Pacific Gas & Electric (PCG)

Cost of Natural Gas

The Utility’s cost of natural gas includes the purchase cost of natural gas and transportation costs on interstate pipelines, but excludes the costs associated with the Utility’s intrastate pipeline, which are included in operating and maintenance expense.  The following table shows a breakdown of the Utility’s cost of natural gas:

In the three months ended March 31, 2005, the Utility’s total cost of natural gas increased approximately $42 million, or 7%, compared to the same period in 2004 primarily due to an increase in the average market price of natural gas purchased of approximately $0.57 per Mcf.

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Cost of Natural Gas

        The Utility's cost of natural gas includes the purchase cost of natural gas and transportation costs on interstate pipelines, but excludes the costs associated with the Utility's intrastate pipeline, which are included in operating and maintenance expense. The following table shows a breakdown of the Utility's cost of natural gas:

        In 2004 the Utility's total cost of natural gas increased approximately $257 million, or 18%, as compared to 2003, primarily due to an increase in the average market price of natural gas purchased of approximately $0.89 per Mcf.

        In 2003, the Utility's total cost of natural gas increased by approximately $513 million, or 54%, compared to 2002 mainly due to the following factors:

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The Utility's cost of natural gas sold increased by approximately $483 million, or 57%, in 2003 compared to 2002 mainly due to an increase in the average cost of natural gas in 2003 of $1.77 per Mcf, or 59%; and



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The Utility's cost of natural gas transportation increased by approximately $30 million, or 30%, in 2003 compared to 2002 mainly due to pipeline transportation charges paid to El Paso Natural Gas Company, or El Paso. The Utility, along with other California utilities, was ordered by the CPUC in July 2002 to enter into new long-term contracts to purchase firm transportation services on the El Paso pipeline, under which the Utility pays a fixed amount to secure capacity on the El Paso pipeline.

        The Utility's cost of natural gas sold in 2005 will be primarily affected by the prevailing costs of natural gas, which are determined by North American regions that supply the Utility.