S O I 5 C U S S I O N (Continued) Pacific Gas and Electnc Company To match revenues and expenses more closely, 1988 through December 31,1988, which reflect the
- effectiveJanuary 1987, the Company began accruing settlement, were $437 million.
revenues for service provided but unbilled at the end of The plant's average capacity factor for the second half j cach month. The cumulative effect of this accounting of1988 was 60% due to scheduled refueling outages
- change, as ofJanuary 1,1987, increased net income by for both Unit 1 and Unit 2 and to an unplanned outage j $91 million, net of related income taxes of $77 million.' for Unit 2.Through December 31,1988, the lifetime
- The effect of this change on years prior toJanuary 1, capacity factor for the plant was 70%.
j 1987 was not material. Under the settlement and for purposes ofillustration, In 1987, the Company offered an early retirement a Diablo Canyon capacity factor of 50% in 1989 would j plan to' qualified employees, which increased administra- produce 9.5 billion kwh or $800 million in revenues on
- tive and general expenses by $87 million before taxes. an annualized basis. A 60% capacity factor would pro-under the olabio - : In 1986, revenues decreased by $614 million from duce 11.4 billion kwh or $950 million in revenues, canyon settle. j 1985. Lower fuel costs passed on to ratepayers through A 70% capacity factor would produce 13.2 billion kwh
- lower rates were offset partially by revenues related to or $1.1 billion in revenues.
"'"8 ""lil'8 P' j Diablo Canyon.
tormance based : Allowancefor Funds Used During Construction j o IIt I988 1987 1986 WW MMincreasd sWyin M aher pricing mechanism, j Diablo Canyon rate case riettlement declining for four straight years. In 1987, AFUDC was
$(i.27) $ - $ -
PG& E's revenues : Non-Diablo Canyon costs (.16) - - reduced by $47 million for prior years' income tax effect
- Uncollected Diablo Canyon of the capitalization of construction period interest from the plant will amounts included in income - -
.98 Early retirement plan -
under the Tax Equity and Fiscal Responsibility Act of (.13) - be based primarily Unbilled revenues -
.24 _ 1982. There was no effect on net income because non-l CPUC reduction in rate of return utility income tax was reduced by approximately the on pre-established authomed on common equity (.04) (.06) ( I4) same amount. AFUDC increases net income but does prices for each Eamings per share impact $(1.47) $ .05 5 .84 not contribute to cash flows until construction is com-
{ pleted and projects are included in rate base. kliowatt hour of
. DiaMo Canyon Under the settlement, revenues are electricity gener. j based primarily on a pre-established price for each kilo- Ratemaking Balancing accounts help maintain the
- watt-hour (kwh) of electricity generated by the plant. Company's earnings stability. Energy-cost balancing sted by the plant, j (Pricing for Diablo Canyon is discussed in Note 2 to the accounts accrue for future recovery some costs of
- consolidated financial statements.)In addition, the gas and 91% of the costs of purchased power and fuels j Company may request floor payments if power genera. used to generate electricity.
l tion drops below specified capacity levels. Floor pay. Sales-fluctuation balancing accounts reduce the j ments insure that the Company will receive some revenue, impact on earnings of fluctuations in electric and core
- even if the plant stops producing power. However, gas sales. For electric and core gas customers, the CPUC
- payments received subsequently must be refunded to bases rates on estimated sales; differences between j customers under specified conditions. From the revenues revenues based on these estimates and actual revenues
- received for Dhblo Canyon, the Company must recover are accumulated in the balancing accounts for subsequent j most of the costs of owning and operating the plant, rate adjustment.
- including all future capital additions.
j Revenues for Diablo Canyon energy provided from
- January 1,1988 throughJune 30,1988, which reflect j interim rates and recovery of nuclear fuel costs approved
- by the CPUC, were $351 million. Revenues fromJuly 1, l
l 18 j O
j l Pacific Gas and Electric Company's (PG&E) gas cus- tioth the ARA and the energy-cost balancing accounts : tomers are separated into" core"and "noncore" classes provide rate relief for the impact of inflation, limiting its i by CPUC order. Core customers include all residential effect on PGRE's earnings. Diablo Canyon utes are ;
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cuttomers and commercial customers that do not based on a formula that considers inflation after 1994. exceed certain use limitations. Noncore customers are (See Note 2.) : industrial and larger commercial customers that meet On December 5,1988, PG&E filed its 1990 general certain size limitations. For noncore customers, PG&E rate case application requesting an increa se in revenues : offers an array of services including gas transportation. to become effectiveJanuary 1,1990. The total requested j While these changes give the Cempany greater Ocxibil- increase, after adjusting for changes in base rates as : ity in competing for some customers, they remove a result of the 1989 ARA, will be $333 million.This j some of the protection afforded previously by the gas amount consists of $246 million and $87 million for elec- : balancing accounts. tric and gas revenues, respectively. l The Attrition Rate Adjustment (ARA) enables the j Company to adjust for changes in financial and opera- Liquidity and CapitalResources : tional expenses in years between general rate cases. Didr/o Canvon As discussed in "Results of Operations" ! In December 1988, the CPUC authorized an electric the Diablo Canyon rate case settlement, effectiveJuly 1, revenue increase of $117 million and a gas revenue 1988, provides that revenues to the Company be based ! increase of $37 million,effectivejanuary 1,1989. Autho- primarily on the amount of electricity generated by the : rized retum on common equity for 1989 is 13% compared plant, rather than on traditional cost based ratemaking. ! to 13.1% for 1988. If Diablo Canyon operates well, the Company's cash ! l In December 1988, the CPUC changed its 1987 flows will improve significantly in future years. i ) l decision to eliminate the electric sales-Guctuation bal- : ) ancing account and the ARA for large light and power Capital &pem/itures Capital expenditures for 1989 customers.The elimination of these raremaking mech- are estimated to be $1.7 billion, consisting of $1.4 bil- ! anisms would have put PG&E's earnings at more risk as lion, including AFUDC, fo. utility construction and sales fluctuated. The CPUC is reviewing this issue further $300 million for investments in nonregulated businesses. ! ) and any possible changes are not expected to be effec- Utility construction expenditures primarily will be for : tive before 1990. reinforcing, replacing and modernizing the transmission ! The combination of balancing accounts and the cost' and distribution system and other facilities and : based regulatory environment has helped to reduce the I equipment. effects ofinflation on the Company's utility business. On December 20,1988, Pacific Gas Transmission ! Company (PGT), a wholly-owned subsidiary of the { Company, filed with the Federal Energy Regulatory Com- : mission to expand its existing gas pipeline facilities { from the liritish Columbia Idaho border to the Oregon- : 15 California border. The Company expects to file with the : CPUC in 1989 to expand its facilities from the Oregon-1" California border to central California. The proposed
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M A N A O E M E N T'5 0 8 5 C U S 5 i O N (Continued) Pacific Gas and IJectric Company j $945 million expansion of the PGT and PG&E gas billion more, subject to indenture provisions on camings
- systems is designed to transport Canadian gas to the coverage and property available as collateral. Despite
- Pacific Northwest, intermountain region and Southern the charges to camings for Diablo Canyon and other costs, j California utility markets. If regulatory approvals are the Company is in compliance with indenture provisions.
- received in a timely fashion, construction could be com- In 1987 and 1988, the Company reacquired certain older, j ' pleted by late 1993. high-cost securities to reduce financing costs.
l The Company also will require $69 million, $131 The Company issues short term debt (principally com-j million and $133 million to meet maturing debt and pre- mercial paper) for interim construction financing and
- ferred stock issues in 1989,1990 and 1991, respectively. for fluctuations in general working capital. Short-tenu j Capital is supplied by intemally generated cash flows debt also has helped fund fuel oil, gas inventories,
- and by extemal financings. Extemal cash flows from advances to gas producers, and unrecovered balances in Resolving the : common stock and long-term debt issued in 1988 sup- balancing accounts. Such borrowing provides flexibility Diable canyon j plied 49% of cash used to meet capital requirements to meet capital needs and to schedule long-term
- for 1988. debt issues.
rate case anows j Proceeds froni financings, net of refundings, during At December 31,1988, the Company had available PG4 E to focus on 1988,1987 and 1986 were: credit facilities totaling $703 million, none of which - i ,,,, ,,,, ,,,, was used at year-end, and short-term borrowings of the new business : $838 million. When balancing account revenues are opportunities n stod $ 378 $ 416 $ 536 undercollected, as in 1986,1987 and 1988, the Company
- tong-term debi 1,060 1,084 2,o44 must borrow until the revenues, plus interest, are presented by a Refundings (1,239) (515) (1,551) received in rates, changing and more Total proceeds 5 199 5 985 5 1,029 Capitalization ratios for the Company for 1988 and
- 1987 were:
competitive utility . I Industry. : Company's dividend reinvestment and employee savings Common stock 43% 44%
- plans. Long term debt has been sold in the United Preferred stock 8 7 j States and in European financial markets. long-term debt 49 49
- The Company's bond indenture permits mortgage Total capitalization i00% 100%
i bonds to be issued up to an amount approved by
- the Company's Board of Directors and the CPUC. At j December 31,1988, the Company had $6.5 billion out-standing in mortgage bends ind may issue up to $3.5 l
20 j
I STATEMENT OF. CONSOLIDATED INCOME Faufic Gas and Electne Company l
. Yean Endedikcember31 1988 1987 1986 :
In Thousands (exceptpershareamounts)
- Operating Revenues j l Electric $5,512,865 $5,133,028 $5,567,438 l Gas 2,132,883 2,# 2,673 2,249,223 j TbtalOperating Revenues 7,645,748 7,185,701 7,816,661 l Operating Expenses :
Cost of electric energy 1,666,071 1,383,497 1,252,414 j Cost ofgas - 1,031,353 899,981 1,100,936 : Transmission 142,572 135,435 .122,244 j Distribution 201,231 189,782 188,499 : Customer accounts and services 304,654 283,965 339,583 j Administrative and general 641,943 708,200 635,792 : Maintenance 382,366 341,118 352,230 : Depreciation 931,964 875,208 693,675 i Income taxes 508,258 603,012 927,647 : Property and other taxes 252,257 240,217 216,978 j Other 284,807 263,585 333,038 j 7bta/ Operating Expenses 6,348,376 5,924,000 6,163,036 j Operating income 1,297,372 1,261,701 1,653,625 j OtherIncome and(income Deductions) 5 Diablo Canyon rate case settlement (1,021,858) -
- j Income tax benefit related to Diablo Canyon rate case settlement 509,547 -
- l Allowance for equity funds used dudng construction 18,603 2,564 69,144 j Interest income 115,442 99,011 120,431 :
Other-net (55,258) 10,312 (37,760) j Tbtal Other income and(income Deductions) (433,524) 111,887 151,835 i Income liefore Interest Erpense 863,848 1,373,588 1,805,460 ! Interest Erpense : Interest on long-term debt 722,074 698,233 707,975 ! Otherinterest charges 91,813 77,845 58,802 : Allowance for borrowed funds used during construction (12,166) 316 (42,540) i Net Interest Erpense 801,721 776,394 724,237 ! Income llefore Change in Recording iInhilled Revenues 62,127 597,194 1,081,223 j Cumulative effect as ofJanuary 1,1987 of accruing unbilled revenues, ; net ofincome taxes of $77,045 - 91,323 - j Net Income 62,127 688,517 1,081,223 i Preferred dividend requirement 102,457 110,782 156,190 j Earnings (Inss) Applicable to Common Stock $ (40,330) $ 577,735 $ 925,033 j Weighted Average Common Shares Outstanding 401,775 377,723 355,937 5 Earnings (loss)l'er Common Share liefore Change in Retording j Unbilled Reavnues $ (.10) $1.29 $2.60 : Cumulative effect as ofJanuary 1,1987 of accruing unbilled revenues -
.24 - j I arnings (Ints)l'er Common Share $ (.10) $1.53 $2.60 i Dit idends Declarni l'er Common Share $1.66 $1.92 $1.90 5 The accompanying Notes to Consohdated Financial Statements are an integral part of this statement, i
- 21
CONSOLIDATED SALANCE SHEET Pacific Gas and Electric Company
- December 31 1983 1987
- In Tinmunds j A ssets
- Plant in Serche (at original cost)
- Electric j Non-nuclear $12,721,004 511,984,909
- Diablo Canyon 5,602,997 5,775,661 i Gas 3,889,030 3,594,959
! Total plant in service 22,213,031 21,355,529 j Accumulated depreciation (6,717,941) (6,208,992)
Diablo Canyon Net Planiin Sert
- ice 15,495,090 15,146,537 providos approx- Con 3trrution Uhrh in Progrest .837,941 923,746
- AJtunces to Gas Producers 280,333 334,767 Imately 2.2 mulloa 228,553 381,376
- Nuclear Fuciand Oll>er Capitallraws kilowatts of j Gas Inploradou costs 213,842 96,107
- Funds Heldhv ' trustee
~
143,458 217,226 capacity to the Investinents 106,106 86,840 Companys electric j Other 16,035 40,045 ,,,,,g,,,,, j Total 17,321,358 17,226,644 Current Assets C'"I #*"' I" ! Cash and cash equivalents 96,966 145,557 service represents j Accounts receivable
- Customers 1,001,969 962,922
{ Other 472,014 471,258 Company) total Allowance for uncollectible accounts (7,348) (8,340)
- Regulatory balancing accounts receivable 636,489 633,897 j Inventories j Fuel oil 109,400 100,590
- Gas stored underground 204,077 224,196 j Materials and supplies 216,921 168,246
- Prepayments 38,408 34,925
! Tota / Current Assets 2,768,896 2,733,251 l Deferred Charges
- Diablo Canyon balancing accounts (net of deferred revenue and j interest of $804,667 as of December 31,1987) -
871,144
- Regulatory assets 304,336 -
- Unamortized project costs 125,796 123,097 l Workers' compensation and disability claims recoverable 100,000 91,900
- Unamortized loss net of gain on reacquired debt 225,772 305,461 j Other-net 221,527 382,155
. l j 7btalDeferred Charges 977,431 1,773,757 j TotalA33 cts $21,067,685 $21,733,652
{ The accompanying Notes to Conwidned hnancial statements are an integral part of this statement. I
- I 22 :
mm. c-C Q N S O L l' d A T E D 5 5 A L A N C E SHEET-Pacific Gas and Electric Company . , , December 31 I '1988 1987 :
=
- In %usands _ _
Capitalization andliabilities . j Capitalization ; .
, : Common stock ; .
z $ 2,057,216_ $ 1,941,543 - l Additional paid-in capital '
'2,874,279 . .2,611,654 j
' Reinvested earnings ~ ' '1,978,432 2,699,108 j Common stock equity ' ., L 6,909,927 7,252,305 ' j -
Preferred stock without mandatory redemption provision 1,010,195 1,010,195 : Preferred stock with mandatory redemption provision 180,000 ' 195,000; j
' Long-term debt - 7,781,580 7,998,265 :
' 7btalCapitalization j ' 15,881,702 16,455,765 Noncurrentliabilities ^ :
. Capitallease obligations 155,023 318,524 j Customer advances for construction 145,351 159,907 L :
Workers' compensation and disability ' claims 100,000' 91,900 :
. Other 152,689 172,781, j TbtalNoncurrentliabilities . 553,063 743,112 '
' Current liabilities .. . : [q Short tenn borrowings 858,232 554,024 j j Accounts payable : :
Trade creditors 450,770 482,938 :- Other 230,214 244,180 ' { ~
. Accrued taxes - -23,671 101,627 ::- !
Deferred income taxes 287,784 275,245 :
- Long-term debt 55,728 71,620 'i )
- Capitallease obligations 225,839 .77,874 : -1 Interest payable c 71,181 75,228 i
' Dividends payable 145,555 186,001 ;
- Amounts due customers 109,006 77,983. j .l Other 74,497 81,928 .j- )
TotalCurrentliabilities 2,532,477 ' 2,228,648 : j Deferred Credits ;. 'l Deferred investment tax credits 546,078 353,481 j Deferred income taxes 1,319,139 1,499,155 l Other 235,226 253,491 j '] [ 7bta/Dc/ erred Credits 2,100,443 2,306,127 ! L
- l Contingencies (Note 10)
'. l
, ;7hral Capitali:ation aud liabilities . $21,067,685 $21,733,652 j ' !
l
- j
- " . l l
l L : l : ; L : l l
.c : I o
- '23 (J : .;
' _ I .. . _ _ _ _ _ _ .
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STATEMENT OF CONSOLIDATED CASH FLOWS Pacific Gas and I:lectric Company Yean Endedikcember31 1988 1987 1986
- In husands Cash Flows Froin Operations
- Net income $ 62,127 5 688,517 $1,081,223 j Adjustments to reconcile net income ta net cash provided by
- operating activities j Depreciation 931,964 875,208 693,675
- Deferred taxes 206,702 48,345 372,904
- Regulatory balancing.iccounts j Diablo Canyon 871,144 -
(713,405)
- Other (2,592) (145,507) 17,151
" " """ Deferred taxe., related to regulatory balancing accounts (445,087) 124,451 356,652
{ procedures require : Change in r,perating assets and liabilities Accour.ts receivable (40,795) (417,470) (11,457)
! Fuel o 1 and gas inventories 11,309 35,183 60,900 Consolidated Cash j Accounts payable (46,704) 44,776 (88,516)
' Accrted taxes (77,956) 51,793 20,186
- Othei working capital (32,613) 16,343 (52,562) vides shareholders j Othe -net 359,128 500,592 104,250 with reinant j Net Cash Provided By Operations 1,796,627 1,822,231 1,841,001 Informauen shut j Investing Activities
- Construction expenditures (1,316,654) (1,326,211) (1,764,556)
PG&E's cash Other-net 8,531 158,067 (38,760) receipts and cash j Net Carh UsedIn Investing Activities (1,308,123) (1,168,144) (1,803,316) paymenta during $ Financing Activitics
- Common stock issued 378,233 415,898 536,299
! Preferred stock redeemed (15,000) (268,976) (243,242) j Long-term debt issued 1,059,570 1,083,703 2,044,300
- Long-term debt matured or redeemed (1,262,191) (314,136) (2,228,335)
{ Long-term debt purchased for sinking fund (at cost) (69,515) (71,340) (63,615)
- Short-term debt issued (redeemed) 304,208 (547,189) 580,778
- Capitallease payments (80,504) (97,432) (91,544)
{ Dividends paid (810,044) (840,466) -(814,582)
- Other-net (41,852) 13,204 (21,334)
{ Net Cash Usedin Financing Aclivities (537,095) (626,734) (301,275) j Net Change In Coh and Ca(b Equivalents (48,591) 27,353 (263,590) { Cah and Cash Equitulents at January l 145,557 118,204 381,794 j Gnh and Carh I quirutenIs aI Deccmher 31 $ 96,966 $ 145,557 $ 118,204 f Supplemental disclosures of cash flow information
- Cash paid during the year for:
j interest $ 748,272 $ 736,107 $ 731,978 l
- Income taxes $ 414,348 5 250,817 $ 309,571
{ The acmmpanymg Notes to Consolidated Financial Statements are an integral part of this statement.
- i
- I 24 j l
STATEMENT OF CONSOLIDATED COMMON STOCK E Q UIT Y i AND POEFEORED STOCK
' Pacific Gas and Electric Company Preferred Preferred :
Stock Without Stock With : [ Addaional Common Mandatory Mandatory : Commun Paid-in Reinsested Stock Redemption Redemption : In Thousands (exceptshares) Stock Capital Eamings E+ity Pronsion Prosision . l Balance, December 31,1985 $1,686,741 $1,790,222 $2,610:512 ' 36,087,475 $1,427,451 $ 252,500 : Net income-1986 1,081,223 1,081,223 i Common stock sold : (23,519,364 shares) 117,597 418,702 536,299 j Common stock issued : for PGT merger j (7,259,530 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) : t Foreign currency j translation adjustment (105) (105) { Balance, December 31,1986 1,840,636 2,319,344 2,855,748 7,015,728 1,207,865 225,285 : Net income-1987 688,517 688,517 i Common stock sold : (20,181,371 shares) 100,907 314,991 415,898 j Preferred stock redeemed (8,209,650 shares) (22,681) (22,681) (197,670) (30,285) j l Cash dividends declared : Preferred stock (120,992) (120,992) j Common stock (728,873) (728,873) : 1 Foreign currency : translation adjustment 4,708 4,708 j IJa/ance, December 31,1987 1,941,543 2,611,654 2,699,108 7,252,305 1,010,195 195,000 i Net income-1988 62,127 62,127 j Common stock sold : (23,134,679 shares) 115,673 262,560 378,233 : Preferred stock redeemed j (150,000 shares) 65 (18,407) (18,342) (15,000) : Cash dividends declared j Prefened stock (102,752) (102,752) : Common stock (666,846) (666,846) { Foreign currency : translation adjustment 5,202 5,202 j llalance, December 31,1988 $2,057,216 $2,874,279 $1,978,432 $6,909,927 $1,010,195 $ 180,000 i The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. j j 25
STATEMENT OF CONQOLaDATED C A PIT A LIZ ATIO N Pacific Gas and Electric Company
- December 31 1988 1987 s
- In Thousands (except percentages and slures) f Cnmmon stock, par value $5 per share (authorized 800,000,000 shares, issued and outstanding at December 31,1988: 411,443,226;
; 1987:388,308,547) $ 2,057,216 $ 1,941,543
! Additional paid-in capital 2,874,279 2,611,654-l Reinvested earnings 1,978,432 2,699,108 j Common Siock Equity 6,909,927 43% 7,252,305 44%
! Preferred stock without mandatory redemption provision j Par value $25 per share (authorized 75,000,000 Shares)
The Company con Nonredeemable l tlnued to reacquire j 5% to 6%-5,784,825 shares outstanding 144,621 144,621
- Redeemable older, high cost 338,373 338,373
- 4.36% to 8.2%-13,534,959 shares outstanding debt to reduce j 9% to 10.46%-21,088,034 shares outstanding 527.201 527,201 financing costs.
1,010,195 1,010,195 8-
- Preferred stock with mandatory redemption provision During 1988 : Par value $100 per share (authorized 10,000,000 shares) j 9% to 10.17%-1,800,000 and 1,950,000 shares outstanding 180,000 195,000 s287 million of 7hta/ Preferird Stock 1,190,195 8% 1,205,195 7%
debt, with interest :
; Pacific Gas and Electric Company rates ranging fron' j First and refunding mortgage bonds Maturity interest Rates
~
L 12 to 13 percent, l
- 1988-1993 3.375% to 13% 393,675 418,640 was reacquired.
! 1994-2016 4.25% to 8.125% 1,623,929 1,623,929 j 1996-2020 8.2% to 8.875% 1,709,984 1,709,984
- 1994-2020 9% to 10% 1,882,880 1,885,000 1994-2019 10.125% to 14% 930,476 1,194,195 i Principalamounts outstanding 6,540,944 6,831,748 j Unamortized discount net of premium (93,229) (103,008) j Total mortgage bonds 6,447,715 6,728,740
- Unsecured debentures,10.8% to 12%, due 1994-2000 223,650 223,650 Pollution control loan agreements, variable rates, due 2008-2016 925,000 925,000
- Otherlong term debt 159,202 36,134
- TotalPG&Elong-term Debt 7,755,567 7,913,524
- 1.ong-term debt of subsidiaries 81,741 156,361 5 1htall.ong-term Debt of PG&EanJSubsidiaries 7,837,308 49% 8,069,885 49%
Irss long-term Debt-Current Portion 55,728 71,620 Lone-term Debtin ThtalCapitali:ation 7,781,580' 7,998,265 j 1hta/ Capitalization $15,881,702 $16,455,765 j The accompanymg Notes to Consohdated financial Statements are an integral part of this statement.
- i
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l 26 i
A. , 4,
~ SCHEDULE-OF: C O N S O L I D A T E G S E O O2 E N T 'I N F O R M A T I O N Pacific Cas and Electric Company .
intersegmeurt - Years Fisdalikcember31 Dectric Gas Giminations Total i:
- In Thousands
'1988' . . .
j
- Operating revenues - 1 $ 5,512,865 u $ 2,132,883 . . . . , $ 7,645,748 :
Intersegment revenues (a) ' 9,807 -717,833 $ - (727,640) -.j 7 bra / Operating Revenues . 5 5,522,672 $ 2,850,716 $ '(727,640)' $ 7,645,748 !-
- Depreciation L $ ~ ' 716,539 ' .5 215,425 $.- 931,964 . j Operating lucome Before Income 7kre3(b) ' $ 1,587,438 $ 218,192 $ 1,805,630 :
Construction Expenditures (c) . $ 918,192 $ : 398,462 . . $ 1,316,654 .
' identifiable assets (c) $16,058,553 : $ 4,079,365 . . $20,137,918 j Corporate assets <
= 929,767 j 3
7bta/Asuis- ,
$21,067,685 j 1987 :
Operating revenues $ 5,133,028 $ 2,052,673 '$ 7,185,701 j
- Intersegment revenues (a) 7,724 631,981 ; $ (639,705)
- l 7btalOperating Retenues $ 5,140,752 - $ 2,684,654. $ (639,705) $ 7,185,701 j Depreciation - t, $ 674,135 $ 201,073- -$ 875,208 :
Operating income Before Income 7kres(b) $ 1,574,483 $ 290,230 $ 1,864,713 ~ j l Construction Expenditures (c) $ 946,046' 5 380,165 $ 1,326,211 : ; identifiable assets (c) . $16,874,666 $ 3,765,079 $20,639,745 : -l
- Corporate assets l 1,093,907 j l 7bta/ Assets $21,733,652 !
1986 j Operating revenues $ 5,567,438 . '$ 2,249,223 $ 7,816,661 ' :
- '{
Intersegment revenues (a) '7,817; 515,293 $ (523,110) 7bta/ Operating Retenues 5 5,575,255 $ 2,764,516 $ (523,110) $ .7,816,661 !
' Depreciation $ -550,205 $ 143,470 $ ' 693,675 j Operating Income Before Income 7 ires (b) $ 2,249,726 $ 331,546 $ 2,581,272 : l Construction Expenditures (c) $ 1,442,096 f $ 322,460. ' $ 1,764,556 j !
Identifiable assets (c) ' $16,296,396 $ 3,582,476 $19,878,872 : -1 Corporate assets -1,123,381 j l
. 7btal Asseis $21,002,253 j l (a) Intersegment electrie and gas revenues are accounted for at tanff rates prescribed by the CPUC. ' :
- (b)locume taxes and general corporare expenses are alhxated in accordance with the FERC Unifonn System of Accounts and requirements of j the CPUC. Operating income in the Statement of Consolidated income is net of income taxes. .
(c) Includes an alk, cation of common plant in service. : l l l
' The accompanying Notes to Consolidated Financial Statements are an integral part of this schedule. :
" 1 j .I
- 1 c :
- i j 27
x
.r >
b JNOT E S : TO C O N S O L I S A T E D L F I N A N C I A L' S T A T E U E N T S /
, Pacific Gas and Electric Company ,
For the Years Ended December 31,1988,1987 and 198s The CPUC autherizes the use of balancing ac'countsi j liste1 - which' reduce camings fluctuations from changes in D
- Susumen of SigalAsset Asseusting Pelleles sales and costs of providing electricity and gas. The l ,
j Accounting Recon /s The accounting records of Pacific L balances of these accounts represen't amounts that will ' l - Gas and Electric Company (PG&E) are kept in accor- . . - be recovered from, or repaid to, customers by adjust .. j dance with the Uniform System of Accounts prescribed ; ments to future customer rates. The CPUC reviews the
- . by the Federal Energy Regulatory Commission reasonableness of the amounts in these accounts.
j (FERC) and adopted by the Califomia Public Utilities ' - .
. .m
- : Commission (CPUC). Plant in Service The costs of plant additions, including ; j replacements of plant retired, are capitalized. Costs - 'j j Principles of Consolidation The consolidated financial . include labor, material, construction overheads and an . j l statements include PG&E arid its wholly-owned and allowance for funds used during construction (AFUDC).'
j majority'-owned subsidiaries (the Company). All signifi- AFUDC is the cost of financing the construction of . , 4
- cant intercompany transactions are eliminated. ' new facilities. EffectiveJuly 1,1988, firmncing costs of c h, j ' Major subsidiaries are: Pacific Gas Transmission ~ capital additions for Diablo Canyon Nuclear Ibwer Plant
^
- . Company (PGT)-transports and sells natural gas out- (Diablo Canyon) are calculated under Statement of j side California;' Alberta and Southern Gas Co. Ltd. Financial Accounting Standards (SFAS) No. 34, Capitali-
_ . -]
-l (A&S)-buys gas in Canada and arranges transport to ' zation o[lnterest Cost, since Diablo Canyon is no longer 1 j the U S. border; PG&E Enterprises-holding company on a cost-based ratemaking basis. (See Note 2 for' discus-
- . for the nonregulated subsidiaries of PGRE, including . sion of the Diablo Canyon rate case settlement.) Costs'. 1 j NGC Energy Company, which acquires and operates . '
of depreciable retired utility plant plus removal costs less . salvage are charged to accumulated depreciation. -
']
.: oil and natural gas production properties.
Alberta Natural Gas Company Ltd (ANG), nn affiliate . . Property maintenance, repairs and minor replacements 1 i of PGT, owns and operates a pipeline in Canada, which ~ i and additions are charged to maintenance expense. 1
- transports natural gas for A&S to the U.S. border. The . .
j investment in ANG, a less than 50% owned affiliate is Depreciation For financial reporting purposes,'depre-l accounted for by the equity method of accounting. ciation of plant in service is computed using a straight-j _' line remaining-life method. For federal income tax
- Revenurs Revenues include billings to customers, purposes, the most liberal depreciation methods allowed j accrued unbilled revenues and changes in regulatory by the In'temal Revenue Code generally are used.
' ~
j
; balancing accounts.- 4
; Before 1987, revenues were recognized as customers Incbme 7 axes PG&E files a consolidated federal a
~
j were billed throughout each month. To match revenues income tax return that includes subsidiaries in which its
- and expenses more closely, effectiveJanuary 1,1987,' o'wnership is 80% or more. .
j the Company began accruing revenues for service pro- Income tax expense includes the current income tax '
- vided but unbilled at the end of each month. The effect expense resulting from operations during the year, plus j of this change on years prior toJanuary 1,1987 was '
~
deferred income taxes on most of the major timing
- not material.' differences between finAcial statement and income j tax reporting, to the extent permitted for ratemaking :(
; purposes.These timing differences are itemized in the
- deferred tax section of Note 8. Deferred taxes also are
! provided for the benefits recognized for investment tax ';
- credits. These tax credits are amortized to income over . !
j the life of the related property. s
; 1 f28 :
~; I
Although the tax effects of most major timing differ- Investing and financing activities include the following j ences are deferred, others are recorded currently (flowed non-cash transactions: : through). Timing differences for which flow through In 1986, the Company issued $143 million of : accounting is utilized include certain capitalized over- common shares to increasa to 100% its ownership of i i heads, percentage repair allowances, excess depreciation PGT. : ) for state tax purposes, and removal costs and federal Capital lease obligations, primarily for nuclear fuel, j j tax depreciation on property acquired prior to 1981. increased by $50 million, $48 million and $83 million, : Prior to 1982, PG&E used flow-through accounting in 1988,1987 and 1986, respectively. j for timing differences for which related deferred income : taxes were not included in rates. Consequently, PG&E Rec /msifications Prior years' amounts in the consoli- j , has not provided deferred income taxes for those timing dated financial statements have been reclassified where :
- l differences.The cumulative net amount of the timing necessary to conform to the 1988 presentation. !
differences for which deferred income taxes had not : I been provided at December 31,1988 was approximately Note 2 : .l
$2.1 billion for federal purposes and $2.4 billion for Diablo Canyon j state purposes. The Company expects to recover the Rate Case Settlement On December 19,1988,the :
tax effects of these timing differences in future rates. CPUC approved a settlement of the Diablo Canyon rate ! case. This decision resulted from a settlement recom- j l Debt Premium, Discount and Related &penses mended by the Company, the California Attomey : { long-term debt premium, discount and expense are General and the CPUC's Division of Ratepayer Advocates. : amortized over the life of each issue Gains and losses The settlement,effectiveJuly 1,1988, adopted alter- ! on reacquired debt are amortized over the remaining native ratemaking for Diablo Canyon by basing revenues : onginal lives of debt reacquired, consistent with rate- primarily on the amount of electricity generated rather i making. EffectiveJuly 1,1988, gains and losses on than on traditional cost-based ratemaking. In approving : { reacquired debt allocated to Diablo Canyon are recog- a settlement, the CPUC explicitly affirmed that Diablo nized in income since Diablo Canyon is no longer on e Canyon costs and operations no longer should be ! ! cost-based ratemaking basis. (See Note 2.) subject to CPUC reasonableness reviews. The CPUC j ! cannot bind future Commissions in fixing rates for the : Inventories EffectiveJuly 1,1988,the Company Company but to the extent permitted by law intends : reduced the carrying value of nuclear fuel to current that this decision remain in effect for the full term of i market value. (See Note 2.) Other inventories are valued the settlement. : at average cost except for fuel oil, which is valued by Applications for rehearing challenging the decision j the last-in first-out (1.lFO) method. were filed by interveners inJanuary 1989 with the : CPUC.These interveners may appeal any CPUC deci-Oiland Gas Ihp/ oration Costs NGC Energy Company sion to the California Supreme Court.The Company is ! uses the successful efforts method of accounting to unable at this time to determine the ultimate outcome determine the profits and losses on nonregulated oil and of an appeal, if made, or whether such appeal,if i gas exploration, development and production, sustained, woukt have a significant adverse impact on j its financial position or results of operations. : Statement of Consolidated Cash Hows As required by The settlement provides that certain costs of Diablo SFAS No. 95, Statement of Cash Hows, a statement of Canyon aggregating $1.056 billion will continue to be ! consolidated cash flows replaced the statement of con- recovered, including a full retum, through base rates. : solidated funds used for construction for fiscal years A portion of these costs, consisting of the loss on reac- I ended December 31,1988,1987 and 1986. quired debt previously deferred, the reduction to market ! For purposes of reporting cash flows, cash and cash : equivalents include special deposits, working funds and short-term investments (at cost which approximates : market). j
! I
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' 29 1- _________________m
NOTES TO CONSOL1 DATED fin A N C1 A L 5 T A T E M E N T S (Continued) Pacific Gas and fjecmc Company
- value of nuclear fuel and a provision for deferred taxe ,8.34 cents /kwh,8.93 cents /kwh,9.6 cents /kwh,10.34 j for items previously flowed through, totaled $310 mil- cents /kwh,11.16 cents /kwh and 11.89 cents /kwh. For
- lion atJuly 1,1988 and was included as regulatory assets 1995 through 2016, the escalating component will be j in deferred charges in the consolidated balance sheet. adjusted by the change in the consumer price index
- Regulatory assets for the remainder will be recorded upon ' plus 2.5%, divided by two.
j adoption of SFAS No. 96, Accountingfor fncome Thres. if power generation drops below specified capacity
- Other than the aforementioned costs, Diablo Canyon levels, the Company may trigger an annual revenue door j transactions no longer meet the criteria for application provision, or under certain conditions, seek abandon-
- of SFAS No. 71, Accounting [or the Effects o/Certain ' ' ment (discussed below).Yloor payments insure that the
- Types of Regulation. Consequently, application of this Company will receive some revenue, even if the plant j statement was discontinued for Diablo Canyon effective i stops producing power. Floor payments are based on
- July 1,1988. '
Lthe prices set in the agreement at a 36% capacity factor j Recovery of actual operating costs, depreciation and from 1988-97 (reduced by 3% each time the floor
- a return on the investment in the plant depends on how . p rovision is exercised and not repaid) with the capacity j well the plant performs and the level of costs incurred, factor decreasing in the future. Floor payments must be
{ : with the Company bearing a significant portion of the refunded to customers under specified circumstances. j risk of operating the plant. The Company's camings ff actual operation falls below the floor capacity factor
- will be affected directly by plant performance and costs, in three consecutive years, whether or not the floor j As a result of the settlement, the Company charged payment provision has been triggered, the Company
- to earnings approximately $871 million of Diablo must file for abandonment or explain why continued .
- Canyon revenues previously recorded but uncollected application of the settlement is appropriate. In the event j through rates, as well as approximately $150 million of of a pmionged plant outage and the Company files for
- litigation and other Diablo Canyon costs. abandonment, the Company may ask for the recovery j Under the settlement, the Company retained all of the lesser of(a) floor payments allowed for ten years,
- interim revenues received for energy provided through less any years of floor payments already received and not j June 30,1988.The settlement has no effect on the repaid, or(b) $3 billion, reduced by $100 million per year
- existing & commissioning trust fund and associated of operation onJanuary 1 of each year starting in 1989.
j rate recovery.
- lleginnin;; July 1,1988, revenues were based on a Decommicioning Costs in 1987, the CPUC granted j pre-established price per kilowatt-hour (kwh) consisting the Company $53 million in annual revenues to provide of a fixed component (3.15 cents /kwh) and an esca- for the future costs of decommissioning Diablo Canyon.
- lating component for each kwh of electricity generated This amount is based on the most recent estimate of j by the plant, as prescribed by the rate case settlement. the decommissioning cost of $579 million (computed in
- From July 1,1988 to December 31,1988, the total price 1985 dollars), which includes a contingency factor of j was 7.8 cents per kwh. Prices for the years 1989 50% for expected changes in regulatory requirements
- through 1994, effectiveJanuary 1 of each year, will be and waste disposal cost increases.
j As of December 31,1988, approximately $90 million
- had been deposited in an external trust fund to be used j for the decommissioning of Diablo Canyon and was included in funds held by trustee in the consolidated
__l_____.______.
balance shee. Funds may not be released from the trust accumulated and unpaid dividends and a redemption : fund until authorized by the CPUC. premium under specified circumstances. j As required by federallaw, the U.S. Department of As required by the FERC, reinvested earnings were : Energy (DOE) is responsible for the future storage and adjusted in 1988 for the net loss of $18 million from disposal of spent nuclear fuel. The cost of these activi- prior years' redemptions of preferred stock. The loss is : ties is funded through a one-tenth of one cent fee on being collected from ratepayers over 10 years as autho- j each kwh generated by all nuclear power plams, including rized by the CPUC. : Diablo Canyon. This fee is deposited with the DOE.The Preferred stock dividends are cumulative. All shares j cost of nuclear fuel, including the spent fuel fee,is recov- of preferred stock have equal preference in dividend and : erable through the Diablo Canyon settlement revenues. liquidation rights. Upon liquidation or dissolution of PG&E, holders of the preferred stock would receive the : Note 3 par value of such shares plus all accumulated and : Preferred Stock unpaid dividends, as specified for the class and series. j Nonredeemable Preferred Stock Without Mandatory i Redemption Provision ($25 par) consists of a 5%, a 5.5%, Note 4 : . Long-term Debt j I and a 6% series, which have rights to annual dividends l per share of $1.25, $1.375, and $1.50, respectively. Mortgage Bonds The First and Refunding Mortgage : Redeemable Preferred Stock Without Mandatory Bonds of PGRE are issued in series, bear annual interest j Redemption Provision ($25 par)is subject to redemp- rates ranging from 4.25% to 14% and mature from l February 15,1989 to August 1,2020. Additional bonds : j tion,in whole or in part,if the Company pays the y specified redemption price plus accumulated and unpaid may be issued up to a maximum total outstanding of j dividends to the redemption date. Per share information $10 billion, assuming compliance with indenture cove-is as follows: nants for earnings coverage and property available as j i
' "' " '" " " " ' ' "' '" "E "
series Annuamividend Redemptirm Price b. mcluding depreciation and interest be erlual to or greater than 1.75 times the annual interest charges on PG&E's j j 9 INN s!.5)$Yl !!')[jjjj s mortgage bonds outstanding. Despite the charges to l Preferred Stock With Mandatory Redemption Provision earnings for Diablo Canyon and other costs, the : ($100 par) consists of a 9% and a 10.17% series, each Company is in compliance with the covenant. The Board j l entitled to a sinking fund providing for the retirement of of Directors of PG&E may increase the amount auth- : stock outstanding at $100 per shart plus accumulated orized, subject to CPUC approval. All real preperties and j i substantially all personal properties are subject to the : l and unpaid dividends.The total redemption cost, exclud-ing any accumulated and unpaid dividends, for each of lien f the indenture. Stock representing PG&E's invest- : ments in subsidiaries is pledged as collateral for the years 1989 through 1993 is $13 million. In addition to sinking fund retirements, the 9% PG&E bonds. j series, and after August 14,1993, the 10.17% series, may : be redeemed at PG&E's option for $100 per share plus j l l l 31
. --___--___________m
NOTE $ TO CONSOLIDATED F1N A N C1 A L $ T A T E M E N T $ (Continued) Paci6c Gas and Electric Company
- PG&E is required by the indenture to make semi- PGRE also has additionalloans with the agency totaling j annual sinking fund payments on February 1 and August - $423 million with interest rates ranging from 6.25% to
- 1 of each year for the retirement of the bonds. The 8.875% and maturities fromJanuary 1,2007 to i payments equal % of 1% of the aggregate bonded indebt- December 1,2018. These loans are secured by PG&E's
- edness outstanding on the preceding November 30 and First and Refunding Mortgage Bonds.
- May 31, respectively. Bonds of any series, with certain j exceptions, may be used to satisfy this requirement. Iong-term Debt ofSubsidiaries in October 1988,
- In addition, holders of Series 84D Bonds maturing on Pacific Gas and Electric Finance Company N.V. redeemed, j November 1,2017 have an option to redeem their bonds at a premium, $75 million ofits 12% Guaranteed
- onJune 1,1995. Debentures which were due in 1991.
j PGRE continues to reacquire high-cost debt when it
- is economical to do so. In 1988, PGNE reacquired $212 Repyment Schedule For the years 1989 through 1993,
- million ofits outstanding First and Refunding Mortgage the Company's combined aggregate amount of debt
! Bonds with interest rates ranging from 12% to 13%, at a maturing and sinking fund requirements, as of Decem-
- redemption premium of $25 million.The premium is ber 31,1988,is $56 million, $118 million, $120 million, j amortized over the remaining originallives of the debt $146 million and $345 million.
- reacquired. EffectiveJuly 1,1988, the portion allocated j to Diablo Canyon was recognized in income. (See Note 2.) Note 5
- InJanuary 1989, PG&E issued $200 million of Series Short term Borrowings j 89A First and Refunding Mortgage Bonds at 9.95%, to PG&E has credit facilities with 24 banks to support
- mature February 1,2022. Proceeds will become part of the sale of commercial paper and for other corporate j the general funds of the Company and will be used for purposes. These credit facilities are renewed annually
- construction expenditures and to finance the redemp- - for a three-year period and total $640 million, none of j tion, repayment, or retirement of outstanding indebted- which was used at December 31,1988. The Compcny
- ness or preferred stock. must comply with certain covenants, the most restrictive i of which requires that the Company maintain a posi-
- E//ution Controllean Agreements PG&E has loans tive balance in its reinvested eamings account. PG&E j from an agency of the State of Califomia to finance air made no significant borrowings against these facilities
- and water pollution control, and sewage and solid waste during the year.The usual maturity for commercial paper
- disposal facilities. In 1988, PG&E borrowed $925 mil- is 10 to 90 days.
j lion to refund existing loans with the agency. Average A&S maintains a $35 million (Canadian)line of credit
- annualinterest rates for 1988 ranged from 4.9% to with a bank to support the sale of commercial paper j 5.2%. Interest rates on the $925 million in loans vary for take-or-pay payments on gas contracts. PG&E has
- depending on whether the loans are in a daily, weekly, executed guarantees to assume liabilities not to exceed j commercial paper, or fixed rate mode. Conversions $350 million on commercial paper and a bank line of
- from one mode to another take place at PG&E's option. credit for A&S to cover take-or-pay borrowings. (See j These loans are subject to redemption by the holder on Note 9.) A&S also maintains lines of credit with four
- demand under certain circumstances. The Company's banks totaling $25 million (Canadian) for operations. As
- obligations for such demands are secured by irrevocable of December 31,1988, A&S had :.a significant borrow-i letters of credit terminating in 1995, unless extended. ings outstanding against either of these lines of credit.
j PGRE has an agreement with Pacific Energy Trust
- (PET) which permits borrowing of an amount up to the difference between $380 million and PET's investment j
in nuclear fuel with a maximum of $152 million. As of
- December 31,1988, PG&E had no borrowings out-l standing against this agreement.
32 i _-___l____
j l
. The Company pays fees to the banks for credit facihues reurement plan) and $107 million for 1988,1987 and : j and other banking services. .
1986, respectively. { i Short term borrowings are principally commercial The plan's funded status was: : I
' paper with weighted average interest rates of 9.7% and 8.3% in 1988 and 1987, respectively. $N,3[ . ' "#I a Actuarial present value of projected 1 Note 6 benefit obligations : 1 vested benefits . $1,777,000 $1,581,618 j l
- Nuclear FuelI. eases 154,711 65,901 Nonvested benefits , 1 PG&E leases nuclear fuel from PET for use at Diablo Accumulated benefit obligation 1,931,711 1,647,519 i j
; Canyon. There are two leases; one lease expires in 2030 Effect of projected future : ]
c mpensationincuases 789,306 738,732 : and the other expires in 1989. . PET's total investment in nuclear fuel is limited to . . Projectedbenefitobligation 2,721,017 2,386,251 : ; 5600 million. If the nuclear fuelleases are terminated, "'" *"'" '"naaenalue 2,535,708 2,205,133 j ] PG&E must reimburse PET for all costs of nuclear fuel P'? i ected benefiiobligation . f
. - in excess of plan assets 185,309 181,098 .
ownership. Under these leases, PG&E owns the spent Unrecognized net gain 52,309 84,802 nuclear fuel. Unrecognized net obligation . (185,682) (197,661) :
. Nuclear fu'el lease expenses were $98 million, $110 Accrued pensionliability ' $ 51,936 $ 68,239 f l million and $95 million in 1988,1987 and 1986, respec- :' I tively, including interest of $21 million, $11 million and
$10 million in those years, respectively.
Assumptions used to calculate the projected benefit !
]
obligation to determine the plan's funded status were: ! ] Lease payments are based on the cost of the nuclear ; j fuel used plus the daily finance charges on PET's net weighted average discount rate - 8.0% 8.5% : 1 investment in nuclear fuel during the period. Prior to Raw f i*' " j on at n c es 7.0% 7.5% the Diablo Canyon settlement, daily finance charges : j were paid only on the in-core portion of the net invest- 1 ment in nuclear fuel. Plan assets are composed primarily of comman stocks, ; j The carrying value of nuclear fuel (see Note 2) was: fixed-income securities and real estate investments. l December 31 1988 1987 h ""fecognized net obligation is being amortized over j' l in Thund, approximately 18 years. j' i l Nuclear fuel $372,022 $536,355 Net pension cost, using the projected unit credit- ;
- Accumulated amortization (159,767) (166,423) actuarial method, was: :
]
Net $212,255 $369,932 : i 1988 1987 : In Thouunds :
- Note 7 . Service co$t for bene 6ts earned $ 81,653 $ 92,812 : ,
InMMst c 5t n Projected l Retirement Plan and Post Retirement Benefits 209,372 184,774 benefit obligation . ! Rel/rement f%tn The Company provides a defined Retum on plan assets (323,087) (89,046) l Net amortization and deferral 135,536 (87,235) benefit retirement plan covering substantially all employees. The retirement benefits are based on years Net pension cost 103,474 101,305 : j Cost of early retirement benefits - 87,052 . . of service and the employee,s base salary. The Company's
- Net pension cost recognized $103,474 - $188,357 funding policy is to contribute each year not more I
than the maximum amount deductible for federal income tax purposes and not less than the minimum contribu. The expected long-term rate of return on plan assets : u
' tion required under the Employee Retirement income used in determining pension cost was 9% and 8% for j j Security Act ofl974.The cost of this plan, charged to 1988 and 1987, respectively. : 1 expense and plant in service, was $103 million, $188 j j million ($87 million of which was the cost of the early :
- 1 l
- I
- 1
- 1
- . l
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i : L j 33 L .,: . \ .___ a _ - _ =
NOTE 5'TO. CON 5OL1 DATED F1NANC1AL 5 T A T E M E N T 5 (Continued) Pacific Gas and Electric Company j EffectiveJanuary 1,1988, pension benefits for manage- Note 8
- ment employees were based on final three years' average - Income Taxes j pay. For nonmanagement employees, the Company his- The current and deferred components ofincome tax
- torically has amended the retirement plan every two to expense were:
- j. three yearsSubject current salaties. so that pension to collective benefits bargaining, the are based on the most j9gg j937 j986
- Company intends to continue this practice and therefore . In muunds j . future amendments to the plan for nonmanagement curr it
- employees have been anticipated and are reflected in the state 88,579 111,835 75,268
* ~
projected benefit obligation and pension cost. Total current 222,443 424,979 207,712 - Deferred-Federal l Early Retirement I'lan in 1987, PGNE offered an and state
! carly retirement plan to qualified employees which Balancing accounts (11,215) 100,229 (8,497) 223,494 197,143 239,695
{ increased administrative and general expenses by $87 . D'j',eciati n
- mdlion before taxes' reacquired debt 8,216 (2.694) 165,045
- Fueloilinventory 14,282 (38,924) -
contributions in aid
- I& fnwranu lienefits The Company provides life .
ofconstruction (27,100) (30,741) (8,225)
- insurance benefits for retired employees. This benefit is capitalized overheads
- and interest 13,511 (44,246) (34,272)
! provided ums are based through an insurance on total claims company paid in the prior year. whose premi-Unbilled revenues (6,433) 48,642 -
, Farly retirement
. A life insurance plan available to certain management plan 2,401 (37,790) -
- employees uses the same actuarial funding methods Diablo canyon
- and assumptions as the Retirement Plan. The annual- adjustment account (446,280) - 365,149 stare nie tax j contribution is the normal cost plus the amortization of 1e on, 15J00 (9,721) 4,166
- the unfunded actuarial liability. The cost of providing Energy proicct costs . (24,414) - -
life insurance benefits is charged to expense and plant in . Other-net (147) (9,066) 6.504
- service and totaled $1.3 million, $2.2 million and $2.3 Totaldeferred (238,385) 172.832 729,565 million for 1988,1987 and 1986,respectively. Investment tax
. credits-net (7,423) 34,663 14,641
//calth Care lienefits The Company provides health Totalincome tax npense 5 (23a65) 5632,474 5951,918
! care benefits for retired employees and their eligible
- dependents. Costs are based on benefits paid during each classification of j year. The cost of providing these benefits for retirees - in$a "[;','o*p',',3,ing
- cannot be separated from the cost for active employees. expenses 5508,258 $603,0l2 $927,647 l Health care costs and the number of retired and active included in other-net (22,076) (47,583) 24,271 -
- Included in accounting
, etnployees were: change - 77,045 -
Diablo Canyon 1988 1987 1986 settlement (509,547) - - j llealth care Costs $99,000,000 $87,000,000 580,000,000 Totalincome tax
. Renred Employees 8,400 8,400 7,300 expense $ (23,365) 5632,474 $951,918
. Active Employees 28,400 28,90G 30,700
- 1 34 :
l l 1 i 1 l 1 The following table reflects the differences between Note 9 : reported state and federalincome taxes and amounts Commit'nents j i determined on pretax income by applying the federal capital &pountures Capital expenditures for 1989 j j statutory rate, are estimated to be $1.7 billion, consisting of $1.4 billion, : 19ss 1987 19s6 including AFUDC, for utility construction and $300 j In Timords million for investments in nonregulated businesses. : j Expected federalincome ; j "d U3 ~"# J D"# E'O' ! ItatSoItate 5 13,179 5 528,396 5 935,245 increase (decrease)in Company's Canadian gas purchasing subsidiary, has : income tax expense contracted to make take-or-pay payments to Canadian ! A L (8,076) (899) (51,384) nad gas pdes O Mes M & adn pnss { inveument and other of natural gas during a contract year. The contracts : tax credes (21,923) (29,0l9) (59,466) permit make-up of the prepaid gas and provide for reim- :
. ofder$1Nnefc 13,365 74,853 85,404 bursement of take-or pay payments if make up of the Rnancial uatement gas prior to the expiration of the contracts is not possi- :
depreciation in ble. Total advances by A&S to producers as of December : 31,1988, were $283 mil on. Advances unreimbursed j J n?ci iI 105,977 133,656 128,648 j Capitahred interest 6,165 (35,094) 18,839 by A&S's gas customers are financed by short term capitalaed mer. borrowings. PG&E has executed guarantees to assume ! Re n I costs liabilities not to exceed $350 million on commercial ! ( 4 ( 92 Repair allowance (10,880) (8,120) { t 4,306) paper and a standby bank line of credit for A&S to cover : Diablo Canron take-or-pay borrowings. (See Note 5.) :
~
Ohr et 3,283 (8,9 l9) A&S has been negotiating reductions in its take or- l pay bligations underexistingcontracts. Additional : Total income tai expense 5 (23,365) $ 632,474 5 951,918 payments under any contracts not renegotiated would j Pretax income 5 38,762 51,320,991 52,033,141 result in additional advances to gas producers. Such : add tional payments could total approximately $78 { Efhuve tax rate Nicalincome tax mdlion through the contract year endedJune 30,1988, : expense / none of which was recorded as of December 31,1988. : pretax income) (60.3%) 47.9% 46.8% : Stod Option ILn The Company offers its key man- i The 1988 effective tax rate was affected primarily by agement employees a Stock Option Plan (the Plan) j the Diablo Canyon settlement. Deferred income taxes for granting nonqualified stock options with associated : Diablo Canyon revenues accrued but not collected had stock appreciation rights (S ARs) and dividend equivalents. j been provided in prior years using historical income tax A total of 1.5 million shares of the Company's : rates. In 1988, these deferred income taxes were reversed common stock was authorized for award under the : and the difference between historical and present income Plan. Common stock may be obtained from either j tax rates wns included in net meome, authorized but unissued shares or from shares that have : In December 1987,SFAS No.96, Accosmtingfor been purchased on the open market by PGNE, Costs j Income Taxes, was issued, establishing new financial associated with awards are not recoverable in rates. : accounting standards for income taxes. The Company inJanuary 1989, options on 142,000 shares were i curremly is evaluating the accounting, regulatory and granted under the Plan at an option price of $17.50, : financial implications of SFAS No. 96, which was During 1988 and 1987, options on 85,150 shares and j amended in December 1988 to require implementation : by 1990. The Company estimates that both assets and j liabil.ities on the consolidated balance sheet will increase :
, two to three billion dollars upon implementation of j SFAS No. 96. The impact,if any, on the consolidated :
income statement cannot be determined at this time. j ; L
- 35
NOTES TO CON 5OLIDATED' FINANCIAL 5 Y A T E M E N T S (Continued) Pacific Gas and Electric Cornpany
- 91,500 shares were granted at option prices of $16.75 is required to purchase energy and capacity produced j and $26.63, respectively. Option prices were the market by QFs. The CPUC established a series of power
- price per share on the date of grant. .
purchase agreements which set the applicable terms, j The options may be exercised during a period of up conditions and price options.
- to ten years and one Jay, and vesting of the right to Under the power purchase agreements, sellers receive
- exercise the options is as follows:(a) up to one-third payments for the energy delivered at a calculated rate j may be exercised in the second year following the year equal to the Company's own marginal costs for con-
- options are granted;(b) up to two thirds may be exer- structing new facilities or purchasing power, or at i cised in the third year following the year the options are forecasted rates negotiated in the individual agreement.
granted and (c) all the options may be exercised in the The total cost of the QF purchase payments is recovera-j fourth year following the year the options are granted. ble in rates.
; Options also become vested and exercisable upon Approximately $538 million, $360 million and $267
- retirement or death, million was paid to QFs for 9,387 million,6,718 million
! As of December 31,1988, options on 17,450 shares and 4,574 million kwh of energy and associated capac-j were exercisable. InJanuary 1989, options on an addi- ity in 1988,1987 and 1986, respectively.
; tional 24,715 shares became exercisable. No options
- or SARs have been exercised and dividend equivalents Note 10 i are not material. Contingencies j Helms PungedStorage Pmject filelms) Helms,
- Irestern Area Power Administration Energy Agree- which was delayed due to a water conduit rupture in
; ment The Company has an agreement with the United 1982 and various start-up problems, became commer-j States Western Area Power Administration (WAPA) to cially operable in 1984.
- purchase energy from them and resell it to them upon The total cost of the project is $966 million, of which j their request. Energy purchased prior to 1967 must be
$716 million is in rate base and $22 million was dis-
- resold to WAPA at a fixed price that is substantially allowed by the CPUC. The Company has applied for j below the Company's current cost of production. Since recovery of $51 million of costs in the 1990 general rate
- 1967, the energy under contract has been purchased by case.These and the remaining $177 million are not in
- the Company from WAPA at favorable prices based on rate base and therefore are not earning a return on j WAPNs cost of generation.That energy must be sold investment. The $177 million, primarily related to con-
- back to WAPA at a price equal to the Company's duit and start-up problems, is subject to litigation and j current thermal production cost at the time of delivery any costs not recovered will be submitted to the CPUC
- to WAPA less the Company's savings that resulted from for recovery in rates.
j the purchases at the lower WAPA prices. The CPUC has indicated that PG&E will bc ar a heavy
- The contract will expire onJanuary 1,2005. As of burden of proofin establishing the reasonableness of j December 31,1988, the cost to the Company to return these costs. in addition, if PGRE seeks to recover in
- the amount of energy currently available to WAPA was rates the costs related to the water conduit rupture, the
- approximately $500 million, assuming WAPA requests CPUC intends to consider an offset to revenues to j the return of all the energy prior to the contract's reflect lost or deferred capacity benefits due to the delay
- expiration date. Nearly all that cost, however,is a return in commercial operation.
j of the benefits the Company received through its pur- In its 1985 Helms rate case decision, the CPUC
- chases from WAPA since 1967, which were passed on declined to include in rates the revenues accrued during j to ratepayers at that time. The Company believes it is the time Helms was out of service for the modification
- entitled to recover in rates costs of energy resold and repair of the generators. These revenues and related j to WAPA.
interest amount to $55 million. PG&E will be allowed to file a separate application for recovery of this amount
- Qualifying lbrilitics (GFs) Under the Public Utility after claims against third parties are resolved.
j Regulatory Policy Act of 1978 (PURPA), the Company The Company believes that it is entitled to recover in i rates all Helms costs not recovered through claims or litigation and that any revenues or costs disallowed by j the CPUC would not have a significant impact on its
- fmancial position or results of operations.
36 j l ll _ _ - _
NuclearInsurance PG&E is a member of Nuclear The Company plans to defend these lawsuits : 1 Mutual Limited (NML) and Nuclear Electric Insurance vigorously and believes that the ultimate outcome of j Limited (NEIL I and II). In the event of property damage this matter would not have a significant impact on its : to a nuclear plant of a member utility or increased cost financial position or results of operations. j of replact ment pcwer due to a prolonged accidental : outage of a member utility's reactor unit, PG&E may FERC-Hydrulectriclicensing Federallegislationhas j be subject to maximum assessments of $57 million eliminated any preference for govemmentally-run utili- : (property damage) or $9 million (replacement power) in ties in the relicensing of hydroelectric projects. Certain j each case per policy period,iflosses exceed premiums, governmentally-run utilities previously had challenged : , reserves, and other NML, NEIL 1 or NEIL 11 resources. the Company's relicensing of three hydroelectric projects. : With respect to property damage at Diablo Canyon, the The law requires the Company to pay these challeng- i NML coverage is limited to $500 million and the NEIL ers a " reasonable" settlement consisting of their costs : 11 coverage provides an additional $825 million in incurred to pursue the licenses and a potential further j , excess of that provided by NML. amount ranging from 0% to 100% of the Company's : In August 1988, the Price-Anderson Act was amended remaining net investment of9 proximately $126 mil- j to increase significantly the maximum industry liability lion in the projects as of October 22,1985. In return, (_
~
for third party claims resulting from any nuclear inci- the challengers are required to withdraw their compet- j dent to $7.3 billion per incident. In the eveat of e nuclear ing license applications. Settlement negotiations are : incident involving any of the nation's licensed reactors, taking place and a tentative agreement has been reached : PGRE is subject to a retrospective assessment of up to for one project. The Company expects to recover settle- j $63 million per in ' dent for each ofits two licensed ment costs for each project through rates. : reactors, not to exceed $10 million per reactor per j q calendar year with payments in excess deferred to the Securities litigation-Diablo Canyon InJanuary : ___ next calendar year. 1989, a purported class action complaint was filed against j t% Company and the current directors in the United : . Wcramento Municipal Utility District fSMUD) In States District Court for the Northern District of Califor- l July 1988, the dirmors of SMUD approved a long term nia by three shareholders allegin5 violation of certain j power sales con ut with the Company, an agreement prm isions of the federal securities laws.The complaint : amending the existing integration contract and an agree- allege ; that the defendants misrepresented and failed to j ment se:tling certain disputo between the parties. This disclose material infonnation concerning the risk that : approval implements an agreement in principle reached the Company may not recover its full investment in j in March 1988 on these and other matters. A final settle- Diabla Canyon. The plaintiffs claim the alleged mis- : ment would resolve all disputes under the existing con- representations and omissions artificully inflated the j tract by the payment by SMUD of $75 million (including price of the Company's publicly traded securities and : the amounts in escrow), amortized over four years with common stock issued through the Company's Dividend : no interest. Ihhe FERC does not approve byJuly 1,1991 Reinvestment Plan. The class of plaintiffs alleged to be j those agreements reached between the two parties and represented is all persons who purchased the Compa- : the provision of certain other services by PG&E, the ny's publicly traded securities during the period of j agreement in principle is voided and the parties will be approximately March 1,1986 to December 23,1988 and : 9 restored to their respective positions as ofJanuary 1,1988. who sustained damages as a result of such purchases. j The plaintiffs seek an unspecified amount of damages, ; . litigation-Geotherma/ Steam Contracts inJanuary including attomey fees. The Company believes that j 1987, two lawsuits were filed against the Company relat- the claims asserted are without merit and intends to : Ne ing to the sale of geothermal steam to the Company oppose them vigorously. However, the Company cannot for use in the generatioa of electricity at the Company's r redict the outcome of such litigation and, since any ! Geysers Geothermal Porer Plant (Geysers). In total, the estimate of possible damages would be highly specula- l !awsuits claim damages in excess of $120 million for tive, cannot determine whether such damages, if j breach of contract, improper calculation of the steam awarded, would be of such magnitude as to have a sig. : price and inadequate operation of the Geysers. The nificant adverse impact on its financial position or j Comp. ty has filed a cross complaint requesting dam- results of operations. : ages in excess of $20 million. A trialis scheduled for j September 1989. : j 37
R E P O tt T OFlNDEPENDENT PUBLIC ACCOUNTANTS Pacific Gas and Electric Company
- To the Shareholders and the Board of Directors in our opinion, the consolidated financial statements j of Pacific Gas and Electric Company: and schedule of consolidated segment information
- referred to above present fairly,in all mat ial respects, l We have audited the accompanying consolidated balance the financial position of Pacific Gas and Ei +tric Com-i sheet and the statement of consolidated capitalization pany and subsidiaries as of December 31,1988 and
- of Pacific Gas and Electric Company (a California corpo- 1987, and the results ofits operations and cash flows for j ration) and subsidiaries as of December 31,1988 and each of the three years in the period ended December
- 1987, and the related statements of consolidated income, 31,1988 in conformity with generally accepted j cash flows, common stock equity and preferred stock, accounting principles.
- and the schedule of consolidated segment information Applications for rehearing have been filed challeng-j for each of the three years in the period ended December ing the Califomia Public Utilities Commission's approval
- 31,1988.These financial statements are the responsi- of the DiaHo Canyon rate case settlement (see Note 2).
j bility of the Company's management. Our responsibility A purported security holders' class action complaint
- is to express an opinion on these financial statements seeking unspecified damages was filed against the Com-j based on our audits. pany alleging failure to disclose materialinformation
- We conducted our audits in accordance with generally concerning recovery ofits investment in Diablo Canyon
- accepted auditing standards. Those standards require (see Note 10).The Company is unable to determine the j that we plan and perform the audit to obtain reasonable ultimate outcome of these matters or whether they
- assurance about whether the financial statements are would have a significant adverse impact on its financial j free of material misstatement. An auditincludes examin- position or results of operations.
- ing, on a test basis, evidence supporting the amounts As discussed in Note 1 to the consoli lated financial j and disclosures in the financial statements. An audit also statements, effectiveJanuary 1,1987, the Company
- includes assessing the accountini, principles used and changed its method of recognizing revenues to accrue j significant estimates made by management,as well as for services provided but unbilled.
! evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis ARTHUR ANDERSEN & CO. l for our opinion. San Francisco, Califomia , j February 2,1989
- RESPONSIBILITY FOR FIN A N CI A L STATEMENTS j Padfic Gn and Electric Company i The responsibility for the integrity of the financial internal accounting control systems to the extent they
- information included in this annual report rests with consider necessary in order to support their opinion on j management. Such information has been prepared in the consolidated financial statements. Their auditors'
- accordance with generally accepted accounting prin- report contains an independent informed judgment as j ciples appropriate in the circumstances, and is based on to the fairness,in all material respects, of the Company's
- the Company's best estimates and judgments after reported results of operations and financial position.
j giving consideration to materiality. In a further attempt to assure objectivity and remove
- PGNE maintains systems ofintemal accounting con- bias, the financial data contained in this report have trols supported by fonnal policies and procedures which been reviewed by the audit committee of the board of j are communicated throughout the Company. These directors. The audit committee is composed of five
- controls are adequate to provide reasonable assurance outside directors who meet regularly with management, j that assets are safeguarded from loss or unauthorized use the corporate internal auditors and Arthur Andersen &
- and to produce the records necessary for the preparation Co., jointly and separately, to review internal account-j of financial information. There are limits inherent in all ing controls and auditing and financial reporting matters.
systems of intemal control, based on the recognition th at The Company maintains high standards in selecting, j the costs of such systems should not exceed the benefits training and developing personnel to ensure that man-l to be derived. The Company believes its systems provide agement's objectives of maintaining strong, effective j this appropriate balance in addition, the Company's intemal controls and unbiased, uniform reporting stan-
- internal auditors perform audits and evaluate the ade- dards are attained. The Company believes its policies
- quacy of and the adherence to these controls, policies and procedures provide reasonable assurance that oper-l and procedures. ations are conducted in conformity with applicable laws
- Arthur Andersen & Co., the Company's independent and with its commitment to a high standard of busi-j public accountants, res iew and evaluate the Company's ness conduct.
38
LO U A R T E R 'L Y, C O N $ 0 L I O A T E D F1NANCIAL @ A T A (Unaudited) . iPacific Gaiand Electric Company : Quarterly financial data for the four quarters of 1988 and' restrictions on the present ability of the Company to pay :
~ 1987 are shown in the table below. Due to the seasonal dividends. The Company's cash flow from operations ' j . ; nature of the utility business, operating revenues, operat. is adequate to cover the current annual dividend, despite : 1
- ing income, and net income are not generated evenly by . the charge to camings of $576 million after tax in the j i fourth quarter of 1988 due to the Diablo Canyon rate :
quarter during the year. . The Company's common stock is traded on the New case settlement and adjustments for various non.Diablo j York, Pacific, London, Amsterdam, Basel and Zurich . Canyon costs. In the first quarter of 1987, the Company - :
' stock exchanges.There were 301,776 common share- recognized the cost of the early retirement plan of $87 j > ~ holders of record as of December 31,1988. Dividends million before taxes. : .I are paid on a quarterly basis, and there are no material j )
- 1 In %usands (except per slwe.imounts) 4th . 3rd- 2nd. ' Ist 1988 :-
Operating revenues $2,043,571. $1,966,016 ' $1,766,565 $1,869,596
- i Operating income - : $ 290,085 5 -388,685 $ 318,403 $1300,199 :
E Net income (loss) . $ (461,644) $ ~ 240,649 5..146,454 $1136,668 : 1 Earnings (loss) per common share $ (1.19) '$ .53 $ , .30 $. .28 i
- Dividends declared per common share $ .35 $ .35 L$ .48 $' .48 :
Common stock price per share . . j
- High $ 18.38 $ 17.50 $ 16.13 $- 18.00 :
Low ~ $ -. 16.63 . $ 15.00 $ 14.00 $ '15.13 j l 4 1987 :
' Operating revenues $1,830,920 $1,827,919 $1,774,712. $1,752,150 j ~ Operatingincome $ 327,313 $ 364,706 $ 323,475 - $ 246,207 :
Income before change in recording unbilled revenues $ 148,897 $ 204,539 5 ~ 153,462 ' $ : 90,296 : Net income .
$ 148,897 ~ $ 204,539 5 153,462. $ 181.J19
~
i i Earnings per common share before change in recording , unbilled revenues S .32 5 .47 5 .33 $ .17 . j l Earnings per common share .
$ .32 $ .47 $ .33 $ .42 :
Dividends declared per common share 5 .48 $ .48 $ .48 $ .48 i Common stock price per share .l l High $ 19.88 $ 20.88 $ 22.75 $ 27.88 i ' Low $ 15.00 $ 18.13 . $ 19.13 . $ L 23.88 : i j 39 '
POG E ~ COG P A R AT1V E S T A T I $ T 1 C S (Unaudited) Pacific Gas and Electric Company Years EndedDecember31 1988 1987. 1986 j Electric Statistics _
- Net area output (millions of kwh) 91,575 88,444 84,633 j Net area output-percent :
- Hydroelectric plants : 9.3% 10.2% 17.4%
ll Thermal electric plants (excluding nuclear) 42.3 38.2 28.7
- Nuclear plants - 12.5 15.8 14.5 j Other producers 35.9' 35.8 39.4
- 1. j Total 100.0% 100.0% -100.0%
e . l oprating enpenses j Area capability-mw(at annualpeak)
- Hydroelectric plants (adverse conditions) 3,875 3,938 3,875.
per c:stomer - l Thermal electric plants (excluding nuclear)' . 8,995 9,070 10,250i continued to j Nuclear plants . 2J60 2,164 ~ 2,152 l l Other producers (adverse conditions) 8,917 6,554- 6,978 decrease.Operat-j Total 23,947 21,726 23,255 ; 188 '"**** * * ! Net area peak demand-mw' i 18,490 16,202' 15,439 encteding the cost : Reserves capacity margin at peak-percent 7.8% 19.3 % 25.7% Annualload factor-percent 56.7% 62.3 % 62.6% ' d ''" '"d '" ! Average annualresidentialconsumption-kwh 6,537. '6,489 6,343 energy. were 8498 j Averar e residential revenue per kwh 8.64c - 7.80e 7.82* l average annual residential bill $565 $506 $496 j Total customers (end of year) 4,026,701 3,951,474 ~ 3,854,787 1988 compared : Plant investment per customer $3,520 $3,565 $3,592 1- l Customers per mile of distribution line 40.3 40.0 - 39.5 ; to85431a1986, ;
- Gas Statistics an 8 percent
- Gas purchased for U.S. operations (thousands of mcf) 745,606 681,421 586,135- '!
decrease. j Source of gas purchased-percent , From Califomia 15.8% 18.3% 24.4% j From other states 33.0' 27.7 33.7 From Canada 51.2 54.0 41.9 j Total- 100.0% 100.0% 100.0% i Average cost of gas purchased per mcf(U.S. operations)
- From Califomia $1.69 $1.71 $2.20 j From other states $2.47 - $2.16 $2.58
- From Canada ' $1.88 ' $1.87 $2.26 j Average $2.05 $1.92 $2.36
- Peak day sendout-mmcf .
3,524 3,530 3,107-l Averageannualresidentialconsumption-mcf 64.0 ~ 66.0 64.6 L 1 : Average residential revenue per mcf $4.77 $4.55 $4.75 l' j Average annual residentialbill $305 $300 $307.
- Total customers (end of year) 3,299,844 3,245,051 3,158,426 .,
j . Plant investment per customer $665 $631 $595 i
-l Customers per mile of distribution main 100.1 100.3 ~ 99.8__
$ MiscellaneousStatistics j Customers served per employee - .
275 264 240
- Depreciation and amortization as a percent of average depreciable plant .
~l j Electric 3.6% - 3.6% 3.5% . i
- . Gas 5.3% 5.7% 4.2%
j PGRE composite (includes common plant in service) 4.0% 4.0% - 3.8% L ! l l i
- H 40 - : [j
.)
e N. 1985 1984 1983 1982 1981 1980 1979 1978 85,398 84,227 78,879 78,399 80,606 76,747 77,511 74,538 5 i 13.3 % 17.9% 22.9% 19.9% 13.2% 17.3 % 15.3 % 18.1% :* 40.2 36.8 28.9 31.7 48.8 46.0 53.6 44.9 7.6 .3 - - - - - - - 38.9 45.0 48.2 48.4 38.0 36.7 31.1 37.0
- i l 100.0 % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% : =
J t 1 : 3,913 3,723 2,658 2,518 2,517 2,491 2,485 2,491 10,012 - 8,926 8,923 8,699 8,815 8,694 8,629 8,311 1,073 - - - - 6,866 7,561 7,617 6,673 8,732 7,180 7,307 6,320 j j 21,864 20,210 19,198 17,890 20,064 18,365 18,421 17,122 16,507 16,225 15,156 13,907 15,542 15,336 15,065 14,948 ! 11.6% 6.2% 8.8% 9.6% 5.9% 9.0% 12.1% 8.4% : 59.1% 59.1% 59.4% 64.4 % 59.2% 57.0% 58.7% 56.9% { 6,533 6,557 6,386 6,252 6,489 6,535 6,811 6,553 : 7.88C 6.75c 6.03c 7.33c 5.77e 5.16e 3.54( 3.93c j .-
$515 $443 $385 $458 $374 $337. $241 $258 :
3,760,521 3,686,179 3,594,124 3,545,923 3,515,099 3,447,739 ' 3,365,950 3,270,302 j
$3,407 $3,157 $2,847 $2,554 $2,310 $2,199 $2,032 $1,869 :
38.8 38.3 39.4 39.1 39.2 39.1 38.9 38.5 l l l 778,318 690,455 621,539 698,166 835,684 '781,643 843,381 711,052 l 21.9 % 24.0% 23.1% 18.2% 19.5 % 16.0% 16.8% 16.4% : 39.3 42.4 36.9 45.4 49.2 43.7 37.0 35.1 3 38.8 33.6 40.0 36.4 31.3 40.3 46.2 48.5 j 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% l
$2.88 $3.60 $3.40 $3.09 $2.60 $2.16 $1.74 $1.59 :
$3.61 $3.98 $4.02 $3.54 $2.57 $2.30 $1.79 $1.35 !
$3.14 $4.21 $4.49 $5.14 $4.86 $4.34 $2.6i $2.22 :
$3.27 $3.96 $4.07 $4.04 $3.29 $3.10 $2.16 $1.81 3 3,603 3,205 3,025 3,133 3,144 3,275 3,398 3,244 :
75.1 69.6 73,0 78.3 72.7 81.6 90.4 86.9 - !
$5.38 $5.43 $4.84 $4.39 $3.91 $3.70 $2.37 $1.97 :
$404 $378 $353 $344 $284 $302 $214 $171 j 3,082,935 3.020,803 2,948,950 2,914,977 2,897,455 2,858,129 2,805,471 2,738,767 :
$555 $500 $471 $474 $475 $467 $450 $441 98.9 98.4 97.2 96.8 96.9 97.0 97.2 97.4 :
231 236 240 249 241 229 230 228 i 3.6% 3.7% 3.5% 3.5% 3.3% 3.3% 3.1% 3.0% j 4.3% 4.3% 4.2% 4.2% 3.5% 3.5% 3.1% 3.1% :* 3.8% 3.9% 3.7% 3.7% 3.4% 3.4% 3.2% 3.1% 41 l
. CON 5OLIOATED REVENUES A N D S A L E S (Unaudited)
Pacific Gas and Electric Company Years Ended December 31 1988 1987 1986
- In Thousands Electric I)epartment
- Restnues
{ Residential $ 1,950,125 5 1,711,031 $ 1,639,108
- Commercial . , . .
.2,083,570 1,955,721 '1,918,093
- Industrial (1000 kw demand or over) 945,893 980,773 ' 1,184,217 '
! Agricultural power . . _ 290,139- '239,204 u a 220,462
- Public street and highway lighting 44,254 :40,803: J 45,149 j Other electric utilities 101,147' 122,349 63,915
- Miscellaneous 87,120 77,102 73,839-wompany ls *
. Other .
' 3,854 - .3,492 ~ 3,504 moving terward : Regulatory balancing accounts 6,763! .2,553 - 419,151 '
- $ 5,512,865 $ '5,133,028 - $ 5,567,438 glin ,i e i, ! 7bta/Electricketenues _
espand the 1400 ! Sales-Kwh ' .. .
; Residential . 22,564,697- '21,932,544 . 20,949,230 l CH' 94*'ta can' j Commercial 23,917,480' 22,621,071 . 21,286,100 ternia sas pipenne. j Industrial (1000 kw demand or over) - 15,942,700 16,061,922 15,972,091: 4
- Agricultural power :3,782,041- 3,154,373 2,560,390 This Enl provide Public street and highway lighting 349,180 ' :341,909 344,276 l, odditional sas sup. j Other electric utilities 1,981,110 ' 2,446,371. -725,397 pues to the Pacmc 7btalElectricSales to Customers 68,537,208 66,558,190 61,837,484 North 1est,1nter. E "' ?""" "' .
- Retenues mountain region :
j Residential Commercial
~$ 936,872 ' $ . 901,326 $ 899,039.
467,334' 435,618 435,351-
)
,,,,,,,,, l l Industrial .409,014 - 299,870- 437,677 i cainer:ta utnur j~ Other gas utilities 68,405' 88,861 28,962- l
,,,,,, j Miscellaneous 108,916 1,073 976
- Regulatory balancing accounts (42,422) 119,848 220,840
- Subsidiary companies (U.S. and Canada) 124,442 136,922 .207,883 I
{ Gas transport 60,322 69,155 18,495 j 7btalGasRetenues - $ 2,132,883_ $ 2,052,673 $ 2,249,223 Sales-Mcf j Residential 196,275 197,882 189,120
- Commercial 92,671 .80,144' 78,087 j Industrial :143,449 99,"/19 128,854 '
j Other gas utilities -28,897 ' -46,977 '9,832 - '~ j TotalGas Sales to Customers . 461,292 '424,722 405,893-
- l'GRE use (primarily electric generation) . 263,588 239,815 - .153,566 j Subsidiary companies (U.S. and Canada) 51,009 46,229 56,027 i Total 775,889 710,766. 615,486-l l l i
- l. :
i l 42 ! i___.____._ __m___ - - - _ _ - - . _ _ _ _ _ _ - - _ _ - _ _ _ _ _ - - _ _ . . _ _ _ _ - . _
- -------------J
l 1985 1984 1983 1982 1981 1980 1979 1978 :
$ 1,659,401 5 1,400,148 $ 1,192,997 $ 1,401,267 $ 1,128,851 $ 998,130 $ 693,368 $ 720,112 j , ,
1,952,531- 1,580,192 1,326,406 1,530,542 1,233,564 1,067,198 752,359 852,265 : 1,381,346 '1,105,750 914,786 1,078,493 860,577 699,073 461,653 531,593 l 287,226 239,644 157,528 235,164 241,221- 212,770 142,727 149,986 j 46,997 41,970 48,320 53,224 41,498 38,225 30,491 34,179 l 93,473 99,350 129,992 172,819 117,791 71,926 67,740 69,855 j 92,737 116,050 40,350 56,256 70,094 58,568 50,111 43,584 : 5,305 7,113 7,890 8,008 7,313 5,336 4,115 3,814 j 300,967 567,948 87,545 (687,171) 204,964 (223,385) 261,281 (308,455) {
$ 5,819,983 $ 5,158,165 $ 3,905,814 $ 3,848,602 $ 3,905,873 $ 2,927,841 $ 2,463,845 $ 2,096,933 - j l
21,067,234 20,730,060 19,778,553 19,107,415 19,575,283 19,329,190 19,605,541 18,314,721 ! 21,452,853 20,626,467 19,259,758 18,662,382 18,722,954 18,283,154 17,891,820 17,166,973 j 17,042,349 16,108,571 14,986,722 15,843,646 16,401,293 14,801,260 15,253,371 14,815,289 : 3,252,215 3,309,155 2,304,205 2,922,541 3,890,088 3,540,022 3,715,026 3,120,644 j 336,736 329,378 339,823 365,119 401,930 431,564 455,445 485,725 : 1,576,215 2,230,163 3,341,984 3,544,563 2,676,998 1,906,465 2,807,249 2,232,563 j 64,727,602 63,333,794 60,011,095 60,445,666 61,668,546 58,291,655 59,728,452 56,135,915 i
$ 1,156,002 $ 1,058,995 $ 972,150 $ 935,996 $ 764,468 $ 799,307 $ 555,017 $ 432,865 :
562,590 596,107 651,332 681,520 607,417 626,611 406,497 346,229 i 800,651 732,875 648,832 712,341 794,786 708,259 499,242 340,546 : 38,322 37,410 39,202 52,589 158,433 148,074 85,867 18,384 j 6,069 3,686 5,469 8,835 2,290 (6,560) 7,128 4,315 : (233,064) (107,521) 91,820 149,817 (276,749) (133,807) 176,354 193,960. 280,428 349,986 332,080 395,395 238,057 189,174 170,519 136,141 !
$ 2,610,998 $ 2,671,538 $ 2,740,885 $ 2,936,493 $ 2,288,702 $ 2,331,058 $ 1,900,624 $ 1,472,440 f 214,935 195,092 200,774 213,031 195,631 216,184 234,295 220,076 j 89,415 90,027 109,637 124,622 128,758 146,827 143,707 144,162 :
178,407 137,178 114,310 132,789 171,769 161,060 186,165 138,975 j 9,247 8,281 8,532 12,021 35,135 34,821 36,013 9,926 : 492,004 430,578 433,253 482,463 531,293 558,892 600,180 513,139 ! 261,017 242,985 170,773 201,219 280,990 202,964 216,062 125,636 j 62,184 61,400 69,417 96,330 73,166 72,608 77,411 64,633 j 817,205 734,963 673,443 780,012 885,449 834,464 893,653 703,408 j
- 43
3 i R E 'C T C R S Pacdic Gas and Electric Company . " l 9eeniet Directore : PeterA. Alagowan FeneeeestCementtees Comyensatio'n ami - l Chairman oithe Board, of the Beerd of Directore Afanagemen t Detylop-Richard A. Clarke . President,and Chief . . ment committee
. ! Chairman of the Board and Executive Officer, Safeway . - &ecutive Cmnmittee Recommends compensa .
- Chief Executive Officer, Stores, incorporated Within limits, may exercise ~ tion and employee benefit -
-l Pacific Gas and Electric - powers and perform duties . policies and practices.
.: Company f the Board.. Reviews planning for , m Geurge A. Afanentis .executivedevelopmentand . '
President, Pacific Gas and ' . succession.
! ' flarry Al. Conger Electric Company , Richard A. Clarke
- Chairman of the Board and (Chairman) -
Chief Executive Officer, Lewis S.Eaton Leslie L.Luttgens - I Homestake Mining S ~ Leslie L Luttgens . aid 7 . AfeIz (Chairman)
'! Company President, Mills College - Richard B. Madden Harry M. Conger
- Peter A.Magowan -.Melvin B. Lane George A.Maneatis Richard B. Madden -
5 IAwisS.1:aton . Frederick 11:Afic/ke,Jr William E Miller
- Chairman of Guarantee Former Chairman of the B ard and Chief E,xecutive John B. M. Place J Savings and Loan 'A udit Committee
- Association . Officer, Pacific Gas and Reviews financial -
- Electric Company ~ statements and internal ~Advisorv Nominating -
~
[ . accounting and control- Committes q
- /ra Alichae/11eyman - -
procedures with indepen- Recommends candidates Irilh.am Eafiller l Chancellor, University of dent public accountants. . for nomination as directors.
- California, Berkeley President and Chief
- Executive Officer,
; SRI Intemational
- Lewis S.Eaton (Chairman) Richard A. Clarke j Afehinitlone (research and consulting) Ira MichaelHeyman (Chairman)
- Chairman of the Board, . Peter A.Magowan Harry M. Conger i
- Lane Publishing Company Mary S.Metz 1 Leslie L.Luttgens d
- (Sunset Magazine) 1ohn RAf.P/ue W lson C. Riles Peter A.Magowan
- . f.ormer Chairman of the-Frederick W.Mielke,jr.
- Board and Chief Execuu.ve
- 1.edic L lxiteen, Officer, Crocker National - John B.M. Place .
Finance Committee i San Francisco Bay Area Corporation and Crocker Recommends long range l l community leader National Bank - ' financial policies and
- objectives and actions l . reqaired to achieve those
- RichardIL Aladden Carl E.Reichardt ny;,,,;,,,'
l Chairman of the Board,- Chairman of the ik>ard and
- President and Chief Chief Executive Officer, j Executive Officer, Wells Fargo & Company . Richard A. Clarke .
- Potlatch Corporation and Wells Fargo Bank, N.A. (Chairman) .
l (diversified forest products) Richard B. Madden . l William E Miller - IIIl f
" C RII## john B.M. Place j President, Wilson Riles Carl E. Reichardt .
. and Associates,lnc.
Stanley T. Skinner
- (educational development '
- o and consulting) .
- Stantgy 'l: Skinner
- Vice Chairman of the
- Board, Pacific Gas and j Electric Company .
-l
-l I 44 j
'1 _ __z - - _ _ _ -- _
I
,.s I'
y . . M - 6 K - * ~ y y 4 fra htichaelIleyrnan Wilson C. Riles Richard B.h1adden Stanley 7: Skinner Frederick W.htielke,Jr Harry Af. Conger IVto r A. A1agouun A1ehinB.Line CarlE. Reichardt John B. ht. Place Wilham E A1t!!cr Riclurd A. Clarke George A.hfaneatis I.cuis S. Faton Afary S. A1eri Leslie L Luttgens 45
OFF1CERS Pacific Gas and Electric Company
- PG&E Officers John C. Danic/sen C. Robert Martin Chief Executive Officers of
- Vice President Vice President PrincipalPG&E Subsidiaries j *Ric hard A C/ar/ e Computer and SanJoaquin Valley Region and Affiliates
- Chairman of the lloard and Telecommunications
- ChieiExecutive Officer Services lVi'!iam R. Ma:otti
- Mason IVi// rich
- Vice President President and Chief j *Stan/cy /:31 inner Richard A Draeger Gas and Electric Technical Executive Officer
- Vice Chairman of Vice President Services PGRE Enterprises
- thelloard General Services
- Jackalyne Pfannenstiel Stephen I' Reynolds j
- George A Mancatis Danie / li. Gibson Vice President President and Chief
- President Vice President Corporate Planning Executive Officer
- Gas Supply Pacific Gas Transmission j
- Jerry R. McLeod' Grant X Radford Company
- Executive Vice President Robert D. Glynn, Jr Vice President
- Vice President Mission Trail Region Dong /as R. Fenton
- *]ohn A 5prou/' Power Generation President and Chief j Executive Vice President James D. Shiger Executive Officer
- and General Manager, Ilmeard M Go/uh . Vice President Alberta Natural Gas
- Gas Supply liusiness Unit Vice President and Nuclear Power Generation Company Ltd
- General Counsel Alberta and Southern
; *Ma son IVil/ rich' Gordon R. 5mith Gas Co. Ltd.
j Executive Vice President Vice President
/ cland.11. Guxtafwn
- Vice President ' Finance and Rates Chief Executive Officers of
- Donald A nraud Golden Gate Region Principal PG&E Enterprises
- Senior Vice President Subsidiaries and Related James B. Stontamore j and General Manager, Ventuies Robert J. Daywood Vice President
- Engmeenng and Vice President Gas Transmission and
- Construction Power Planning and Storage N"h"# N' A."J "
- llusiness Unit Contracts President and Chief
! li'll/ lam /I.1Ya// ace Executive Officer
*G, ne G. / /am' ANGUS Petroleum
- /cu R. flerrera' Vice President
- Senior Vice President 'Vice President Corporation Engineering
- Administrative Services General Construction G/oria & Ge/ U"".a/J 1 liwH'
! *Fiigi/ G. Rme Thomas 11:liigib Controller President and Chief
- Senior Vice President Vice President and Executhe Offker j and General Manager, Corporate Secretary NGC Energy Company la< L lilent ins-StarA Distribution llusiness Unit Treasurer
! Grant X Ilarne I"*th R Ncarn o
- *Gr< gory M. Rusxer Vice President Brian L MiGrath Chicf E.xecutive oificer j Senior Vice President and Corporate Assistant Secretary PG&E Enterprises /Bechtel
- General Manager, Electric Power i,omt venture Communications
- Supply liusiness Unit Kathlecu Rurger
- John C. Key 3er Assistant Secretary
- Lrman L Hoan Vice President
- Member, Ntanagement j Vice President Marketing and Customer Comn""ec Julia n. York
- Redwood Region Services Assistant Treasurer 1 E"c'"" Febr=1 11989; becomes Execunve Vice President and General Manager,
. I km rp I. ( /if ton, Jr- John li. Koe bn Gas supply Business Umt. ; Vice President Vice President effective Arni I,1989. ; East Illy Region Community and 2. Retires Arnll,1989.
- Governmental Relations 3. Resignation effective March 1, Rnw// Il Cnuningham 1989, to sene as President and Vice President fact /syuc Chief Execume Officer j lluman Resources Vice President "P
4 Effectne March 1,1989;
; Sacramento Valley Region pn viquay vice Presidem and Controller.
- 5. Retired Echruary 1,1989.
- 6. Effeeme March 1,1989.
PO&E'S SERVICE TEQQlTORY PG&E provides natural stretches from Eurekain the the ninth largest economy economy rests on a strong, ; gas and electricity to over north to Bakersfield in the in the world-larger than growing base of aerospace : 10 million people in one south and from the Pacific the economies of Australia, manufacturing companies, j of the nation's most scenic Ocean in the west to the the Netherlands, or Switzer- high tech electronics indus- : and prosperous regions- snow-capped Sierra Nevada land.just as important, tries, food processing, : northem and central Cali- in the east. the region has consistently petroleum refining, agricul- : fornia.Our94,000 square- Standing alone, the area outperformed the rest of ture, and dozens of other j mile service territory served by PG&E ranks as the U.S. economy. industries. And PG&Eis : This solid and steady there, ready to sell the high. : growth can be explained in quality electric and gas : I w.mme> a single word: diversity. services they need. l [ g D$E #s Our sersice territory's pros- ! i M[ ::: perity does not depend on : 1 j I. 4 p;..Q%y![ $ '^ a single industry or a single j q 3 product. Instead, the area's
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SHAREHOLDER INFORMATION Paafic Gas and Electric Company
- Shareholder Services Office in PGRE's Dividend Rein. Ilow to Conm//</.ne Dividend Reinvestment Plan
- 77 Ilea/e Street, Room /M#) vestment Plan. Also, you Aaounn You may automatically j San I rancisco, CA W106 receive all dividend pay- If you want to consolidate reinvest your dividends
- (N00) 367-7731 ments, annual and quanerly your separate accounts into from common and pre-
- reports, and proxy mate- one account, you should ferred stock in new shares
- Sharehvider Handbook rials through your broker. contact the Shareholder of PG&E common stock
- PG&E has prepared a help. Therefore,if you are receiv- Services office to obtain through the Company's j ful shareholder's handbook ing unwanted duplicate the necessary forms Dividend Reinvestment
. providmg mformation on mailings, you should and instructions. When and Common Stock Pur-
- the Company's shareholder contact your broker, not accounts are consolidated, chase Plan.Through an j services, stock certificates, PG&E, to eliminate the it may be necessary to reis. " optional cash investment"
. and stock transfer systems. duplications. sue the stock certificates. feature, Plan participants Have you moved? . Copies are available from also may purchase addi-
- the Shareholder Services Lost or Stolen Certificates llom to Eliminate You should Inform tional shares of common
- office. If your stock certificate is Dup //cate Mailings stock, subject to limitations Shareholder ,s en, burned or in If you want to maintain
! StockHeldinBrokerage set forth in the Plan some other way destroyed, more than one account but '
- Accounts (" Street Name") prospectus?
servicesin mmno : When you purchase your y u should notify the Share- eliminate additional mail-If you hold certificates holder Services office m ings of annual and quarterly in your own name (rather of anychange stock and the stock is held
- for you by the broker,it wntma immediately. reports, you may do s than through a broker) you in your address.
- is listed with the Company by sending the labels (or Multiple Dividend Checks may obtain the Plan pro-
- in the broker's name, or and Duplicate Mallings a copy of the labels) from Please include spectus and enrollment et nd' PG&E don Some shareholders hold a Company mailing to the form by contacting the the old and the ! not know the identity of their stock on our records ShareholderSemees office, Shareholder Services office.
- individual shareholders in similar but different ndicating the names you However, if your certifi-new address. lf wish to keep on the mail-who hold their stock in names (e.g. Robert A. cates are held by a broker possible. attach a this manner-we simply Johnson and R. A. Johnson). ing list for annual and quar' (in " street name"), then
- know that a broker holds When this occurs, the law terly rep rts and the r ames you are not eligible to copy of a recent a certain number of shares requires that we create a y u wish to delete.Tlus participate in the Dividend I which may be for any separate account for each wiu nly affect these mail.
Reinvestment Plan. ings; dividend checks and i number of customers. name. Even though the
- If you hold your stock mailing addresses are the p xy materials will con-
- in street name, you are same, we are required to tmue to be sent to each j not eligible to participate "CC ""'-
mail separate dividend
- checks and annual and Replacement of Dividend
- quarterly reports to each Checks
- account. If you do not receive your i dividend check within five
- business days after the pay-
- ment date, or if a check
- is fost or destroyed, you j should notify the Share-
- holder Services office
- so that payment may be
- stopped on the check and j a replacement issued.
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