Pacific Gas & Electric (PCG)

QUARTER-OVER-QUARTER COMPARISON

          The difference in PG&E Corporation’s earnings from operations for the first quarter of 2005 compared with first quarter 2004 results primarily from the timing of last year’s final decision in Pacific Gas and Electric Company’s 2003 General Rate Case.  Because the decision was received in May of last year, first quarter 2004 results did not include its effects, which would have added approximately $0.15 per share to earnings from operations.
          Also contributing to the quarter-over-quarter difference was an additional $0.03 per share in 2005, reflecting increased earnings on the equity portion of Pacific Gas and Electric Company’s rate base (the equity portion of rate base grew from about 48 percent in the first quarter last year to 52 percent in January 2005).  An additional increase of $0.02 per share in 2005 is attributable to the effects of fewer shares outstanding, with another $0.02 per share reflecting other miscellaneous items.
          Partially offsetting these items, the company raised its forecast of environmental remediation costs by about $0.03 per share, after updating estimates to complete work at a number of existing sites. 
          Also impacting the quarter-over-quarter difference in earnings from operations was a reduction of about $0.04 per share in earnings associated with the regulatory asset established under the settlement resolving Pacific Gas and Electric Company’s Chapter 11 case. The company securitized the regulatory asset in February 2005, and as a result, earned a return on the asset for only a portion of the first quarter, compared with a full quarter of returns last year.