SAN FRANCISCO - PG&E Corporation (NYSE: PCG) and Pacific Gas and Electric Company today filed objections to the California Public Utilities Commission's (CPUC) disclosure statement with the U.S. Bankruptcy Court.

After reviewing the CPUC's alternative plan, PG&E continues to believe its plan of reorganization is the only feasible solution that restores the company to investment grade credit levels and gets the State of California out of the power buying business.

As it promised to the Bankruptcy Court, PG&E will not raise objections that the CPUC's alternative plan is unconfirmable during this phase of the case and will reserve those objections for the confirmation hearing. However, PG&E believes the CPUC's disclosure statement, as currently drafted, omits critical facts and may be misleading. As a result, the disclosure statement needs to be amended to include additional information in several areas, including:

• That the CPUC is maintaining sovereign immunity and the Bankruptcy Court might not have the authority to require the Commission to implement its plan or to enforce the commitments made by the Commission in its plan. The CPUC cannot continue to claim sovereign immunity when it is submitting an alternative plan. The CPUC's disclosure statement needs to reveal explicitly the risk that the CPUC may decide not to implement its plan or take actions inconsistent with the plan, and that as long as it asserts sovereign immunity there would be a dispute over whether the Bankruptcy Court could force the Commission to comply with the plan.

• That the CPUC may take the position that it is not bound by the plan it filed and may change its plan at any time. The CPUC has previously taken the position that it is not bound by its decisions, and therefore may take the position that its plan is not binding on future Commissions and may be amended, altered or rescinded at any time. However, before the Bankruptcy Court, the CPUC said that it is legally authorized to submit and be bound by its plan. This assertion appears to be inconsistent with California law as interpreted by the CPUC, which says the CPUC may not bind itself or future Commissions on matters within its regulatory jurisdiction, and in fact may, at any time, rescind, alter or amend any order or decision it previously has made.

• That there are two pending proceedings that could force the CPUC to change or possibly withdraw its alternative plan. The CPUC is currently involved in proceedings that may require that its plan be modified, altered or rescinded, and require that the CPUC hold public hearings and issue further decisions before it may proceed with or be bound by its plan. The proceedings, which relate to the CPUC's authority to propose and implement its alternative plan of reorganization, include a lawsuit by the Foundation for Taxpayer and Consumer Rights in the California Supreme Court and a CPUC Bankruptcy Investigation, which the Commission has initiated itself.

• That the CPUC's plan does not require the utility to be an investment grade company. The CPUC's alternative plan states the requirement that the utility's investment grade credit rating be restored can be waived at any time. Receiving an investment grade credit rating is an essential requirement in PG&E's plan of reorganization, which may not be waived. Without an investment grade credit rating, the likelihood of success for the CPUC's plan is highly uncertain, which would likely force the State of California to remain in the power buying business for several more years.

• That the CPUC's alternative plan requires preemption of existing state law in order to confiscate assets and cash, which belong to PG&E. The CPUC has not disclosed that it needs to preempt state law to confiscate the utility's return on investment and other assets, such as the Filed Rate Doctrine claim and other claims. The CPUC's alternative plan would require the Bankruptcy Court to preempt the Commission's own decisions, state law and the California Constitution to expropriate the $1.6 billion Pacific Gas and Electric Company would earn as a return on the investment it makes to build and maintain the transmission and distribution infrastructure to serve customers, as well as other assets of the utility.

• The CPUC needs to detail the approvals necessary to implement its plan. The CPUC fails to identify the numerous regulatory approvals required for implementing its alternative plan, the anticipated time frame associated with the approvals and whether the CPUC is reserving the right to deny the approvals that it would need to provide.

In the filing, PG&E also noted the CPUC's plan contains provisions that are materially different from those presented in the CPUC's Term Sheet, which raise fundamental legal issues concerning the confirmability of the CPUC's alternative plan. In particular, the CPUC's plan attempts to close the cash shortfall in its Term Sheet by requiring the utility to take on $3.8 billion of new debt, selling $1.75 billion in new common stock and obtaining from lenders a new $1.9 billion secured credit facility to fund working capital and other collateral obligations. Each of these new sources of revenue improperly burdens the utility and the rights of thousands of PG&E Corporation shareholders and investors.