Pacific Gas & Electric (PCG)

NOTE 6: COMMON STOCK

PG&E Corporation

PG&E Corporation has authorized 800 million shares of no-par common stock of which 418,616,141 shares were issued and outstanding at December 31, 2004 and 416,520,282 were issued and outstanding at December 31, 2003. A wholly owned subsidiary of PG&E Corporation, Elm Power Corporation, holds 24,665,500 shares of the outstanding shares.

During the fourth quarter of 2004, 1,863,600 shares of PG&E Corporation common stock were repurchased through transactions with brokers and dealers on the New York Stock Exchange and/or the Pacific Exchange for an aggregate purchase price of approximately $60 million. Of this amount, 850,000 shares were purchased at a cost of approximately $28 million and are held by Elm Power Corporation.

On December 15, 2004, PG&E Corporation entered into an accelerated share repurchase agreement with Goldman, Sachs & Co., or GS&Co., under which PG&E Corporation repurchased 9,769,600 shares of its outstanding common stock for an aggregate purchase price of approximately $318 million, at an initial price of $32.50 per share. The repurchase was funded from available cash on hand. The repurchased shares have been retired as of December 20, 2004. Under this arrangement, PG&E Corporation has an obligation to pay GS&Co. a price adjustment based on the daily volume weighted average market price of PG&E Corporation common stock over the term of the arrangement. The price adjustment can be settled, at PG&E Corporation’s option, in cash or in shares of its common stock and is accounted for as equity. The number of shares that PG&E Corporation would issue in settlement of the price adjustment feature is capped at approximately 19.5 million shares. At December 31, 2004, this price adjustment obligation amounted to approximately $7.4 million. If this obligation were settled in shares at December 31, 2004, PG&E Corporation would have issued approximately 222,000 shares. PG&E Corporation expects the arrangement to terminate on February 22, 2005, and to pay GS&Co. approximately $14 million to settle its obligations.

On December 15, 2004, the Board of Directors of the Utility authorized the repurchase of up to $800 million, (which has been increased to $1.8 billion following the receipt of proceeds from the issuance of ERBs) of the Utility’s common stock from PG&E Corporation, with such repurchases to be effective from time to time, but no later than December 31, 2006. It was previously anticipated that the first series of ERBs would be issued as early as January 2005. Based on this expectation, on December 15, 2004, PG&E Corporation’s Board of Directors authorized the repurchase of up to $975 million of its outstanding common stock. On February 16, 2005, this authorization was increased to $1.05 billion. PG&E Corporation expects to enter into a replacement accelerated share repurchase arrangement by the end of February or early March 2005 to repurchase an aggregate of $1.05 billion of its outstanding shares. The repurchased shares will be retired at that time.

PG&E Corporation repurchased and retired 6,580 shares of its common stock, at a cost of $102,274 during the year ended December 31, 2002. There were no stock repurchases during the year ended December 31, 2003.

Of the 418,616,141 shares issued and outstanding at December 31, 2004, 1,601,710 shares are PG&E Corporation restricted stock granted under the PG&E Corporation long-term incentive program. Further, PG&E Corporation issues common stock in connection with employee benefit plans. See Note 10 for further discussion.

PG&E Corporation previously issued warrants to purchase 5,066,931 shares of its common stock at an exercise price of $0.01 per share to lenders during 2002. During 2004, 4,003,812 shares of PG&E Corporation common stock were issued upon the exercise of the warrants. At December 31, 2004, 347,912 of these warrants were outstanding and exercisable with an expiration date of September 2, 2006.

NOTE 6: COMMON STOCK

PG&E Corporation

        PG&E Corporation has authorized 800 million shares of no-par common stock of which 418,616,141 shares were issued and outstanding at December 31, 2004 and 416,520,282 were issued and outstanding at December 31, 2003. A wholly owned subsidiary of PG&E Corporation, Elm Power Corporation, holds 24,665,500 shares of the outstanding shares.

        During the fourth quarter of 2004, 1,863,600 shares of PG&E Corporation common stock were repurchased through transactions with brokers and dealers on the New York Stock Exchange and/or the Pacific Exchange for an aggregate purchase price of approximately $60 million. Of this amount, 850,000 shares were purchased at a cost of approximately $28 million and are held by Elm Power Corporation.

        On December 15, 2004, PG&E Corporation entered into an accelerated share repurchase agreement with Goldman, Sachs & Co., or GS&Co., under which PG&E Corporation repurchased 9,769,600 shares of its outstanding common stock for an aggregate purchase price of approximately $318 million, at an initial price of $32.50 per share. The repurchase was funded from available cash on hand. The repurchased shares have been retired as of December 20, 2004. Under this arrangement, PG&E Corporation has an obligation to pay GS&Co. a price adjustment based on the daily volume weighted average market price of PG&E Corporation common stock over the term of the arrangement. The price adjustment can be settled, at PG&E Corporation's option, in cash or in shares of its common stock and is accounted for as equity. The number of shares that PG&E Corporation would issue in settlement of the price adjustment feature is capped at approximately 19.5 million shares. At December 31, 2004, this price adjustment obligation amounted to approximately $7.4 million. If this obligation were settled in shares at December 31, 2004, PG&E Corporation would have issued approximately 222,000 shares. PG&E Corporation expects the arrangement to terminate on February 22, 2005, and to pay GS&Co. approximately $14 million to settle its obligations.

        On December 15, 2004, the Board of Directors of the Utility authorized the repurchase of up to $800 million, (which has been increased to $1.8 billion following the receipt of proceeds from the issuance of ERBs) of the Utility's common stock from PG&E Corporation, with such repurchases to be effective from time to time, but no later than December 31, 2006. It was previously anticipated that the first series of ERBs would be issued as early as January 2005. Based on this expectation, on December 15, 2004, PG&E Corporation's Board of Directors authorized the repurchase of up to $975 million of its outstanding common stock. On February 16, 2005, this authorization was increased to $1.05 billion. PG&E Corporation expects to enter into a replacement accelerated share repurchase arrangement by the end of February or early March 2005 to repurchase an aggregate of $1.05 billion of its outstanding shares. The repurchased shares will be retired at that time.

        PG&E Corporation repurchased and retired 6,580 shares of its common stock, at a cost of $102,274 during the year ended December 31, 2002. There were no stock repurchases during the year ended December 31, 2003.

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        Of the 418,616,141 shares issued and outstanding at December 31, 2004, 1,601,710 shares are PG&E Corporation restricted stock granted under the PG&E Corporation long-term incentive program. Further, PG&E Corporation issues common stock in connection with employee benefit plans. See Note 10 for further discussion.

        PG&E Corporation previously issued warrants to purchase 5,066,931 shares of its common stock at an exercise price of $0.01 per share to lenders during 2002. During 2004, 4,003,812 shares of PG&E Corporation common stock were issued upon the exercise of the warrants. At December 31, 2004, 347,912 of these warrants were outstanding and exercisable with an expiration date of September 2, 2006.

        PG&E Corporation did not declare or pay common or preferred stock dividends in 2004, 2003 or 2002.

Utility

        The Utility is authorized to issue 800 million shares of its $5 par value common stock, of which 321,314,760 shares were issued and outstanding as of December 31, 2004 and 2003. PG&E Holdings, LLC, a wholly owned subsidiary of the Utility, holds 19,481,213 of the outstanding shares. PG&E Corporation and PG&E Holdings, LLC hold all of the Utility's outstanding common stock. Approximately 94% of the outstanding common stock of the Utility that is owned by PG&E Corporation was pledged as security for PG&E Corporation's Senior Secured Notes. On November 15, 2004, PG&E Corporation redeemed these notes in full and the pledge was released.

        The Utility may pay common stock dividends and repurchase its common stock provided cumulative preferred dividends on its preferred stock and mandatory preferred sinking fund payments are paid. As further discussed in Note 7, upon emergence from Chapter 11, the Utility paid cumulative preferred dividends as of December 31, 2004 and preferred sinking fund payments related to 2004, 2003, and 2002.