Pacific Gas & Electric (PCG)

Item 8.01 – Other Events

Advanced Metering Infrastructure Application

               On June 16, 2005, the Utility filed an application with the California Public Utilities Commission (CPUC) requesting approval of its plan to deploy an advanced metering infrastructure (AMI) to all of the Utility’s electric and core natural gas customers. The application also requests cost recovery for the capital investments and ongoing operating costs, net of operating savings, associated with implementing the AMI project.  If the Utility’s application is approved, the Utility will install, replace, or modify approximately five million electric meters and four million gas meters, providing customers with advanced meters that can record usage in time intervals and be read remotely.  The Utility also will install hardware and software to collect data from these meters and to transmit it to the Utility’s operating systems, including customer information and billing systems.  The Utility has included its proposal for the initial implementation of dynamic electric rate options starting in the summer of 2006 within its AMI project application. 

               The Utility’s application estimates that the total cost for full deployment of the AMI project will be $1.46 billion, consisting of $1.25 billion in capital costs and $213 million in expense.  The Utility is proposing that the investment and other deployment costs be included in its rates on a phased basis as the advanced meters are deployed. 

               The $1.46 billion AMI project cost includes approximately $132 million of costs associated with pre-deployment activities.  The Utility filed a separate application with the CPUC in March 2005 seeking recovery of approximately $49 million of these costs.  That application has not yet been approved but is scheduled for decision by the CPUC in early October 2005.  The Utility’s June 16 application requests cost recovery for the remaining approximately $83 million of pre-deployment costs.

               Due to the operational cost savings that the Utility expects to achieve, the Utility projects that the overall net rate impacts of the AMI project will be about 1 percent of the Utility’s combined electric and gas revenue requirements during the years 2006 through 2010.  The projected net rate impacts do not take into account any potential electric procurement savings that may result from the AMI project. 

               The Utility has proposed a procedural schedule for its AMI project deployment application that contemplates that hearings would begin in October 2005, and that a final decision would be issued by the CPUC in February 2006.  The Utility is seeking to begin pre-deployment activities this summer, start meter installation in the first quarter of 2006, and complete meter installation by 2011. 

               PG&E Corporation and the Utility cannot predict the outcome of this proceeding.

Denial of Petitions for Review of Orders Approving Chapter 11 Settlement Agreement

               On June 13, 2005, the California Court of Appeal denied petitions filed by the City and County of San Francisco (CCSF) and Aglet Consumer Alliance (Aglet) in April 2004 seeking review of the CPUC’s orders approving the settlement agreement entered into on December 19, 2003 among PG&E Corporation, the Utility and the CPUC to resolve the Utility's Chapter 11 case (Settlement Agreement).  Within ten days of the California Court of Appeal’s orders denying their petitions, CCSF and Aglet may seek review in the California Supreme Court.

              If the Settlement Agreement or the U.S. Bankruptcy Court for the Northern District of California’s order confirming the Utility’s Chapter 11 plan of reorganization is overturned or modified on appeal, PG&E Corporation's and the Utility's financial condition and results of operations, and the Utility's ability to pay dividends or otherwise make distributions to PG&E Corporation, could be materially adversely affected. 

Declaration of Common Stock Dividends

               On June 15, 2005, the Board of Directors of the Utility declared a cash dividend of approximately $118 million on the Utility’s common stock for the second quarter of 2005.  The dividend was paid to PG&E Corporation and PG&E Holdings, LLC, a wholly owned subsidiary of the Utility that holds approximately 6 percent of the Utility's common stock, on June 16, 2005.  Also on June 15, 2005, the Board of Directors of PG&E Corporation declared a cash dividend of $0.30 per share on PG&E Corporation common stock for the second quarter of 2005, payable on July 15, 2005 to shareholders of record on June 30, 2005. 

Notice of Redemption of Utility’s Floating Rate Senior Notes

               On May 27, 2005, pursuant to the Utility’s instruction, the trustee under the indenture for the Utility’s Floating Rate Senior Notes due 2006 provided notice that the remaining $200 million aggregate principal amount of Floating Rate Senior Notes would be redeemed on July 3, 2005.  The Floating Rate Senior Notes due 2006 will be redeemed in accordance with the procedures of The Depository Trust Company.