Editorials

PG&E Corp., the parent of Northern California’s bankrupt utility, reported a $4.1 billion fourth-quarter loss Monday in a grudging acknowledgment that the company might not be able to charge its customers for last year’s soaring electricity costs. 

The San Francisco-based company recorded a before-tax charge of $6.9 billion to account for the difference between what it paid for wholesale electricity last year and what state regulators allowed the utility to charge its 4.5 million customers. 

After a tax benefit, the special charge produced a loss of $4.1 billion, or $11.34 per share, in the three months ended Dec. 31. That compared to a loss of $611 million, or $1.67 per share, in the prior year. 

Despite the utility’s bankruptcy, the parent company continued to portray itself as a successful business. 

“While overshadowed by the extraordinary impacts of the California energy crisis, we demonstrated continued solid performance on an operating basis,” said PG&E CEO Robert Glynn Jr., a written statement. 

If not for the one-time charge, PG&E’s fourth-quarter earnings would have been 39 cents per share. The consensus estimate of analysts polled by Thomson Financial/First Call was 40 cents per share. 

The earnings report, released Monday evening, represented the first snapshot of PG&E’s finances since the company’s regulated utility, Pacific Gas and Electric, filed for Chapter 11 bankruptcy April 6. PG&E management has scheduled an 8:30 a.m. PDT conference call Tuesday to discuss the results with industry analysts and investors. 

Despite the charge taken in the fourth quarter, the company expressed confidence that it will prevail in its legal fight to raise rates retroactively and pass on last year’s electricity costs to its customers. 

The fourth-quarter charge “does not diminish our conviction that the utility is entitled under law to recover these costs,” Glynn said. 

PG&E is suing to recover its electricity rates in federal court. The company also has asked U.S. Bankruptcy Judge Dennis Montali to overturn a California Public Utilities Commission ruling that could hurt its bid to raise rates retroactively. 

Management argues that the utility had met all the conditions needed to raise its rates as of July 2000. Regulators at the CPUC disagree. 

The issue also could affect PG&E’s earnings this year. In the first two months of 2001, PG&E estimates that the utility’s electricity costs exceeded what it could charge for retail rates by another $2 billion. 

Excluding the special charges, PG&E said it earned $925 million, or $2.54 per share, for all of 2000, a 13 percent increase from a 1999 profit of $826 million, or $2.24 per share. PG&E said the showing exceeded its goal of increasing profits by 8 to 10 percent annually. 

With one-time charges, PG&E said it lost $3.4 billion, or $9.29 per share, for all of 2000, versus a loss of $73 million, or 20 cents per share, in 1999. 

The company’s unregulated power wholesale subsidiary, the National Energy Group, contributed most of the gains last year. 

National Energy’s operating profit shot up to $162 million last year, more than doubling from $63 million in 1999. The unregulated business, now based in Maryland, also accounted for most of the company’s sales with revenues of $16.6 billion, up 43 percent from 1999. 

The parent company and National Energy Group aren’t a part of the utility’s bankruptcy. Their exclusion from the bankruptcy is expected to become a sticking point among the utility’s 30,000 creditors. 

With the PG&E’s utility in bankruptcy, National Energy has become the most valuable part of the company. Some analysts estimated PG&E’s regulated businesses may be worth as much as $12 per share if the company can keep it out of the bankruptcy proceedings. 

PG&E’s stock gained 19 cents Monday to close at $8.84. 

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On the Net: 

http://www.pgecorp.com/