How did PG&E Corporation's earnings change in 2005 compared with 2004?

Net income was $917 million in 2005, down from $4,504 million in 2004. The 2004 figure included a $684 million gain on disposal of NEGT and the one-time recognition of regulatory assets under the Settlement Agreement. Income from continuing operations was $904 million in 2005 versus $3,820 million in 2004.

What is the status of the Utility's Chapter 11 case and the pending appeal?

The Utility's plan of reorganization became effective on April 12, 2004. Two former CPUC commissioners appealed the bankruptcy court's confirmation order; the Ninth Circuit heard oral argument on February 13, 2006, and a decision is uncertain in timing. The company believes the appeal is without merit. If the confirmation order is overturned or modified, the filing states that financial results and the Utility's ability to pay dividends could be materially adversely affected.

What were the main capital allocation actions in 2005?

The Utility issued Energy Recovery Bonds totaling about $2.7 billion and used proceeds to repay debt and repurchase common stock from PG&E Corporation, including $960 million in March and $950 million in November. PG&E Corporation repurchased 61,139,700 shares for approximately $2.2 billion and raised its annual dividend target to $1.32 per share.

What are the main pending legal and regulatory risks?

The CPUC's investigation into billing and collection practices could result in refunds and penalties, with hearings scheduled to begin May 22, 2006. The California Attorney General and City and County of San Francisco lawsuits seek restitution and penalties of not less than $500 million total, which the company says have no merit. The Chromium Litigation settlement requires releases from at least 90% of settling plaintiffs by September 15, 2006.

What is the Utility's outlook for capital spending and rates?

The Utility expects capital expenditures to average approximately $2.5 billion annually over the next five years, which is expected to grow rate base by approximately 6% per year. The 2007 General Rate Case requests electric and gas distribution revenue requirement increases of $481 million and $114 million, with a final decision on most issues expected by December 14, 2006.

PG&E 10-K FY2005 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed February 17, 2006. Cited figures are marked; the original filing is the authoritative source.

PG&E Corporation, an energy-based holding company, conducts its business principally through Pacific Gas and Electric Company (the Utility), a public utility serving approximately 5 million electricity distribution customers and approximately 4.2 million natural gas distribution customers in northern and central California.

At December 31, 2005, the Utility had approximately $33.8 billion^a of assets and generated revenues of approximately $11.7 billion in 2005. PG&E Corporation reported net income of $917 million for 2005, down from $4,504 million in 2004, which included a $684 million gain on disposal of NEGT and the 2004 recognition of regulatory assets under the Settlement Agreement. The Utility emerged from Chapter 11 on April 12, 2004, and an appeal of the bankruptcy court confirmation order remains pending at the Ninth Circuit.

Key 2005 capital actions included two Energy Recovery Bond issuances totaling about $2.7 billion^b, approximately $2.2 billion of accelerated share repurchases by PG&E Corporation, and an increase in the annual dividend target to $1.32 per share. The Utility's capital expenditures are expected to average approximately $2.5 billion annually over the next five years. The company recorded a $314 million reserve for the Chromium Litigation after reaching a $295 million settlement with approximately 1,100 plaintiffs.

Significant uncertainties include the CPUC investigation into the Utility's billing and collection practices, where the CPSD recommends a refund of $117 million^c plus fines of $6.75 million, and the California Attorney General and City and County of San Francisco lawsuits seeking restitution claims that the company describes as without merit. The Utility's 2007 General Rate Case application requests increases in distribution revenue requirements of $481 million for electric and $114 million for gas.

02—Key points

Key Highlights

2005 net income of $917 million for PG&E Corporation, compared with $4,504 million in 2004, which included a $684 million gain on disposal of NEGT and the one-time recognition of regulatory assets in 2004.
Operating revenues of $11,703 million for PG&E Corporation in 2005, compared with $11,080 million in 2004.
Energy Recovery Bonds of approximately $2.7 billion issued in 2005 to refinance the Settlement Regulatory Asset, with a $844 million second series issued in November 2005.
PG&E Corporation repurchased 61,139,700 shares for approximately $2.2 billion under accelerated share repurchase arrangements in 2005, with $500 million of the $1.6 billion authorization remaining.
Chromium Litigation: $295 million settlement with approximately 1,100 plaintiffs, with a $314 million reserve recorded at December 31, 2005.
CPUC billing and collection investigation: CPSD recommends a refund of $117 million plus $6.75 million in fines; TURN recommends $53 million refund and $1 million contribution.
2007 General Rate Case application requests electric and gas distribution revenue requirement increases of $481 million and $114 million, with capital expenditures expected to average approximately $2.5 billion annually from 2006 through 2010.

03—Questions

Frequently Asked Questions

How did PG&E Corporation's earnings change in 2005 compared with 2004?
Net income was $917 million in 2005, down from $4,504 million in 2004. The 2004 figure included a $684 million gain on disposal of NEGT and the one-time recognition of regulatory assets under the Settlement Agreement. Income from continuing operations was $904 million in 2005 versus $3,820 million in 2004.
What is the status of the Utility's Chapter 11 case and the pending appeal?
The Utility's plan of reorganization became effective on April 12, 2004. Two former CPUC commissioners appealed the bankruptcy court's confirmation order; the Ninth Circuit heard oral argument on February 13, 2006, and a decision is uncertain in timing. The company believes the appeal is without merit. If the confirmation order is overturned or modified, the filing states that financial results and the Utility's ability to pay dividends could be materially adversely affected.
What were the main capital allocation actions in 2005?
The Utility issued Energy Recovery Bonds totaling about $2.7 billion and used proceeds to repay debt and repurchase common stock from PG&E Corporation, including $960 million in March and $950 million in November. PG&E Corporation repurchased 61,139,700 shares for approximately $2.2 billion and raised its annual dividend target to $1.32 per share.
What are the main pending legal and regulatory risks?
The CPUC's investigation into billing and collection practices could result in refunds and penalties, with hearings scheduled to begin May 22, 2006. The California Attorney General and City and County of San Francisco lawsuits seek restitution and penalties of not less than $500 million total, which the company says have no merit. The Chromium Litigation settlement requires releases from at least 90% of settling plaintiffs by September 15, 2006.
What is the Utility's outlook for capital spending and rates?
The Utility expects capital expenditures to average approximately $2.5 billion annually over the next five years, which is expected to grow rate base by approximately 6% per year. The 2007 General Rate Case requests electric and gas distribution revenue requirement increases of $481 million and $114 million, with a final decision on most issues expected by December 14, 2006.

04—Continue

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