Pacific Gas & Electric (PCG)

Accounts Receivable Financing

On March 5, 2004, the Utility entered into certain agreements providing for the continuous sale of a portion of the Utility’s accounts receivable to PG&E Accounts Receivable Company, LLC, or PG&E ARC, a limited liability company wholly owned by the Utility. In turn, PG&E ARC sells interests in its accounts receivable to commercial paper conduits or banks. PG&E ARC may obtain up to $650 million of financing under such agreements. The borrowings under this facility bear interest at commercial paper rates and a fixed margin based on the Utility’s credit ratings. Interest on the facility is payable monthly. The maximum amount available for borrowing under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. The credit facility will terminate on March 5, 2007. The Utility began selling accounts receivables to PG&E ARC on the Effective Date and used the proceeds from the sale of the accounts receivable in connection with this credit facility to pay allowed claims on the Effective Date. On May 7, 2004, PG&E ARC paid off this credit facility, and on December 31, 2004, there were no amounts drawn on the credit facility. Although PG&E ARC is a wholly owned consolidated subsidiary of the Utility, PG&E ARC is legally separate from the Utility. The assets of PG&E ARC (including the accounts receivable) are not available to creditors of the Utility or PG&E Corporation, and the accounts receivable are not legally assets of the Utility or PG&E Corporation. For the purposes of financial reporting, the credit facility is accounted for as a secured financing.

The accounts receivable facility includes a covenant from the Utility requiring it to maintain, as of the end of each fiscal quarter ending after the Effective Date, a debt to capitalization ratio of at most 65%.

Accounts Receivable Financing

        On March 5, 2004, the Utility entered into certain agreements providing for the continuous sale of a portion of the Utility's accounts receivable to PG&E Accounts Receivable Company, LLC, or PG&E ARC, a limited liability company wholly owned by the Utility. In turn, PG&E ARC sells interests in its accounts receivable to commercial paper conduits or banks. PG&E ARC may obtain up to $650 million of financing under such agreements. The borrowings under this facility bear interest at commercial paper rates and a fixed margin based on the Utility's credit ratings. Interest on the facility is payable monthly. The maximum amount available for borrowing under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. The credit facility will terminate on March 5, 2007. The Utility began selling accounts receivables to PG&E ARC on the Effective Date and used the proceeds from the sale of the accounts receivable in connection with this credit facility to pay allowed claims on the Effective Date. On May 7, 2004, PG&E ARC paid off this

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credit facility, and on December 31, 2004, there were no amounts drawn on the credit facility. Although PG&E ARC is a wholly owned consolidated subsidiary of the Utility, PG&E ARC is legally separate from the Utility. The assets of PG&E ARC (including the accounts receivable) are not available to creditors of the Utility or PG&E Corporation, and the accounts receivable are not legally assets of the Utility or PG&E Corporation. For the purposes of financial reporting, the credit facility is accounted for as a secured financing.

        The accounts receivable facility includes a covenant from the Utility requiring it to maintain, as of the end of each fiscal quarter ending after the Effective Date, a debt to capitalization ratio of at most 65%.