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.

PACIFIC GAS AND ELECTRIC COMPANY AND PG&E CORPORATION FILE PLAN OF REORGANIZATION

Plan Pays Claims in Full, Does Not Call for Retail Rate Increases or State Bailout

(San Francisco, CA)- PG&E Corporation (NYSE: PCG) and its utility unit Pacific Gas and Electric Company jointly filed a Plan of Reorganization in U.S. Bankruptcy Court today that enables Pacific Gas and Electric Company to pay all valid creditor claims in full and emerge from Chapter 11 bankruptcy proceedings. The official creditors' committee supports the plan.

"This plan is an achievable solution that will enable Pacific Gas and Electric Company to move out of Chapter 11 as a financially strong business positioned to continue safe, reliable and responsive delivery of gas and electricity to its customers, pay all valid creditor claims in full, and do so without asking for a rate increase or a state bailout," said Robert D. Glynn, Jr., Chairman of Pacific Gas and Electric Company and Chairman, CEO and President of PG&E Corporation. "And, the plan will enable us to provide long-term growth prospects to shareholders."

The plan reorganizes Pacific Gas and Electric Company and PG&E Corporation into two separate, stand-alone companies no longer affiliated with one another. The reorganized Pacific Gas and Electric Company will continue to own and operate the existing retail electric and natural gas distribution system. The electric generation, electric transmission, and natural gas transmission operations currently under Pacific Gas and Electric Company will be part of PG&E Corporation. The common shares of the reorganized Pacific Gas and Electric will be distributed to PG&E Corporation shareholders.

The electric generation, electric transmission and gas transmission operations, when reorganized as new businesses under PG&E Corporation, will have the ability to issue debt that will be combined with new financing at Pacific Gas and Electric and used to help pay creditors' claims. The plan also restructures certain existing debt and uses $3.3 billion in cash on hand to satisfy creditor claims.

Under the plan, all valid creditor claims will be paid in full, using a combination of cash and long-term notes. In total, the plan will provide creditors with about $9.1 billion in cash and $4.1 billion in notes. The vast majority of creditors-those with allowed claims of $100,000 or less-will receive cash payments for the full amount of their allowed claims on the effective date of the plan. Most secured creditors will also receive 100 percent of their allowed claims in cash. Finally, unsecured creditors with allowed claims in excess of the $100,000 threshold will be paid 60 percent in cash and 40 percent in notes.

Following the restructuring, Pacific Gas and Electric Company and PG&E Corporation will be organized as follows:

• Pacific Gas and Electric Company will be a separate California corporation focused on providing electric and natural gas distribution service to its customers in Northern and Central California. It will hold 70 percent of the current utility assets (in terms of book value) and will employ 16,000 people. Pacific Gas and Electric Company will continue to provide the full range of utility services to one out of every 20 Americans.

• PG&E Corporation, in addition to its existing National Energy Group business, will have three new businesses that will own and operate the electric generation, electric transmission and gas transmission operations formerly under Pacific Gas and Electric Company.

The new electric generation business will be a California company established to own and operate the hydroelectric and nuclear generation assets and associated lands, and to assume the power contracts with irrigation districts, now held by the utility. In total, the unit will have approximately 7,100 megawatts of generation. The facilities will be operated in accordance with all current FERC and Nuclear Regulatory Commission licenses, and in keeping with sound environmental stewardship policies. The generating business will sell its power back to the reorganized Pacific Gas and Electric Company under a 12-year contract at a stable, market-based rate.

The new electric transmission business will be a California company established to own and operate the transmission system currently operated by the utility. The system comprises 18,500 circuit miles of electric transmission lines and cables.

The new gas transmission business will be a California company established to own and operate the natural gas transmission assets currently operated by the utility, including 6,300 miles of transmission pipelines and three gas storage facilities.

Following the reorganization, the California Public Utilities Commission will continue to regulate the reorganized Pacific Gas and Electric Company, including retail electric and natural gas rates. The Federal Energy Regulatory Commission (FERC) will continue to have jurisdiction over the licenses for the hydroelectric assets, and the rates, terms and conditions of service provided by the electric transmission business. FERC will also assume jurisdiction over rates for the power generated by the Diablo Canyon Nuclear Power Plant, and over the rates, terms and conditions of service for the gas transmission system, which will become an interstate pipeline.

Glynn said, "This plan, without raising retail rates, provides a safe, reliable and long-term electric supply to California customers. It enables our company to maintain a qualified workforce. And it enables us to keep our generating assets intact and integrated, rather than selling them piecemeal to pay creditors."

The company expects that roles and responsibilities for the vast majority of its workforce will be unaffected by the plan. The reorganized Pacific Gas and Electric Company and the newly established entities will employ essentially the same people who operate the various assets under the current organization.

"We envision essentially the same experienced, dedicated team continuing to do their jobs with a comparable level of pay and benefits programs," said Glynn. "We believe these businesses should be operated and maintained by the people who know how to run them best."

In addition to resolving creditors' claims and maintaining stability for customers and employees, the plan also provides long-term benefits to the state. It provides the state with a path to exit the business of buying power for customers, by identifying conditions under which Pacific Gas and Electric Company would be financially able to re-assume the procurement responsibility that is currently being fulfilled by the state Department of Water Resources.

The Chapter 11 process requires that the plan of reorganization ultimately be confirmed by the Bankruptcy Court before it can be implemented.

Paul Aronzon, legal counsel for the Official Committee of Unsecured Creditors, said "This plan provides a comprehensive and responsible framework to resolve creditors' claims and restore PG&E's creditworthiness. It has our full support, and we look forward to an expeditious resolution of the Chapter 11 process."

"With this plan filed," said Glynn, "we are now focused on bringing the Chapter 11 process to completion, reaffirming the financial health and creditworthiness of our operations through this reorganization, restoring customers' confidence, and rebuilding value for our shareholders."

At 10:00 AM Pacific Time today, PG&E Corporation and Pacific Gas and Electric Company will discuss the plan of reorganization on a conference call for members of the media. The dial-in numbers for the call are 877-691-0877 OR 800-521-5461, pass code 7234. For New York or International callers, the dial-in numbers are 973-321-1020 OR 303-267-1007, pass code 7234. A replay of the call will be available through September 27 at 877-690-2096 for domestic callers and 402-220-0652 for New York and International callers, no pass code is needed.

At 11:30 AM Pacific Time today, PG&E Corporation and Pacific Gas and Electric Company will discuss the plan on a conference call for members of the financial community. The call will be webcast. To access the webcast, go to www.pgecorp.com.

On Monday, September 24, at 5:00 AM Pacific Time, PG&E Corporation and Pacific Gas and Electric Company will make a presentation to financial analysts on the plan. The presentation will be webcast. To access the webcast, go to www.pgecorp.com.

Please visit our websites: www.pgecorp.com and www.pge.com