Overview

The level of PG&E Corporation and the Utility’s current assets and current liabilities is subject to fluctuation as a result of seasonal demand for electricity and natural gas, energy commodity costs, and the timing and effect of regulatory decisions and financings, among other factors. The Utility will use the proceeds of the issuance of the ERBs it received from PERF, the issuer of the ERBs, to refinance the remaining unamortized balance of the Settlement Regulatory Asset through the redemption and repurchase of higher cost equity and debt. The Utility plans to use a portion of the ERB proceeds to defease $600 million of Floating Rate First Mortgage Bonds by the end of February 2005, retire $300 million of short-term debt, and repurchase approximately $960 million of its common stock from PG&E Corporation.

In January 2005, the equity component of the Utility’s capital structure reached 52%, the target specified in the Settlement Agreement. As discussed below, on February 16, 2005, the Boards of Directors of the Utility and PG&E Corporation each declared a common stock dividend. In addition, PG&E Corporation anticipates that it will repurchase shares of its common stock of up to $1.05 billion, increased from a previous authorization of up to $975 million.

Overview

The level of PG&E Corporation’s and the Utility’s current assets and current liabilities is subject to fluctuation as a result of seasonal demand for electricity and natural gas, energy commodity costs, and the timing and effect of regulatory decisions and financings, among other factors.

With the achievement of a 52% equity ratio in January 2005, the Utility reinstated the payment of a regular quarterly dividend.  In addition, during the three months ended March 31, 2005, the Utility used cash (including the ERB proceeds) in excess of amounts needed for operations, debt service and repayment, base capital expenditures, and the payment of a quarterly dividend, to repurchase common stock.  In turn, PG&E Corporation used the cash received from the Utility in the form of dividends and share repurchases to recommence the payment of a regular quarterly dividend and repurchase common stock from shareholders.

Overview

        The level of PG&E Corporation and the Utility's current assets and current liabilities is subject to fluctuation as a result of seasonal demand for electricity and natural gas, energy commodity costs, and the timing and effect of regulatory decisions and financings, among other factors. The Utility will use the proceeds of the issuance of the ERBs it received from PERF, the issuer of the ERBs, to refinance the remaining unamortized balance of the Settlement Regulatory Asset through the redemption and repurchase of higher cost equity and debt. The Utility plans to use a portion of the ERB proceeds to defease $600 million of Floating Rate First Mortgage Bonds by the end of February 2005, retire $300 million of short-term debt, and repurchase approximately $960 million of its common stock from PG&E Corporation.

        In January 2005, the equity component of the Utility's capital structure reached 52%, the target specified in the Settlement Agreement. As discussed below, on February 16, 2005, the Boards of Directors of the Utility and PG&E Corporation each declared a common stock dividend. In addition, PG&E Corporation anticipates that it will repurchase shares of its common stock of up to $1.05 billion, increased from a previous authorization of up to $975 million.

OVERVIEW

        The preferred source of electrical power for SONGS electrical loads (safety-related and nonsafety-related) is the offsite power supply or 230 kV grid. The offsite power supply is sometimes referred to as the preferred power supply in the regulatory documents.

        The basic requirement for the offsite power supply is that it provides sufficient capacity and capability to safely shut down the reactor and to mitigate certain specified accident scenarios. When this condition is met, the offsite power supply is considered Operable with respect to the SONGS Operating License and Technical Specifications. It is a necessary condition of the Operating License that the offsite power supply be Operable at all times. If the offsite power system is declared Inoperable, action must be taken to shut down an online SONGS unit(s) and, for an offline unit, to suspend activities as required by the SONGS Operating License and Technical Specifications. The offsite power system is considered Inoperable if it is degraded to the point that it does not have the capability to supply electrical loads needed to safely shut down the reactor and to mitigate the effects of an accident at SONGS. This level of degradation can be caused by an unstable offsite power system, or any condition which renders the offsite power unavailable to safely shutdown the units or to supply emergency electrical loads.

        In specific terms, the offsite power supply voltage (at the SONGS switchyard) must stay within the range of 218 kV to 238 kV under all normal and plant accident (i.e. emergency shutdown or trip) conditions. Otherwise the offsite power supply is considered Inoperable. Since accident scenarios for which the plant is designed can result in a unit trip, it is imperative that the trip not impair the operability of the offsite power system. Therefore, following a trip of a SONGS unit (i.e., the unit breakers open), the SONGS switchyard voltage must recover to and be maintained at or above 218 kV within 2.5 seconds following the trip. If this condition cannot be met, then the offsite power supply is considered Inoperable, and action must be taken to shut down the operating SONGS unit(s). Even though these requirements apply at all times, this condition is primarily of concern when one SONGS unit is online and the other unit offline. If both SONGS units are online and one unit trips (due to an accident or otherwise), the non-tripped unit will provide local voltage support to the SONGS switchyard, and 230 kV system voltage will remain within the required range. In cases where one SONGS unit is online and one unit offline, the offsite power supply must be sufficiently robust to survive a trip of the online unit and meet the SONGS voltage requirements in the post-trip condition. A dual unit trip is not the limiting condition since a plant accident is not postulated simultaneous with a dual unit trip.

        System Operating procedures and programs shall be in place to ensure that various system operating conditions (generating unit outages, line outages, system loads, spinning reserve, etc.), including multiple contingency events, are evaluated and understood, such that impaired or potentially degraded grid conditions are recognized, assessed and communicated to the SONGS Control Room for Operability determination.

        The SONGS switchyard is made up of the SCE switchyard and the SDG&E switchyard. Unless specifically stated otherwise, SONGS switchyard requirements contained in this document apply to both the SCE switchyard and the SDG&E switchyard.

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