-
PG&E Corporation's third
quarter diluted earnings from operations were $0.68 per share,
or $248 million, compared with diluted earnings from operations
in the same quarter last year of $0.50 per share, or $185 million.
(Two important items affect comparability between the quarters:
an $0.11 per share upward adjustment in utility earnings for
the third quarter of 1999 to reflect the retroactive effect
of the delayed 1999 General Rate Case, and a $0.05 per share
upward adjustment in National Energy Group earnings for the
third quarter of 1999 to offset losses recorded in the energy
services and Texas natural gas operations, which are no longer
part of continuing operations. Adjusted for these items, third
quarter 1999 results would have been $0.66 per share on a diluted
basis.)
-
Revenues for the period
were $7.5 billion, compared with third quarter 1999 revenues
of $6.2 billion.
-
National Energy Group
contributions rose, with diluted earnings from operations of
$0.10 per share, or $37 million, on revenues of $5 billion.
Operating earnings for the NEG in the third quarter of 1999
were $0.01 per share. Adjusted for comparability to offset the
loss of $0.05 per share associated with the now discontinued
energy services and Texas natural gas operations, third quarter
1999 earnings for the NEG would have been $0.06 per share.
-
Pacific Gas and Electric
Company diluted earnings from operations were $0.58 per share,
or $211 million, on revenues of $2.5 billion. Adjusted for comparability,
third quarter 1999 diluted earnings would have been $0.60 per
share. (The adjustment reflects the fact that third quarter
1999 results did not include the increase in revenues associated
with the delayed decision on the company's 1999 General Rate
Case, which was resolved in February 2000 and was retroactive
to January 1, 1999, and the effect of which was recorded in
the fourth quarter of 1999.)
(San Francisco, CA)
- PG&E Corporation (NYSE:PCG) today reported that it earned $0.68
per share on an operating and diluted basis, or $248 million, in
the third quarter. The Corporation earned $0.50 per share on an
operating and diluted basis, or $185 million, in the same quarter
last year. However, it noted that the quarter-over-quarter change
in earnings does not reflect several important items affecting comparability.
Most notably, earnings reported in the third quarter of 1999 included
$0.05 per share in losses in the Corporation's now discontinued
energy services and Texas natural gas operations, and did not include
$0.11 per share in earnings from the utility's General Rate Case,
which were booked in the fourth quarter of 1999 for the entire year.
With those items taken into account, on a comparable basis PG&E
Corporation's third quarter 1999 earnings would have been $0.66
per share, resulting in a comparable quarter-over-quarter increase
of 3 percent.
Pacific Gas and Electric
Company
The Corporation's utility
unit, Pacific Gas and Electric Company, earned $0.58 per share on
an operating and diluted basis, or $211 million, on revenues of
$2.5 billion for the quarter. The earnings reflect, in part, the
final decision on the unit's 1999 General Rate Case, which accounts
for approximately $0.11 per share this quarter.
Although earnings met targets
for the quarter, since June the unit accumulated approximately $2.9
billion in uncollected costs to procure electricity for customers
in California's wholesale market. Wholesale electric prices this
summer skyrocketed to levels as much as five times higher than last
year's prices. Rates for retail customers, however, have been frozen
at levels far below wholesale prices. As a result, the utility has
been unable to collect all of its energy procurement costs through
customer rates as intended under the electric restructuring process
in California.
The company reported the
potential adverse impact of these growing costs in an 8-K filing
with the Securities and Exchange Commission in September. At the
same time, the company emphasized that it would focus on working
collaboratively to resolve the crisis. Those efforts included asking
the California Public Utilities Commission (CPUC) to reconsider
a ruling that prohibited California utilities from recovering uncollected
energy procurement costs after the end of the transition to a competitive
market and the end of the customer rate freeze. In a ruling last
week, the CPUC announced it will reopen its earlier decision.
The company remains focused
on working with all parties to develop a fair and workable resolution
that ensures the continued financial health of the utility and protects
customers against sudden and dramatic rate increases like those
seen in San Diego over the summer.
The uncollected power procurement
costs do not immediately impact the utility's earnings because they
are being tracked in an account for future recovery. In the meantime,
the utility is using its borrowing capability to pay these costs
on behalf of its customers.
PG&E National Energy Group
The PG&E National Energy
Group (NEG) continued to make strong contributions to the Corporation's
overall results, with earnings from operations of $0.10 per share
for the quarter. The period was the unit's third consecutive quarter
marked by solid performance and continued success in executing its
strategy for growth. The results exclude a non-recurring charge
of $0.01 per share associated with the consolidation of the NEG's
business in Bethesda, Md., as well as a one-time charge of $0.05
per share reflecting a true-up following the close of NEG's sale
of its energy services operations.
Performance in the NEG remained
solid across the board. In the electric generation operations, the
Corporation said the NEG's Northeast plants turned in strong results
despite the cool summer, as the majority of its power in the region
is sold under fixed contracts. The unit's gas transmission operations
also performed well, with increased demand for capacity on the NEG's
Northwest pipeline, which continues to operate at 100 percent of
current capacity. Positive power and gas trading margins led to
the favorable performance within the energy trading operation.
The Corporation said the
sustained earnings performance has the NEG on track to meet its
goal of delivering 30 percent of the Corporation's earnings by 2002.
The third quarter also saw
the NEG continue to achieve important milestones in its strategy
to grow its business, both in the power generation and natural gas
transmission markets. In its efforts to expand its portfolio of
controlled megawatts* (MW), the NEG moved forward with power plant
development and construction projects, and it continued to secure
additional capacity through strategic tolling agreements.*
Among the highlights for
the quarter, the NEG contracted for 50 gas turbines representing
16,000 megawatts of capacity; announced a 10-year 160-megawatt tolling
agreement with DTE Energy Services that gives the NEG its first
asset in the Midwest; acquired a 500-megawatt merchant plant under
construction in Mississippi; launched development on a new 1,000-megawatt
facility near Las Vegas; and completed a successful open season
process for the North Baja pipeline project, with expressions of
interest for more than double the capacity of the pipeline.
"The results posted by the
National Energy Group and Pacific Gas and Electric Company this
quarter reflect continued solid execution and strong forward momentum,"
said Robert D. Glynn, Jr., PG&E Corporation Chairman, CEO, and President.
"We remain on track to surpass by several percentage points our
goal of growing operating earnings per share by 8 to 10 percent
for 2000."
Actions to Date to Address
Wholesale Electric Market Problems in California
In light of the wholesale
electric market problems in the state, Glynn indicated that the
company has taken a number of actions in recent weeks with the objective
of reducing wholesale prices and managing the impact on utilities
and their customers.
He noted that Pacific Gas
and Electric Company made several filings at the Federal Energy
Regulatory Commission (FERC) throughout the third quarter asking
the commission to implement immediate relief in the form of price
caps, initiate market mitigation measures, and immediately commence
hearings to address the California market. The company also asked
the FERC to consider refunds of wholesale power costs if FERC's
investigation reveals that unjust and unreasonable rates were charged.
The utility also has taken
action to mitigate future volatility in the price of electricity
by expanding energy conservation and energy efficiency initiatives,
and identifying substations where small generation units can be
placed to provide additional power at critical times. In addition,
after receiving regulatory authority in August to buy electricity
outside of the Power Exchange, directly from other suppliers, the
utility said it has entered into bilateral contracts for term power
for a portion of its load to stabilize prices and hedge against
price volatility. The company said it expects to pursue and enter
into similar arrangements going forward.
The Corporation pointed
to projects its NEG is undertaking to help resolve the power crunch
and ensure reliability of California's electric supply. In the near
term, the NEG plans to begin operation of a 49-megawatt peaker unit
in San Diego County in time for the summer of 2001. Plans for additional
capacity beyond next summer include the La Paloma plant now under
construction near Bakersfield, Ca., as well as other new plants
in development in the West.
The Corporation also applauded
the steps by a number of other parties toward developing a workable
solution to the challenge in California. It noted that the ISO is
currently working on market mitigation efforts, including the approval
of up to $255 million for peaking capacity contracts to meet next
summer's demand; the FERC and the CPUC have opened investigations
and have held hearings on the issue; and Governor Gray Davis has
underscored the importance of addressing this issue to ensure the
continued health of the state's economy, calling on FERC to further
reduce price and bid caps on wholesale power sold in California.
"We believe the stakeholders
in California understand the need for a fast solution to the problems
in the wholesale electric market," said Glynn, "and we are confident
that such a solution can be developed and implemented soon, especially
in light of the positive steps now being taken to address the situation."
* Terms Used in This Release
Controlled Megawatts - Electric
generating capacity which PG&E Corporation has the rights to sell
in the wholesale marketplace, either through full or partial ownership
of generating assets, or through contractual agreements.
Tolling Agreement - Contracts
that provide PG&E Corporation with the rights to sell electricity
generated by facilities owned and operated by another party. Under
such arrangements, PG&E Corporation supplies the fuel to the power
plant, and then sells the plant's output in the competitive market.
PG&E
CORPORATION
CONDENSED STATEMENT OF CONSOLIDATED INCOME
(unaudited)
|
Three months ended September
30, |
Nine months ended September
30, |
|
|
|
(in millions, except per share amounts) |
2000 |
1999 |
2000 |
1999 |
|
Operating Revenues |
Pacific Gas and Electric Company |
$ |
2,523 |
$ |
2,587 |
$ |
7,037 |
$ |
6,905 |
PG&E National Energy Group |
PG&E Generating |
290 |
275 |
883 |
818 |
PG&E Gas Transmission |
– Texas |
258 |
177 |
707 |
970 |
– Northwest |
64 |
56 |
177 |
166 |
PG&E Energy Trading |
4,777 |
3,490 |
10,493 |
8,145 |
Eliminations and Other |
(408) |
(368) |
(1,147) |
(979) |
Total operating revenues |
7,504 |
6,217 |
18,150 |
16,025 |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
Cost of energy for Pacific Gas and |
2,234 |
864 |
4,187 |
2,183 |
Electric Company |
|
|
|
|
|
|
|
|
|
|
|
Cost of energy–PG&E National Energy |
4,618 |
3,394 |
10,137 |
8,415 |
Group |
|
|
|
|
|
|
|
|
|
|
|
Deferred electric procurement costs |
(2,176) |
– |
(2,789) |
– |
Operating expenses, including |
|
|
|
|
|
|
|
|
|
|
|
depreciation |
2,199 |
1,443 |
4,688 |
3,970 |
Total operating expenses |
6,875 |
5,701 |
16,223 |
14,568 |
Operating Income |
629 |
516 |
1,927 |
1,457 |
Interest expense and other |
(146) |
(170) |
(484) |
(502) |
Income Before Income Taxes |
483 |
346 |
1,443 |
955 |
Income taxes |
239 |
149 |
671 |
395 |
Income before discontinued operations |
and cumulative effect of a change in |
|
|
|
|
accounting principle |
244 |
197 |
772 |
560 |
Discontinued operations |
Loss from operations of PG&E |
Energy Services (net of applicable |
income tax of $9 million and |
|
|
|
|
$26 million, respectively) |
– |
(12) |
– |
(34) |
Loss on disposal of PG&E Energy |
Services (net of applicable income |
|
|
|
|
taxes of $13 million) |
(19) |
– |
(19) |
– |
|
Income before cumulative effect of |
a change in accounting principle |
225 |
185 |
753 |
526 |
Cumulative effect of a change in an |
accounting principle (net of appli- |
cable income taxes of $8 million) |
– |
– |
– |
12 |
Net income |
$ |
225 |
$ |
185 |
$ |
753 |
$ |
538 |
Weighted Average Common Shares |
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
362 |
367 |
361 |
369 |
Earnings Per Common Share, Basic |
Income from continuing operations |
$ |
0.67 |
$ |
0.53 |
$ |
2.14 |
$ |
1.52 |
Discontinued operations |
(0.05) |
(0.03) |
(0.05) |
(0.09) |
Cumulative effect of change in |
accounting principle |
– |
– |
– |
0.03 |
|
Net Income |
$ |
0.62 |
$ |
0.50 |
$ |
2.09 |
$ |
1.46 |
Earnings Per Common Share, Diluted |
Income from continuing operations |
$ |
0.67 |
$ |
0.53 |
$ |
2.12 |
$ |
1.51 |
Discontinued operations |
(0.05) |
(0.03) |
(0.05) |
(0.09) |
Cumulative effect of change in |
accounting principle |
– |
– |
– |
0.03 |
|
Net Income |
$ |
0.62 |
$ |
0.50 |
$ |
2.07 |
$ |
1.45 |
|
|
|
|
|
|
|
|
|
|
|
Dividends Declared Per Common |
$ |
0.30 |
$ |
0.30 |
$ |
0.90 |
$ |
0.90 |
Share |
Earnings and earnings per share for PG&E Corporation's
lines of business are as follows: |
Earnings (millions) |
Earnings (millions) |
Three months ended September
30, |
Nine months ended September
30, |
|
|
2000 |
1999 |
2000 |
1999 |
Utility |
Pacific Gas and Electric |
$ |
211 |
$ |
179 |
$ |
655 |
$ |
498 |
Company (a) |
|
|
|
|
|
|
|
|
|
|
|
PG&E National Energy Group |
PG&E Generating |
16 |
21 |
70 |
77 |
PG&E Gas Transmission |
– Texas |
– |
(7) |
– |
(33) |
– Northwest |
16 |
18 |
43 |
46 |
PG&E Energy Trading |
5 |
(17) |
27 |
(19) |
PG&E Energy Services |
|
– |
(12) |
– |
(34) |
Eliminations and Other |
– |
3 |
(10) |
(3) |
Subtotal - PG&E National Energy |
|
|
|
|
|
|
|
|
|
|
|
Group |
37 |
6 |
130 |
34 |
|
|
|
|
|
|
|
Earnings from Operations |
248 |
185 |
785 |
532 |
|
|
|
|
|
|
|
Items impacting comparability (b) |
(23) |
– |
(32) |
6 |
Reported Earnings |
$ |
225 |
$ |
185 |
$ |
753 |
$ |
538 |
Earnings per Share (Diluted) |
Earnings per Share (Diluted) |
Three months ended September
30, |
Nine months ended September
30, |
|
|
2000 |
1999 |
2000 |
1999 |
Utility |
Pacific Gas and Electric |
$ |
0.58 |
$ |
0.49 |
$ |
1.80 |
$ |
1.35 |
Company (a) |
|
|
|
|
|
|
|
|
|
|
|
PG&E National Energy Group |
PG&E Generating |
0.04 |
0.05 |
0.19 |
0.21 |
PG&E Gas Transmission |
– Texas |
– |
(0.02) |
– |
(0.10) |
– Northwest |
0.04 |
0.05 |
0.12 |
0.12 |
PG&E Energy Trading |
0.02 |
(0.05) |
0.08 |
(0.05) |
PG&E Energy Services |
|
– |
(0.03) |
– |
(0.09) |
Eliminations and Other |
– |
0.01 |
(0.03) |
(0.01) |
Subtotal - PG&E National Energy |
|
|
|
|
|
|
|
|
|
|
|
Group |
0.10 |
0.01 |
0.36 |
0.08 |
|
|
|
|
|
|
|
Earnings from Operations |
0.68 |
0.50 |
2.16 |
1.43 |
|
|
|
|
|
|
|
Items impacting comparability (b) |
(0.06) |
– |
(0.09) |
0.02 |
Reported Earnings |
$ |
0.62 |
$ |
0.50 |
$ |
2.07 |
$ |
1.45 |
(a) 1999 results for Pacific
Gas and Electric Company do not include the impacts associated with
the delayed decision on the Company's 1999 General Rate Case (GRC),
which was resolved in February 2000 and retroactive to January 1,
1999. The effects of the 1999 GRC were recorded in the fourth quarter
of 1999 and would have increased 1999 third quarter and year-to-date
earnings by $38 ($0.11 per share) and $115 ($0.32 per share).
(b) Items impacting comparability
in 2000 include loss on disposal of assets, net of tax, of $19 million
($0.05 per share) resulting from a true-up following sale of the
energy services operations and relocation and severance charges
related to the restructuring of the PG&E National Energy Group of
$4 million ($0.01 per share) in the third quarter and $13 million
($0.04 per share) in the nine months ended September 30, 2000. Items
impacting comparability in the nine-month period ending September
30, 1999 include a restructuring charge of $6 million ($0.01 per
share) incurred at PG&E Gas Transmission and income from a change
in accounting principle at PG&E Generating of $12 million ($0.03
per share).