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PG&E Corporation Second Quarter Financials To Include Significant Non-Operating Items

07/30/2001

(San Francisco, CA) – PG&E Corporation (NYSE: PCG) announced today that two non-operating items in the second quarter will offset a small portion of the substantial prior charges recorded for unrecovered wholesale power and transition costs at its Pacific Gas and Electric Company unit, which stood at about $5.2 billion after tax as of March 31, 2001. The items are estimated to total between $500 million to $600 million and will be reflected in the Corporation’s quarterly earnings report on August 1, 2001.

The company’s second quarter financial results will include the impact of (1) the actual charges from the California Independent System Operator (ISO) for power the ISO purchased in March 2001, which were lower than previous projections, and (2) estimated income associated with the termination of bilateral power sales contracts with Pacific Gas and Electric Company. Due to the earlier write-off of the company's regulatory balancing accounts related to unrecovered wholesale power and transition costs, the total amount of these items will flow through to its income statement as non-operating income.

In the second quarter, the company will account for the difference between actual ISO charges for March power purchases and the estimated ISO charges that the company recorded in the first quarter, which were based on the information then available from the ISO. The difference between the estimated charges and the actual charges will be reflected as a non-operating item for the second quarter. The company continues to assert that it is not responsible for ISO purchases made during the first quarter. However, it was required under applicable accounting rules to record those charges in its first quarter results, pending resolution of the issue.

Second quarter results will also account for the termination of certain bilateral power purchase contracts by the counterparties, who were entitled to do so in the event of a decline in the utility's credit quality. The contracts require that the market value of the contracts be settled upon termination. The estimated value of the contracts will be reflected as a non-operating item.

The company said the reconciliation of the actual and estimated ISO charges, and the estimated value of the terminated bilateral contracts will offset a small portion of the massive charges it recorded for uncollected wholesale power and transition costs in the fourth quarter of 2000 and the first quarter of 2001. Notwithstanding the offset, the company estimates that its net undercollection remains at approximately $4.6 billion to $4.7 billion after tax.

The company also noted that actual results for the second quarter may be affected by many factors, including the extent to which more information is revealed about the recently released California Department of Water Resources revenue requirements and the impact such revenue requirements may have on the utility’s financial condition and results of operations.

As previously announced, the company will report its financial results for the second quarter on August 1, 2001, before the market opens. A conference call with the financial community will be held to discuss the results that morning at 9:00 AM Pacific time. The call will be open to the public on a listen-only basis via webcast. Please visit our website at www.pgecorp.com for more information and instructions for accessing the webcast. A replay of the webcast will also be available on the company's website following the call.

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