Pacific Gas & Electric (PCG)

Factors Affecting 2004 Results of Operation and Financial Condition

During 2004, several events had a significant impact on PG&E Corporation’s and the Utility’s results of operation and financial condition, including:

•                  The Utility’s reorganization under Chapter 11 of the U.S Bankruptcy Code, or Chapter 11, on April 12, 2004, the effective date of its plan of reorganization, and the associated $7.8 billion exit financing;

•                  The return to cost-of-service ratemaking for the Utility’s electricity distribution and generation operations;

•                  The CPUC’s authorization of a majority of the Utility’s base revenue requirements in the Utility’s 2003 General Rate Case, or GRC; and

•                  The elimination of PG&E Corporation’s equity ownership in NEGT.

Factors Affecting 2004 Results of Operation and Financial Condition

        During 2004, several events had a significant impact on PG&E Corporation's and the Utility's results of operation and financial condition, including:

•

The Utility's reorganization under Chapter 11 of the U.S Bankruptcy Code, or Chapter 11, on April 12, 2004, the effective date of its plan of reorganization, and the associated $7.8 billion exit financing;

3

•

The return to cost-of-service ratemaking for the Utility's electricity distribution and generation operations;



•

The CPUC's authorization of a majority of the Utility's base revenue requirements in the Utility's 2003 General Rate Case, or GRC; and



•

The elimination of PG&E Corporation's equity ownership in NEGT.