August 01, 2001
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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 posted net income from operations of $243 million, or $0.67 per share, compared with $253 million, or $0.69 per share, for the same quarter last year. Adjusting for non-operating items related to the California energy crisis, the Corporation reported total net income of $750 million, or $2.07 per share.

  • Pacific Gas and Electric Company contributed operating income of $175 million, or $0.48 per share, compared with $216 million, or $0.59 per share, last year.

  • PG&E National Energy Group grew operating results to $71 million, or $0.19 per share, for the quarter, compared with $37 million, or $0.10 per share, in the second quarter of 2000.

Second Quarter Earnings Statement

(San Francisco) -- PG&E Corporation (NYSE: PCG) today reported second-quarter net income from operations of $243 million, or $0.67 per share, compared with $253 million, or $0.69 per share, for the same quarter last year. Total net income for the quarter was $750 million, reflecting the impact of several non-operating items.

Income from operations at Pacific Gas and Electric Company, the Corporation's utility business, was $175 million, or $0.48 per share, compared with $216 million, or $0.59 per share, last year. The lower operating results primarily reflect the reduced capacity factor for Unit 2 at the company's Diablo Canyon Nuclear Power Plant, which was off-line for 29 days during the quarter for regularly scheduled refueling and maintenance work, compared with no refueling outage in the second quarter of last year.

Income from operations at PG&E National Energy Group grew to $71 million, or $0.19 per share, for the quarter, compared with $37 million, or $0.10 per share, in the second quarter of 2000. The results reflected particularly strong performance in the integrated energy and marketing segment of the business. Performance was strong in the natural gas pipeline segment in the Northwest as well.

"The Corporation's operating results show that the underlying performance of our business remains solid," said PG&E Corporation Chairman, CEO and President Robert D. Glynn, Jr. "Pacific Gas and Electric is responding to the operational demands of the energy crisis, and our National Energy Group is continuing to grow its contribution to our bottom line."

Total Net Income

PG&E Corporation reported total net income of $750 million, or $2.07 per share, compared with $248 million, or $0.68 per share, for the same quarter of 2000. The substantial increase over the same period from the prior year is attributable to various non-operating items affecting results for the quarter. Most significantly, as reported in a filing earlier this week with the Securities and Exchange Commission, these include $552 million in non-operating income offsetting a portion of the charges previously recorded for unrecovered wholesale power and transition costs at Pacific Gas and Electric Company.

The $552 million offset primarily reflects the following two items:

  • Accounting for the value of certain bilateral power contracts that were terminated by the counterparties, who were entitled to do so in the event of a decline in the utility's credit quality. The contracts require that the market value of the contracts be settled upon termination. The estimated value of the contracts is reflected as a non-operating item.

  • Accounting for the actual charges from the ISO for power the ISO purchased in March, which were lower than the estimated amounts the company recorded in the first quarter based on available information at the time. The difference between the estimated charges and the actual charges is reflected as a non-operating item for the second quarter offsetting previously recorded power purchase costs.

Further, Pacific Gas and Electric Company's second quarter results do not include any ISO charges for purchases and related services after April 6, the date on which the Federal Energy Regulatory Commission reaffirmed its ruling that the ISO cannot bill non-creditworthy parties for power purchases. The company continues to assert that it is not responsible for ISO purchases made during the majority of the first quarter. However, accounting rules required that the company estimate and record those charges in its first quarter results, pending resolution of the issue.

Even with the positive impact of these offsets in the second quarter, however, the company estimates that its net undercollection remains at approximately $4.7 billion after tax, as a result of charges recorded in the fourth quarter of 2000 and the first quarter of 2001.

Accomplishments At Pacific Gas And Electric Company

The success of the refueling outage at Diablo Canyon, which was the shortest in the facility's history, was one of a number of operational accomplishments throughout the utility during the quarter in preparation for the summer. These other accomplishments included increasing customer energy efficiency programs, and enhancing various systems and procedures related to plan for and manage potential rotating outages. The utility also worked with 10 generators to interconnect more than 1,000 additional megawatts to the electric transmission grid this summer, and it signed agreements with more than 130 QF power generators to lock in power deliveries at fixed costs, helping to protect customers against swings in wholesale market prices.

Accomplishments At PG&E National Energy Group

In addition to strong earnings performance, the PG&E NEG completed two important financings during the second quarter. Specifically, the unit sold $1 billion of 10-year notes in a private placement, and it obtained a new $550 million senior letter of credit and revolving credit facility. The financings will be used by the unit to invest in generating and pipeline assets, and to support its energy trading activities and fund working capital requirements.

Second quarter accomplishments also included further progress in developing and building the unit's portfolio of controlled megawatts. Commercial operations began in June at the 526-megawatt (MW) Attala power plant in Mississippi and at the final unit of the 144-MW multi-unit peaking facility in Ohio. Also in June, PG&E NEG began construction on the 1,080-MW Athens plant in New York and the 111-MW Plains End facility in Colorado. In addition, an agreement was announced in June between the PG&E NEG and the city of Denton, Texas, under which the company acquired a 178-MW generating facility and agreed to a power sales contract with the city. The various projects grew the company's total electric generation portfolio to approximately 7,000 MW in operation and approximately 5,700 MW currently under construction.

In its natural gas pipeline operations, during the second quarter the PG&E NEG completed two open seasons for new capacity. The unit expects the open seasons will lead to capacity expansions and extensions of its Northwest pipeline.

"The earnings growth in the PG&E National Energy Group and its success in securing new capital show that this business is strong and on track with executing its growth strategy," said Glynn.

Guidance And Conclusion

The Corporation reaffirmed the guidance it provided in the first quarter regarding the outlook for net income from operations in 2001. Specifically, the company estimates net income from operations for the year will be in the range of $2.70 to $2.75 per share. "Our performance in the second quarter confirms that our business is continuing to perform while we work to resolve the challenges in California," said Glynn.

A conference call with the financial community will be held today at 9:00 AM Pacific time to discuss the company's results for the quarter. The call will be open to the public on a listen-only basis via webcast. Please visit our website for more information and instructions for accessing the webcast. A replay of the conference call will also be available on our website.

The information in this release includes forward-looking statements regarding the expected financial results for the quarter ended June 30, 2001. These forward-looking statements are subject to various risks and uncertainties. These statements are based on current expectations and assumptions which management believes are reasonable and on information currently available to management. Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including the extent to which more information is revealed about the recently released California Department of Water Resources' revenue requirements and the impact such revenue requirements may have on the Utility's financial condition and results of operation; the outcome of the Utility's regulatory proceedings; whether and to what extent the Utility is determined to be responsible for the ISO's charges billed to the Utility; any regulatory, judicial, or legislative actions that may be taken to meet future power needs in California, mitigate the higher wholesale power prices, provide refunds for prior power costs, or address the Utility's financial condition; and the other risk factors discussed in PG&E Corporation's reports filed with the Securities and Exchange Commission