Pacific Gas & Electric (PCG)

Recorded Liability for Legal Matters

In accordance with SFAS No. 5, “Accounting for Contingencies,” PG&E Corporation and the Utility make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.  These provisions are reviewed quarterly and adjusted to reflect the impacts of negotiations, settlements and payments, rulings, advice of legal counsel and other information and events pertaining to a particular case.  In assessing such contingencies, PG&E Corporation’s and the Utility’s policy is to exclude anticipated legal costs.

The liability for legal matters is included in PG&E Corporation’s and the Utility’s other noncurrent liabilities in the Consolidated Balance Sheets, and totaled approximately $198 million at March 31, 2005 and $200 million at December 31, 2004.  Based on current information, PG&E Corporation and the Utility do not believe that it is probable that losses associated with legal matters that exceed amounts already recognized will be incurred in amounts that would be material to PG&E Corporation’s or the Utility’s financial position or results of operations.

Recorded Liability for Legal Matters

In accordance with SFAS No. 5, PG&E Corporation and the Utility make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed quarterly and adjusted to reflect the impacts of negotiations, settlements and payments, rulings, advice of legal counsel and other information and events pertaining to a particular case. In assessing such contingencies, PG&E Corporation’s and the Utility’s policy is to exclude anticipated legal costs.

The liability for legal matters is included in PG&E Corporation’s and the Utility’s other noncurrent liabilities in the Consolidated Balance Sheets, and totaled approximately $200 million at December 31, 2004 and $205 million at December 31, 2003. Based on current information, PG&E Corporation and the Utility do not believe that it is probable that losses associated with legal matters that exceed amounts already recognized will be incurred in amounts that would be material to PG&E Corporation’s or the Utility’s financial position or results of operations.

Recorded Liability for Legal Matters

        In accordance with SFAS No. 5, PG&E Corporation and the Utility make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed quarterly and adjusted to reflect the impacts of negotiations, settlements and payments, rulings, advice of legal counsel and other information and events pertaining

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to a particular case. In assessing such contingencies, PG&E Corporation's and the Utility's policy is to exclude anticipated legal costs.

        The liability for legal matters is included in PG&E Corporation's and the Utility's other noncurrent liabilities in the Consolidated Balance Sheets, and totaled approximately $200 million at December 31, 2004 and $205 million at December 31, 2003. Based on current information, PG&E Corporation and the Utility do not believe that it is probable that losses associated with legal matters that exceed amounts already recognized will be incurred in amounts that would be material to PG&E Corporation's or the Utility's financial position or results of operations.