The Associated Press

Even as it reported a $4.1 billion fourth-quarter loss Monday, PG&E Corp. still found something to brag about.

Despite the bankruptcy of the regulated utility that once represented the heart of its business, PG&E stressed that much of the company remains in good health, particularly its unregulated subsidiaries.

Excluding the special charge – taken to cover the utility’s unrecovered electricity expenses last year – PG&E said its earnings for all 2000 would have totaled $925 million, or $2.54 per share, up 13 percent from 1999. Management boasted that the performance beat the company’s goal of boosting its earnings of 8 to 10 percent annually.

But because of the special charge, including one-time charges PG&E reported losing $3.4 billion in 2000.

“While overshadowed by the extraordinary impacts of the California energy crisis, we demonstrated continued solid performance on an operating basis,” said PG&E CEO Robert Glynn Jr., in a written statement.

That positive spin continued a balancing act PG&E‘s management has performed since last fall, when the soaring cost of wholesale electricity began to sink its utility, Pacific Gas and Electric.

To California’s lawmakers and regulators, PG&E paints a grim picture of its finance as management fights for the right to raise its rates retroactively and pass on electricity costs to its 4.5 million Northern California customers.

To investors though, PG&E emphasizes the positives as the company’s management battles to preserve what value is left of its battered stock. The company’s Monday closing price of $8.84 per share is 73 percent below its 52 week high of $32.50 reached last summer.

“They give a sob story in California and then it’s like they stage a victory parade for Wall Street,” said Doug Heller, consumer advocate for the Foundation for Taxpayer and Consumer Rights, a PG&E critic.

PG&E‘s fourth-quarter report was the first snapshot of the company’s finances since the utility Chapter 11 bankruptcy filing April 6.

The San Francisco-based company recorded a before-tax charge of $6.9 billion to account for the difference between what it paid for wholesale electricity last year and what state regulators allowed the utility to pass on to its customers.

After a tax benefit, the special charge produced a loss of $4.1 billion, or $11.34 per share, in the three months ended Dec. 31. That compared to a loss of $611 million, or $1.67 per share, in the prior year.

If not for the one-time charge, PG&E‘s fourth-quarter earnings would have been 39 cents per share. The consensus estimate of analysts polled by Thomson Financial/First Call was 40 cents per share.

Despite the charge taken in the fourth quarter, the company expressed confidence that it will prevail in its legal fight to raise rates retroactively and pass on last year’s electricity costs to customers.

The fourth-quarter charge “does not diminish our conviction that the utility is entitled under law to recover these costs,” Glynn said.

PG&E is suing to recover its electricity rates in federal court. The company also has asked U.S. Bankruptcy Judge Dennis Montali to overturn a California Public Utilities Commission ruling that could hurt its bid to raise rates retroactively.

Management argues that the utility had met all the conditions needed to raise its rates as of July 2000. Regulators at the CPUC disagree.

The issue also could affect PG&E‘s earnings this year. In the first two months of 2001, PG&E estimates that the utility’s electricity costs exceeded what it could charge for retail rates by another $2 billion.

PG&E‘s revenues last year climbed 26 percent to $26.2 billion, up from $20.8 billion in 1999. Including one-time charges, PG&E lost $3.4 billion, or $9.29 per share, for all of 2000, versus a loss of $73 million, or 20 cents per share, in 1999.

The company’s unregulated power subsidiary, the National Energy Group, contributed most of the gains last year.

National Energy’s operating profit shot up to $162 million last year, more than doubling from $63 million in 1999. The unregulated business, now based in Maryland, also accounted for most of the company’s sales with revenues of $16.6 billion, up 43 percent from 1999.

The parent company and National Energy Group aren’t a part of the utility’s bankruptcy. Their exclusion from the bankruptcy is expected to become a sticking point among the utility’s 30,000 creditors.

With the utility in bankruptcy, National Energy has become the most valuable part of PG&E. Some analysts estimated PG&E‘s regulated businesses may be worth as much as $12 per share if the company can keep it out of the bankruptcy proceedings.