Pacific Gas & Electric (PCG)

Utility Retained Generation Regulatory Assets

•                  In the Settlement Agreement, the CPUC deemed the Utility’s adopted electricity generation rate base in a 2002 proceeding to be just and reasonable and not subject to modification, adjustment or reduction, except as necessary to reflect capital expenditures and changes in authorized depreciation. Accordingly, the Utility recognized a one-time, non-cash gain of $1.2 billion, pre-tax, for the retained generation regulatory assets in the first quarter of 2004. The individual components of the regulatory assets are amortized over their respective lives, with a weighted average life of approximately 16 years. The Utility retained generation regulatory assets will earn an authorized rate of return on its equity component of 11.22% in 2004 and 2005.

Utility Retained Generation Regulatory Assets

•

In the Settlement Agreement, the CPUC deemed the Utility's adopted electricity generation rate base in a 2002 proceeding to be just and reasonable and not subject to modification, adjustment or reduction, except as necessary to reflect capital expenditures and changes in authorized depreciation. Accordingly, the Utility recognized a one-time, non-cash gain of $1.2 billion, pre-tax, for the retained generation regulatory assets in the first quarter of 2004. The individual components of the regulatory assets are amortized over their respective lives, with a weighted average life of approximately 16 years. The Utility retained generation regulatory assets will earn an authorized rate of return on its equity component of 11.22% in 2004 and 2005.

94