February 18, 2005
ISSUED BY:   PG&E Corporation, 1-800-743-6397


  • Fourth quarter 2004 consolidated net income reported under GAAP was $2.04 per share. (All “per share” amounts are presented on a diluted basis.)
  • Earnings from operations were $0.44 per share for the quarter.
  • Full-year GAAP results were $10.57 per share, due largely to one-time, non-cash items.
  • Full-year earnings from operations were $2.12 per share.
  • Guidance for 2005 earnings from operations is reaffirmed at $2.15 to $2.25 per share.
Related Documents
Consolidated Income Statement
Utility Operating Statistics

(San Francisco) -- PG&E Corporation’s (NYSE: PCG) consolidated net income as reported in accordance with generally accepted accounting principles (GAAP) was $871 million, or $2.04 per share for the fourth quarter of 2004. As previously reported, a one-time, non-cash item related to the elimination of the Corporation’s equity interest in its former national energy unit increased GAAP results by $684 million, or $1.60 per share. Consolidated net income in the fourth quarter of 2003 was $37 million, or $0.09 per share.

On a non-GAAP earnings-from-operations basis, earnings for the fourth quarter were $186 million, or $0.44 per share, compared with $139 million, or $0.33 per share, in 2003. Earnings from operations excludes certain non-operating income and expenses. These items are shown as “Items Impacting Comparability” on the attached financial tables, which reconcile earnings from operations with consolidated net income as reported in accordance with GAAP.

For Pacific Gas and Electric Company alone, fourth quarter earnings from operations were $191 million, or $0.45 per share, compared with $141 million, or $0.34 per share, in 2003.

The quarter-over-quarter difference in earnings from operations primarily reflects the effects of the delayed 2003 General Rate Case (GRC) decision. The net effect was approximately $0.11 per share that otherwise would have been reflected in fourth quarter of 2003 earnings from operations.

Other factors impacting the quarter-over-quarter difference include about $0.06 per share of earnings on the Chapter 11 settlement regulatory asset in the fourth quarter of 2004, as well as $0.06 per share from higher electric and gas transmission revenues. Higher electric transmission revenues were driven by electric transmission rate decisions, and higher gas transmission revenues reflected the effects of colder-than-normal weather. These positive items were offset by $0.07 per share of additional costs from a second scheduled refueling outage at the Diablo Canyon power plant, with the remaining $0.05 per share due to a higher number of shares outstanding and other items.


For the full year 2004, PG&E Corporation’s reported GAAP results were $4.5 billion, or $10.57 per share, of which $8.52 per share reflected two one-time, non-cash items relating to Pacific Gas and Electric Company’s Chapter 11 exit and the elimination of the Corporation’s equity interest in its former national energy unit. Total consolidated net income in 2003 was $420 million, or $1.02 per share.

On a non-GAAP earnings-from-operations basis, PG&E Corporation earned $901 million, or $2.12 per share in 2004, compared with $611 million, or $1.48 per share in 2003. Earnings from operations exceeded the $2.10 per share upper end of the Corporation’s guidance range due to higher gas transmission revenues, which occurred primarily due to the effects of colder-than-normal weather in the fourth quarter. Pacific Gas and Electric Company contributed $931 million, or $2.19 per share, to earnings from operations in 2004, compared with $616 million, or $1.49 per share, in 2003.

“Last year’s financial, regulatory and operational accomplishments drove solid earnings performance. They also establish a platform for focusing on our performance for customers and returning value to shareholders,” said Peter A. Darbee, President and Chief Executive Officer of PG&E Corporation. “Pacific Gas and Electric Company has a strong balance sheet, healthy cash flows and investment grade credit ratings. We’ve re-established a common stock dividend. We are executing substantial share repurchases. And we’re continuing to make new investments in the core utility business in order to deliver better, faster and more cost-effective service to customers.”

The difference in earnings from operations from 2003 to 2004 is magnified by the effects of the delayed 2003 GRC decision, which was not resolved until May 2004. Revenues authorized in the GRC were retroactive to January 1, 2003, but the decision was not final in time to be reflected in 2003 earnings from operations. If not for the delayed GRC decision, 2003 earnings from operations would have been higher by approximately $0.45 per share.

Another principal driver for the increase in earnings from operations in 2004 versus 2003 was earnings on the equity portion of the Chapter 11 settlement agreement regulatory asset, which accounted for an additional $0.27 per share. (As previously reported, the Chapter 11 settlement agreement regulatory asset is being refinanced through the issuance of Energy Recovery Bonds, and therefore earnings on the regulatory asset will not recur.)

For the full year 2004, two large one-time, non-cash items impacting comparability accounted for a substantial amount of the difference between earnings from operations and reported consolidated net income.

Specifically, as previously reported for the first quarter of 2004, accounting for the regulatory assets established as part of Pacific Gas and Electric Company’s Chapter 11 settlement agreement was reflected as a non-cash gain of approximately $6.92 per share. In the fourth quarter, the Corporation recorded a positive $1.60 per share non-cash entry necessary to reflect the resolution of the Chapter 11 filing by National Energy & Gas Transmission, Inc. (NEGT), which eliminated the Corporation’s equity interest in NEGT. The $1.60 per share item reverses the Corporation’s net negative investment in NEGT.


Reaffirming its previously issued earnings guidance, the Corporation expects 2005 earnings from operations to be in the range of $2.15-$2.25 per share. The assumptions underlying the 2005 estimates include the achievement of the utility’s authorized return on equity of 11.22 percent, the refinancing of the settlement agreement regulatory asset and the implementation of accelerated share repurchase programs.

The first series of Energy Recovery Bonds refinancing the regulatory asset has been issued, and the second series is now expected to be issued in late 2005, earlier than previously anticipated. Stock repurchases of $1.05 billion are now planned for March 2005, which is higher than the $975 million originally planned as a result of a slightly stronger cash and capital structure position.

PG&E Corporation bases guidance on “earnings from operations” in order to provide a measure that allows investors to compare the underlying financial performance of the business from one period to another, exclusive of items that management believes do not reflect the normal course of operations. Earnings from operations are not a substitute or alternative for consolidated net income presented in accordance with GAAP.

The attachment to this news release reconciles 2005 estimated earnings per share from operations with estimated consolidated net income per share in accordance with GAAP.

PG&E Corporation will host an investor conference for members of the financial community at 8:00 a.m. Eastern time on February 25, 2005 in New York City. The meeting will be available to the public on a listen-only basis via webcast and will include an overview of the business and strategic focus, capital spending needs, and multi-year financial outlook. Because the meeting so closely follows today’s earnings announcement, PG&E Corporation will not hold its regular quarterly conference call for analysts today. Please visit our website for more information and instructions for accessing next week’s investor conference webcast.

This press release and the attachment contain forward-looking statements regarding estimated earnings for 2005, and the targeted level of stock repurchases and dividends in 2005 based on anticipated cash flows. These statements are based on current expectations and assumptions which management believes are reasonable and on information currently available to management, but are necessarily subject to various risks and uncertainties. In addition to the risk that the assumptions described above prove to be inaccurate (including that the Utility earns an authorized return on equity of 11.22 percent, the timely implementation of an $1.05 billion accelerated share repurchase program, and the issuance of the second series of energy recovery bonds in late 2005), factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include:

  • The timing and resolution of the pending appeals of the CPUC’s approval of the settlement agreement and the bankruptcy court confirmation of the Utility’s plan of reorganization;
  • Unanticipated changes in operating expenses or capital expenditures, which may affect the Utility’s ability to earn its authorized rate of return;

  • The level and volatility of wholesale electricity and natural gas prices and supplies, the Utility’s ability to manage and respond to the levels and volatility successfully, and the extent to which the Utility is able to timely recover increased costs related to such volatility;

  • The operation of the Utility’s Diablo Canyon nuclear power plant, which exposes the Utility to potentially significant environmental costs and capital expenditure outlays;

  • The impact of current and future ratemaking actions of the CPUC, including the risk of material differences between forecasted costs used to determine rates and actual costs incurred;

  • Whether the assumptions and forecasts underlying the Utility’s CPUC-approved long-term electricity procurement plan prove to be accurate, the terms and conditions of the generation or procurement commitments the Utility enters into in connection with its plan, the extent to which the Utility is able to recover the costs it incurs in connection with these commitments, and the extent to which a failure to perform by any of the counterparties to the Utility’s electricity purchase contracts or the Department of Water Resources’ contracts allocated to the Utility’s customers affects the Utility’s ability to meet its obligations or to recover its costs;

  • The extent to which the CPUC or the FERC delays or denies recovery of the Utility’s costs, including electricity purchase costs, from customers due to a regulatory determination that such costs were not reasonable or prudent or for other reasons resulting in write-offs of regulatory balancing accounts;

  • How the CPUC administers the capital structure, stand-alone dividend and first priority conditions of the CPUC’s decisions permitting the establishment of holding companies for the California investor-owned electric utilities;

  • The impact of future legislative or regulatory actions or policies;

  • Increased competition;
  • The outcome of pending litigation; and
  • Other factors discussed in PG&E Corporation's SEC reports.