Pacific Gas & Electric (PCG)

Interest Expense

PG&E Corporation’s interest expense is not allocated to its affiliates. In 2004, PG&E Corporation’s interest expense decreased by approximately $64 million, or 33%, compared to 2003 due to a reduction in principal debt amount outstanding and lower interest rates in 2004 compared to 2003, as well as a write-off of approximately $89 million of unamortized loan fees, loan discount, and prepayment fees associated with the repayment in July 2003 of approximately $735 million of principal and interest under PG&E Corporation’s then existing credit agreement. This decrease in interest expense was partly offset by a redemption premium of approximately $51 million and a charge due to the write-off of approximately $15 million of unamortized loan fees associated with the redemption of PG&E Corporation’s $600 million of 6 ⁷¤₈% Senior Secured Notes due 2008, or Senior Secured Notes, on November 15, 2004.

In 2003, PG&E Corporation’s interest expense decreased by approximately $42 million, or 18%, compared to 2002. The decrease was mainly due to a decrease in amortization of deferred charges and unamortized loan fees during 2003, compared to 2002. During the third quarter of 2003, PG&E Corporation wrote off approximately $89 million as described above, while during the third quarter of 2002, PG&E Corporation wrote off $153 million of unamortized loan fees and discounts when it repaid principal and modified a loan under PG&E Corporation’s credit agreement.

Interest Expense

PG&E Corporation’s interest expense is not allocated to its affiliates.  In the three months ended March 31, 2005, PG&E Corporation’s interest expense decreased by approximately $11 million, or 61%, compared to the same period in 2004, due to a reduction in the amount of outstanding debt.  During the first quarter 2004, PG&E Corporation incurred $11 million in interest expense related to its $600 million of 6⁷/₈ % Senior Secured Notes due 2008, which were redeemed on November 15, 2004.  Interest expense in the first quarter 2005 was primarily due to PG&E Corporation’s $280 million of 9.50% Convertible Subordinated Notes due 2010, or Convertible Subordinated Notes.

Interest Expense

        PG&E Corporation's interest expense is not allocated to its affiliates. In 2004, PG&E Corporation's interest expense decreased by approximately $64 million, or 33%, compared to 2003 due to a reduction in principal debt amount outstanding and lower interest rates in 2004 compared to 2003, as well as a write-off of approximately $89 million of unamortized loan fees, loan discount, and

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prepayment fees associated with the repayment in July 2003 of approximately $735 million of principal and interest under PG&E Corporation's then existing credit agreement. This decrease in interest expense was partly offset by a redemption premium of approximately $51 million and a charge due to the write-off of approximately $15 million of unamortized loan fees associated with the redemption of PG&E Corporation's $600 million of 6⁷/8% Senior Secured Notes due 2008, or Senior Secured Notes, on November 15, 2004.

        In 2003, PG&E Corporation's interest expense decreased by approximately $42 million, or 18%, compared to 2002. The decrease was mainly due to a decrease in amortization of deferred charges and unamortized loan fees during 2003, compared to 2002. During the third quarter of 2003, PG&E Corporation wrote off approximately $89 million as described above, while during the third quarter of 2002, PG&E Corporation wrote off $153 million of unamortized loan fees and discounts when it repaid principal and modified a loan under PG&E Corporation's credit agreement.