PRESS RELEASES 2001 RELEASE
FOR IMMEDIATE RELEASE
April 16, 2001

Listen to the conference call to the Financial Community

Contact: PG&E Corporation
EDITORS: Please do not use "Pacific Gas and Electric" or "PG&E" when referring to PG&E Corporation or its National Energy Group. The PG&E National Energy Group is not the same company as Pacific Gas and Electric Company, the utility, and is not regulated by the California Public Utilities Commission. Customers of Pacific Gas and Electric Company do not have to buy products or services from the National Energy Group in order to continue to receive quality regulated services from Pacific Gas and Electric Company.

PG&E CORPORATION REPORTS RESULTS FOR 2000

  • PG&E Corporation reported a net loss for 2000 of $3.4 billion, or $9.29 per share, following after-tax charges of $4.1 billion, or $11.36 per share, for uncollected wholesale power procurement and transition costs at Pacific Gas and Electric Company.

  • Before the charge and other non-recurring items, net income from operations* in 2000 was $2.54 per diluted share, or $925 million. Net income from operations for 1999 was $2.24 per share, or $826 million.

  • Pacific Gas and Electric Company posted net income from operations of $2.11 per diluted share*, or $769 million. For 1999, the utility reported net income from operations of $2.07 per share, or $763 million.

  • National Energy Group contributions rose significantly over 1999, with net income from operations of $0.45 per diluted share, or $162 million, for 2000. Net income from operations in 1999 was $0.17 per share.

(San Francisco, CA) - PG&E Corporation (NYSE:PCG) said today that the absence of certain regulatory treatment facing its California utility unit required the utility unit to record an after-tax accounting charge of $4.1 billion against its income for the year. It did so because it could no longer meet the accounting standards requiring probable recovery of more than $6 billion in wholesale costs incurred by Pacific Gas and Electric Company last year to buy power on behalf of its utility customers. As a result of the charge, PG&E Corporation reported a net loss for the year of $3.4 billion, or $9.29 per share. Also, the Corporation announced on April 6, 2001, that its utility unit has sought protection under Chapter 11 of the U.S. Bankruptcy Code, believing that the federal court will provide the best venue to resolve the financial challenges associated with the California energy crisis.

"While standard accounting rules required the utility to record a charge against earnings for unreimbursed wholesale and transition costs, taking this charge does not diminish our conviction that the utility is entitled under law to recover these costs, nor does it diminish our ongoing lawsuit in Federal District Court," said PG&E Corporation Chairman, CEO and President, Robert D. Glynn, Jr. Glynn added that, should these costs ultimately be deemed recoverable, the utility could reestablish these assets and recognize income in the future.

Excluding this charge and other non-recurring items, PG&E Corporation reported net income from operations for the year of $925 million, or $2.54 per diluted share, compared with net income from operations in 1999 of $826 million, or $2.24 per share, a 13 percent increase. On an operating basis, the company’s results exceeded its goal to grow operating earnings by 8 to 10 percent per year.

The increase in net income from operations primarily reflects the continued growth and strong performance of the corporation’s unregulated business unit, the National Energy Group, which grew its earnings from operations by 165 percent over 1999. Income contributions from Pacific Gas and Electric Company for 2000 rose approximately 2 percent over 1999 results.

"While overshadowed by the extraordinary impacts of the California energy crisis," said Glynn, "we demonstrated continued solid performance on an operating basis. We are proud of that accomplishment, even as we are deeply dissatisfied at reporting a substantial net loss due to the uncertainty around the recovery of our wholesale power and transition costs."

Pacific Gas and Electric Company

Operating revenues at Pacific Gas and Electric Company in 2000 were $9.6 billion, compared with $9.2 billion in 1999. The unit reported net income from operations of $769 million, or $2.11 per diluted share, compared with $763 million, or $2.07 per share, for last year. However, on an overall basis, the utility reported a net loss of $3.5 billion, reflecting two non-recurring charges. Most significantly, as noted, financial reporting standards required the unit to record an after-tax write-off of $4.1 billion in uncollected wholesale power and transition costs that no longer met the accounting standard requiring that they be probable of recovery. The utility’s net results also included a non-recurring charge of $79 million, or $0.22 per share, reflecting the utility’s inability to fully utilize tax benefits of losses in California.

The utility’s Diablo Canyon Nuclear Power Plant completed another year of outstanding operations in 2000 and was once again given high marks and superior ratings by the Nuclear Regulatory Commission and the Institute of Nuclear Power Operations. Other successes at the utility included continued implementation of cost-efficient measures as well as efforts to strengthen customer service programs. Last year, for example, Pacific Gas and Electric Company became one of the first utilities in the country to allow customers a full range of Internet-based service, from scheduling appointments to managing their accounts.

For much of 2000, however, the utility’s resources were focused intensively on managing the California energy crisis, taking whatever measures possible to ensure that it could continue purchasing and delivering electricity and natural gas 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. The NEG increased its profitability substantially over last year, earning net income from operations of $162 million, or $0.45 per diluted share, on revenues of $16.6 billion for 2000, compared with $63 million, or just $0.17 per share, on revenues of $11.6 billion in 1999.

The NEG’s net income from operations for 2000 excludes several non-recurring items. The unit incurred a charge of $40 million, or $0.11 per share, as an adjustment to the loss on its disposition of its retail energy services business. These charges were offset partially by a favorable actualization of $20 million, or $0.06 per share, on the sale of its Texas natural gas liquids and natural gas pipeline business, which closed in December 2000.

The NEG turned in four consecutive solid quarters across the board in 2000. In the electric generation operations, the company continued its aggressive development and construction efforts, and secured turbines that will enable it to bring 16,000 megawatts of new capacity on line. The NEG also continued to secure additional capacity through strategic tolling agreements.* In the NEG’s natural gas transmission operations, the unit experienced increased demand for capacity on the NEG’s Northwest pipeline, and it moved forward with development of the North Baja pipeline project. Positive power and gas trading margins in all regions led to the favorable performance within the energy trading operation, with the majority of its contribution coming from the Northeast.

Continuing Efforts to Resolve the Energy Crisis

PG&E Corporation and its California utility continue to pursue multiple avenues for managing and resolving the California energy crisis, including legal actions through the courts, negotiations with regulators and elected officials, and dialogue with lenders and creditors while the utility works to achieve a solution to the crisis.

"We are committed, on behalf of our creditors, our shareholders and our customers, to successfully guiding our utility unit through the Chapter 11 reorganization process while maintaining our strong dedication to operating our utility business with a focus on providing safe and reliable service," said Glynn. "We also intend to continue to execute our strategy for growth in our NEG business, building on the accomplishments of 2000 and continuing to build that unit’s contribution to shareholder value."

This press release contains forward-looking statements regarding the future performance of PG&E Corporation and its businesses. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially. Some of the factors that could cause actual results to differ materially include: regulatory changes, including the pace and extent of the ongoing restructuring of the electric and natural gas industries across the United States; whether the Utility will be able to continue to capitalize and ultimately recover under-collected electric procurement costs recorded in its TRA from customers; what regulatory, judicial, or legislative actions may be taken to mitigate the higher power prices in California; the method and timing of disposition and valuation of the Utility's hydroelectric generation assets; the timing of the completion of the Utility's transition cost recovery and the consequent end of the current electric rate freeze in California; any changes in the amount of transition costs the Utility is allowed to recover from its customers; future operating performance at the Utility's Diablo Canyon Nuclear Power Plant; the method adopted by the CPUC for sharing the net benefits of operating Diablo Canyon with ratepayers and the timing of the implementation of the adopted method; the extent of anticipated growth of transmission and distribution services in the Utility's service territory; the success of management's strategies to maximize shareholder value in PG&E National Energy Group, which may include acquisitions or dispositions of assets, or investments in emerging companies or new businesses; the extent to which our current or planned generation development projects are completed and the pace and cost of such completion; generating capacity expansion and retirements by others; the outcome of the Utility's various regulatory proceedings, including the proceeding to determine the value of the Utility's hydroelectric generation assets, the electric transmission rate case applications, post-transition period ratemaking proceedings, the 2001 attrition rate adjustment request, and the 2002 General Rate Case; future market prices for electricity and future fuel prices which, in part, are influenced by future weather conditions and the availability of hydroelectric power; fluctuations in commodity gas, natural gas liquids, and electricity prices and the ability to successfully manage such price fluctuations; the pace and extent of competition in the California generation market and its impact on the Utility's costs and resulting collection of transition costs; the effect of compliance with existing and future environmental laws, regulations, and policies, the cost of which could be significant; and the outcome of pending litigation.
PG&E CORPORATION CONDENSED STATEMENT OF CONSOLIDATED INCOME (unaudited)
Three months ended December 31,
 
Twelve months ended December 31,
 
(in millions, except per share amounts)
2000
1999
2000
1999
 
Operating Revenues
Pacific Gas and Electric Company
$
2,600
$
2,323
$
9,637
$
9,228
PG&E National Energy Group
PG&E Generating
328
304
1,211
1,122
PG&E Gas Transmission
– Texas
166
178
873
1,148
– Northwest
62
58
239
224
PG&E Energy Trading
5,561
2,376
16,054
10,521
Eliminations and Other
(635)
(444)
(1,782)
(1,423)
Total operating revenues
8,082
4,795
26,232
20,820
Operating Expenses
                     
Cost of energy for Pacific Gas and
Electric Company
 
3,979
966
8,166
3,149
Cost of energy–PG&E National
Energy Group
 
5,083
2,172
15,220
10,587
Operating expenses, including                      
depreciation
2,491
2,236
7,179
6,206
Deferred electric procurement                      
costs
(3,676)
(6,465)
Provision for loss on generation-                      
related regulatory assets
                     
and power costs
6,939
6,939
Total operating expenses
14,816
5,374
31,039
19,942
Operating Income (Loss)
(6,734)
(579)
(4,807)
878
Interest expense and other
(61)
(115)
(545)
(617)
Income (Loss) Before Income
Taxes
(6,795)
(694)
(5,352)
261
Income tax expense (benefit)
(2,699)
(147)
(2,028)
248
Income (Loss) from continuing
operations
(4,096)
(547)
(3,324)
13
Discontinued operations
Loss from operations of
       
PG&E Energy Services (net of applicable income taxes of $9 million and $36 million, respectively)
(6)
(40)
Loss on disposal of PG&E
       
Energy Service (net of applicable income taxes of $23 million and $36 million, respectively)
(21)
(58)
(40)
(58)
Net loss before cumulative
       
effect of a change in accounting principle
(4,117)
(611)
(3,364)
(85)
Cumulative effect of a
       
change in an accounting principle (net of applicable income taxes of $8 million)
12
Net loss
$
(4,117)
$
(611)
$
(3,364)
$
(73)
Weighted Average Common                      
Shares Outstanding
363
366
362
368
Earnings (Loss) Per Common Share, Basic and Diluted(a)
Income (Loss) from
                     
continuing operations
$
(11.28)
$
(1.49)
$
(9.18)
$
0.04
Discontinued operations
(0.06)
(0.18)
(0.11)
(0.27)
Cumulative effect of change
in accounting principle
0.03
Net earnings (loss)
$
(11.34)
$
(1.67)
$
(9.29)
$
(0.20)
                     
Dividends Declared Per
$
0.30
$
0.30
$
1.20
$
1.20
Common Share
Earnings and earnings per share for PG&E Corporation's lines of business are as follows:
Earnings (millions)
Earnings (millions)
Three months ended December 31,
Twelve months ended December 31,
2000
1999
2000
1999
Utility
Pacific Gas and Electric
$
114
$
265
$
769
$
763
Company (a)
                     
National Energy Group
PG&E Generating
14
20
84
97
PG&E Gas Transmission
– Texas
(4)
(37)
– Northwest
15
22
58
68
PG&E Energy Trading
13
(15)
40
(34)
PG&E Energy Services
 
(6)
(40)
Eliminations and Other
(10)
12
(20)
9
Subtotal - National
                     
Energy Group
32
29
162
63
             
Other Enterprises
(6)
(6)
Earnings from Operations (b)
140
294
925
826
             
Items impacting
comparability (c)
(4,257)
(905)
(4,289)
(899)
Reported Earnings
$
(4,117)
$
(611)
$
(3,364)
$
(73)
Earnings per Share (Diluted)
Earnings per Share (Diluted)
Three months ended December 31,
Twelve months ended December 31,
2000
1999
2000
1999
Utility
Pacific Gas and Electric
$
0.31
$
0.72
$
2.11
$
2.07
Company (a)
                     
National Energy Group
PG&E Generating
0.04
0.06
0.23
0.26
PG&E Gas Transmission
– Texas
(0.01)
(0.10)
– Northwest
0.04
0.06
0.16
0.18
PG&E Energy Trading
0.04
(0.04)
0.11
(0.09)
PG&E Energy Services
 
(0.02)
(0.11)
Eliminations and Other
(0.03)
0.03
(0.05)
0.03
Subtotal - National Energy
                     
Group
0.09
0.08
0.45
0.17
             
Other Enterprises  
(0.02)
(0.02)
Earnings from Operations (b)
0.38
0.80
2.54
2.24
             
Items impacting comparability (c)
(11.72)
(2.47)
(11.83)
(2.44)
Reported Earnings
$
(11.34)
$
(1.67)
$
(9.29)
$
(0.20)

(a) The diluted shares for the year 2000 exclude 2 million in incremental shares due to the antidilution      effects of the loss from continuing operations.

(b) Earnings from operations exclude items impacting comparability and should not be considered an      alternative to net income or an indicator of a Companies' operating performance.

(c) Items impacting comparability in the year 2000 include the write-off of regulatory assets at the Utility of      $4,111 million ($11.36 per share); impact of inability to fully utilize tax benefits of losses in California of      $79 million ($0.22 per share); adjustments to the estimated loss on disposal of the retail energy      services unit of $40 million ($0.11 per share); a favorable actualization of $20 million ($0.06 per share)      on the sale of the Texas natural gas liquids and natural gas pipeline business unit, which closed on      December 22, 2000; an $83 million charge ($0.23 per share) related to an adjustment to legal reserves      at the Utility; $4 million ($0.01 per share) of other items, and $0.02 per share of dilution. Items      impacting comparability in the year 1999 include the following: write-down of assets related to sale of      the Texas natural gas liquids and natural gas pipeline business of $890 million ($2.42 per share);      provision for loss on sale of retail energy services unit of $58 million ($.16 per share); favorable      adjustment of litigation liability of $35 million ($.10 per share); income from change in accounting      principle of $12 million ($.03 per share); and other items of $2 million ($.01 per share).


 

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