• PG&E Corporation earned $1.06 per share in consolidated net income in 2003, compared with a net loss of $2.26 per share in 2002. (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 in 2003 were $1.48 per share, compared with $2.22 per share in 2002.
• Pacific Gas and Electric Company's 2003 earnings from operations, without headroom, were $1.49 per share, compared with $2.08 per share for 2002.

(San Francisco) -- PG&E Corporation (NYSE: PCG) earned $420 million, or $1.06 per share, in consolidated net income in 2003, compared with a net loss of $874 million, or $2.26 per share, in 2002. For the fourth quarter only, consolidated net income was $37 million, or $0.09 per share, in 2003, compared with a net loss of $2,189 million, or $5.41 per share, in the fourth quarter of 2002.

On an earnings-from-operations basis, PG&E Corporation and its California utility business, Pacific Gas and Electric Company, earned $611 million, or $1.48 per share in 2003, compared with $851 million, or $2.22 per share in 2002. Earnings from operations for the fourth quarter only were $139 million, or $0.34 per share, in 2003, compared with $220 million, or $0.55 per share, in 2002.

PG&E Corporation's earnings from operations do not include results from National Energy & Gas Transmission, Inc. (NEGT). 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 consolidated net income in accordance with generally accepted accounting principles (GAAP).

Income from headroom (the difference between Pacific Gas and Electric Company's generation-related costs and generation-related revenues) was $43 million, or $0.11 per share, in the fourth quarter of 2003, compared with $133 million, or $0.33 per share, in the fourth quarter of 2002. Total headroom in 2003 was $677 million, or $1.64 per share, compared with $1,051 million, or $2.74 per share, in 2002.

For the full year 2003, items impacting comparability at the Corporation and Pacific Gas and Electric Company primarily included incremental interest costs of $370 million, or $0.85 per share, as well as Chapter 11 costs and costs related to the California energy crisis of $123 million, or $0.30 per share, generally consisting of external legal fees, financial advisory fees and other related costs.

As disclosed in the Corporation's annual report on Form 10-K for 2003, accounting for stock options as an expense in 2003 would have reduced earnings by $0.05 per share.

PACIFIC GAS AND ELECTRIC COMPANY

Pacific Gas and Electric Company contributed $616 million, or $1.49 per share, to earnings from operations in 2003, compared with $797 million, or $2.08 per share, in 2002.

For the fourth quarter only, Pacific Gas and Electric Company's earnings from operations were $141 million, or $0.35 per share, in 2003, compared with $204 million, or $0.51 per share, in 2002.

The difference between Pacific Gas and Electric Company's 2003 and 2002 earnings from operations, both for the full year and for the fourth quarter, largely reflected the delay of a final decision in the 2003 General Rate Case (GRC), which is pending at the California Public Utilities Commission (CPUC). While the delay of the final GRC decision affects earnings from operations, it did not significantly affect the utility's or the Corporation's consolidated net income, because the majority of any revenues authorized for 2003 are recognized in existing headroom, which is included in 2003 consolidated net income.

The delay of the GRC decision is not expected to impact 2004 earnings from operations or 2004 earnings guidance, because Pacific Gas and Electric Company continues to expect that the final GRC decision will reflect the terms of the settlement agreement the utility reached in September with the CPUC's Office of Ratepayer Advocates and various consumer groups. Under the settlement, the CPUC would authorize base revenues for 2003 and provide for timely and predictable revenue adjustments in 2004, 2005 and 2006 to cover higher expenses for rate base growth and inflation.

In addition to the delay of the GRC decision, the year-over-year difference in utility earnings from operations is attributable to lower revenues in 2003 from the utility's California gas transmission pipeline due to increased hydroelectric production, which reduced the demand for some gas-fired generation. Additionally, PG&E Corporation had a greater number of average shares outstanding in 2003. These factors were offset partially by the positive impact of higher electric transmission rates that went into effect in August 2003.

CHAPTER 11 EXIT ACTIVITIES

Pacific Gas and Electric Company continues to move forward as planned with preparations to implement the Plan of Reorganization approved in December by the CPUC and federal bankruptcy court. The utility has targeted April 2004 to complete the sale of the long-term debt, which the utility expects to be the last condition of the Plan of Reorganization to be satisfied. The plan provides that the effective date will occur 11 business days after all the conditions have been satisfied.

"We continue to see a clear path to stability and increasing financial performance through Pacific Gas and Electric Company's upcoming exit from Chapter 11," said Robert D. Glynn, Jr., PG&E Corporation Chairman of the Board, CEO and President.

NATIONAL ENERGY & GAS TRANSMISSION

PG&E Corporation's consolidated net income for the full year 2003 includes financial results for NEGT only for the period January 1 through July 7, 2003, which are classified as results from discontinued operations.

On July 8, 2003, 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.

GUIDANCE FOR 2004 EARNINGS FROM OPERATIONS

Reaffirming its previously issued earnings guidance, the Corporation expects 2004 earnings from operations for PG&E Corporation and Pacific Gas and Electric Company to be in the range of $2.00-$2.10 per share.

Guidance estimates reflect forecasted results for PG&E Corporation and Pacific Gas and Electric Company; guidance does not include NEGT. Guidance for 2004 is based on a number of assumptions, including the assumption that the confirmed plan of reorganization is implemented in a timely manner. Guidance also assumes that the CPUC issues a final decision in the utility's 2003 GRC that is consistent with the terms of the GRC settlement agreement.

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 consolidated net income presented in accordance with GAAP.

The attachment to this news release reconciles 2004 estimated earnings per share from operations with estimated consolidated net income per share in accordance with GAAP.

A conference call with the financial community will be held today at 11:00 a.m. Eastern Standard Time to discuss PG&E Corporation's results for the full year and the fourth quarter 2003. 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 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:

Whether and on what terms the Utility's confirmed plan of reorganization is timely implemented,

Unanticipated changes in operating expenses or capital expenditures;

The level and volatility of wholesale electricity and natural gas prices and supplies, and the Utility's ability to manage and respond to the levels and volatility successfully;

Weather, storms, earthquakes, fires, floods, other natural disasters, explosions, accidents, mechanical breakdowns and other events or hazards 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;

Unanticipated population growth or decline, changes in market demand and demographic patterns, and general economic and financial market conditions, including unanticipated changes in interest or inflation rates;

The extent to which the Utility's residual net open position (i.e., the amount of electricity the Utility needs to meet its customers' electricity demands that is not provided by Utility-owned generation, Utility power purchase contracts, or the electricity provided by the California Department of Water Resources, or DWR, and allocated to the Utility) increases or decreases due to changes in customer and economic growth rates, the periodic expiration or termination of Utility or DWR power purchase contracts, the reallocation of the DWR power purchase contracts, whether various counterparties are able to meet their obligations under their power sale agreements with the Utility or with the DWR, the retirement or other closure of the Utility's electricity generation facilities, the performance of the Utility's electricity generation facilities, and other factors;

The operation of the Utility's Diablo Canyon nuclear power plant, which exposes the Utility to potentially significant environmental and capital expenditure outlays;

Actions of credit rating agencies;

Acts of terrorism;

The outcome of pending litigation, rate cases, including the 2003 General Rate Case and other regulatory proceedings;

The impact of future legislative or regulatory actions;

How the CPUC administers the capital structure, stand-alone dividend and first priority conditions of the CPUC's decisions permitting the establishment of holding companies for California investor-owned electric utilities;

Whether the Utility is in compliance with all applicable rules, tariffs and orders relating to electricity and natural gas utility operations, and the extent to which a finding of non-compliance could result in customer refunds, penalties or other non-recoverable expenses;

Whether the Utility is required to incur material costs or capital expenditures or curtail or cease operations at affected facilities to comply with existing and future environmental laws, regulations and policies;

Increased competition as a result of the takeover by condemnation of the Utility's distribution assets, duplication of the Utility's distribution assets or service by local public utility districts, self-generation by its customers and other forms of competition that may result in stranded investment capital, decreased customer growth, loss of customer load, and additional barriers to cost recovery; and

The extent to which the Utility's distribution customers switch between purchasing electricity from the Utility and from alternate energy service providers as direct access customers and the extent to which cities, counties and others in the Utility's service territory begin directly serving the Utility's customers or combine to form community choice aggregators.