Confidential Settlement Document
Per CPUC Rule 51

Gas Accord II Settlement Participants:


Attached is PG&E's Gas Accord II (GA II) Settlement Proposal.  We believe it
addresses many of the issues and concerns you have raised in the workshops.


As an overview, this proposal:

* Maintains the basic Gas Accord structure in place today for the
period 2003 to 2007.
*
* Offers end user transportation rates for 2003 lower for most
customers than rates in effect today.
*
* Provides for vintaged Redwood path rates for core customers.
*
* Offers a 7.5 cent/dth rate to large customers while minimizing rate
changes to other customers, minimizing the incentive for these customers to
seek to bypass local transmission charges and other CPUC-approved charges.
*
* Adopts guidelines to improve reliability and help moderate prices in
gas commodity markets, and identifies the capital projects needed to meet
these guidelines over the course of the GA II period (2003-2007).
*
* Provides a high degree of rate stability, with a 3.5% escalator to
capture both inflation and the cost of needed capital projects.  The
guaranteed rates will be adjustable only for significant changes in the cost
of capital or increased costs due to governmental requirements or
catastrophic events.
*
* Preserves a rate differential between the Redwood and Baja paths,
although somewhat less than the current differential.
*
* Proposes a two-stage open season for firm transportation services
beginning in 2003, with end users receiving a first option on available
capacity.
*
* Maintains the core aggregation program with some adjustments.

PG&E also anticipates that the Core Procurement Incentive Mechanism (CPIM)
will be similar to today's mechanism, but will reflect the somewhat larger
capacity holdings needed to meet anticipated increases in core demand and to
meet a 1-day in 10-year cold weather event.

This also will serve as a reminder that an all-Party meeting is scheduled at
PG&E's headquarters in San Francisco on January 10 and 11, to discuss this
proposal and to respond to your questions.  We look forward to answering
your questions and receiving your feedback.

The attached documents include the GA II Settlement proposal, an Attachment
(a copy of PG&E's proposed Gas Rule 27), and a set of supporting workpapers.

Finally, please note that the Settlement document and the Attachment are in
"Word 2000" format.  We would be glad to provide the same documents in an
earlier version of Word, upon request by individual Parties.

We look forward to seeing you on January 10-11.  In the meantime, we extend
our best wishes for a safe and happy holiday season.


Frank Lindh     Ray Williams
(415) 973-2776    (415) 973-3634

<<PG&E Gas Accord II Settlement Proposal 12-20-00.doc>>  <<Proposed Gas
Rule 27.doc>>  <<COS & Rates Workpapers for GA II 12-20-2000 Proposal.xls>>

 - PG&E Gas Accord II Settlement Proposal 12-20-00.doc
 - Proposed Gas Rule 27.doc
 - COS & Rates Workpapers for GA II 12-20-2000 Proposal.xls