Pacific Gas & Electric (PCG)

Workers’ Compensation Security

The Utility is self-insured for workers’ compensation. To maintain its status as a self-insurer for workers’ compensation, the Utility must either deposit collateral with the California Department of Industrial Relations, or the DIR, or participate in the Alternative Security Deposit program, or the ASP, which is administered by the Self-Insurer’s Security Fund, or the SISF. The ASP is a program that allows the SISF to arrange a composite deposit for participating self-insurers on a portfolio basis, rather than individual self-insurers arranging their deposits individually. The SISF arranges portfolio security to be delivered to the DIR for the aggregate self-insured workers’ compensation liabilities for participating self-insurers. The SISF composite deposit for participating self-insurers, including the Utility, was established on July 1, 2004, and resulted in the release of the $348 million collateral ($305 million in surety bonds and $43 million in cash) that existed at June 30, 2004. As a result, PG&E Corporation’s guarantee of the Utility’s reimbursement obligation associated with these surety bonds was reduced by $305 million, and the remaining liability is expected to be immaterial.

PG&E Corporation’s guarantee of the Utility’s underlying obligation to pay workers’ compensation claims remains in place. As of December 31, 2004, the actuarially determined workers’ compensation liability was approximately $226 million.

Workers' Compensation Security

        The Utility is self-insured for workers' compensation. To maintain its status as a self-insurer for workers' compensation, the Utility must either deposit collateral with the California Department of Industrial Relations, or the DIR, or participate in the Alternative Security Deposit program, or the ASP, which is administered by the Self-Insurer's Security Fund, or the SISF. The ASP is a program that allows the SISF to arrange a composite deposit for participating self-insurers on a portfolio basis, rather than individual self-insurers arranging their deposits individually. The SISF arranges portfolio security to be delivered to the DIR for the aggregate self-insured workers' compensation liabilities for participating self-insurers. The SISF composite deposit for participating self-insurers, including the Utility, was established on July 1, 2004, and resulted in the release of the $348 million collateral ($305 million in surety bonds and $43 million in cash) that existed at June 30, 2004. As a result, PG&E Corporation's guarantee of the Utility's reimbursement obligation associated with these surety bonds was reduced by $305 million, and the remaining liability is expected to be immaterial.

        PG&E Corporation's guarantee of the Utility's underlying obligation to pay workers' compensation claims remains in place. As of December 31, 2004, the actuarially determined workers' compensation liability was approximately $226 million.