Pacific Gas & Electric (PCG)

Environmental Remediation Liabilities

Given the complexities of the legal and regulatory environment regarding environmental laws, the process of estimating environmental remediation liabilities is a subjective one. The Utility records a liability associated with environmental remediation activities when it is determined that remediation is probable, as defined in SFAS No. 5, and the cost can be estimated in a reasonable manner. The liability can be based on many factors, including site investigations, remediation, operations, maintenance, monitoring and closure. This liability is recorded at the lower range of estimated costs, unless a more objective estimate can be achieved. The recorded liability is re-examined every quarter.

At December 31, 2004, the Utility’s accrual for undiscounted environmental liability was approximately $327 million. The Utility’s undiscounted future costs could increase to as much as $480 million if other potentially responsible parties are not able to contribute to the settlement of these costs or the extent of contamination or necessary remediation is greater than anticipated.

The accrual for undiscounted environmental liability is representative of future events that are likely to occur. In determining maximum undiscounted future costs, events that are possible but not likely are included in the estimation.

Environmental Remediation Liabilities

Given the complexities of the legal and regulatory environment regarding environmental laws, the process of estimating environmental remediation liabilities is a subjective one.  The Utility records a liability associated with environmental remediation activities when it is determined that remediation is probable, as defined in SFAS No. 5, and the cost can be estimated in a reasonable manner.  The liability can be based on many factors, including site investigations, remediation, operations, maintenance, monitoring and closure.  This liability is recorded at the lower range of estimated costs, unless a more objective estimate can be achieved.  The recorded liability is re-examined every quarter.

At March 31, 2005, the Utility’s accrual for undiscounted environmental liability was approximately $408 million.  The Utility’s undiscounted future costs could increase to as much as $571 million if other potentially responsible parties are not able to contribute to the settlement of these costs or the extent of contamination or necessary remediation is greater than anticipated.

Environmental Remediation Liabilities

        Given the complexities of the legal and regulatory environment regarding environmental laws, the process of estimating environmental remediation liabilities is a subjective one. The Utility records a liability associated with environmental remediation activities when it is determined that remediation is probable, as defined in SFAS No. 5, and the cost can be estimated in a reasonable manner. The liability can be based on many factors, including site investigations, remediation, operations, maintenance, monitoring and closure. This liability is recorded at the lower range of estimated costs, unless a more objective estimate can be achieved. The recorded liability is re-examined every quarter.

        At December 31, 2004, the Utility's accrual for undiscounted environmental liability was approximately $327 million. The Utility's undiscounted future costs could increase to as much as $480 million if other potentially responsible parties are not able to contribute to the settlement of these costs or the extent of contamination or necessary remediation is greater than anticipated.

        The accrual for undiscounted environmental liability is representative of future events that are likely to occur. In determining maximum undiscounted future costs, events that are possible but not likely are included in the estimation.