Pacific Gas & Electric (PCG)

Depreciation, Amortization and Decommissioning

The Utility charges the original cost of retired plant and removal costs less salvage value to accumulated depreciation upon retirement of plant in service for its lines of business that apply SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation,” as amended, or SFAS No. 71, which includes electricity and natural gas distribution, electricity generation and transmission, and natural gas transportation and storage.

In 2004, the Utility’s depreciation, amortization and decommissioning expenses increased by approximately $276 million, or 23%, compared to 2003, primarily as a result of the amortization of the Settlement Regulatory Asset and an increase in the Utility’s plant assets.

In 2003, the Utility’s depreciation, amortization and decommissioning expenses increased by approximately $25 million, or 2%, compared to 2002 mainly due to an increase in the Utility’s plant assets.

Depreciation, Amortization and Decommissioning

In the three months ended March 31, 2005, the Utility’s depreciation, amortization and decommissioning expenses increased by approximately $74 million, or 24%, compared to the same period in 2004, primarily as a result of the amortization of the Settlement Regulatory Asset and Energy Recovery Bond Regulatory Asset and an increase in the Utility’s plant assets.

Depreciation, Amortization and Decommissioning

        The Utility charges the original cost of retired plant and removal costs less salvage value to accumulated depreciation upon retirement of plant in service for its lines of business that apply SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation," as amended, or SFAS No. 71, which includes electricity and natural gas distribution, electricity generation and transmission, and natural gas transportation and storage.

        In 2004, the Utility's depreciation, amortization and decommissioning expenses increased by approximately $276 million, or 23%, compared to 2003, primarily as a result of the amortization of the Settlement Regulatory Asset and an increase in the Utility's plant assets.

        In 2003, the Utility's depreciation, amortization and decommissioning expenses increased by approximately $25 million, or 2%, compared to 2002 mainly due to an increase in the Utility's plant assets.