Pacific Gas & Electric Company 8-K 12-20-2006
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report: December 20, 2006
(Date
of
earliest event reported)
PG&E
CORPORATION
(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
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
PACIFIC
GAS AND ELECTRIC COMPANY
(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
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
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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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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o
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Soliciting
Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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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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o
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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.
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Departure
of Directors or Principal Officers; Election of Directors; Appointment
of
Principal Officers; Compensatory Arrangements of Certain
Officers
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A.
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2007
Officer Compensation
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On
December 20, 2006, the Nominating, Compensation and Governance Committee of
the
PG&E Corporation Board of Directors (Committee) approved the 2007 Officer
Compensation Program for PG&E Corporation and Pacific Gas and Electric
Company (Utility)
based
on
data from a comparator group of 27 companies that the Committee previously
approved for use in setting officer compensation. The 2007 Officer Compensation
Program consists of (1) an annual salary increase budget of 4 percent to be
used
for base pay adjustments, mid-year discretionary increases, and lump-sum
payments, (2) target participation rates for cash awards under the PG&E
Corporation 2007 Short-Term Incentive Plan (STIP) ranging from 30 percent to
100
percent of base salary depending on officer level, with a maximum payout of
200
percent of base salary, and (3) value ranges for grants under the PG&E
Corporation 2006 Long-Term Incentive Plan (LTIP) (see “2007 Officer Equity
Compensation” under Item 8.01 below). The Committee approved the 2007 Officer
Compensation Program after consultation with the Committee’s independent
compensation consultant.
The
Committee also approved the 2007 STIP structure for officers of PG&E
Corporation and the Utility. Recommendations as to the specific performance
targets for each STIP component will be presented for the Committee’s action at
its February 2007 meeting. The 2007 STIP structure for officers focuses the
annual incentive opportunity on returns to shareholders by emphasizing financial
objectives such as earnings from operations. The structure also recognizes
the
equal importance of key strategic objectives and operating and service measures
aimed at the achievement of operational excellence and improved customer
service. Corporate financial performance, as measured by corporate earnings
from
operations, will account for 50 percent of the incentive, 20 percent of the
incentive will be based on the Utility’s success in implementing its strategy to
achieve
operational excellence and improved customer service, 20 percent of the
incentive will be based on customer satisfaction indices, 5 percent will be
based on the results of an employee opinion survey, and the remaining 5 percent
will be based on achieving safety standards.
The
Committee will continue to retain full discretion as to the determination of
final officer STIP payments. As part of the 2007 Officer Compensation Program,
the Committee approved target participation rates for cash awards under the
STIP
ranging from 30 percent to 100 percent of base salary depending on officer
level, with a maximum payout of 200 percent of base salary. Actual STIP payments
are determined by the Committee based on the extent to which certain
pre-established performance criteria are met.
The
Committee (and with respect to Peter A. Darbee and Thomas B. King, the
independent members of the Boards of Directors of PG&E Corporation and the
Utility, respectively) approved 2007 base salaries and the 2007 STIP targets
(based on a percentage of base salary) for the following executive officers:
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Name
and Title
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2007
Base Salary
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2007
STIP % Target
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Peter
A. Darbee, Chairman of the Board, Chief Executive Officer and President,
PG&E Corporation and Chairman of the Board, Utility
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$1,050,000
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100%
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Thomas
B. King, Chief Executive Officer, Utility
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$640,000
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75%
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Christopher
P. Johns, Senior Vice President, Chief Financial Officer and Treasurer,
PG&E Corporation and Utility
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$523,640
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55%
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The
Committee (and with respect to Peter A. Darbee and Thomas B. King, the
independent members of the Boards of Directors of PG&E Corporation and the
Utility, respectively) also approved the 2007 perquisite amount for each officer
named above, ranging from $25,000 to $35,000.
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B.
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Compensation
Arrangement
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On
December 20, 2006, the PG&E Corporation Board of Directors approved an
arrangement for Peter A. Darbee, Chairman of the Board, Chief Executive Officer
and President of PG&E Corporation, that provides a grant of restricted stock
shares with an aggregate value of $1 million. The Committee has awarded Mr.
Darbee the restricted stock shares, effective January 2, 2007. The number of
restricted stock shares that Mr. Darbee will receive on January 2, 2007 will
be
determined based on the closing stock price of PG&E Corporation common stock
on January 2, 2007 (the date of grant), as reported on the New York Stock
Exchange. The restrictions on the restricted stock shares will lapse five years
after the date of grant, provided that Mr. Darbee is still employed by PG&E
Corporation or any of its affiliates. Vesting of the restricted stock shares
is
subject to acceleration under certain circumstances associated with Mr. Darbee’s
death, disability, or termination of employment. The vesting of the restricted
stock shares would accelerate upon a Change in Control of PG&E Corporation
(as defined in the LTIP) if this modification to Mr. Darbee’s compensation
arrangements is not assumed by the Acquiror (as defined in the
LTIP).
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C.
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Appointment
of New Director
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On
December 20, 2006, the Boards of Directors of PG&E Corporation and the
Utility elected
Richard A. Meserve to serve as a director of PG&E Corporation and the
Utility, effective immediately.
Dr.
Meserve is entitled to receive the following director compensation (1) a
prorated retainer for the remainder of 2006 based on an annual retainer of
$45,000, (2) an annual retainer of $50,000 beginning on January 1, 2007, and
(2)
equity awards valued at $80,000, consisting of $40,000 in restricted stock
and
$40,000 in either stock options or restricted stock units to be awarded under
the formula award provisions of the LTIP on the first business day of the year,
beginning on January 2, 2007. Dr. Meserve will also receive per-meeting fees
of
$1,750 for each Board meeting attended.
To
accommodate the election of Dr. Meserve, the Boards of Directors of PG&E
Corporation and the Utility adopted
resolutions to set the number of directors on each respective Board. Under
PG&E Corporation’s Bylaws, the authorized number of directors may not be
less than 7 nor more than 13, but within that range the Board of Directors
may
set the exact number of directors by an amendment to the Bylaws. PG&E
Corporation’s Bylaws were amended to change the number of directors from 9 to
10. Under
the
Utility’s Bylaws, the authorized number of directors may not be less than 9 nor
more than 17, but within that range the Board of Directors may set the exact
number of directors by an amendment to the Bylaws. The
Utility’s Bylaws were amended to change the number of directors
from 10 to 11. The amendments to the Bylaws became effective on December 20,
2006.
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. The composition of PG&E Corporation’s and
the Utility’s Boards of Directors continues to meet the Corporate Governance
Guidelines.
There
are
no arrangements or understandings pursuant to which Dr. Meserve was selected
as
a director of PG&E Corporation or of the Utility. Dr. Meserve 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.
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Item
5.03 -
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Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal Year
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The
information set forth above in Item 5.02 regarding the amendment of the Bylaws
of PG&E Corporation and the Utility is hereby incorporated into Item 5.03 of
this report by reference. The text of the amendment to PG&E Corporation’s
Bylaws is attached hereto as Exhibit 99.1 and the text of the amendment to
the
Utility’s Bylaws is attached hereto as Exhibit 99.2.
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A.
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2007
Officer Equity
Compensation
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On
December 20, 2006, the Committee (and with respect to Peter A. Darbee and Thomas
B. King, the independent members of the Boards of Directors of PG&E
Corporation and the Utility, respectively) approved the total value of equity
grants to be made on the first business day of January 2007 under the LTIP
to
the following executive officers:
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Name
and Title
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2007
LTIP Grant Value
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Peter
A. Darbee, Chairman of the Board, Chief Executive Officer and President,
PG&E Corporation and Chairman of the Board, Utility
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$4,500,000
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Thomas
B. King, Chief Executive Officer, Utility
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$1,250,000
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Christopher
P. Johns, Senior Vice President, Chief Financial Officer and Treasurer,
PG&E Corporation and Utility
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$875,000
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The
equity grants will be divided equally between restricted stock and performance
shares based on a per-share price of PG&E Corporation common stock of
$44.618, the average closing price of PG&E Corporation common stock on the
New York Stock Exchange for the month of November 2006.
The
Committee also approved the terms of the restricted stock and performance shares
to be granted under the LTIP to all participants, including officers.
Restrictions on the restricted stock will lapse over a five-year period in
increments of 20 percent on the first, second, and third anniversaries of the
date of grant. The restrictions on the remaining 40 percent of the restricted
stock will lapse early on the third anniversary of the date of grant if PG&E
Corporation’s total shareholder return (TSR) for the prior three-year period is
in the top quartile relative to PG&E Corporation’s comparator group of 12
companies. If PG&E Corporation’s TSR for that period is not in the top
quartile, the restrictions will continue and will not lapse until the fifth
anniversary of the date of grant.
Performance
shares will vest, if at all, at the end of a three-year period depending on
PG&E Corporation’s TSR for the period as certified by the Committee. The
payment for performance shares will be calculated by multiplying the number
of
vested performance shares by the average closing price of PG&E Corporation
common stock over
the
last 30 calendar days of the third year of the performance period. There will
be
no payout for TSR performance below the 25th percentile of the comparator group
of 12 companies; there will be a 25 percent payout if TSR is at the 25th
percentile; there will be a 100 percent payout if TSR is at the 75th percentile;
and there will be a 200 percent payout if PG&E Corporation’s TSR ranks first
in the comparator group. If PG&E Corporation’s TSR is between the 25th
percentile and the 75th percentile, or above the 75th percentile, award payouts
will be determined by straight-line interpolation, adjusted to round numbers
(i.e., the nearest multiple of five).
Restricted
stock and performance shares accrue dividends. However, the payment of all
dividends that may be accrued with respect to such awards will be subject to
the
same restrictions,
including the requirement to satisfy any performance goal,
if
applicable, as the shares to which they relate.
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B.
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Adoption
of Director Stock Ownership
Guidelines
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On
December 20, 2006, the Boards of Directors of PG&E Corporation and the
Utility adopted stock ownership guidelines for non-employee directors. The
guidelines provide that each director should beneficially own PG&E
Corporation common stock (or, for directors of the Utility, Utility preferred
stock or PG&E Corporation common stock) with an aggregate value of at least
$200,000 within five years after being elected as a director or within five
years after adoption of the guidelines, whichever is later. For purposes of
calculating a director’s share ownership, PG&E Corporation restricted stock
units and common stock equivalents held by the director are included. The Boards
of Directors of PG&E Corporation and the Utility amended each company’s
Corporate Governance Guidelines to include the stock ownership guidelines.
The
amendments became effective on December 20, 2006. The amended Corporate
Governance Guidelines will be posted on the companies’ websites at:
www.pge-corp.com.
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Item
9.01.
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Financial
Statements and Exhibits
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99.1
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Text
of the amendment to the Bylaws of PG&E Corporation effective December
20, 2006
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99.2
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Text
of the amendment to the Bylaws of Pacific Gas and Electric Company
effective December 20, 2006
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SIGNATURE
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
thereunto duly authorized.
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PG&E
CORPORATION
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LINDA
Y.H. CHENG
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Linda
Y. H. Cheng
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Vice
President, Corporate Governance and Corporate Secretary
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PACIFIC
GAS AND ELECTRIC COMPANY
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LINDA
Y.H. CHENG
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Linda
Y. H. Cheng
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Vice
President, Corporate Governance and Corporate Secretary
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Dated:
December 22, 2006
Exhibit
Index
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Text
of the amendment to the Bylaws of PG&E Corporation effective December
20, 2006
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Text
of the amendment to the Bylaws of Pacific Gas and Electric Company
effective December 20, 2006
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