pge8k122008.htm
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UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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FORM
8-K
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CURRENT
REPORT
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Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
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Date
of Report:
December
16, 2008
(Date
of earliest event reported)
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PG&E
CORPORATION
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(Exact
Name of Registrant as specified in Charter)
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California
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1-12609
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94-3234914
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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One Market, Spear Tower, Suite 2400, San
Francisco, CA
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94105
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(Address
of principal executive offices)
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(Zip
code)
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415-267-7000
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(Registrant’s
Telephone Number, Including Area Code)
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N/A
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(Former
Name or Former Address, if Changed Since Last Report)
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PACIFIC
GAS AND ELECTRIC COMPANY
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(Exact
Name of Registrant as specified in Charter)
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California
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1-2348
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94-0742640
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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77 Beale Street, P. O. Box 770000, San Francisco,
California
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94177
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(Address
of principal executive offices)
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(Zip
code)
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(415) 973-7000
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(Registrant’s
Telephone Number, Including Area Code)
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N/A
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(Former
Name or Former Address, if Changed Since Last Report)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2.
below):
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[ ]
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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[ ]
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Soliciting
Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[ ]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17
CFR 240.14d-2(b)
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[ ]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17
CFR 240.13e-4(c))
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Item
5.02. Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
A.
2009 Officer Compensation
On
December 16, 2008, the Compensation Committee of the PG&E Corporation Board
of Directors (Committee) approved the PG&E Corporation 2009 Short-Term
Incentive Plan (STIP) under which officers and employees of PG&E Corporation
and Pacific Gas and Electric Company (Utility) may receive cash awards based on
the extent to which specified performance targets for each STIP component are
achieved. Corporate financial performance, as measured by PG&E
Corporation’s earnings from operations, will determine 50 percent of the
incentive, 17.5 percent of the incentive will be based on the Utility’s success
in improving electric and gas distribution system reliability, 17.5 percent of
the incentive will be based on customer satisfaction ratings for the Utility, 5
percent will be based on the results of an employee opinion survey, and the
remaining 10 percent will be based on achieving safety goals. The
Committee will approve the specific performance targets for each STIP component
in February 2009.
B. Amendments to Executive
Compensation Plans and Arrangements
On
December 16 and December 17, 2008, the Committee and the Boards of Directors of
PG&E Corporation and the Utility amended certain PG&E Corporation and
Utility compensation and benefit plans and arrangements, including the PG&E
Corporation Officer Severance Policy, in order to conform with the requirements
of Section 409A of the Internal Revenue Code. The Committee amended
the Officer Severance Policy (1) to eliminate the ability of terminated officers
under the age of 55 to elect to use their severance payments to buy years of
credited service under the PG&E Corporation Supplemental Executive
Retirement Plan, and (2) to narrow the circumstances under which an officer’s
resignation following a “Change in Control” of PG&E Corporation (as defined
in the policy) will be for “good reason” entitling the officer to the benefits
specified in the policy for officers who are terminated without cause in
connection with a Change in Control. In addition, on December 17, 2008, the
independent members of the PG&E Corporation Board of Directors amended the
terms of a May 2008 restricted stock unit award agreement between PG&E
Corporation and Peter A. Darbee, Chairman, Chief Executive Officer and
President, to revise provisions regarding the timing of vesting and settlement
(i.e., payment) of the restricted stock units in the case of a Change in Control
of PG&E Corporation. If the acquirer fails to assume or
continue the restricted stock unit award, the outstanding restricted stock units
will vest immediately before, and contingent on, the Change in Control and will
be settled upon the earlier of Mr. Darbee’s separation from service or the
original vesting date. If Mr. Darbee’s employment is terminated
without cause (a) following a “potential change in control” of PG&E
Corporation (as defined in the Officer Severance Policy) or (b) within two years
after a Change in Control of PG&E Corporation, the restricted stock units
will vest and be settled upon his separation from service.
C.
Election of New Director
On December 17, 2008, the
Boards of Directors of PG&E Corporation and the Utility elected Roger
H. Kimmel to serve as a director of PG&E Corporation and the Utility,
effective January 1, 2008.
Mr.
Kimmel will be entitled to receive the following director compensation (1) an
annual retainer of $55,000 beginning on January 1, 2009, and (2) equity awards
valued at $90,000, consisting of $45,000 of restricted stock and $45,000 of
either stock options or restricted stock units to be awarded under the formula
award provisions of the PG&E Corporation 2006 Long-Term Incentive Plan in
March of each year, beginning in March 2009. Mr. Kimmel will also
receive per-meeting fees of $1,750 for each Board meeting attended.
Under
PG&E Corporation’s and the Utility’s Corporate Governance Guidelines, at
least 75% of each Board is required to be composed of independent directors,
defined as directors who (1) are neither current nor former officers or
employees of, nor consultants to, PG&E Corporation or its subsidiaries, (2)
are neither current nor former officers or employees of any other corporation on
whose board of directors any officer of PG&E Corporation serves as a member,
and (3) otherwise meet the definition of “independence” set forth in the
applicable stock exchange rules. (On December 17, 2008, the Boards of
Directors of PG&E Corporation and the Utility amended each company’s
Corporate Governance Guidelines to reflect recent revisions to the New York
Stock Exchange listing standards relating to director
independence.) The composition of PG&E Corporation’s and the
Utility’s respective Boards of Directors continues to meet the Corporate
Governance Guidelines.
There are no arrangements
or understandings pursuant to which Mr. Kimmel was selected as a director of
PG&E Corporation or of the Utility. Mr. Kimmel does not
have any relationship or related transaction with PG&E Corporation or
the Utility that would require disclosure pursuant to Item 404(a) of Securities
and Exchange Commission Regulation S-K.
Item
5.03. Amendments to Articles of Incorporation or Bylaws; Change
in Fiscal Year
On
December 17, 2008, the Board of Directors of PG&E Corporation amended
PG&E Corporation’s Bylaws to increase the authorized number of directors
from 8 to 9, effective January 1, 2009. Under PG&E Corporation’s
Bylaws, the authorized number of directors may not be less than 7 or more than
13, but within that range the Board of Directors may set the exact number of
directors by an amendment to the Bylaws. The text of the amendment to
PG&E Corporation’s Bylaws is attached to this report as Exhibit
99.
Item
8.01 Other Events
Energy
Efficiency Incentive Mechanism
On
December 18, 2008, the California Public Utilities Commission (CPUC) voted to
approve a decision that awards the Utility $41.5 million in interim shareholder
incentive revenues for the Utility’s energy efficiency program performance in
2006 and 2007. The awarded amount represents 35% of approximately
$119 million in estimated shareholder incentive revenues for the 2006-2007
program years.
Under the
energy efficiency incentive mechanism, in order to earn incentives the Utility
and the other two California investor-owned utilities must (1) achieve at least
85% of the CPUC’s overall energy savings goal over the three-year program cycle
and (2) achieve at least 80% of the CPUC’s individual kilowatt-hour (kWh),
kilowatt (kW), and gas therm savings goals over the three-year program
cycle. If the utilities achieve between 85% and 99% of the CPUC’s
overall savings goal, 9% of the verified net benefits (i.e., energy resource
savings minus total energy efficiency program costs) will accrue to shareholders
and 91% of the verified net benefits will accrue to customers. If the
utilities achieve 100% or more of the CPUC’s overall savings goal, then 12%
of the total verified net benefits will accrue to shareholders and 88% will
accrue to customers. The CPUC limited the maximum amount of revenue
that the utilities could earn, and the maximum amount that the utilities could
be required to reimburse customers, over the 2006-2008 program
cycle. For the Utility, the maximum amount is $180 million.
If the utilities achieve less than 65% of any one of the individual
metric savings goals (i.e., kWh, kW, or gas therm), then the utilities must
reimburse customers based on the greater of (1) 5 cents per kWh, 45 cents per
therm, and $25 per kW for each kWh, therm, or kW unit below the 65% threshold,
or (2) a dollar-for-dollar payback of negative net benefits, also known as a
cost-effectiveness guarantee.
The
utilities are required to submit two interim claims; the first claim is based on estimated
performance achieved during the first and second years of the three-year period,
and the second claim is based on estimated performance achieved over the entire
three-year period. Estimated performance will be
calculated based on the number and cost of energy efficiency measures installed
by the utilities and estimates and assumptions about the energy savings per
energy efficiency measure. The number and cost of energy efficiency
measures that the utilities claim to have installed in each interim claim will
be subject to verification by the CPUC’s Energy Division. The energy
savings estimates and assumptions to be used by the utilities will be updated
periodically by the Energy Division. In the decision approved on
December 18, 2008, the CPUC ruled that 65% of the incentives calculated for the
utilities’ 2006-2007 interim claims will be “held back” until completion of
final measurement studies and a final verification report for the entire
three-year program cycle. The CPUC also ruled that the utilities will not
be entitled to any additional incentives for the 2006-2008 program period beyond
the incentives already received if the utility’s performance falls within a
“deadband;” i.e., if a utility achieves (1) less than 80% of the CPUC’s goal for
any individual savings metric or (2) less than 85% of the CPUC’s overall energy
savings goal but greater than 65% of the CPUC’s goal for each individual savings
metric.
The
CPUC’s December 18, 2008 decision also establishes a new procedure to allow
parties to comment on the Energy Division’s draft measurement studies and
verification reports and to subject the draft reports to formal review by the
full CPUC before being finalized. (The latest draft verification
report issued by the CPUC’s Energy Division on November 18, 2008, based on the
Energy Division’s proposed energy savings estimates and assumptions, shows the
Utility’s 2006-2007 energy efficiency program accomplishments relative to the
CPUC’s goals as 81% for kWh, 67% for kW, and 93% for therms, averaging to
80%. This compares to the Utility’s calculation of estimated
achievements, based on energy savings estimates and assumptions the Utility used
to design its energy efficiency programs, at 147% for kWh, 114% for kW, and 120%
for therms, averaging 127% of the CPUC’s goals overall.) In the
December 18, 2008 decision, the CPUC ordered the Energy Division to issue a
resolution containing its draft verification report covering the 2006-2007
interim claims no later than January 15, 2009. The draft will then be
subject to review and approval by the full CPUC.
Both the
final verification reports of the utilities’ second interim claims (to be
submitted in 2009 based on estimated performance over the 2006-2008 program
period) and the final verification reports of the utilities’ true-up claims (to
be submitted in 2010 based on actual performance over the 2006-2008 program
period) may result in an adjustment to the interim claim amounts, but
as long as the final measured energy savings are at least 65% of each of the
CPUC’s individual savings goals over the 2006-2008 program period, the utilities
will not be required to pay back any incentives that they received on an interim
basis.
Whether
the Utility will receive all or a portion of the remaining $77 million in
incentives for the 2006 and 2007 program years, whether the Utility will receive
any additional incentives or incur a reimbursement obligation in 2009 based on
the second interim claim, and whether the final true-up in 2010 will result in a
positive or negative adjustment, are expected to be based on continually updated
analyses for the measurement, evaluation, and verification of the energy
efficiency program results.
Item
9.01. Financial Statements and Exhibits
Exhibits
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Exhibit
99
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Text
of the amendment to the Bylaws of PG&E Corporation effective January
1, 2009
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrants have
duly caused this report to be signed on their behalf by the undersigned hereunto
duly authorized.
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PG&E
CORPORATION
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Dated:
December 18, 2008
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By:
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LINDA
Y.H. CHENG
Vice
President, Corporate Governance and Corporate
Secretary
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PACIFIC
GAS AND ELECTRIC COMPANY
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Dated:
December 18, 2008
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By:
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LINDA
Y.H. CHENG
Vice
President, Corporate Governance and Corporate
Secretary
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EXHIBIT
INDEX
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Exhibit
99
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Text
of the amendment to the Bylaws of PG&E Corporation effective January
1, 2009
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