FOR IMMEDIATE RELEASE Docket #: I.02-04-026

Media Contact: PUC Press Office, 415.703.1366, news@cpuc.ca.gov

PUC MOVES TOWARD CLOSURE ON PG&E BANKRUPTCY ISSUE; APPROVES ALTERNATE DECISION PROPOSED
BY PRESIDENT PEEVEY

SAN FRANCISCO, December 18, 2003 -- The California Public Utilities Commission (PUC) today took a major step in resolving Pacific Gas and Electric Company's (PG&E) bankruptcy by approving an alternate proposed decision presented by PUC President Michael R. Peevey, and sponsored by President Peevey and Commissioner Geoffrey F. Brown that will restore PG&E to a creditworthy utility.

Today's decision lowers rates by more than 1 cent per kilowatt-hour (kWh); stays faithful to all state laws; provides $100 million for the enhancement of the environment and the provision of a wilderness experience for inner city urban youth; and allows PG&E to become creditworthy and able to finance needed energy infrastructure for its customers at reasonable costs.

"This decision is the beginning of the end of a very difficult period of time for California, this Commission, and PG&E," said PUC President Peevey. "Today we have improved the business climate of the state and assured affordable electricity for millions of Northern Californians."

"I strongly support the modified settlement. This protracted and difficult litigation must be brought to an end," said Commissioner Brown. "The stark truth is that there is no easy way to pay the enormous debt racked up by PG&E during the energy crisis. Today we have made a decision on a modified settlement agreement that is in the public interest."

The Commission approved the basic economic terms of the settlement proposed by PG&E and PUC staff. It projects an initial rate reduction of approximately $670 million in 2004; adopts enhanced environmental benefits; and recommends certain non-economic changes to three provisions of the proposed settlement agreement. The decision also upholds the authority of the PUC to enter into a legally binding settlement agreement with PG&E and PG&E Corp.

PG&E and The Utility Reform Network (TURN) have proposed deleting the provision of the settlement proposed by PG&E and PUC staff that calls for PG&E to reimburse PG&E Corp. for its professional fees and expenses incurred in connection with the Chapter 11 proceeding. Both parties also proposed allowing use of a securitized financing backed by a dedicated rate component (DRC) to be used to refinance the Regulatory Asset once PG&E emerges from Chapter 11, and assuming that authorizing legislation satisfactory to the Commission, TURN, and PG&E is passed and signed into law. Today's decision incorporates those suggested modifications.

Under today's decision, and anticipating other future actions, PG&E's system average rate would go from 13.9 cents per kWh to 12.4 cents per kWh by the end of the first quarter of 2004. In addition, if the Legislature passes a bill to add a DRC and the governor signs it, there would be a further reduction in rates to 12.2 cents per kWh. Also, returning PG&E to creditworthy status would reduce the amount of cash needed by the company for collateral, and refunds by generators ordered by the Federal Energy Regulatory Commission in 2004 could further reduce PG&E rates next year to below 12 cents per kWh.

Federal bankruptcy judge Montali has scheduled a status conference on Monday, Dec. 22 to consider action taken by the Commission and to consider issues related to the confirmation of PG&E's settlement plan.

For more information, please visit the PUC's website at www.cpuc.ca.gov.

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