SAN FRANCISCO, Nov. 5, 2001 – PG&E Corporation today reported third-quarter net income from operations of $256 million, or $0.70 per diluted share, compared with $248 million, or $0.68 per diluted share, for the same quarter last year.
“The Corporation’s results for the third quarter continue to reflect solid underlying performance across our operations,” said PG&E Corporation Chairman, CEO and President Robert D. Glynn, Jr.
Total reported net income for the quarter was $771 million, compared with $225 million for the third quarter of 2000.
Income from operations at Pacific Gas and Electric Company, the Corporation’s utility business, was $192 million, or $0.53 per diluted share, compared with $211 million, or $0.58 per diluted share, last year. The decrease in operating income from a year ago primarily reflects the effects of a recent California Public Utilities Commission (CPUC) action to retroactively reduce revenues previously authorized in the utility’s 1999 General Rate Case.
Specifically, for the years 1999 through 2001, the commission retroactively reduced the revenues the utility was entitled to collect for such areas as meter reading, customer account services and emergency response services. The 2001 effects of this decision are included in operating results, with the 1999 and 2000 effects accounted for as items impacting comparability and reflected in total net income. The company intends to challenge the ruling in the courts.
At the PG&E National Energy Group (PG&E NEG), income from operations grew to $77 million, or $0.21 per diluted share, for the third quarter, compared with $37 million, or $0.10 per diluted share, in the third quarter of 2000.
Total Net Income
PG&E Corporation reported total net income of $771 million, or $2.12 per diluted share, compared with $225 million, or $0.62 per diluted share, for the same quarter of 2000. This increase reflects the difference between generation revenues and generation costs at Pacific Gas and Electric Company in the third quarter of 2001.
Previously, in keeping with CPUC requirements, these revenues were used to amortize generation-related transition costs associated with energy industry restructuring. However, in the fourth quarter of 2000, accounting rules forced the company to write off the balance of these unrecovered transition costs. Since the second quarter of 2001, the company’s revenues have enabled it to offset a portion of these previously written-off costs.
As noted, total net income also includes the 1999 and 2000 impacts of the CPUC’s recent retroactive General Rate Case decision, as well as several other items related to the California energy crisis. Specifically, these items are $66 million, or $0.18 per share, of costs associated with the termination of gas transportation hedges at the utility; $62 million, or $0.17 per share, of additional interest costs; $25 million, or $0.07 per share, of other costs associated with Pacific Gas and Electric Company’s Chapter 11 case; and a gain of $0.02 per share related to the state income tax effect of the generation-related revenues mentioned above.
Third-Quarter Accomplishments at Pacific Gas and Electric Company
In September, Pacific Gas and Electric Company and PG&E Corporation announced a plan to reorganize and refinance the utility’s operations in order to resolve creditors’ claims in the utility’s Chapter 11 case. The Plan of Reorganization filed in the Bankruptcy Court will enable the company to emerge from Chapter 11 without asking the court to raise rates or seeking a state bailout.
Instead, the company will restructure its operations to create the capacity for new financing to pay creditors’ claims. The company is on track to make a series of necessary federal regulatory filings in late November seeking approvals to transfer certain assets and operating licenses in order to implement the plan by the end of 2002.
“Pacific Gas and Electric Company continued to successfully manage the financial and operational challenges associated with the state’s energy crisis,” said Glynn. “In addition to filing the Plan of Reorganization, our team again delivered on its commitment to provide safe, reliable and responsive gas and electric service to its customers, as it has throughout 2001.”
In the third quarter alone, the company’s service representatives, meter readers, troublemen and credit representatives completed over 600,000 field orders, and maintained an on-time-appointment score of more than 97 percent, compared with the company’s target of 94 percent.
Year-to-date, the company’s call centers have handled 14.6 million customer calls, up more than 35 percent over volume from the previous year. The company has also maintained solid customer satisfaction survey results, with more than 90 percent of customers surveyed rating services as good, very good or excellent.
On the energy conservation front, the utility’s Smarter Energy Line has answered 425,000 calls year to date, more than double the number of calls from the previous year. The utility also continued its successful energy efficiency rebate programs, receiving and paying more than 73,000 customer rebate applications for energy efficient appliances in the third quarter, and also paying more than $7.7 million in instant in-store rebates for energy efficient lighting purchases.
Third-Quarter Accomplishments at PG&E National Energy Group
Among the highlights for the quarter, the PG&E NEG completed a successful effort to establish a $1.25 billion revolving credit facility that will provide working capital and credit to finance the unit’s growth plans.
In July, the NEG completed the sale of its Otay Mesa Generating Project in San Diego County to Calpine. Under the terms of the sale, Calpine will build, own and operate the facility and PG&E National Energy Group will contract for a portion of the output. Also, the Caledonia generating project in Mississippi, with which the PG&E NEG has signed an 810-megawatt tolling agreement, went into construction during the quarter.
In August, the PG&E NEG broke ground on the 1,170-megawatt Covert generating project in southwest Michigan, and in September it secured financing and began construction on the 111-megawatt Plains End peaking facility near Denver, Colorado. The PG&E NEG took also ownership of the 66-megawatt Mountain View wind-generating facility in Southern California, which will sell its power to the California Department of Water Resources under a 10-year contract. In its natural gas transmission operations, the PG&E NEG began construction on the expansion of its Pacific Northwest natural gas pipeline.
“The team at the PG&E National Energy Group continued its solid performance in the third quarter, as it has throughout all of 2001,” said Glynn.
During the quarter, the PG&E NEG continued working to manage the indirect impacts of the utility’s Chapter 11 filing and to shape its strategy in light of increasingly challenging market conditions.
Looking to 2002 and 2003, the PG&E NEG will continue to move forward with all of the projects currently under construction or with which it has tolling agreements.
These include the Liberty Electric, Athens, Southhaven, La Paloma and Harquahala generating projects. As a result, the PG&E NEG expects construction to be completed on more than 5,400 megawatts, plus almost another 2,200 megawatts from a number of tolling agreements.