---------------------- Forwarded by Don Miller/HOU/ECT on 04/06/2001 03:25 PM ---------------------------


Jon Cartwright <JCartwright@FI.RJF.com> on 04/06/2001 11:37:02 AM
To:	"'RJF Energy-Gram'" <cartwrit@bloomberg.net>
cc:	 
Subject:	Pacific Gas and Electric Company Files for Chapter 11 Reorganization


    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.

    --30--kwp/sf*

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

    KEYWORD: CALIFORNIA
    INDUSTRY KEYWORD: UTILITIES ENERGY

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Symbols:
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  06-Apr-2001  16:34:42 GMT
Source BW     - Business Wire
Categories:
  MST/R/US/CA MST/I/ELC MST/I/OIS