December 18, 2003
ISSUED BY:   PG&E Corporation

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.


Customers Will See Significant Rate Reductions Effective Next Month

SAN FRANCISCO - The California Public Utilities Commission (CPUC) today approved a settlement agreement between Pacific Gas and Electric Company, its parent PG&E Corporation, and the CPUC, which paves the way for the utility to emerge from Chapter 11 as an investment grade company and provides significant rate reductions to its customers.

"The approval of the settlement agreement helps resolve much of the uncertainty that our customers, company and investors have faced, and which has gripped the state's energy industry for the past three years," said Robert D. Glynn, Jr., Chairman, CEO and President of PG&E Corporation. "After Pacific Gas and Electric Company emerges from Chapter 11, it can return to the traditional roles it has played in California's economy; roles that have been interrupted by the challenges of the energy crisis."

Glynn highlighted some of the important benefits of the settlement agreement, including:

  • A significant rate decrease for customers: Customers will have their electricity rates reduced by approximately $670 million in 2004, with the opportunity for additional rate reductions in the future.
  • An opportunity for an additional $1 billion savings for customers: Through an agreement with The Utility Reform Network (TURN), the utility would expeditiously seek to refinance a portion of its costs after emerging from Chapter 11 under the settlement plan, if specific conditions are met. The refinancing could potentially save customers approximately $1 billion in lower interest rates and tax savings over the term of the agreement.
  • Environmental benefits, including the protection of the 140,000 acres of sensitive watershed lands surrounding the company's hydroelectric facilities.
  • Restoration of the utility's financial health and investment grade credit rating to allow the company to access the capital markets in order to finance, at historically low interest rates, the infrastructure improvements and long-term procurement of natural gas and electricity needed to support California's economy.
  • Paying in full, or otherwise fully satisfying all valid creditors claims.

"We are firmly committed to working with the Commission to strengthen the traditional regulatory relationship between the utility and the CPUC," said Gordon R. Smith, Pacific Gas and Electric Company's President and CEO. "With the world watching today, the Commission demonstrated the leadership required to help reassure the financial community that California is back on track, and to provide for a substantial reduction in customer rates."

PG&E's customers should recognize the efforts of TURN for forging an agreement that could potentially save approximately $1 billion in financing costs, and results in lower rates. The utility will work diligently with TURN to achieve these additional customer savings.

Last week, the U.S. Bankruptcy Court issued a decision approving PG&E's plan of reorganization and finding that the settlement agreement is confirmable. The Court has scheduled a hearing on December 22 to discuss the confirmation order. If the final approvals are met, the utility has targeted the end of the first quarter of 2004 for its exit from Chapter 11.

The statements in this release regarding management's beliefs and expectations with respect to Pacific Gas and Electric Company's future financial health and exit from Chapter 11 are forward-looking statements that are subject to a number of risks and assumptions. Actual results could differ materially depending on many factors, including whether the plan of reorganization embodying the terms of the proposed settlement agreement is confirmed by the Bankruptcy Court and timely implemented, the timing and the outcome of various regulatory proceedings, including the utility's 2003 General Rate Case, and other factors discussed in PG&E Corporation's and Pacific Gas and Electric Company's reports provided to the Securities and Exchange Commission.