PG&E Files Chapter 11

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cc:
Subject: PG&E Files Chapter 11

Pacific Gas and Electric Company Files for Chapter 11 Reorganization

Business Wire
04/06/01, 12:34p
(Copyright , 2001, Business Wire)

SAN FRANCISCO--(BUSINESS WIRE)--April 6, 2001--Pacific Gas and Electric
Company, the utility unit of PG&E Corporation (NYSE: PCG), today filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in San Francisco
bankruptcy court. The company said it is taking this action in light of its
unreimbursed energy costs which are now increasing by more than $300 million
per month, continuing CPUC decisions that economically disadvantage the
company, and the now unmistakable fact that negotiations with Governor Gray
Davis and his representatives are going nowhere.

Neither PG&E Corporation nor any of its other subsidiaries, including its
National Energy Group, have filed for Chapter 11 reorganization or are
affected by the utility's filing.

"We chose to file for Chapter 11 reorganization affirmatively because we
expect the court will provide the venue needed to reach a solution, which
thus far the State and the State's regulators have been unable to achieve,"
said Robert D. Glynn, Jr., Chairman of Pacific Gas and Electric Company. "The
regulatory and political processes have failed us, and now we are turning to
the court."

Glynn added, "Our objective is to move through the Chapter 11 reorganization
process as quickly as possible, without disruption to our operations or
inconvenience to our customers. Throughout this crisis, our 20,000 employees
have been and remain committed to providing safe and reliable service to the
13 million Californians who depend on us to deliver their gas and
electricity."

Pacific Gas and Electric Company decided to file for the protection of
Chapter 11 primarily due to:

-- Failure by the state to assume the full procurement
responsibility for Pacific Gas and Electric's "net open
position" as was provided under AB1X. This has the result of
increasing financial exposure to unreimbursed wholesale energy
procurement costs, which the utility estimates to be
approximately $300 million or more per month.

-- The impact of actions by the California Public Utilities
Commission (CPUC) on March 27, 2001, and April 3, 2001, that
created new payment obligations for the company and undermined
its ability to return to financial viability.

-- Lack of progress in negotiations with the state to provide
recovery of $9 billion in wholesale power purchases made by
the utility since June 2000, which have not been recoverable
in frozen rates.

-- The adoption by the CPUC of an illegal and retroactive
accounting change that would appear to eliminate our true
uncollected wholesale costs.

"In addition, despite Pacific Gas & Electric's best efforts to work with the
State of California to reach a consensual, responsible, fair and
comprehensive solution to California's energy crisis, no agreement has been
reached with the Governor and the Governor's representatives have
dramatically slowed the pace and the progress of discussions over the past
month.

"Furthermore since last fall, we have filed comprehensive plans for resolving
this matter with the CPUC, but they have not acted affirmatively on them,"
said Glynn.

On October 4, 2000, Pacific Gas and Electric sought emergency rate action by
the CPUC. In November 2000, we filed our rate stabilization plan, which, if
adopted, would have increased electric prices by an initial 25 percent,
compared with the 46 percent recently adopted by the CPUC. Neither request
was acted upon. Had the state acted at that time:

-- Pacific Gas and Electric would have been kept creditworthy;

-- Pacific Gas and Electric would have been able to enter into
long-term power purchase contracts at prices lower than those
announced by the state;

-- The state would not have had to almost exhaust the state's
budget surplus by spending billions of dollars to purchase
power for the utility's customers;

-- The state would not now need to issue billions of dollars in
bonds to cover these power purchases; and

-- The state would not now be advancing a proposal to spend
billions of dollars to purchase the state's three
investor-owned utility's electric transmission systems.

"This year, the state has spent more than $3 billion on power purchases and,
with the CPUC, has arranged to be reimbursed for these expenses," noted
Glynn. "In contrast, since June Pacific Gas and Electric Company has spent $9
billion in excess of revenues to pay for power for its customers and
exhausted its ability to continue borrowing, but there has been no progress
on a plan to reimburse it for those expenditures as provided by law.

"Statements by the Governor and other public officials since last September
gave us reason to believe that a solution could be reached outside the
context of Chapter 11 that would restore the utility's financial viability
and enable it to meet its financial obligations equitably. However, these
statements have not been followed up by constructive actions, and a
reorganization in Chapter 11 is now the most feasible means of resolution."

The utility will utilize existing resources to continue operating its
business during bankruptcy, including paying vendors and suppliers in full
for goods and services received after the filing. The utility will pay
electric commodity suppliers as provided by law. The utility intends to
continue normal electric and gas transmission and distribution functions
during the Chapter 11 process. Employees will continue to be paid. Health
care plans and other benefits for employees and most retirees will continue.
The utility's qualified retirement plans for retirees and vested employees
are fully funded and protected by federal law.

Notice

A media teleconference will be held today at 10:15 A.M. Pacific Daylight Time
to discuss this announcement. Pacific Gas and Electric Company Chairman
Robert D. Glynn, Jr., and Pacific Gas and Electric Company President and CEO
Gordon R. Smith will be available for questions. The dial-in number is
888/469-2078, and the password for access is "media." An investment community
conference call to discuss Pacific Gas and Electric Company's Chapter 11
filing has been scheduled for 11:15 A.M. Pacific Daylight Time today. A
real-time webcast of this conference call can be accessed at www.pgecorp.com.

CONTACT: PG&E Corporation
News Department 415/973-5930