PG&E;’s 3rd-Quarter Operating Profit Falls

The parent of Pacific Gas & Electric said Wednesday that its third-quarter net income improved, although the utility’s operating performance declined.

PG&E; Corp.’s net income rose 9% to $510 million, or $1.24 a share, from $466 million, or $1.19, a year earlier.

Revenue increased 5% to $3.1 billion from $2.9 billion.

The third-quarter profit included $495 million of “headroom” -- a regulatory term used to describe the cash cushion between the utility’s power generation revenue and costs. Neither management nor investors regard earnings from headroom as the best measure of the San Francisco-based company’s financial strength.

Excluding headroom and other items unrelated to its ongoing business, PG&E; said its profit would have been $174 million, or 42 cents a share, a 28% decline from third-quarter operating profit of $241 million, or 61 cents, last year.

The latest operating results missed the consensus estimate of 48 cents a share among analysts surveyed by Thomson First Call.

PG&E;’s shares fell 4 cents to $24.08 on the New York Stock Exchange.

Management attributed the decline in the company’s operating results to delays in getting final approval for a proposed $326-million rate increase, as well as reduced demand for its natural gas service.

The company is counting on the California Public Utilities Commission to approve a retroactive rate increase early next year.

Despite the recent erosion in operating profit, PG&E; remains on a “clear path to financial stability,” Chairman Robert Glynn Jr. said in a conference call.

PG&E; is pinning its hopes on a bankruptcy reorganization plan for Pacific Gas & Electric that still faces opposition from consumer activists and some large business customers, who contend that the bailout will enrich shareholders at ratepayers’ expense.

PUC President Michael Peevey helped draw up the reorganization plan, but the proposal still hasn’t cleared a potentially nettlesome hurdle -- majority approval from the PUC’s five-member board.

U.S. Bankruptcy Court Judge Dennis Montali also must confirm the plan.

If the PUC doesn’t approve the plan by year’s end, PG&E; can scrap the proposal and pursue other alternatives.