• PG&E Corporation reported total net income of $1.71 per share for the first quarter of 2002, compared with a loss of $2.62 per share for the first quarter of 2001. (All “per share” amounts in this release are presented on a diluted basis.)

• Earnings from operations for PG&E Corporation in the quarter were $0.60 per share, compared with $0.70 per share for the first quarter of 2001.

• Pacific Gas and Electric Company’s earnings from operations were $0.44 per share, compared with $0.56 per share for the first quarter of 2001.

• PG&E National Energy Group’s earnings from operations were $0.10 per share, compared with $0.15 per share for the first quarter of 2001.

(San Francisco) -- PG&E Corporation (NYSE: PCG) earned $631 million, or $1.71 per share, in the first quarter of 2002, compared with a loss of $951 million, or $2.62 per share, for the same quarter last year, which included energy crisis-related write-offs and other charges of $1.2 billion, or $3.32 per share, at Pacific Gas and Electric Company.

Earnings from operations for the first quarter were $220 million, or $0.60 per share, compared with $255 million, or $0.70 per share, in the first quarter of 2001.

“Our businesses continue to perform well in 2002,” said Robert D. Glynn, Jr., Chairman, CEO and President of PG&E Corporation. “Financial and operational results for the first quarter are in keeping with our outlook for 2002 as a transition year with regard to resolving the utility’s Chapter 11 case, and managing the challenging market conditions for our national business. We continue to make progress on both fronts.”

Earnings from operations for the quarter consisted of $0.44 per share from Pacific Gas and Electric Company, $0.10 per share from the PG&E National Energy Group (PG&E NEG), and $0.06 per share at the Corporation.

The Corporation also reported income of $176 million, or $0.48 per share, from “headroom” at Pacific Gas and Electric Company for the first quarter of 2002. Headroom is income which reflects the recovery of prior uncollected costs previously written off for GAAP accounting purposes, but which is now being recovered in existing electric rates. Prior to the energy crisis, and in accordance with California Public Utilities Commission requirements, any such headroom was used to amortize utility costs associated with electric restructuring. However, for much of 2000 and part of 2001, no such revenues were available as wholesale power prices far exceeded retail rates, and the unrecovered balance of these costs was written off. Subsequently, increases in the utility’s retail rates resulted in headroom once again being available for cost recovery.

Beginning with the first quarter of 2002, in order to provide for greater clarity, the Corporation’s income statement shows earnings from operations both including and excluding headroom. Including headroom, earnings from operations for the first quarter were $396 million, or $1.08 per share. There was no headroom in the first quarter of 2001

The results for the first quarter also included several items impacting comparability with the prior year’s results. These items are not included in earnings from operations. The company reversed some prior charges previously recorded to cover wholesale energy purchases made last year by the California Independent System Operator (ISO). In March 2002, federal regulators reaffirmed a prior decision barring the ISO from billing non-creditworthy entities for power purchases. The resulting net gain was $352 million, or $0.95 per share. Other items impacting comparability included energy crisis-related and bankruptcy-related costs that, in aggregate, were $117 million, or $0.32 per share.

Earnings from operations at Pacific Gas and Electric Company were $160 million, or $0.44 per share, compared with $203 million, or $0.56 per share, for the same quarter last year. The quarter-over-quarter change reflects comparatively higher operational expenses this year, due primarily to the fact that in the first quarter of 2001 expenditures were curtailed substantially through cash conservation measures at the height of the energy crisis. As expected, the 2002 results also reflect a reduction in contributions from the utility’s California gas transmission operations.

Pacific Gas and Electric Company continued solid operational performance in the first quarter, consistently delivering safe, reliable and responsive service to its 13 million customers in Northern and Central California. Specific accomplishments included completing contracts to connect 3,100 megawatts of new electric generation to the grid; completing two major transmission line upgrades to improve service and reliability to San Francisco residents; and initiating nine economic development projects designed to foster business growth in the state. The utility also continued its successful energy efficiency programs during the first quarter. In addition to educating consumers through its toll-free Smarter Energy Line, the utility participated in 62 events and presentations to promote energy efficiency strategies and solutions; helped install energy efficient traffic signals in 117 cities; and completed an $850,000 grant to 13 food banks in its service area for the purchase of energy efficient refrigerators.

At the PG&E National Energy Group, earnings from operations were $37 million, or $0.10 per share, for the quarter, compared with $54 million, or $0.15 per share, in 2001. The results included $0.07 per share from the PG&E NEG’s Integrated Energy and Marketing segment, compared with $0.10 per share in 2001, and $0.05 per share from its Interstate Pipeline Operations, compared with $0.05 per share in 2001. First quarter 2002 results also included $0.02 per share in eliminations and other costs.

The results from the PG&E NEG’s Integrated Energy and Marketing segment primarily reflected the continuing low wholesale power prices and the mild winter weather in the Northeast.

PG&E NEG accomplishments for the first quarter included beginning commercial operations at two of the three generating units at the Lake Road Generating Plant in Connecticut; launching construction on the North Baja natural gas pipeline project in Arizona and Southern California; continuing construction on the Gas Transmission Northwest pipeline expansion project, which is scheduled to be complete later this year; and positioning the Plains End power plant in Colorado to begin commercial operation in May. The PG&E NEG also worked intensively during the quarter to expand its construction financing facility, closing the arrangement on April 5 with 17 banks participating for $1.5 billion.

2002 Guidance and Conclusion

The Corporation previously provided 2002 earnings guidance in the range of $3.00 per share for earnings from operations including income from headroom. Today the Corporation provided a separate estimate for earnings from operations without headroom income. Specifically, earnings from operations excluding income from headroom are expected to be in the range of $2.50 to $2.55 per share for 2002.

On a quarterly basis, the amount of income from headroom is expected to fluctuate materially due to many factors, including the outcome of regulatory proceedings and other regulatory actions, changes in estimates of previously incurred energy procurement costs, sales volatility, the level of direct access sales, and the impact of the end of the rate freeze period. The Corporation emphasized that headroom represents cash earnings and has a positive impact on the company’s balance sheet.

“Thanks to the focus and commitment of our team throughout the company,” said Glynn, “our first quarter performance continues to provide a strong platform on which we are moving ahead with Pacific Gas and Electric Company’s plan of reorganization in the bankruptcy court, and on which we can continue strengthening our PG&E National Energy Group business.”

A conference call with the financial community will be held today at 11:30 AM Pacific time to discuss the Corporation’s results for the year. The call will be open to the public on a listen-only basis via webcast. Please visit our website www.pgecorp.com for more information and instructions for accessing the webcast. A replay of the conference call will be available toll-free by calling 877-690-2090, and also will be available on our website. International callers will be able to access the replay by dialing 402-220-0699.

* Terms Used in This Release

Headroom – Headroom is income which reflects the recovery of prior uncollected costs previously written off for GAAP accounting purposes, but which is now being recovered in existing electric rates at Pacific Gas and Electric Company.

This press release includes forward-looking statements including statements regarding management's guidance regarding 2002 earnings per share, that are necessarily subject to various risks and uncertainties. These statements are based on current expectations and assumptions which management believes are reasonable and on information currently available to management. Actual results could differ materially from those contemplated by the forward-looking statements.

Although PG&E Corporation and the Utility are not able to predict all of the factors that may affect future results, some of the factors that could cause future results to differ materially from historical results or those expressed or implied by the forward-looking statements include:

• the pace and outcome of the Utility’s bankruptcy case;
• the effect of the Utility's bankruptcy proceedings on PG&E Corporation and PG&E NEG, and in particular, the impact a protracted delay in the Utility's bankruptcy proceedings could have on PG&E Corporation's liquidity and access to capital markets;
• the outcome of the CPUC's pending investigation into whether the California investor owned utilities, including the Utility, have complied with past CPUC decisions, rules, or orders authorizing their holding company formations, the outcomes of the lawsuits brought by the California Attorney General, the City and County of San Francisco, and the People of the State of California, against PG&E Corporation alleging unfair or fraudulent business acts or practices based on alleged violations of conditions established in the CPUC's holding company decisions, and the outcome of the California Attorney General's petition requesting revocation of PG&E Corporation's exemption from the Public Utility Holding Company Act of 1935, and the effect of such outcomes, if any, on PG&E Corporation, the Utility, and PG&E NEG;
• the extent to which the ability of PG&E Corporation to obtain financing or capital on reasonable terms is affected by conditions in the general economy, the energy or capital markets, by restrictions imposed on PG&E Corporation under its credit agreement, and by the interpretation of the CPUC’s holding company conditions;
• the outcome of the Utility's various regulatory proceedings pending at the CPUC, including the 2002 attrition rate adjustment application, the 2003 General Rate Case (GRC), and any future retail rate changes that may be implemented by the CPUC to reflect the adopted revenue requirements for the Utility’s retained generation and DWR purchases made on behalf of the Utility’s retail customers;
• whether the CPUC's March 27, 2001, accounting decision regarding the Utility's under collected wholesale power purchase costs is upheld and whether the Utility's lawsuit against the CPUC for recovery of those costs is successful;
• the CPUC’s determination of the end of the rate freeze and the amount of transition costs the Utility is allowed to collect from its customers;
• whether the Utility’s hydroelectric and non-nuclear generating assets are valued for regulatory and ratemaking purposes and if so, the amount and timing of such regulatory valuation;
• legislative or regulatory changes affecting the electric and natural gas industries in the United States, including the pace and extent of efforts to restructure the electric and natural gas industries;
• the volatility of commodity fuel and electricity prices (which may result from a variety of factors, including: weather; the supply and demand for energy commodities; the availability of competitively priced alternative energy sources; the level of production and availability of natural gas, crude oil, and coal; transmission or transportation constraints; federal and state energy and environmental regulation and legislation; the degree of market liquidity; and natural disasters, wars, embargoes, and other catastrophic events); any resulting increases in the cost of producing power and decreases in prices of power sold; and whether the Utility's and PG&E NEG's strategies to manage and respond to such volatility are successful;
• PG&E NEG's ability to obtain financing from third parties, or from PG&E Corporation for PG&E NEG’s planned development projects and related equipment purchases and to refinance PG&E NEG's and its subsidiaries' existing indebtedness as it matures, in each case, on reasonable terms, while preserving PG&E NEG's credit quality, which could be negatively affected by conditions in the general economy, the energy markets, or the capital markets; and the extent to which the CPUC's holding company conditions may be interpreted to restrict PG&E Corporation's ability to provide financial support to PG&E NEG;
• the extent to which the CPUC’s holding company conditions may be interpreted to restrict PG&E Corporation’s ability to provide financial support to PG&E NEG;
• the extent to which PG&E NEG's current or planned development of generation, pipeline, and storage facilities are completed and the pace and cost of that completion, including the extent to which commercial operations of these development projects are delayed or prevented because of various development and construction risks such as PG&E NEG's failure to obtain necessary permits or equipment, the failure of third party contractors to perform their contractual obligations, or the failure of necessary equipment to perform as anticipated;
• the extent and timing of generating, pipeline, and storage capacity expansion and retirements by others;
• the performance of PG&E NEG's projects and the success of PG&E NEG's efforts to invest in and develop new opportunities;
• restrictions imposed upon PG&E Corporation and PG&E NEG under certain term loans of PG&E Corporation, including maintenance of minimum segregated cash balances by PG&E Corporation and prohibitions on payment of dividends by both PG&E Corporation and PG&E NEG, and the extent to which the debt covenants can be maintained;
• future sales levels, which, in the case of the Utility, will be affected by the level of exit fees that may be imposed on direct access customers; general economic and financial market conditions; and changes in interest rates;
• volatility resulting from mark-to-market accounting and the extent to which the assumptions underlying PG&E NEG's and the Utility's mark-to-market accounting and risk management programs are not realized;
• the effect of compliance with existing and future environmental laws, regulations, and policies, the cost of which could be significant;
• heightened rating agency criteria and the impact of changes in credit ratings on PG&E NEG's future financial condition, particularly a downgrade to below investment grade which would impair PG&E NEG's ability to meet liquidity calls in connection with its trading activities and obtain financing for its planned development projects;
• the effect of new accounting pronouncements; and
• the outcome of pending litigation and environmental matters.