ELEMENTS OF THE WOOD ALTERNATE

1) Preserves the Basic Structure of the Proposed Settlement (PSA), in that it approves

A) Refinancing the entire company.

B) Provides cash flows and regulatory guarantees sufficient to accomplish this unprecedented financing as quickly as possible.

Specifically, it approves:

· a commitment to achieving and maintaining investment grade credit for the utility in accordance with rating agency metrics;

· the use of headroom properly computed through year end 2003 to pay PG&E debts;

· the creation of a regulatory asset as an additional ratepayer contribution to PG&E rehabilitation;

· ratebase treatment for the regulatory asset, including an equity return;

· payment by ratepayers of 60 % of PG&E's legitimate claims (second bullet below);

· a federal court settlement that binds the Commission for the duration of regulatory asset amortization (four years).

2) It modifies the PSA in the following ways:

· reduces the size of the regulatory asset from $2.21 billion to $1.2 billion and shortens the amortization period (and the period of federal court supervision) from 9 years to 4 years;

· eliminates ratepayer contribution of PG&E and Corp. litigation expenses related to the bankruptcy;

· like the PD and the Peevey Alternate 2 it eliminates Paragraph 6 of the Settlement Agreement, which limited the Commission's authority with respect to PG&E dividends;

· places additional restrictions on the holding company;

· like the Peevey Alternate 2 it approves the Environmental Stipulation and augments it with the urban environmental component.