(San Francisco) – PG&E Corporation (NYSE: PCG) today gave notice that it intends to retire $600 million in senior secured notes in November in order to clear the way for substantial common stock repurchases planned for late this year and 2005. The announcement follows today’s final resolution of tax litigation between the Corporation and National Energy & Gas Transmission, Inc. (NEGT), which in turn enables the Corporation to access approximately $350 million that had been designated as restricted cash pending resolution of the litigation. As announced previously, the Corporation intends to use the $350 million to repurchase common stock.

In accordance with the settlement agreement reached between PG&E Corporation, NEGT and its wholly owned or controlled subsidiaries, and the official committee of unsecured creditors in NEGT’s Chapter 11 case, the parties filed a stipulation to dismiss the litigation that was pending in the U.S. District Court of Maryland. The stipulation also was signed by the committee representing NEGT’s noteholders, although the committee was not a party to the original settlement agreement. After the stipulation was filed, the settlement became final and non-appealable.

The Corporation today formally instructed the trustee for its 6 7/8% senior secured notes due 2008 to provide notice of redemption to noteholders. Upon redemption, the restrictions on the Corporation’s ability to buy back stock will be eliminated. The trustee is required to provide 30 days notice to the noteholders, after which the redemption will occur. The Corporation expects the notes will be retired by mid-November, using cash on hand. The cost to redeem the notes is estimated to be $600 million of principal, plus a redemption premium of approximately $50.5 million. The Corporation will also pay $13.8 million of unpaid interest that has accrued since the last interest payment.

“PG&E Corporation is focused on returning value to shareholders through common stock dividends and share repurchases,” said Robert D. Glynn, Jr., Chairman, CEO and President of PG&E Corporation. “The resolution of the NEGT issues and the redemption of the senior notes will enable us to begin taking the next steps toward realizing that aspiration.”

The $350 million of repurchases are expected to occur by the end of 2004 or early 2005. An additional $1.2 billion of dividends and stock repurchases is expected in 2005, assuming Pacific Gas and Electric Company refinances part of its balance sheet early next year as planned. PG&E Corporation is also beginning a separate stock repurchase program, which can proceed prior to the redemption of the senior notes, using proceeds of stock option exercises. Stock repurchases late this year are not expected to significantly affect the Corporation’s average number of shares outstanding for the full year 2004. The Corporation’s previously issued earnings guidance for 2005 already reflects the impact of these projected share repurchases.

This press release contains forward-looking statements regarding projected uses of cash to repurchase stock in 2004 and 2005. 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 timing and resolution of the petitions for review that were filed in the California Court of Appeal seeking review of (i) the CPUC's December 18, 2003 decision approving the settlement agreement entered into among the CPUC, PG&E Corporation and the Utility to resolve the Utility’s Chapter 11 case (Settlement Agreement), and (ii) the CPUC's March 16, 2004 denial of applications for rehearing of the December 18, 2003 decision;
• The timing and resolution of the pending appeals of the bankruptcy court's order confirming the Utility’s plan of reorganization under Chapter 11;
• Whether the conditions to securitizing the $2.21 billion after-tax regulatory asset established under the Settlement Agreement are met, and if so, the timing and amount of the securitization;
• Whether the CPUC approves the Utility's long-term electricity resource plan and adopts the Utility's related ratemaking proposals, whether the assumptions and forecasts underlying the long-term resource plan prove to be accurate, and the terms and conditions of the long-term resource commitments the Utility enters into in connection with its long-term resource plan;
• Unanticipated changes in operating expenses or capital expenditures affecting the Utility’s ability to earn its authorized rate of return;
• The level and volatility of wholesale electricity and natural gas prices and supplies, the Utility's ability to manage and respond to the levels and volatility successfully, and the extent to which the Utility is able to timely recover increased costs related to such volatility;
• The extent to which the Utility's residual net open position ( i.e., that portion of the Utility's electricity customers' demand not satisfied by electricity that the Utility generates or has under contract, or by electricity provided under the California Department of Water Resources electricity contracts allocated to the Utility's customers) increases or decreases;
• The operation of the Utility's Diablo Canyon nuclear power plant which exposes the Utility to potentially significant environmental and capital expenditure outlays;
• The impact of current and future ratemaking actions of the CPUC, including the risk of material differences between forecasted costs used to determine rates and actual costs incurred;
• The extent to which the CPUC or the Federal Energy Regulatory Commission delays or denies recovery of the Utility's costs from customers due to a regulatory determination that such costs were not reasonable or prudent or for other reasons resulting in write-offs of regulatory balancing accounts;
• 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;
• The impact of future legislative or regulatory actions or policies;
• Increased competition;
• The outcome of pending litigation; and
• Other factors discussed in PG&E Corporation's SEC reports