Company Pursues Global Restructuring Plan

BETHESDA, Md. – PG&E National Energy Group today announced that the company is in default under its corporate revolving credit arrangement for failure to repay $431 million due today. The company is in active negotiations with key lenders and bondholders regarding a global restructuring of the company’s debts. PG&E National Energy Group is a wholly owned subsidiary of PG&E Corporation (NYSE: PCG).

The company’s failure to repay the $431 million tranche of the corporate revolving credit facility causes a cross-default under five other major credit facilities and equity funding obligations. These include:

• Default under the two-year tranche of the corporate revolving credit facility - $273 million outstanding, primarily consisting of letters of credit;
• Cross-default under PG&E National Energy Group’s senior unsecured notes due in 2011 - $1 billion outstanding;
• Guarantee of the turbine revolver - $205 million outstanding;
• Equity commitment guarantee to GenHoldings credit facility - $355 million outstanding;
• Equity commitment guarantee to La Paloma credit facility - $375 million outstanding; and
• Equity commitment guarantee to Lake Road credit facility - $230 million.

In addition, the company will not be making a $52 million interest payment due Friday, Nov. 15, 2002, on the senior unsecured notes due in 2011.

Notwithstanding the defaults, PG&E National Energy Group believes that the lenders will continue negotiations to restructure the company’s obligations.

“While the challenges are complicated and multifaceted, we are confident that there is a path of resolution that can work for all parties involved,” said Thomas B. King, president, PG&E National Energy Group. “However, working through and resolving the various issues is going to require substantial time.”

As reported in a Nov. 13, 2002, form 10-Q filing with the U.S. Securities and Exchange Commission, if the restructuring cannot be achieved by agreement with PG&E National Energy Group’s creditors, the company and certain of its subsidiaries may be compelled to seek protection under or be forced into Chapter 11 of the Bankruptcy Code. The recent form 10-Q filing also outlines the financing facilities in greater detail.

Like much of the wholesale energy sector, PG&E National Energy Group has faced a challenging environment and difficult market conditions. During 2001 and 2002, new supply additions begun during the high-price period combined with a softening economy and reduced load growth resulted in excess energy supply in many regions. The excess supply conditions have put downward pressure on the prices of most regional wholesale energy markets. Prior to the decline of the energy markets, the company initiated substantial growth plans. Obligations undertaken to support these growth plans are now beginning to mature.

In recent days, PG&E National Energy Group:

• Signed an agreement to sell one-half of its 50 percent interest in the Hermiston Generating plant to Sumitomo Corporation and Sumitomo Corporation of America. The plant, located in Hermiston, Ore., will continue to be operated and managed by a subsidiary of PG&E National Energy Group.
• Announced that it plans to shut down its Spencer Station Generating facility in Denton, Texas.

Headquartered in Bethesda, Md., PG&E National Energy Group develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services.

This news release discusses certain matters that may be considered “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, including statements regarding the intent, belief or current expectations of PG&E National Energy Group and its management. Actual future results could differ materially from those expressed or implied in any forward-looking statements. PG&E National Energy Group describes in its filings with the U.S. Securities and Exchange Commission some of the key factors that could cause actual results to differ materially.