EXHIBIT 1
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION
REPRESENTED EMPLOYEES
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 2000 AND 1999
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------
[Graphic Appears Here]
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
Table of Contents
Report of Independent Public Accountants 1
Statements of Net Assets Available for Benefits as of December 31, 2000 and 1999 2
Statements of Changes in Net Assets Available for Benefits for the Years Ended
December 31, 2000 and 1999 3
Notes to Financial Statements 4
Supplemental Schedules:
Schedule I Schedule H Line 4i - Schedule of Assets Held for Investment
Purposes as of December 31, 2000 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Employee Benefit Committee of PG&E Corporation,
Pacific Gas and Electric Company and Participants in the
Pacific Gas and Electric Company Savings Fund Plan For Union Represented
Employees:
We have audited the accompanying statement of net assets available for benefits
of Pacific Gas and Electric Company Savings Fund Plan For Union Represented
Employees (the Plan), formerly known as Pacific Gas and Electric Company
Savings Fund Plan - Part II as of December 31, 200O and 1999, and the related
statement of changes in net assets available for benefits for the years then
ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Mah & Associates, LLP
San Francisco, California
June 18, 200l
1
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2000 AND 1999
(In thousands)
2000 1999
---------- ----------
ASSETS:
Investments at fair value $1,097,166 $1,357,213
Stable Value Fund 220,521 289,241
Participant loans 25,288 25,617
---------- ----------
Total investments 1,342,975 1,672,071
---------- ----------
Receivables:
Interest and dividends 5,641 6,420
Investments sold 1,140 -
Other 49 3,128
---------- ----------
Total receivables 6,830 9,548
---------- ----------
Total assets 1,349,805 1,681,619
---------- ----------
LIABILITIES:
Other 95 156
---------- ----------
Total liabilities 95 156
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $1,349,710 $1,681,463
========== ==========
The accompanying notes are an integral part of these Financial Statements.
2
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(In thousands)
2000 1999
---------- ----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO:
Employer contributions $ 14,953 $ 17,415
Employee contributions 58,712 68,533
Interest and dividend income 26,800 31,687
---------- ----------
Total increase 100,465 117,635
---------- ----------
DECREASE IN NET ASSETS ATTRIBUTABLE TO:
Benefit distributions to participants 122,614 74,639
Administrative expenses 225 1,102
Net depreciation in fair value of investments 46,561 58,713
---------- ----------
Total decrease 169,400 134,454
---------- ----------
NET DECREASE BEFORE ASSET TRANSFERS (68,935) (16,819)
ASSET TRANSFERS OUT (262,818) (21,347)
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 1,681,463 1,719,629
---------- ----------
End of year $1,349,710 $1,681,463
========== ==========
The accompanying notes are an integral part of these Financial Statements.
3
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
1. DESCRIPTION OF PLAN
The following brief description of the Pacific Gas and Electric Company
Savings Fund Plan for Union Represented Employees (formerly Pacific Gas and
Electric Company Savings Fund Plan - Part II ) is provided for general
informational purposes only. Participants should refer to the Plan Document
for more complete information.
General - The Pacific Gas and Electric Company Savings Fund Plan for Union
Represented Employees (the Plan) is a defined contribution plan and is
subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA). The name of the Plan was changed from Pacific Gas and Electric
Company Savings Fund Plan - Part II effective January 1, 2000 to reflect the
dissolving of the Master Trust described below. The Plan covers certain
eligible union employees of Pacific Gas and Electric Company (the Company).
On April 1, 2000, participants represented by the Engineers and Scientists of
California (ESC) transferred to a plan in another trust of PG&E Corporation
(the Corporation), the Company's parent company. The Plan previously
participated in a Master Trust until June 1, 1999, at which time the Master
Trust was effectively dissolved due to a transfer of the assets of the other
participating plan to another trust.
The Board of Directors of the Corporation has established the Employee
Benefit Committee (the EBC) to have oversight over the financial management
of affiliated company funded employee benefit plans. The Company provides
administrative support to handle the day-to-day administration. The EBC
reserves express authority over all financial and administrative decision
making on behalf of the Plan. The EBC retains State Street Bank and Trust
Company as the Trustee of the Plan.
Eligibility - Certain union employees of the Company are eligible to
participate in the Plan upon attaining regular employment status as defined
by the Plan Document.
Contributions - Participating employees may elect to contribute from 1 to
15 percent of their annual base salary (Annual Base Salary) on a pre-tax or
after-tax basis through payroll deductions. The Annual Base Salary for
purposes of the Plan is limited by the Internal Revenue Code (the Code) to
$170,000 for 2000 and $160,000 for 1999. Participants may also rollover
amounts representing distributions from other qualified plans. Pre-tax
contributions are not subject to federal or state income tax until withdrawn
or distributed from the Plan.
As provided by the Code, pre-tax employee contributors may not exceed
$10,500 for 2000 and $10,000 for 1999, and total contributions to a
participant's account may not exceed the lesser of 25% of compensation or
$30,000 for the plan year.
The Company matches contributions in an amount equal to 50% of each
participant's elective contribution, up to 6% of the participant's Annual
Base Salary, depending on length of service as defined by the Plan Document.
Participant Accounts - Individual accounts are maintained for each of the
Plan's participants and each account is credited with their elective
contribution, the Company's matching contribution, and an allocation of
the Plan's net earnings and certain investment management fees. Allocations
are based on participant account balances as defined in the Plan Document.
Vesting - Employer contributions and participant elective contributions and
their related accumulated earnings and losses are 100% vested at all times.
4
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
Investment Options - Individual Plan participants designate the way in which
their contributions are invested and may change their investment designation at
any time. The following investment funds were available to the participants as
of December 31, 2000 and 1999:
. PG&E Corporation Stock Fund - This Fund is designed to provide participants
with an opportunity to own part of PG&E Corporation and share in the
investment performance of the PG&E Corporation Stock, while holding an
appropriate level (approximately one to five percent) of short-term
investments to meet daily liquidity requirements.
. Bond Index Fund - This Fund invests primarily in government, corporate,
mortgage-backed, and asset-backed securities. The Fund invests in a well-
diversified portfolio that is representative of the broad domestic bond
market.
. Small Company Stock Index Fund - This Fund invests in all of the stocks in
the Russell Special Small Company Index in proportion to their weighting in
the index.
. Large Company Stock Index Fund - This Fund invests in all 500 stocks in the
S&P 500 Index in proportion to their weightings in the Index.
. International Stock Index Fund - This Fund typically invests in all stocks in
the Morgan Stanley Capital International Europe AustralAsia Far East (EAFE)
Index in proportion to their weightings in the Index.
. Conservative Asset Allocation Fund - This Fund is a portfolio of commingled
stock and bond funds. This Fund invests approximately 60 percent in the Bond
Index Fund, approximately 30 percent in the Large Company Stock Index Fund,
approximately 5 percent in the Small Company Stock Index Fund, and
approximately 5 percent in the International Stock Index Fund.
. Moderate Asset Allocation Fund - This Fund is a portfolio of commingled
stock and bond funds. This Fund invests approximately 40 percent in the Bond
Index Fund, approximately 42 percent in the Large Company Stock Index Fund,
approximately 8 percent in the Small Company Stock Index Fund, and
approximately 10 percent in the International Stock Index Fund.
. Aggressive Asset Allocation Fund - This Fund is a portfolio of commingled
stock and bond funds. This Fund invests approximately 20 percent in the Bond
index Fund, approximately 55 percent in the Large Company Stock Index Fund,
approximately 10 percent in the Small Company Stock Index Fund, and
approximately 15 percent in the International Stock Index Fund.
. Stable Value Fund - This Fund invests in a diversified portfolio of
investment contracts issued by insurance companies, banks, and other
financial institutions.
. United States Bond Fund - This Fund was closed to new contributions effective
July 1, 1991. Currently, this fund still holds a minimal amount of
investments.
5
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
Participant Loans - Effective January 1, 1999, participants may borrow from
their account balance a minimum of $1,000 and a maximum equal to the lesser
of $50,000 or 50 percent of their account balance. As these loans are repaid
by the participant, the proceeds, including interest, are returned to the
participant's account. Loans are repayable through payroll deductions over
periods ranging up to 5 years for general-purpose loans or up to 15 years for
the purchase of a primary residence. The interest rate is equal to the prime
rate, as determined by the Trustee, plus 1%. Interest rates on outstanding
loans range from 8.5% to 10.5%.
Benefits - Upon termination of service from any affiliate of the Corporation,
a participant may elect to receive an amount equal to the participant's
account value. The form of payment may be a single lump-sum distribution or a
partial distribution with the remainder paid later. Participants may also
elect to roll their account balances into another qualified plan or account.
In the event of a participant's death, the participant's beneficiaries will
receive the participant's account value in a lump sum payment.
Withdrawals - Except upon death, total disability, termination or retirement,
withdrawal of participant balances requires approval of the Trustee and the
Company. Hardship withdrawals and certain in-service withdrawals are
permitted.
Administrative Expenses - The Company pays certain costs of administering the
Plan, including fees and expenses of the Trustee management fees. Certain
investment management fees are paid by participants. The fees paid by
participants reduce the investment return reported and credited to
participants.
Voting Rights - Each participant is entitled to exercise voting rights
attributable to the equivalent shares allocated to their account for the PG&E
Corporation Stock Fund and is notified by the Trustee prior to the time that
such rights are to be exercised. The Trustee is not permitted to vote any
share for which a participant has not given instructions. The Trustee is
required, however, to vote any unallocated shares on behalf of the collective
best interest of Plan participants and beneficiaries.
Plan Termination - The Company's Board of Directors reserves the right to
amend or terminate the Plan at any time subject to provisions of ERISA. In
the event the Plan is terminated, participants will receive full payment of
the balance in their accounts. No plan assets may revert to the Company or
the Corporation.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Use of Estimates - The accompanying financial
statements are prepared in conformity with generally accepted accounting
principles ("GAAP"). The preparation of financial statements, in conformity
with GAAP, requires management to make estimates and assumptions. These
estimates and assumptions affect the reported amounts of additions,
deductions, assets, and liabilities and disclosure of contingencies. Actual
results could differ from these estimates.
A participant's interest in the investment funds is represented by
participation units allocated on the basis of contributions and assigned a
unit value on the basis of the total value of each fund.
Investment Valuation and Income Recognition - The Plan's investments (except
for interest in the Stable Value Fund and Participant Loans) are stated at
fair value based on published market quotations. Fair value for units is
determined by quoted prices in an active market. The Plan values investments
in the Stable Value Fund and Participant Loans at cost which approximates
fair value.
6
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
Interest income, dividends, investment management fees, where appropriate,
and the net appreciation or depreciation in the fair value of the
investments held by the Plan are allocated to the participant's accounts
each day.
Interest income is recognized as it is earned and dividends are recorded on
the ex-dividend date.
Net depreciation in fair value of investments consists of the net change in
unrealized appreciation and depreciation during the year on investments held
at the end of the year and the realized gain or loss on the sale of
investments during the year.
Purchases and sales of securities are recorded on a trade date basis.
Realized gains and losses from security transactions are reported on the
average cost basis.
Payment of Benefits - Benefit payments to participants are recorded upon
distribution.
3. INVESTMENTS
General - Each investment fund is managed by the Trustee or an investment
manager, which has discretionary investment authority over the funds.
Although the EBC is responsible for the selection of the Plan's investment
funds, neither the Company nor the Corporation is involved in their day-to-
day investment operations.
Fund Information - The following summarizes the net assets and related
investment fund balances of the Plan as of December 31, 2000 and 1999 (in
thousands):
2000 1999
----------- -----------
PG&E Corporation Stock Fund $ 389,550 $ 448,364
Bond Index Fund 18,735 20,798
Small Company Stock Index Fund 82,860 57,858
Large Company Stock Index Fund 481,523 676,678
International Stock Index Fund 24,378 25,926
Conservative Asset Allocation Fund 11,697 14,513
Moderate Asset Allocation Fund 52,676 72,275
Aggressive Asset Allocation Fund 32,957 38,138
United States Bond Fund 2,790 2,663
----------- -----------
Investments at fair value 1,097,166 1,357,213
Stable Value Fund 220,521 289,241
Participant loans 25,288 25,617
----------- -----------
Total investments $ 1,342,975 $ 1,672,071
=========== ===========
7
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
The following individual investments represented 5% or more of net assets of
the Plan at December 31, 2000 and 1999 (in thousands):
2000 1999
--------- ----------
PG&E Corporation Common Stock $ 370,747 $ 434,290
State Street Global Advisors Russell Special Small Co. Fund $ 91,305 $ -
State Street Global Advisors S&P 500 Index Fund $ 524,549 $ 732,405
Stable Value Fund $ 220,521 $ 289,241
Financial Investments with Off-Balance Sheet Risk - The EBC has adopted a
"Position Statement on Risk Management and the Use of Derivatives" which
applies to the Plan. This statement recognizes that derivatives may be used
by the Plan's investment managers to achieve their investment objectives.
However, the Plan assets will not be exposed to risks through derivatives
that would be inappropriate in their absence. At December 31, 2000 and
1999, the Plan held no direct investments in derivatives.
4. TAX STATUS
The Internal Revenue Service (IRS) has ruled that the Plan is a qualified
tax-exempt plan under Section 401 (a) and Section 409(a) of the Code and the
trust forming a part thereof is exempt under Section 501(a) of the Code.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Furthermore, participating employees are not liable
for federal income tax on amounts allocated to their accounts attributable
to: (1) employee 401(k) contributions, (2) dividends, earnings, and interest
income on both 401(k) contributions and non-40l(k) contributions, or (3)
employer contributions, until the time that they withdraw such amounts from
the Plan.
The Company received a favorable tax determination letter from the IRS in
November of 1995. Accordingly, the Company believes that the Plan continues
to be designed and operated in accordance with the applicable requirements
of the Code.
5. SUBSEQUENT EVENT
PG&E Corporation Common Stock is 27.6% of the Plan's total investments as of
December 31, 2000. As of the date of this report, the current per share
value of the PG&E Corporation Common Stock decreased by approximately 41.6%
of the value as of December 31, 2000.
Historically, PG&E Corporation paid quarterly dividends to participants in
the PG&E Corporation Stock Fund. In light of its financial condition and the
California energy crisis, PG&E Corporation suspended the declaration and
payment of dividends in January 2001. Further, under the terms of a credit
agreement, PG&E Corporation is prohibited from declaring and paying
dividends until outstanding loans have been repaid.
On April 6, 2001, the Company sought protection from its creditors through a
Chapter 11 bankruptcy filing. The filing for bankruptcy and the related
uncertainty surrounding any reorganization plan that is ultimately adopted
will have a significant impact on the Company's future liquidity and
results of operations. Except as disclosed, the Company's bankruptcy will
have no effect on the Plan.
8
Schedule I
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
LINE 4i OF SCHEDULE H - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 2000
(Cost and current value in thousands)
Number of
Identity of Issuer and Description of Investment Units or US
(including Maturity and Yield) Bonds Cost Current Value
- ------------------------------------------------ ---------- ------------- ---------------
PG&E Corporation Stock Fund
* PG&E Corporation Common Stock 18,537,350 $ 456,891 $ 370,747
* State Street Bank & Trust Co. Short-Term Investment Fund 18,803,068 18,803 18,803
---------- ------------- -------------
Total PG&E Corporation Stock Fund 37,340,418 $ 475,694 $ 389,550
========== ============= =============
Bond Index Fund
* State Street Global Advisors Bond Market Index Fund 1,514,897 $ 16,966 $ 18,735
========== ============= =============
Small Company Stock Index Fund
* State Street Global Advisors Russell Special Small Co. Fund 5,917,729 $ 86,541 $ 82,860
========== ============= =============
Large Company Stock Index Fund
* State Street Global Advisors S&P 500 Index Fund 26,284,010 $ 394,771 $ 481,523
========== ============= =============
International Stock Index Fund
* State Street Global Advisors Daily EAFE Fund 1,992,313 $ 26,130 $ 24,378
========== ============= =============
Conservative Asset Allocation Fund
* State Street Global Advisors Bond Market Index Fund 569,842 $ 6,316 $ 7,047
* State Street Global Advisors Daily EAFE Fund 48,384 586 592
* State Street Global Advisors Russell Special Small Co. Fund 41,034 561 575
* State Street Global Advisors S&P 500 Index Fund 190,147 3,405 3,483
---------- ------------- -------------
Total Conservative Asset Allocation Fund 849,407 $ 10,868 $ 11,697
========== ============= =============
Moderate Asset Allocation Fund
* State Street Global Advisors Bond Market Index Fund 1,704,941 $ 18,120 $ 21,085
* State Street Global Advisors Daily EAFE Fund 437,342 4,914 5,351
* State Street Global Advisors Russell Special Small Co. Fund 315,738 3,988 4,421
* State Street Global Advisors S&P 500 Index Fund 1,190,975 18,652 21,819
---------- ------------- -------------
Total Moderate Asset Allocation Fund 3,648,996 $ 45,674 $ 52,676
========== ============= =============
9
Schedule I (cont.)
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN FOR UNION REPRESENTED EMPLOYEES
LINE 4i OF SCHEDULE H - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 2000
(Cost and current value in thousands)
Number of
Identity of Issuer and Description of Investment Units or US
(including Maturity and Yield) Bonds Cost Current Value
- ------------------------------------------------ ---------- ------------- ---------------
Aggressive Asset Allocation Fund
* State Street Global Advisors Bond Market Index Fund 534,346 $ 5,879 $ 6,608
* State Street Global Advisors Daily EAFE Fund 423,022 5,043 5,176
* State Street Global Advisors Russell Special Small Co. Fund 246,302 3,312 3,449
* State Street Global Advisors S&P 500 Index Fund 967,452 16,485 17,724
---------- ------------- -------------
Total Aggressive Asset Allocation Fund 2,171,122 $ 30,719 $ 32,957
========== ============= =============
United States Bond Fund
United States Savings Bonds Series E
(Units of $18.75 Cost and $25.00 Maturity) 2,533 $ 48 $ 643
United States Savings Bonds Series EE
(Units of $25.00 Cost and $50.00 Maturity) 33,725 843 1,832
United States Savings Bonds Series EE
(Units of $50.00 Cost and $100.00 Maturity) 3,568 178 315
---------- ------------- -------------
Total United States Bond Fund 39,826 $ 1,069 $ 2,790
========== ============= =============
Stable Value Fund(1)
PG&E Primco GIC Pool N/A $ 208,654 $ 220,521
========== ============= =============
Participants Loans (interest ranging from 8.50% to 10.50%) N/A $ 25,288 $ 25,288
========== ============= =============
------------- -------------
Total Assets Held for Investment Purposes $ 1,322,374 $ 1,342,975
============= =============
(1) The Stable Value Fund investment contracts and participant loans are not
measured in numbers of units and therefore unit information is not
applicable (N/A)
* Represents a party-in-interest as defined by ERISA
10