Remarks By:		Robert D. Glynn, Jr.	Date:		April 21, 2004
		Chairman, Chief Executive Officer and President, PG&E Corporation Peter A. Darbee Senior Vice President and Chief Financial Officer PG&E Corporation Gordon R. Smith Senior Vice President Chief Executive Officer and President Pacific Gas and Electric Company
Occurrence:		Annual Shareholders Meeting	Location:		San Francisco, California

These remarks and related materials may contain forward-looking statements. Actual results could differ materially from those expressed or implied by the forward-looking statements.

Remarks Before the 2004 Annual Shareholders Meeting

ROBERT D. GLYNN, JR.

Good morning. Welcome to the annual shareholders meeting for PG&E Corporation and Pacific Gas and Electric Company.

I'm Bob Glynn, Chairman of both companies, and we are all pleased to report on the completion of Pacific Gas and Electric Company's Chapter 11 process nine days ago.

Now, a few introductions.

With me are Corporate Secretary, Linda Cheng, and Senior Vice President and General Counsel, Bruce Worthington.

And sharing in today's presentation are Pacific Gas and Electric Company President and CEO, Gordon Smith, and PG&E Corporation Senior Vice President and Chief Financial Officer, Peter Darbee.

Also, Joseph Thatcher from Mellon Investor Services, the independent Inspector of Election, is here.

In the audience are members of our Boards of Directors and some of our retired directors and officers. We'll introduce our current directors, and I'll ask them to stand as they are introduced.

• David Andrews,
• Les Biller,
• David Coulter,
• Lee Cox,
• Bill Davila,
• Mary Metz,
• Carl Reichardt,
• and Barry Williams.

We welcome them all.

Special recognition today goes to two of our directors who are retiring at this meeting. Carl Reichardt, retires after 21 years, and Bill Davila, after 13 years. Each of them was willing to serve beyond their normal retirement date to see the company through its past challenges. Their counsel, their guidance, and their experience have been of great value to the board through this period, and we are indebted to them, and I am personally indebted to them. We wish them well in the future. Thank you Carl; thank you Bill.

Since the start of 2004, your company's core business – Pacific Gas and Electric Company – has:

• regained its investment grade credit rating,
• repaid all creditors in full, with interest,
• reduced customers' electric rates by $800 million,
• and, having restored our financial health, created a path for PG&E Corporation to resume paying a common dividend by the second half of 2005.

These results were achieved with broad-based support that included the California Public Utilities Commission, labor, a consumer group, environmental groups, and creditors.

And with these accomplishments, PG&E Corporation has turned the corner.

We've exited a period that has been uniquely uncertain and challenging, and started one that we expect will be uniquely stable-- with a nine-year settlement with the California Public Utilities Commission, a four-year proposed settlement in our General Rate Case, and five-year collective bargaining agreements with all three of our unions.

Investors today have unprecedented visibility into our income statement, balance sheet and cash flows.

And they can see a gas and electric utility whose operations are sound and profitable, and whose levels of income are strong and growing.

They also see a company whose:

• products and services are as popular and in-demand as ever,
• working relationships with regulators are growing stronger, and
• opportunities for providing value to shareholders and customers are more solid than at any time in the past several years.

Now, Peter Darbee, PG&E Corporation's Senior Vice president and Chief Financial Officer, will discuss financial performance, and Gordon Smith, President and CEO of Pacific Gas and Electric Company, will comment on operations.

PETER A. DARBEE

First, we'll review PG&E Corporation's 2003 results, and the company's earnings outlook. Then, our projected cash flow, key credit statistics, and finally total shareholder return.

Click slide to view larger.

Frequently, I have the opportunity to speak with our institutional investors about the Corporation's financial results. I especially welcome this opportunity to discuss the key elements of our financial performance with you today.

PG&E reported earnings of $1.06 per share in 2003, compared to a loss of $2.26 per share in 2002. Earnings from operations were $1.48 per share.

Earnings from operations reflect what management believes are the company's normal or on-going earnings. The financial community uses them to evaluate and compare corporate performance. A full discussion of last year's financial results is in our annual report, as you know.

This chart shows projected earnings per share through 2008 for PG&E Corporation and Pacific Gas and Electric Company, but not our national energy group, which is now treated as a discontinued operation.

For 2004, we expect earnings from operations to grow by about 38 percent to between $2.00 and $2.10 per share.

The 2005 through 2008 earnings per share projections are strong and growing. They could well be even greater if we use some of our free cash flow to buy back shares.

These earnings projections are based on two key settlement agreements. First, the reorganization settlement agreement which prescribes a specific capital structure and minimum return on equity. And second, the proposed settlement to the 2003 General Rate Case. These settlements provide Pacific Gas and Electric Company with a greater level of financial certainty than at any time in our recent history.

Click slide to view larger.

The settlements also create a foundation for strong cash flow.

Equity free cash flow ranges from about $260 million in 2005 up to about $980 million in 2008. This can be used for dividends, further investment in the business, or share repurchases, and we know, that dividends are important to you.

In addition, reinvestment in the business and share repurchases will grow earnings per share.

Click slide to view larger.

One of Pacific Gas and Electric Company's objectives was to emerge from Chapter 11 as an investment grade company. We achieved that goal and we now intend to continue to strengthen the Utility's credit worthiness. First, we'll use cash flow to attain a 52 percent equity ratio in the company's capital structure. By the second half of 2005, shareholders' equity will reach approximately $9.5 billion, and we aspire to then begin paying dividends and buying back stock.

The company's strong balance sheet, together with strong cash flow, result in credit statistics that will approach those generally required to achieve an "A" credit rating.

Click slide to view larger.

As we've stated many times, the company's goal is always to deliver a growing and competitive total return on your investment. As a result, it's important to look at how PG&E Corporation has performed in this regard. You might find it appropriate to look at PG&E's total shareholder return since the peak of the California energy crisis and just before we made the decision to file for Chapter 11.

This chart shows that PG&E's total shareholder return was substantially better than a group of similar utilities to which we compare our financial performance. It was also better than the S&P 500 and Dow Jones Utilities indices. Over this period, PG&E Corporation's total return to shareholders was 145 percent. That's an average annual return of 35 percent. We believe this performance speaks for itself.

So to close:

• PG&E has now emerged from a thoroughly challenging period.
• Our earnings have reflected this, but the outlook for them is both strong and growing. So is the outlook for our cash flow.
• The company's balance sheet is improving, as are its key credit statistics.
• And finally, and most importantly, this good news has been reflected in the company's stock price.

I'm delighted to have had the opportunity to provide you, our shareholders, with today's report.

GORDON R. SMITH

You've just heard about our 2003 financial performance.

I'll now update you on our operations.

I want to highlight three areas that played a significant role in our success last year:

• the team of employees who once again demonstrated that they can do the job;
• the infrastructure improvements we made to ensure that we have the capability to deliver our customers safe and reliable service; and
• our commitment to the environment where we were once again recognized as a national leader.

On an average day last year:

• PG&E employees connected over 400 new electric and gas customers.
• Answered more than 40,000 customer phone calls.
• Made about 7,000 service visits to customers' homes and businesses.
• And, were on time for 96 percent of their appointments, and they resolved customers' needs on the first visit more than 84 percent of the time.

Last Fall, 24 PG&E crews helped our neighbors – Southern California Edison and San Diego Gas & Electric – restore power to their customers after some of the worst wildfires in the state's history.

The California Public Utilities Commission issued a Resolution recognizing the contributions our employees made to help rebuild the electric infrastructure in Southern California.

And they commended the company for the tireless and heroic efforts our crews displayed to lessen the impact of the devastation caused by the fires.

Performing well requires people with the right skills and talents, and a commitment with the unions that represent two thirds of our employees.

In 2003, we reached new collective bargaining agreements with all three of our labor unions – the International Brotherhood of Electrical Workers Local 1245, the Engineers and Scientists of California Local 20, and the International Union of Security Officers who represent the security guards at Diablo Canyon.

These five-year agreements give us a solid foundation to continue performing well as we move forward.

Last year, PG&E achieved one of our best safety records in the last decade, with total lost workdays nearly 13 percent lower than in 2002.

We continue to strive toward our goal of having an injury-free workplace.

As we did before and during the California energy crisis, we continued investing in California's energy infrastructure.

Since 2001, these investments total over $4.5 billion, and last year alone, we invested over $1.5 billion.

We'll continue to invest at that rate over the next five years, to meet customer growth and maintain reliability.

These investments will provide confidence to our customers that we'll be there when they need us, and provide earnings opportunities for our shareholders.

2003's investments included connecting new power plants to the electric grid and completing several major electric transmission projects to accommodate growth, increase efficiency and maintain reliability in Northern and Central California.

Our energy efficiency programs are among the best in the business.

We've been at this for more than a quarter of a century, and we look forward to leading the nation in delivering energy efficiency to our customers in the years ahead.

Our 2003 programs saved enough energy to power more than 80,000 homes and had the additional benefit of avoiding more than 285,000 tons of power plant emissions that otherwise would have gone into the air that we breathe.

The U.S. Environmental Protection Agency and the U.S. Department of Energy recognized the company with a 2003 Energy Star Award for regional, state and community leadership in promoting energy efficiency.

We also received separate recognition from the EPA and DOE as "the 2003 Energy Star Partner of the Year for New Homes," for our work promoting the construction of energy efficient housing.

And, the EPA presented Pacific Gas and Electric Company with its 2003 Climate Protection Award in recognition of our success in reducing greenhouse gases.

As Bob mentioned in his introductory comments, Pacific Gas and Electric's products and services are as popular and in-demand as ever.

Our performance is vital to the people, the businesses, and the economy of California.

14 million Californians – one out of every 20 Americans – rely on us to be there every time they flip on a switch or turn up their thermostat. In fact, they demand it. Every minute of the day – every day of the year.

Providing safe and reliable service takes the combined skills, talents and teamwork of 20,000 men and women who proved again last year that they're up to the challenge.

Meeting that challenge ever more efficiently and effectively will always be the basis for our success.

And, we're looking forward to doing precisely that in 2004 and beyond. We have the right team for the job. We have a clear and stable path ahead. And, we have the opportunity for the company's operational performance to once again be reflected in value for our shareholders.

ROBERT D. GLYNN, JR.

The outlook for PG&E Corporation includes new opportunities to deliver value to both shareholders and customers.

For our shareholders, you've already heard our aspiration to declare a common stock dividend by the second half of 2005.

The company's expected strong cash flows will enable us to fulfill that aspiration.

Our customers' electric rates for this year have been set about $800 million lower than last year.

Legislation is moving forward in Sacramento on a bill that would enable us to deliver further customer savings. We support this legislation, along with consumer groups and the CPUC.

We also look forward to once again connecting to our communities in ways that go beyond delivering gas and electricity.

An active role in our communities has been a part of PG&E's identity throughout its history. The restoration of our financial health enables us to re-energize those relationships and reinforce our shared interests, including making sure that California remains a great place to live and work.

We're doing that through:

• major new environmental commitments,
• new commitments to substantially increase our support for community organizations,
• promoting energy efficiency and safety,
• exploring innovative new clean energy technologies, and
• assisting low-income members of our community.

Efforts like these are as much a part of our future as are strong cash flows, credit ratings and earnings. We believe they're important to our company, to our employees, communities, and shareholders. And we're glad to be in a position to support them more strongly than we have in the past.

The strength of our dedicated employee team members, those we just met in the video, and thousands more, was tested by the challenges and uncertainties of the past several years, as much as our financial strength and resolve were tested.

And, the last three years have challenged PG&E'ers as much as any earthquake, fire, storm, or any operational matter in the company's history.

It would be easy to take for granted some things that have been accomplished over the last few years, but the facts are: the lights were on, the gas kept flowing, new customers got hooked up, and existing customers got service.

These accomplishments happened because individual PG&E'ers just plain continued to deliver for customers and, in doing so, for shareholders.

To recognize and thank our entire employee team, the presidents of our Employee Associations are here to represent our large and diverse workforce this morning.

With us are: Dan Barber, President of the Pride Network; Brian Bowers, Director of the Pacific Service Employees Association; Wayland Chan, President of the Asian Employees Association; Maria Padrones, President of the Hispanic Employees Association; Sam Sabagguit, President of the Filipino Employees Association; Rhonda Shiffman, President of the Women's Network Employee Association; and Al Thomas, President of the Black Employees Association.

Thank you each for being here.

On behalf of the thousands of employees you represent, please accept the company's gratitude for the dedication, hard work, and focus that made it possible for PG&E to keep delivering while it resolved the challenges of the past few years.

Thank you.

And thank you to the entire shareholder assembly.