ENOVA CORPORATION
INVESTOR RELATIONS NEWS
March 12, 1998
Alternative Decision Issued by Commissioner Neeper on
Enova Corporation-Pacific Enterprises Merger
Late yesterday, Commissioner Neeper of the California Public
Utilities Commission (CPUC) issued an alternate order, calling for a
10-year timeline for sharing merger synergies. The alternate order
adequately addresses the companies' only major concern over the proposed
decision from the Administrative Law Judge (ALJ), which was the time
period for sharing of synergy savings (five years vs. ten years).
The alternate would change only nine pages of the proposed
decision, retaining the decision's favorable treatment of other issues.
In summary, the alternate recommends five years of savings, a general
rate case or other similar true up, and then five years of upward
adjustments in the revenue requirement. The upward adjustments would
equal 50% of the projected savings for years 6-10, less adjustments for
100% ratepayer and shareholder savings. Specifically, it recommends:
- A 50/50 sharing of the projected $1.1 billion in net savings or
cost avoidances from the merger over 10 years. (Because of
adjustments, customers would receive $557 million and shareholders
would receive $531 million.)
- Costs-to-achieve would be amortized over ten years, in equal
amounts per year.
- Five years (years 1 through 5) of ratepayer credits based on 50%
of the first five years of projected savings (with adjustments),
minus the applicable costs-to-achieve.
- A general rate case or other similar true-up to go into effect
after five years.
- Five years (years 6 through 10) of upward adjustments to the new
revenue requirement, reflecting 50% of projected savings (as
adjusted) and including the applicable costs-to-achieve.
Attached is a table detailing the annual savings. Neeper's
alternate doesn't prevent other commissioners from issuing other
alternate decisions as well. The CPUC schedule calls for a final
decision on March 26, which may be the ALJ proposed decision, the Neeper
alternate, or another decision.
Enova Corporation and Pacific Enterprises Merger
Alternate Order of Commissioner Neeper
Comparison of Gains to Ratepayers and Shareholders for Ten Years
(Assuming that Projected Savings are Realized on Schedule)
(millions of dollars)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Total
--------------------------------------------------------------------------------------
Shareholder Savings 52.2 69.6 93.3 106.3 114.4 123.3 129.3 135.7 143.5 152.6 1,120.1
100% Ratepayer 5.7 5.9 6.2 6.4 6.8 7.2 7.6 8.0 8.4 8.8 71.0
100% Shareholder 1.9 2.8 3.7 4.3 4.7 4.9 5.2 5.3 5.8 6.0 44.6
--------------------------------------------------------------------------------------
Total Gross Savings 59.8 78.3 103.2 117.0 125.9 135.4 142.1 149.0 157.7 167.4 1,235.7
Costs to Achieve (14.8) (14.8) (14.8) (14.8) (14.8) (14.8) (14.8) (14.8) (14.8) (14.8) (148.1)
Net Savings 45.0 63.5 88.4 102.2 111.1 120.6 127.3 134.2 142.9 152.6 1,087.6
Ratepayers:
Half of Sharable Savings 26.1 34.8 46.7 53.1 57.2 0.0 0.0 0.0 0.0 0.0 217.9
100% Ratepayer 5.7 5.9 6.2 6.4 6.8 7.2 7.6 8.0 8.4 8.8 71.0
Less Half of Costs to Achieve (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (74.1)
Gain from Lower Rates 123.3 129.3 135.7 143.5 152.6 684.4
Loss from Increased Rev. Req. (61.6) (64.6) (67.8) (71.8) (76.3) (342.2)
Net to Ratepayers: 24.4 33.3 45.5 52.1 56.6 61.5 64.9 68.5 72.7 77.7 557.0
Shareholders:
Half of Sharable Savings 26.1 34.8 46.7 53.1 57.2 0.0 0.0 0.0 0.0 0.0 217.9
100% Shareholder 1.9 2.8 3.7 4.3 4.7 4.9 5.2 5.3 5.8 6.0 44.6
Less Half of Costs to Achieve (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (7.4) (74.1)
Gain from increased Rev. Req. 61.6 64.6 67.8 71.8 76.3 342.2
Net to Shareholders: 20.6 30.2 43.0 50.0 54.5 59.1 62.4 65.7 70.2 74.9 530.6
Assumptions:
Costs to achieve are $148.1 million spread over ten years
GRC implemented in year 6
Projected savings realized on schedule in 2003-2007