Pacific Gas & Electric (PCG)

          (a)     Under Section 701 of the Second Supplemental Mortgage, the Company established an eleventh series of Bonds designated as the “Bond of the Eleventh Series” and such Bond was originally issued in certificated form.  The Release Date having occurred on the date hereof and pursuant to Section 702 of the Second Supplemental Mortgage, the Bonds of the Eleventh Series are hereby redesignated as the “Senior Note due December 1, 2016” (the “Senior Note due 2016”).

          (b)     In accordance with Section 702 of the Second Supplemental Mortgage, the Holder of the Bond of the Eleventh Series shall surrender such Bond to the Trustee and the Trustee shall simultaneously exchange the surrendered Bond for a Senior Note due 2016.  The form of the Senior Note due 2016 being exchanged pursuant hereto is attached hereto as Exhibit C.

          (c)     As established in Section 703 of the Second Supplemental Mortgage and as continued hereunder, (i) the initial face amount of the Senior Note due 2016 is $200,000,000, which face amount represents the maximum principal amount of the Senior Note due 2016, (ii) the amount of principal payable on the Senior Note due 2016, and the date or dates on which such principal is payable, are as set forth in said Senior Note due 2016, (iii) for all purposes of this Indenture, the principal amount of the Senior Note due 2016 Outstanding as of any date of calculation shall be equal to the Obligations (as defined in the Senior Note due 2016) outstanding under the MBIA Reimbursement and Indemnity Agreement as of such date, but in no event shall the principal amount of such Senior Note due 2016 as of any date of calculation be greater than the then current face amount of such Senior Note due 2016, and (iv) for all purposes of this Indenture, principal of the Senior Note due 2016 shall be payable without the presentment or surrender thereof.

          (d)     As established in Section 704 of the Second Supplemental Mortgage and as continued hereunder, (i) the Senior Note due 2016 bears interest at the rate or rates, and interest with respect thereto is payable on the Interest Payment Dates set forth in said Senior Note due 2016; (ii) the Senior Note due 2016 has a Stated Maturity of December 1, 2016; and (iii) interest on the Senior Note due 2016 shall accrue from the same dates that interest, if any, accrues on outstanding Obligations pursuant to the MBIA Reimbursement and Indemnity Agreement until such interest is paid.

          (e)     As established in Section 705 of the Second Supplemental Mortgage and as continued hereunder, the Senior Note due 2016 is not subject to redemption prior to its Stated Maturity, and no sinking fund is provided for the Senior Note due 2016.

          (f)     As established in Section 706 of the Second Supplemental Mortgage and as continued hereunder, the Trustee is appointed as initial Paying Agent and initial Bond Registrar for the Senior Note due 2016.  The Place of Payment of the Senior Note due 2016 shall be the Corporate Trust Office of the Trustee; provided, however, that the Company reserves the right to change, by one or more Officer’s Certificates any such place or the Bond Registrar; provided, further, that the Company reserves the right to designate, by one or more Officer’s Certificates, one or more of its offices as any such place or itself as the Bond Registrar.

          (g)     As established in Section 707 of the Second Supplemental Mortgage and as continued hereunder, (i) the Senior Note due 2016 may not be exchanged for any other Bond, except as provided in Section 3.06 of this Indenture, and may not be transferred except to effect an assignment thereof to a successor or an assign of MBIA; and (ii) the Company may take such actions as it shall deem necessary, desirable or appropriate to effect compliance with such restrictions on transfer, including the issuance of stop-transfer instructions to the Trustee or any other transfer agent.

          (h)     Other terms of the Senior Note due 2016 are as expressly set forth in Exhibit C hereto.

ARTICLE V

ISSUANCE OF BONDS