PG&E Corporation Reports Financial Performance On Track With Expectations For 2006

Complete Earnings Tables

Second Quarter Reflects Regularly Scheduled Diablo Canyon Refueling

  • Consolidated net income reported under GAAP was $0.65 per share for PG&E Corporation for the quarter ended June 30, 2006, compared to $0.70 per share in the same quarter of 2005. (All “per share” amounts are presented on a diluted basis.)
  • Net income for the second quarter was $232 million, compared to $267 million for the same quarter last year. As expected, net income was lower due to the “carrying cost credit” that has been provided since Nov. 2005 to compensate customers for pre-funded tax liabilities, as well as expenses associated with a regularly scheduled refueling outage at Diablo Canyon Power Plant.
  • Earnings from operations for the second quarter were $0.64 per share compared to $0.69 per share in the same quarter of 2005.
  • Guidance for 2006 earnings from operations is reaffirmed in the $2.40-$2.50 per share range. Guidance for 2007 earnings from operations is reaffirmed at $2.65-$2.75 per share

(San Francisco) -- PG&E Corporation’s (NYSE: PCG) consolidated net income reported in accordance with generally accepted accounting principles (GAAP) was $232 million, or $0.65 per share, in the second quarter of 2006. In the same period last year, consolidated net income was $267 million, or $0.70 per share.

On a stand-alone basis, PG&E Corporation’s Pacific Gas and Electric Company subsidiary’s GAAP results were $227 million for the second quarter of 2006, compared with $272 million in the same quarter of 2005.

As anticipated, net income for both the three and six months ended June 30, 2006 reflects the impact of a “carrying cost credit.” This credit has been provided to customers since November 2005 to compensate them for the pre-funding of future tax liabilities associated with the refinancing of a regulatory asset put in place as part of Pacific Gas and Electric Company’s bankruptcy settlement (see “Terms in Press Release” below). The cash from the refinancing was utilized to repurchase common stock, partially offsetting the impact on earnings per share.

Expenses associated with a planned refueling outage for Unit 2 of the Diablo Canyon Power Plant also lowered net income for the quarter, but are not expected to have a significant impact on the year. While the utility recovers the costs for scheduled plant maintenance in its rates evenly throughout the year, the costs of the refueling outage occurred in the second quarter. This creates a timing difference between revenues and expenses that will balance out over the year.

Net income for the second quarter was not impacted by the higher market prices of fuel or purchased power. Increases or decreases in these expense categories are generally offset by increases or decreases in revenues authorized for collection by the California Public Utilities Commission (CPUC).

“Earnings for the second quarter were solid and in line with expectations,” said Peter A. Darbee, PG&E Corporation Chairman, CEO and President. “We are on track to deliver on our objectives for 2006, and made significant progress in this past quarter.”

Darbee cited a number of successes the company had during the quarter including:

  • Completion of the Diablo Canyon Unit 2 refueling outage safely and on time, getting the unit back on line quickly and saving customers money. The plant outage also included work to replace low-pressure turbines, which, along with efficient turbines installed on Unit 1 last December, has increased the plant’s output by 80 megawatts.

  • Approval by the CPUC to invest $1.4 billion in capital to install more than 10 million SmartMeter™ devices throughout the company’s service area—the largest deployment of automated metering technology in the country. This technology will provide customers with better information and the ability to make cost-saving choices about the way they use energy. It will also give the utility new rapid response capabilities to restore service following an outage, as well as enhanced abilities to assist customers.

  • Approval from the Federal Energy Regulatory Commission and the CPUC for the utility’s 530-megawatt Contra Costa 8 project, enabling PG&E to build the first new utility-owned generation in California in a decade.


On a non-GAAP basis, PG&E Corporation’s earnings from operations for the second quarter were $228 million, or $0.64 per share, compared with $262 million, or $0.69 in the same quarter of 2005.

Earnings from operations exclude certain non-operating income and expenses reported in GAAP net income (see “Items Impacting Comparability” in the accompanying financial tables, which reconcile earnings from operations with consolidated net income in accordance with GAAP).


PG&E Corporation reaffirmed its previous guidance for earnings from operations in the range of $2.40-$2.50 per share for 2006 and $2.65-$2.75 per share for 2007.

Guidance assumes that the utility earns its authorized return on equity of 11.35 percent.

PG&E Corporation bases guidance on “earnings from operations” in order to provide a measure that allows investors to compare the underlying financial performance of the business from one period to another, exclusive of items that management believes do not reflect the normal course of operations. Earnings from operations are not a substitute or alternative for consolidated net income presented in accordance with GAAP.

Supplemental Financial Information:

  • In addition to the financial information accompanying this release, an expanded package of supplemental financial and operational information for the quarter will be furnished to the Securities and Exchange Commission and also will be available shortly on PG&E Corporation’s website (

Conference Call with the Financial Community to Discuss Second Quarter Results:

  • Today’s call at 11:30 a.m. Eastern time is open to the public on a listen-only basis via webcast. Please visit for more information and instructions for accessing the webcast. The call will be archived on the website. Also, a toll-free replay will be accessible shortly after the live call through 9:00 p.m. EDT, on August 9, 2006, by dialing 877-690-2089. International callers may dial 402-220-0645.

Terms used in this press release:

  • Carrying Cost Credit – This is a credit that has been provided to customers since November 2005 to compensate them for the pre-funding of future tax liabilities associated with the refinancing of the regulatory asset, which was put in place as part of Pacific Gas and Electric Company’s bankruptcy settlement. The regulatory asset was established in 2004 to provide the financial stability for the company to emerge from Chapter 11. In order to save customers almost $1 billion in lower financing and tax costs over the 9-year life of the regulatory asset, the company refinanced the regulatory asset in 2005 by issuing two series of energy recovery bonds (ERBs). The first series of ERBs was issued in February 2005 to refinance the after-tax portion of the regulatory asset. The second series of ERBs was issued in November 2005 to pre-fund the utility's tax liability that will be incurred as the utility collects the revenue to pay off the first series of ERBs. The credit is computed at the utility’s authorized rate of return. The carrying cost credit will decline as the taxes are paid, reaching zero in 2012 when the ERBs and related taxes are expected to be paid in full.

This press release contains forward-looking statements regarding management’s guidance for PG&E Corporation’s 2006 and 2007 earnings per share from operations. These statements are based on current expectations and various assumptions which management believes are reasonable, including that Pacific Gas and Electric Company (Utility) earns its authorized rate of return. These statements and assumptions are necessarily subject to various risks and uncertainties, the realization or resolution of which are outside of management's control. Actual results may differ materially. Factors that could cause actual results to differ materially include:

  • Unanticipated changes in operating expenses or capital expenditures, which may affect the Utility’s ability to earn its authorized rate of return;
  • How the Utility manages its responsibility to procure electric capacity and energy for its customers;
  • The adequacy and price of natural gas supplies, and the ability of the Utility to manage and respond to the volatility of the natural gas market for its customers;
  • The operation of the Utility’s Diablo Canyon nuclear power plant, which could cause the Utility to incur potentially significant environmental costs and capital expenditures, and the extent to which the Utility is able to timely increase its spent nuclear fuel storage capacity at Diablo Canyon;
  • Whether the Utility is able to recognize the benefits expected to result from its efforts to improve customer service through implementation of specific initiatives to streamline business processes and deploy new technology;
  • The outcome of proceedings pending at the Federal Energy Regulatory Commission (FERC) and the California Public Utilities Commission (CPUC), including the Utility’s 2007 General Rate Case and the Utility’s application for approval of new long-term generation resource commitments;
  • How the CPUC administers the capital structure, stand-alone dividend, and first priority conditions of the CPUC’s decisions permitting the establishment of holding companies for the California investor-owned electric utilities, and the outcome of the CPUC's new rulemaking proceeding concerning the relationship between the California investor-owned energy utilities and their holding companies and non-regulated affiliates;
  • The impact of the recently adopted Energy Policy Act of 2005 and future legislative or regulatory actions or policies affecting the energy industry;
  • Increased municipalization and other forms of bypass in the Utility’s service territory; and
  • Other factors discussed in PG&E Corporation's SEC reports.

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