August 06, 2001
Contact: Jim Lewis, PG&E National Energy Group (301) 280-6553
EDITORS: Please do not use "Pacific Gas and Electric" or "PG&E" when referring to PG&E Corporation or its National Energy Group. The PG&E National Energy Group is not the same company as Pacific Gas and Electric Company, the utility, and is not regulated by the California Public Utilities Commission. Customers of Pacific Gas and Electric Company do not have to buy products or services from the National Energy Group in order to continue to receive quality regulated services from Pacific Gas and Electric Company.


BETHESDA, Md.—PG&E Corporation's (NYSE: PCG) National Energy Group today announced it has begun construction of the 1,170-megawatt Covert Generating Plant in southwest Michigan. Projected to begin operating in summer of 2003, Covert Generating will be a combined cycle, gas-fired plant, producing enough electricity to power roughly 1 million homes.

The plant site is located in Covert Township, about 48 miles west of Kalamazoo. As a "merchant" plant, Covert Generating is intended to sell its output primarily in the competitive wholesale markets via the Michigan Electric Transmission Company lines, a subsidiary of Consumers Energy.

"The construction of the Covert Generating Plant is an important step in meeting the growing need for electricity throughout the Midwest," said Chris Iribe, president and chief operating officer of the National Energy Group's East Region. "We look forward to the opportunity to provide efficient power at competitive costs."

The Covert Plant's three generators, fueled by natural gas, will be driven by advanced Mitsubishi 501G turbines in a combined-cycle configuration to optimize efficiency and environmental performance. Covert Generating last spring commenced construction of a water intake and discharge system from Lake Michigan to the plant that will be owned and operated by the nearby City of South Haven and will be available to serve future drinking water needs of the City and several neighboring townships.

The Covert development team selected The Shaw Group Inc. and its subsidiary, Stone & Webster, as the primary contractor for the project. The Covert Generating Plant received its final permits early this year.

"Construction of the Covert Generating Plant comes at the end of a long development effort. We're grateful to the people of Covert Township and neighboring communities for their patience and support during this complicated process," said Iribe.

Covert Generating Company, LLC, is a wholly owned, indirect subsidiary of PG&E National Energy Group. Headquartered in Bethesda, Md., the National Energy Group develops, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services.

This news release contains statements concerning plans for the construction and operation of the Covert Generating Plant that may be considered forward-looking statements that involve a number of risks and uncertainties. Actual future results could differ materially from those expressed or implied in any forward-looking statements. Some of the key factors that could cause actual results to differ materially include, but are not limited to, (i) changes in government regulations, including federal and state regulation of the electric energy industry; (ii) the delay, interruption or prevention of commercial operations because of various development, construction and operation risks, such as a failure to obtain financing, necessary permits or equipment, the failure of third-party contractors to perform their contractual obligations, the failure of equipment to perform as anticipated, or an inability to obtain equipment or labor on acceptable terms; (iii) the development and operation of competing power plants; (iv) fluctuations in natural gas and electricity prices and the ability to successfully manage such price fluctuations, (v) the risks associated with marketing and selling power from power plants in the newly competitive energy market, and (vi) the other risks identified in PG&E Corporation's reports filed with the Securities and Exchange Commission.