PG&E; Reports Tripling of Net Income

PG&E; Corp., which began the second quarter with a bankruptcy filing by its beleaguered utility arm, Wednesday reported a tripling of net income to $750 million tied to lower electricity costs and other one-time gains.

But operating income lagged year-ago levels despite improved operations at PG&E;’s power-plant-building subsidiary. PG&E; blamed the deterioration primarily on a planned maintenance outage at the Diablo Canyon nuclear power plant.

In contrast, PG&E; posted a net loss of $951 million in the first quarter because accounting rules required it to write off $1.1 billion in electricity and other costs it was not assured of recovering.

Operating income for the first and second quarters was an identical $243 million, or 67 cents a share. In the second quarter of last year, PG&E; reported operating income of $253 million, or 69 cents a share.

The company said it was not yet clear whether the cost of electricity will be covered by the higher rates customers are paying.

“The corporation’s operating results show that the underlying performance of our business remains solid,” said Robert D. Glynn Jr., PG&E; chairman, chief executive and president. “Pacific Gas & 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.”

Wall Street analysts had expected PG&E; to earn 71 cents a share in the second quarter, according to the average estimate of analysts polled by First Call/Thomson Financial.

PG&E;’s stock price gained 18 cents to close at $15.05 a share on the New York Stock Exchange.

PG&E;’s leap in net income was due to $552 million in nonoperating income, which the San Francisco company disclosed Monday.

The gains resulted from lower-than-expected costs in March for electricity purchased on the utility’s behalf by the state grid operator. The power company also benefited from payments triggered by the early termination of contracts by generators who feared that the utility could not pay for the power.

PG&E; normally would offset these gains with expenses accumulated in balancing accounts. But the company wrote off those electricity debts in 2000 and in the first quarter of this year, so the gains are recorded as income.

After accounting for the $552 million in offsets, PG&E; estimates that its electricity “undercollection”--power costs it has not been able to pass along to customers--totals $4.7 billion after taxes.

PG&E;’s largest subsidiary, Pacific Gas & Electric Co., which serves 4.7 million customers in Northern and Central California, remains profitable despite an April 6 filing for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code.

The utility earned $175 million in the second quarter, down from $216 million a year ago. The lower results came from a 29-day outage at the Diablo Canyon nuclear plant for refueling and maintenance.

Pacific Gas & Electric has until Dec. 6 to file a plan of reorganization with the Bankruptcy Court. The utility will finish the job well before the deadline, Glynn said in a conference call with analysts.

The company recently was granted a four-month extension, and the plan “is coming together quite nicely,” Glynn said.

When the utility will emerge from bankruptcy protection is not known, Glynn said.

“We are going through waters that are not very well charted,” he said. “This is not like building a power plant where there are well-benchmarked estimates about how long it takes to get a permit and how long it takes to get a turbine.”

PG&E; executives also said they didn’t see significant conservation by customers in the second quarter. The utility delivered about 1% fewer kilowatt-hours during the period than in the second quarter of 2000. When adjusted for weather, the decline was about 2.5%.

Executives also said they plan to soon refile a lawsuit that seeks to force state regulators to raise rates enough to pay for uncollected power costs.

PG&E; National Energy Group, which builds and operates power plants and a natural gas pipeline and trades energy commodities, boosted operating income to $71 million from $37 million a year ago. The company cited strong performance in the group’s energy trading and power generation businesses.