5. Assignment of Proceeding

Michael R. Peevey is the Assigned Commissioner and Timothy Kenney is the assigned ALJ in this proceeding.

Findings of Fact

1. Decision 04-10-037 authorized PG&E to issue $1.538 billion of long-term debt and preferred stock, in any combination, as long as the selected combination results in a capital structure that complies, on average, with the Commission-adopted capital structure during the period the adopted capital structure is in effect. PG&E's petition requests that this condition be rescinded.

2. Investors might interpret D.04-10-037 as requiring that the long-term debt and preferred stock issued pursuant to D.04-10-037 be voided under § 825 if PG&E fails to maintain its capital structure in accordance with Commission requirements.

3. The cost of issuing the long-term debt and preferred stock authorized by D.04-10-037 could increase if investors believe there is a risk that such long-term debt and preferred stock might be voided after it has been issued.

4. Decision 04-10-037 authorized PG&E to issue $1.538 billion of long-term debt and preferred stock during 2004 - 2008 for three purposes: finance capital expenditures, retire bridge loans, and redeem preferred stock. PG&E asks that D.04-10-037 be modified to allow PG&E to use the long-term debt and preferred stock authorized by the Decision for every purpose listed in § 817.

5. The Commission has previously authorized PG&E and other utilities to issue long-term debt and preferred stock for every purpose listed in § 817.

6. Decision 04-10-037 denied PG&E's request for (i) general authority to issue debt secured by its accounts receivable, and (ii) renew its accounts receivable (A/R) credit facility when it expires in 2007.

7. The restrictions on PG&E's authority to pledge its accounts receivable described in the previous Finding of Fact (FOF) do not apply to the following: (i) the portion of PG&E's accounts receivable that are sequestered for other purposes pursuant to statutes or Commission orders, or (ii) the existing $650 million A/R credit facility that is secured by PG&E's accounts receivable.

8. PG&E requests that D.04-10-037 be modified to allow PG&E to (i) issue debt secured by its accounts receivable, and (ii) renew its A/R facility when it expires in 2007.

9. Granting PG&E's request described in the previous FOF would be consistent with Commission precedent and should help PG&E to issue debt at the lowest possible cost to its ratepayers.

10. PG&E requests that D.04-10-037 be modified to provide PG&E with unambiguous authority to issue FMBs as primary obligations.

11. FOF 14 and COL 17 of D.04-10-037 indicate that it was the Commission's intent in the Decision to provide PG&E with authority under § 851 to issue FMBs as primary obligations.

12. Notice of PG&E's petition to modify D.04-10-037 appeared in the Commission's Daily Calendar on December 1, 2004. There were no protests or other responses to the petition.

Conclusions of Law

1. PG&E's petition to modify D.04-10-037 is subject to Commission approval pursuant to §§ 816 et seq., and 851. The Commission has broad discretion under these statutes to approve, modify, or reject PG&E's petition.

2. PG&E's petition to modify D.04-10-037 should be granted in all respects.

3. Consistent with the condition adopted in D.04-10-037, if a default occurs and title to any PG&E property, franchise, permit, or right that is necessary or useful in the performance of PG&E's duties to the public is transferred pursuant to FMBs, the thing transferred should continue to be used to provide utility services to the public until the Commission authorizes otherwise.

4. The following Order should be effective immediately so that PG&E may issue as soon as possible the debt and preferred stock authorized therein.

ORDER

IT IS ORDERED that:

1. The petition to modify Decision (D.) 04-10-037 filed by Pacific Gas and Electric Company (PG&E) is granted pursuant to Public Utilities Code §§ 816 et seq., and 851.

2. Long-term debt and preferred stock issued pursuant to D.04-10-037 shall not be deemed void if PG&E fails to comply with Commission capital structure requirements.

3. PG&E may use the long-term debt and preferred stock authorized by D.04-10-037 for every purpose listed in § 817.

4. PG&E may (i) issue debt pursuant to D.04-10-037 that is secured by its accounts receivable, and (ii) renew its accounts receivable credit facility when it expires in 2007.

5. PG&E may issue First Mortgage Bonds (FMBs) pursuant to D.04-10-037 as primary obligations. If a default occurs and title to any PG&E property, franchise, permit, or right that is necessary or useful in the performance of PG&E's duties to the public is transferred pursuant to FMBs, the thing transferred shall be used to provide utility services to the public until the Commission authorizes otherwise.

6. This proceeding is closed.

This order is effective today.

Dated April 7, 2005 at San Francisco, California.

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