(San Francisco, CA) - PG&E Corporation (NYSE: PCG) today reported that the Corporation and its utility subsidiary, Pacific Gas and Electric Company, will not make payments of commercial paper obligations due this week nor will upcoming scheduled payments be made to power generators in excess of the revenues received from customers. These circumstances were precipitated by the downgrade of both entities' credit ratings by Standard & Poor's and Moody's and the resulting defaults that the downgrades caused under the entities' financing arrangements.

PG&E stated that it is focused on conserving the nearly depleted cash reserves at both the holding company and the utility in an effort to continue meeting critical operational expenses, including employee payroll, payments to trade vendors, and normal payments to natural gas suppliers.

Standard & Poor's provided the following reasons, among others, for its downgrade:

• "Some of the Pacific Gas and Electric's principal trade creditors are demanding that sizeable cash payments be made as a precondition to the purchase of commodities necessary for ongoing business operations;

• "Neither legislative nor negotiated solutions to the state's utilities' financial meltdown appear to be forthcoming in a timely manner, which continues to impede access to financial markets for the working capital needed to avoided insolvency; and

• "Southern California Edison Co.'s decision to default on its obligation to pay principal and interest due on January 16, 2001 diminishes the prospects for the Pacific Gas and Electric's access to capital markets."

Among other things, the downgrades constitute a default under the utility's $850 million revolving credit facility and entitle the banks to refuse a loan request under this facility. The default also precludes PG&E Corporation from making further draws under its facilities, including further draws to repay maturing commercial paper. PG&E Corporation has $501 million of commercial paper outstanding, of which $263 million will mature by January 31, 2001.

"We are taking these steps reluctantly," said PG&E Corporation Chairman, CEO and President Robert D. Glynn, Jr. "But it is critical that we extend our existing cash reserves in order to meet the basic expenses that are essential to providing safe and reliable services to customers."

Upcoming payments to power generators include $583 million due to the California Independent System Operator on February 1 for real-time energy purchases, and an estimated payment of more than $100 million to the California Power Exchange due February 15. Another payment to the ISO, of approximately $1.2 billion, will come due on March 2. The utility also has payments of $420 million due to qualifying generators (QF's) in early February 2001 and estimated payments of $410 million due to these QF's in early March 2001. These amounts far exceed the utility's current cash reserves of $700 million. PG&E Corporation currently has cash reserves of approximately $347 million.