Pacific Gas & Electric (PCG)

FULL-YEAR 2004 RESULTS

        For the full year 2004, PG&E Corporation's reported GAAP results were $4.5 billion, or $10.57 per share, of which $8.52 per share reflected two one-time, non-cash items relating to Pacific Gas and Electric Company's Chapter 11 exit and the elimination of the Corporation's equity interest in its former national energy unit. Total consolidated net income in 2003 was $420 million, or $1.02 per share.

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        On a non-GAAP earnings-from-operations basis, PG&E Corporation earned $901 million, or $2.12 per share in 2004, compared with $611 million, or $1.48 per share in 2003. Earnings from operations exceeded the $2.10 per share upper end of the Corporation's guidance range due to higher gas transmission revenues, which occurred primarily due to the effects of colder-than-normal weather in the fourth quarter. Pacific Gas and Electric Company contributed $931 million, or $2.19 per share, to earnings from operations in 2004, compared with $616 million, or $1.49 per share, in 2003.

        "Last year's financial, regulatory and operational accomplishments drove solid earnings performance. They also establish a platform for focusing on our performance for customers and returning value to shareholders," said Peter A. Darbee, President and Chief Executive Officer of PG&E Corporation. "Pacific Gas and Electric Company has a strong balance sheet, healthy cash flows and investment grade credit ratings. We've re-established a common stock dividend. We are executing substantial share repurchases. And we're continuing to make new investments in the core utility business in order to deliver better, faster and more cost-effective service to customers."

        The difference in earnings from operations from 2003 to 2004 is magnified by the effects of the delayed 2003 GRC decision, which was not resolved until May 2004. Revenues authorized in the GRC were retroactive to January 1, 2003, but the decision was not final in time to be reflected in 2003 earnings from operations. If not for the delayed GRC decision, 2003 earnings from operations would have been higher by approximately $0.45 per share.

        Another principal driver for the increase in earnings from operations in 2004 versus 2003 was earnings on the equity portion of the Chapter 11 settlement agreement regulatory asset, which accounted for an additional $0.27 per share. (As previously reported, the Chapter 11 settlement agreement regulatory asset is being refinanced through the issuance of Energy Recovery Bonds, and therefore earnings on the regulatory asset will not recur.)

        For the full year 2004, two large one-time, non-cash items impacting comparability accounted for a substantial amount of the difference between earnings from operations and reported consolidated net income.

        Specifically, as previously reported for the first quarter of 2004, accounting for the regulatory assets established as part of Pacific Gas and Electric Company's Chapter 11 settlement agreement was reflected as a non-cash gain of approximately $6.92 per share. In the fourth quarter, the Corporation recorded a positive $1.60 per share non-cash entry necessary to reflect the resolution of the Chapter 11 filing by National Energy & Gas Transmission, Inc. (NEGT), which eliminated the Corporation's equity interest in NEGT. The $1.60 per share item reverses the Corporation's net negative investment in NEGT.

FULL-YEAR 2004 RESULTS

        For the full year 2004, PG&E Corporation's reported GAAP results were $4.5 billion, or $10.57 per share, of which $8.52 per share reflected two one-time, non-cash items relating to Pacific Gas and Electric Company's Chapter 11 exit and the elimination of the Corporation's equity interest in its former national energy unit. Total consolidated net income in 2003 was $420 million, or $1.02 per share.

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        On a non-GAAP earnings-from-operations basis, PG&E Corporation earned $901 million, or $2.12 per share in 2004, compared with $611 million, or $1.48 per share in 2003. Earnings from operations exceeded the $2.10 per share upper end of the Corporation's guidance range due to higher gas transmission revenues, which occurred primarily due to the effects of colder-than-normal weather in the fourth quarter. Pacific Gas and Electric Company contributed $931 million, or $2.19 per share, to earnings from operations in 2004, compared with $616 million, or $1.49 per share, in 2003.

        "Last year's financial, regulatory and operational accomplishments drove solid earnings performance. They also establish a platform for focusing on our performance for customers and returning value to shareholders," said Peter A. Darbee, President and Chief Executive Officer of PG&E Corporation. "Pacific Gas and Electric Company has a strong balance sheet, healthy cash flows and investment grade credit ratings. We've re-established a common stock dividend. We are executing substantial share repurchases. And we're continuing to make new investments in the core utility business in order to deliver better, faster and more cost-effective service to customers."

        The difference in earnings from operations from 2003 to 2004 is magnified by the effects of the delayed 2003 GRC decision, which was not resolved until May 2004. Revenues authorized in the GRC were retroactive to January 1, 2003, but the decision was not final in time to be reflected in 2003 earnings from operations. If not for the delayed GRC decision, 2003 earnings from operations would have been higher by approximately $0.45 per share.

        Another principal driver for the increase in earnings from operations in 2004 versus 2003 was earnings on the equity portion of the Chapter 11 settlement agreement regulatory asset, which accounted for an additional $0.27 per share. (As previously reported, the Chapter 11 settlement agreement regulatory asset is being refinanced through the issuance of Energy Recovery Bonds, and therefore earnings on the regulatory asset will not recur.)

        For the full year 2004, two large one-time, non-cash items impacting comparability accounted for a substantial amount of the difference between earnings from operations and reported consolidated net income.

        Specifically, as previously reported for the first quarter of 2004, accounting for the regulatory assets established as part of Pacific Gas and Electric Company's Chapter 11 settlement agreement was reflected as a non-cash gain of approximately $6.92 per share. In the fourth quarter, the Corporation recorded a positive $1.60 per share non-cash entry necessary to reflect the resolution of the Chapter 11 filing by National Energy & Gas Transmission, Inc. (NEGT), which eliminated the Corporation's equity interest in NEGT. The $1.60 per share item reverses the Corporation's net negative investment in NEGT.