With its principal subsidiary still enmeshed in Chapter 11 bankruptcy, San Francisco-based PG&E Corp. last week reported a complicated stream of earnings that included several arcane designations such as “headroom,” reversal of past pre-bankruptcy charges and various energy crisis/bankruptcy charges. The net effect of all the accounting machinations is $631 million, or $1.71/share, of earnings for the first quarter, compared to a $951 million loss, or negative 2.62/share for the same period last year.

Using the most comparable numbers — “earnings from operations” — results were down for this most recent period, compared to the first quarter of 2001, although PG&E CEO Robert Glynn said all of the company’s businesses “continue to perform well,” and he characterized both the financial and operational results for the first quarter as consistent with the company’s outlook for 2002.

Earnings from operations were $220 million, or 60 cents/share, for the first quarter, compared with $255 million, or 70 cents/share, in the first quarter last year. The earnings were concentrated in Pacific Gas and Electric Co. (44 cents/share), with the PG&E National Energy Group adding 10 cents/share, and the corporation providing the rest (6 cents/share).

The utility earnings of $160 million, or 44 cents/share, are down from the $203 million, or 56 cents/share, for the same period in 2001, reflecting what Glynn called “comparatively higher operational expenses this year, due primarily to the fact that in the first quarter of 2001 (just before the April 6, 2001 bankruptcy filing), expenditures were curtailed substantially through cash conservation measures at the height of the energy crisis.”

Nonutility results from the National Energy Group were also down — $37 million, or 10 cents/share, compared with $54 million, or 15 cents/share, for the first period last year. The drop was primarily attributed to lower wholesale energy prices and mild winter weather.

For the first time, PG&E Corp. said it was reporting earnings both with and without accounting for “headroom,” which includes income recovering prior uncollected wholesale power costs that had been previously written off for GAAP (“generally accepted accounting principles”) but are now being recovered in retail utility rates. (A combination of lower across-the-board wholesale energy costs and a 40% increase in retail charges beginning in June 2001 has provided billions of dollars in headroom.)

Operating earnings for the first quarter, including headroom, totaled $396 million, or $1.08/share, the utility holding company reported. There was no headroom in the first quarter last year to compare to these figures.

The other relevant figures pertaining to the overall $631 million net income result in the first quarter are the total value of the reversed charges, including a net gain of $352 million, and countering charges for energy crisis-related and bankruptcy-related costs in the first quarter of $117 million. Thus, the sum of the operating earnings, including headroom ($396 million), and the previous charge reversal ($352 million), minus the crisis/bankruptcy first quarter costs ($177 million), produces the $631 million net income results.

“Thanks to the focus and commitment of our team throughout the company,” said PG&E’s CEO Glynn, “our first quarter performance continues to provide a strong platform on which we are moving ahead with (the utility’s) plan of reorganization in the bankruptcy court, and on which we can continue strengthening our PG&E National Energy Group business.”

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