• PG&E Corporation's consolidated net income for the third quarter of 2003 was $1.24 per share, compared with $1.19 per share for the same quarter last year. (All “per share” amounts in this release are presented on a diluted basis.)
  
  
• Consolidated earnings from operations for PG&E Corporation and Pacific Gas and Electric Company were $0.42 per share, compared with $0.61 per share for the same quarter last year.
  
  
• Pacific Gas and Electric Company's earnings from operations, without headroom, were $0.42 per share, compared with $0.59 per share for the same quarter last year.

(San Francisco) -- PG&E Corporation (NYSE: PCG) earned $510 million, or $1.24 per share, in consolidated net income for the third quarter of 2003, compared with $466 million, or $1.19 per share, for the third quarter of 2002.

Third-quarter 2003 consolidated earnings from operations for PG&E Corporation and its California utility business, Pacific Gas and Electric Company, were $174 million, or $0.42 per share, compared with $241 million, or $0.61 per share for the third quarter last year.

“PG&E Corporation delivered earnings from operations on target for the quarter,” said Robert D. Glynn, Jr., PG&E Corporation Chairman of the Board, CEO and President. “We continue to see a clear path to stability and increasing financial performance through approval and implementation of the proposed settlement agreement to allow Pacific Gas and Electric Company to exit Chapter 11 by the end of the first quarter of 2004. We believe the company is on track and on schedule to achieve that objective.”

PG&E Corporation's consolidated earnings from operations do not include results from National Energy & Gas Transmission, Inc. (NEGT, previously PG&E National Energy Group, Inc.). Also excluded from earnings from operations are headroom at Pacific Gas and Electric Company, as well as certain non-operating income and expenses that are listed as “Items Impacting Comparability” on the attached supplemental financial table, which reconciles earnings from operations with reported earnings under GAAP.

Income from headroom (the difference between Pacific Gas and Electric Company's generation-related costs and generation-related revenues) was $495 million, or $1.19 per share, for the quarter compared with $376 million, or $0.95 per share, in the third quarter of 2002. Total headroom through the third quarter of 2003 was a positive $635 million, or $1.55 per share.

Items impacting comparability at the Corporation and Pacific Gas and Electric Company included incremental interest costs of $130 million, or $0.30 per share, as well as Chapter 11 costs and costs related to the California energy crisis of $24 million, or $0.06 per share, generally consisting of external legal fees, financial advisory fees and other related costs.

The Corporation's quarterly report on Form 10-Q will disclose the earnings impact of accounting for stock options if the company were to record them as an expense. For the third quarter of 2003, accounting for stock options as an expense would have reduced earnings by $0.02 per share.

PACIFIC GAS AND ELECTRIC COMPANY

Pacific Gas and Electric Company contributed $174 million, or $0.42 per share, to earnings from operations for the quarter, compared with $232 million, or $0.59 per share, for the same quarter last year.

As expected, the difference between Pacific Gas and Electric Company's third quarter 2003 and third quarter 2002 operating earnings per share largely reflected the continued absence of a revenue increase through the 2003 General Rate Case (GRC) pending at the California Public Utilities Commission (CPUC). The additional revenues are necessary to offset additional expenses for rate base growth, inflation, benefits and other costs. Other items accounting for the quarter-over-quarter difference were lower gas transmission revenues in 2003, as increased hydroelectric production reduced the demand for some gas-fired generation, and an increase in 2003 in the average number of common shares outstanding.

PROPROSED 2003 GRC SETTLEMENT AGREEMENT

In September, the utility, together with the CPUC's Office of Ratepayer Advocates and various consumer groups, reached a proposed settlement agreement to resolve the 2003 GRC. Under the settlement, the utility would receive an increase in revenues of $236 million for electric distribution, $52 million for gas distribution, and $38 million for electric generation. The revenue increases will be effective for the full year 2003. The agreement would also provide for timely and predictable revenue increases in 2004, 2005 and 2006, to cover higher expenses for rate base growth and inflation. A final 2003 GRC decision is expected early next year, and if received in time, will be booked fully in the utility's fourth quarter 2003 results.

PROPOSED CHAPTER 11 SETTLEMENT AGREEMENT

During the third quarter, the proposed settlement agreement to resolve Pacific Gas and Electric Company's Chapter 11 case continued through the approval processes in the federal bankruptcy court and at the CPUC.

A new plan of reorganization based on the terms of the proposed settlement agreement received nearly unanimous support in a vote by creditors, with 97 percent of voting creditors and all voting creditor classes electing to approve the plan. Confirmation hearings on the plan began this week in the bankruptcy court and are scheduled to conclude within several weeks.

The CPUC's public hearings on the proposed settlement agreement were concluded on schedule in late September. A proposed decision from the administrative law judge is expected in November, and a final decision by the CPUC is expected in December.

NATIONAL ENERGY & GAS TRANSMISSION

On July 8, 2003, National Energy & Gas Transmission (NEGT), then named PG&E National Energy Group, Inc., and certain of its subsidiaries filed for Chapter 11. PG&E Corporation no longer has representatives on NEGT's Board of Directors and no longer retains significant influence over the ongoing operations of NEGT. PG&E Corporation's equity interest in NEGT is expected to be eliminated when the bankruptcy court approves a plan of reorganization for NEGT.

As appropriate under accounting rules, as of July 8, 2003, PG&E Corporation is no longer including NEGT in the Corporation's consolidated results and has begun using the cost method of accounting to reflect its ownership interest in NEGT.

PG&E Corporation's consolidated net income for the third quarter includes financial results for NEGT only for the period July 1 through July 7, 2003.

GUIDANCE FOR 2003 AND 2004 EARNINGS FROM OPERATIONS

Reaffirming its previously issued earnings guidance, the Corporation expects 2003 earnings from operations for PG&E Corporation and Pacific Gas and Electric Company to be in the range of $1.90-$2.00 per share, not including headroom. For 2004, earnings from operations are expected to be in the range of $2.00-$2.10 per share.

Guidance estimates reflect forecasted consolidated results for PG&E Corporation and Pacific Gas and Electric Company; guidance does not include NEGT. Among the assumptions on which current guidance for 2003 is based is the expectation that the CPUC issues a decision in the utility's 2003 GRC in time to be included in the company's fourth quarter financial results, and that the outcome is consistent with the proposed GRC settlement agreement. In addition, guidance for 2004 is based on a number of assumptions, including the assumption that the proposed settlement agreement to resolve the utility's Chapter 11 case is approved and the contemplated plan of reorganization is implemented in a timely manner.

PG&E Corporation bases guidance on “earnings from operations” in order to provide a measure that allows investors to compare the underlying financial performance of the business from one period to another, exclusive of items that management believes do not reflect the normal course of operations. Earnings from operations are not a substitute or alternative for total net income presented in accordance with generally accepted accounting principles.

The estimated range for 2003 earnings on a GAAP or "reported" basis for PG&E Corporation and Pacific Gas and Electric Company is $1.26-$2.18 per share. For 2004, the estimated range for reported earnings for PG&E Corporation and Pacific Gas and Electric Company is $1.78-$1.93 per share. The attachment to this news release reconciles estimated earnings from operations with estimated total net income.

A conference call with the financial community will be held today at 2:30 PM Eastern Standard Time to discuss PG&E Corporation's results for the quarter. 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) 470-0867, and also will be available on our website. International callers will be able to access the replay by dialing (402) 220-0642.

This press release and the attachment contain forward-looking statements regarding estimated earnings for 2003 and 2004, and the outcome of the Utility's Chapter 11 proceeding. These statements are based on current expectations and assumptions which management believes are reasonable and on information currently available to management but are necessarily subject to various risks and uncertainties. Actual results could differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause future results to differ materially include:

The outcome of the Utility's Chapter 11 proceeding, including whether the proposed settlement agreement among the Utility, PG&E Corporation, and the staff of the CPUC becomes effective and whether the Settlement Plan is implemented;

• Unanticipated changes in operating expenses and capital expenditures;

• The level and volatility of wholesale electricity and natural gas prices and the Utility's ability to manage and respond to this volatility successfully;
• Weather, storms, earthquakes, fires, other natural disasters, explosions, accidents, mechanical breakdowns, and other events or perils that affect demand, result in power outages, reduce generating output, or cause damage to the Utility's assets or operations or those of third parties on which the Utility relies;
• Changes in market demand and general economic and financial market conditions, including unanticipated changes in interest or inflation rates;
• The Utility's ability to manage over time its residual net open position, which is the portion of the Utility's customers'; demand not satisfied by electricity from the Utility's generation facilities, the Utility's electricity purchase contracts or the California Department of Water Resources' (DWR) electricity purchase contracts allocated to the Utility;
• Acts of terrorism;
• Applicable governmental policies and legislative or regulatory actions generally;
• How the CPUC administers the capital structure, stand-alone pidend, and first priority conditions of the holding company conditions;
• The outcome of pending litigation, rate cases, including the 2003 GRC, and other regulatory proceedings;
• Future regulatory proceedings related to whether the Utility has complied with all applicable rules, tariffs, and orders, and the extent to which a finding of non-compliance could result in customer refunds, penalties, or other non-recoverable expenses;
• The effect of compliance with existing and future environmental laws, regulations, and policies, including those addressing global climate change;
• Increasing competition, the level of direct access customers, and the extent to which the cities and counties in the Utility's service territory become community choice aggregators; and
• New accounting pronouncements, including significant changes in accounting policies material to PG&E Corporation or the Utility.