Form 8-K dated June 16, 2006
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report: June 16, 2006
(Date
of
earliest event reported)
PG&E
CORPORATION
(Exact
Name of Registrant as specified in Charter)
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California
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1-12609
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94-3234914
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(State
or other jurisdiction of
incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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One
Market, Spear Tower, Suite 2400, San Francisco, California
94105
(Address
of principal executive offices, zip code)
415-267-7000
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
PACIFIC
GAS AND ELECTRIC COMPANY
(Exact
Name of Registrant as specified in Charter)
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California
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1-2348
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94-0742640
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(State
or other jurisdiction of
incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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77
Beale Street, P. O. Box 770000, San Francisco, California
94177
(Address
of principal executive offices, zip code)
(415)
973-7000
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨ Soliciting
Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
8.01 Other Events
On
June
15, 2006, the California Public Utilities Commission (CPUC) approved the
settlement reached among Pacific Gas and Electric Company (Utility), the CPUC’s
Division of Ratepayer Advocates (DRA), and the Coalition of California Utility
Employees that will permit the Utility to recover revenue requirements
associated with annual contributions to the Utility’s pension plan trust in
2006, 2007, 2008 and 2009. These contributions are projected to be
necessary
for the
pension plan trust to reach fully-funded status as of January 1, 2010.
The
settlement resolves the Utility’s application for approval of funding to make a
2006 pension contribution as well as the Utility’s separate request for pension
contribution funding for 2007, 2008 and 2009 made in the Utility’s 2007 General
Rate Case (GRC) application.
The
decision adopting the settlement provides that
the
$155
million distribution and generation revenue requirement that the CPUC authorized
the Utility to collect beginning January 1, 2006, subject to refund, to fund
a
pension contribution of approximately $250 million in 2006, is final and no
longer subject to refund. Approximately $75 million of the $250 million
contribution will be capitalized. The remaining $20 million relates to revenue
requirements for gas transmission and storage, for electric transmission, and
nuclear decommissioning, which have been or will be addressed in other CPUC
or
Federal Energy Regulatory Commission (FERC) proceedings.
For
2007,
2008 and 2009, the decision provides for an annual pension contribution of
approximately $153 million and a distribution and generation pension-related
revenue requirement of approximately $98 million.
As
required by the settlement, the Utility will be making its $250 million pension
contribution for 2006 within 40 days of the date that the CPUC’s decision
approving the settlement is mailed. The Utility’s pension contributions for the
years 2007, 2008, and 2009 will be made on a quarterly basis. Also, within
the
next 60 days, the Utility will file an advice letter establishing a two-way
balancing account for any differences between the Utility’s authorized pension
contribution amounts for 2006 through 2009 and any contribution amounts that
either are lower than the authorized amounts for any reason or are higher than
the authorized amounts due to federal laws that may, in the future, require
higher pension contribution amounts. The Utility would seek to reflect in rates
any balance in this balancing account.
B.
Approval
of Contra Costa Unit 8 Application
On
June
15, 2006, the CPUC also issued a final decision adopting, with one exception,
all of the provisions of a proposed settlement agreement among the Utility,
the
DRA, The Utility Reform Network, and California Unions for Reliable Energy.
The
decision approves the Utility’s application to acquire, complete construction
of, and operate Contra Costa Unit 8 (CC8), a 530-megawatt electric generating
facility currently owned by Mirant Corporation (Mirant), pursuant to the terms
of an Asset
Transfer Agreement between Mirant and the Utility. The Asset Transfer Agreement
provides the terms and conditions under which the CC8 project assets, including
its site, equipment, permits, and contracts, would be transferred to the
Utility, and development and construction of the plant would be completed by
the
Utility. (As previously disclosed, the Asset Transfer Agreement implements
one
part of a settlement agreement among the Utility, Mirant, and certain of
Mirant’s subsidiaries to settle certain of the Utility’s claims in Mirant’s
Chapter 11 proceeding.) The Utility’s application requested
cost-of-service
funding to complete the remaining construction of the CC8 facility and to
operate the facility for up to three years, until the Utility’s first GRC after
commercial operation of the project.
As
previously disclosed, in
approving the California investor-owned utilities’ long-term procurement plans,
the CPUC decided that
the
utilities should be allowed to recover stranded costs for their non-Renewable
Portfolio Standards resource commitments from all customers, including departing
customers, through a non-bypassable charge for at least 10 years from the date
of signing a power purchase agreement or the date of commercial operation of
a
utility-owned power plant. The CPUC also decided that the utilities should
be
allowed to justify a cost recovery period longer than 10 years on a case-by-case
basis. The
CPUC’s June 15 decision rejected the Utility’s proposal to recover any
above-market costs of the CC8 project through a non-bypassable charge for the
30-year life of the project. Instead, the CPUC adopted a 10-year period for
recovery of these non-bypassable charges. At the end of this 10-year period,
the
Utility will still be able to collect any above-market costs for the CC8 project
from its current full-service customers, but will no longer be able to charge
departing customers for these costs.
The
settlement establishes an initial annual non-fuel revenue requirement for the
CC8 project of approximately $67 million. This revenue requirement will be
trued-up to actual capital costs in the Utility’s first GRC after commercial
operation of the project. The settlement also establishes $295 million as a
reasonable and prudent estimate of the initial capital cost of completing the
project, reduced from the Utility’s original estimate of $310 million. The
Utility will be entitled to increase its revenue requirement without further
reasonableness review if the actual capital costs incurred are as much as $305
million. If the actual capital costs are more than $305 million but less than
$345 million, the Utility will be entitled to include in its rate base and
recover in rates only 90 percent of the actual capital costs that exceed $305
million, up to the $345 million threshold. If actual capital costs for the
project are $345 million or more, the Utility may request recovery of the amount
exceeding $345 million, subject to a reasonableness review. The settlement
provides that the initial capital cost estimate, the initial revenue
requirement, and the dollar thresholds described above may be adjusted for,
among other things, delays in the resumption of construction or changes in
the
project scope caused by permit requirements or by governmental action or
inaction.
On
June
13, 2006, the FERC authorized Mirant to transfer the CC8 facility to the
Utility. The
completion of the CC8 acquisition remains subject to the satisfaction of a
number of closing conditions, including achieving the satisfactory resolution
of
certain environmental permitting issues affecting the plant. The Utility
currently is assessing these permitting issues to
determine any potential changes to the scope or cost of the project.
If
the
Utility and Mirant do not close the acquisition of the CC8 project assets on
or
before June 30, 2008, the Utility will be paid $70 million from an escrow
account funded by Mirant in lieu of Mirant’s transferring the project
assets.
C. Proposed
Decision Adopting Advanced
Metering Infrastructure Application
On
June
15, 2006, a CPUC administrative law judge issued a proposed decision adopting
with only minor modifications the Utility’s application to deploy its advanced
metering infrastructure (AMI) project at an estimated cost of $1.74 billion,
including an estimated capital cost of $1.4 billion,
based on
a five-year installation schedule for virtually all of the Utility's electric
and gas customers starting in 2006.
The
authorized $1.74 billion project cost includes a risk-based allowance of
approximately $129 million, which the Utility could spend to address delays,
overruns, or other unforeseen contingencies as part of the reasonable costs
of
the project. Of the $1.74 billion amount, approximately $54.8 million would
be
authorized for costs related to marketing new critical peak pricing rate
programs and would be recoverable in rates without further reasonableness
review. The remaining $1.68 billion of project costs would also be recoverable
in rates without further reasonableness review. The proposed decision also
adopts the Utility’s request to recover in rates 90 percent of up to $100
million in additional project costs beyond the $1.68 billion amount. If costs
exceed this additional $100 million threshold, the Utility may request recovery
of the amount exceeding the $100 million threshold, subject to a reasonableness
review.
The
proposed decision adopts the Utility’s proposal to record costs and benefits
related to the AMI project in separate electric and gas balancing accounts
as
they are incurred. As
previously disclosed, the Utility expects that approximately 89 percent of
the
AMI project costs would be offset by the anticipated operational savings and
efficiencies resulting from AMI. The remaining 11 percent is expected to be
offset by electric procurement savings resulting from voluntary customer
participation in demand response options.
Comments
are due on July 5, 2006, and reply comments are due on July 10, 2006. It is
expected that the CPUC will issue a final decision by the end of July. PG&E
Corporation and the Utility cannot predict whether the CPUC will approve
this application or
whether the anticipated benefits and costs savings of the AMI project would
be
realized.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrants
have
duly caused this report to be signed on their behalf by the undersigned hereunto
duly authorized.
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PG&E
CORPORATION
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Dated:
June 16, 2006
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By:
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/s/
LINDA Y.H. CHENG
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LINDA
Y.H. CHENG
Vice
President, Corporate Governance and Corporate
Secretary
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PACIFIC
GAS AND ELECTRIC COMPANY
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Dated:
June 16, 2006
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By:
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/S/
LINDA Y.H. CHENG
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LINDA
Y.H. CHENG
Vice
President, Corporate Governance and Corporate
Secretary
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