SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: March 9, 2001
Exact Name of
Commission Registrant State or other IRS Employer
File as specified Jurisdiction of Identification
Number in its charter Incorporation Number
---------- -------------- --------------- --------------
1-12609 PG&E Corporation California 94-3234914
1-2348 Pacific Gas and California 94-0742640
Electric Company
Pacific Gas and Electric Company PG&E Corporation
77 Beale Street, P.O. Box 770000 One Market, Spear Tower, Suite 2400
San Francisco, California 94177 San Francisco, California 94105
(Address of principal executive offices) (Zip Code)
Pacific Gas and Electric Company PG&E Corporation
(415) 973-7000 (415) 267-7000
(Registrant's telephone number, including area code)
Item 5. Other Events.
A. Recent Regulatory Action
On March 7, 2001, the California Public Utilities Commission (CPUC)
issued an interim decision in Pacific Gas and Electric Company's
(Utility) rate stabilization plan proceeding to respond to a request
from the California Department of Water Resources (DWR) that the CPUC
establish an interim allocation of revenues as a source for funding the
DWR's power purchases under California Assembly Bill 1X (AB 1X). Among
other things, the decision recognizes that Public Utilities Code Section
360.5, adopted in AB 1X, (1) requires the CPUC to determine the portion
of each electric utility's existing electric retail rate, the
"California Procurement Adjustment" or CPA, that is equal to the
difference between the generation related component of the utility's
retail rate in effect on January 5, 2001, and the sum of the costs of
the utility's own generation, QF contracts, existing bilateral contracts
(i.e., entered into before February 1, 2001), and ancillary services,
(2) requires the CPUC to determine the amount of the CPA that is
allocable to the power sold by the DWR, (3) entitles the DWR to receive
payment of that amount by each utility upon receipt from its retail end-
use customers. Given these provisions, the Utility believes that Public
Utilities Code Section 360.5 requires this "residual" method for
calculating DWR revenues under the CPA, rather than a "ratio" method as
had been proposed by the CPUC administrative law judge. Under the
"ratio" method, the DWR could receive payments of some amounts of
revenue received by the utilities from retail end-use customers that
otherwise would be available to pay for the utilities' generation, QF
and bilateral contracts, and ancillary services.
Additionally, the decision recognizes that AB 1X gives the DWR the sole
responsibility for setting its revenue requirement, that the CPUC has no
authority to determine whether the DWR's power purchases are just and
reasonable and that therefore such purchases are per se reasonable, and
that the CPUC must ensure the DWR's recovery of its revenue requirement.
The decision orders that the DWR may recover and the CPUC shall approve
and impose, either as part of the CPA or as additional rates, rates
sufficient to enable the DWR to recover its revenue requirements.
Finally, the decision notes that an expedited schedule has been set to
determine the method for calculating DWR revenues under the CPA and the
allocation of the CPA on an interim basis. A proposed interim CPA
decision is expected to be issued on March 16, 2001, with a final
decision scheduled to come before the CPUC on March 27, 2001. The
Utility is unable to predict whether the CPUC will adopt the residual
method, the ratio method, or some other method.
The Utility's financial condition and liquidity would be adversely
affected if the CPUC does not adopt the residual method, unless there
was an adequate rate increase as permitted by AB 1X.
B. 2001 Cost of Capital Proceeding
On March 6, 2001, a CPUC administrative law judge issued a proposed
decision in the Utility's 2001 cost of capital proceeding, recommending
no change in the current 11.22 percent return on equity (ROE) for the
Utility's electric and gas distribution operations for test year 2001.
Based on the current capital structure of 46.2 percent long-term debt,
5.8 percent preferred stock, and 48 percent common equity (which the
Utility has requested be retained), the overall rate of return would be
9.12 percent.
The proposed decision cites a reasonable ROE range of 10.75 percent to
11.25 percent. In his proposed decision, the administrative law judge
noted that his recommendation of 11.22 percent would keep the ROE at
what he considered to be the high end of the range, based on the
difficulties currently facing the Utility. The proposed decision denies
the Utility's request to replace its annual cost of capital filing with
an automatic trigger mechanism, but permits the Utility to seek the
CPUC's approval at a later date when the California energy market and
the Utility's financial condition have stabilized.
The proposed decision would eliminate the requirement for the Utility to
file a 2002 cost of capital application by May 8, 2001. Instead, the
Utility would be required to file its next cost of capital filing by May
8, 2002, unless directed to file earlier.
Comments on the proposed decision are due by March 26, 2001. The CPUC
is not expected to issue a final decision in the 2001 cost of capital
proceeding before April 19, 2001.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
PG&E CORPORATION
By: CHRISTOPHER P. JOHNS
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CHRISTOPHER P. JOHNS
Vice President and Controller
PACIFIC GAS AND ELECTRIC COMPANY
By: DINYAR B. MISTRY
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DINYAR B. MISTRY
Vice President and Controller
Dated: March 9, 2001