SECURITIES AND EXCHANGE COMMISSION
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of DOCUMENTS INCORPORATED BY REFERENCE The Utility served approximately FormFORM 10-K (Mark One)xþANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 20032005oroOro CommissionExact Name of Registrant State ofIRS EmployerFile Numberas specified in its charter IncorporationIRS Employer1-12609 PG&E CORPORATION California 94-3234914 1-2348 PACIFIC GAS AND ELECTRIC COMPANY California 94-0742640 PG&E Corporation 77 Beale Street One Market, Spear Tower P.O. Box 770000 Suite 2400 San Francisco, California San Francisco, California (Address of principal executive offices) (Address of principal executive offices) 94177 94105 (Zip Code) (Zip Code) (415) 973-7000 (415) 267-7000 (Registrant’s telephone number, including area code) (Registrant’s telephone number, including area code) CorporationCorporation: Common Stock, no par value Preferred Stock Purchase RightsNew York Stock Exchange and Pacific Exchange Company
Company: First Preferred Stock,American Stock Exchange and Pacific Exchange 7.04%, 5% Series A, 5%, 4.80%, 4.50%, 4.36%Mandatorily Redeemable: 6.57%, 6.30% American Stock Exchange and Pacific Exchange7.90% Deferrable Interest Subordinated DebenturesAmerican Stock Exchange and Pacific ExchangePG&E Corporation Pacific Gas and Electric Company PG&E Corporation Pacific Gas and Electric Company PG&E Corporation Pacific Gas and Electric Company þ No oregistrant’sregistrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:PG&E Corporation oPacific Gas and Electric Company þPG&E Corporation Pacific Gas and Electric Company (as definedor a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act Rule 12b-2)Act. (Check one).:PG&E Corporation Yes Accelerated filer þ¨No Non-accelerated filer o¨Pacific Gas and Electric Company PG&E Corporation Pacific Gas and Electric Company No þx2003,2005, the last business day of the second fiscal quarter:PG&E Corporation Common Stock $ 8,16413,975 millionPacific Gas and Electric Company Common Stock Wholly owned by PG&E Corporation PG&E Corporation: 345,319,971 (excluding shares held by a wholly owned subsidiary) Pacific Gas and Electric Company: Wholly owned by PG&E Corporation Common Stock outstanding as of February 17, 2004:PG&E Corporation:418,976,121Pacific Gas and Electric Company:Wholly owned by PG&E Corporationinvolved.involved:Designated portions of the combined 2005 Annual Report to Shareholders for the year ended December 31, 2003Part I (Item 1)1, Item 1.A.), Part II (Items 5, 6, 7, 7A, 8 and 8), 9A)Designated portions of the Joint Proxy Statement relating to the 2006 Part IV (Item 15)III (Items 10, 11, 12, 13 and 14)Annual Meetings of Shareholders iii 1 1 1 Page11
13 3 4 5 5 7 8 9 9 9 11 11 12 12 12 13 13 14 15 15 16 16 17 18 18 18 18 20 20 20 21 22 24 25 25 25 26 27 27 29 30 31 31 Units of MeasurementiiiPART IItem 1.Business1 Corporate Structure and Business1 The Utility32 13232 33 1Corporate and Other Information2Employees2The Utility’s Plan of Reorganization and Settlement Agreement2Refinancing Supported by a Dedicated Rate Component3Forward Looking Statements and Risk Factors4Electric Utility Operations6Electricity Distribution Operations6Electricity Resources8Electricity Transmission12Natural Gas Utility Operations13Natural Gas Supplies16Gas Gathering Facilities16Interstate and Canadian Natural Gas Transportation Services Agreements16Competition17The Electric Industry18The Natural Gas Industry19PG&E Corporation’s Regulatory Environment20Federal Energy Regulation20State Energy Regulation20The Utility’s Regulatory Environment22Federal Energy Regulation22State Energy Regulation24Other Regulation25Ratemaking Mechanisms25Overview25DWR Electricity and DWR Revenue Requirements27DWR Allocated Contracts28Procurement Resumption and Procurement Plans28Electricity Transmission29Natural Gas31Environmental Matters32General32Air Quality33Water Quality34Endangered Species35Hazardous Waste Compliance and Remediation35Nuclear Fuel Disposal37Nuclear Decommissioning38Electric and Magnetic Fields39Item 2.Properties40iPageItem 3.Legal Proceedings40Pacific Gas and Electric Company Chapter 11 Filing 4133 43Pacific Gas and Electric Company vs. Michael Peevey, et al. 4333 In. re: Natural Gas Royalties Qui Tam Litigation4433 44Complaints Filed by the California Attorney General, City and County of San Francisco and Cynthia Behr4533 4736 37 4838 Executive Officers of the Registrants48 5139 5139 Management’s5140 5240 5240 40 40 40 40 40 41 52Item 9A.Controls and Procedures52PART III5243 Directors5243 Executive Officers54Section 16 Beneficial Ownership Reporting Compliance54Audit Committee Members and Financial Expert54Website Availability of Corporate Governance and Other Documents54Item 11.Executive Compensation55Compensation of Directors55Summary Compensation Table56Option/SAR Grants in 200359Aggregated Option/SAR Exercises in 2003 and Year-End Option/SAR Values60Long Term Incentive Program-Awards in 200360Retirement Benefits61Termination of Employment and Change in Control Provisions6143 6244 Security Ownership of Management6245 Principal Shareholders6450 Equity Compensation Plan Information65Item 13.Certain Relationships and Related Transactions65Item 14.Principal Accountant Fees and Services6551 Fees Paid to Independent Public Accountants65Pre-Approval of Services Provided by the Independent Public Accountant66PART IVItem 15.Exhibits, 67Signatures76Independent Auditors’ Report77Financial Statement Schedules7852 UNITS OF MEASUREMENT1 Kilowatt (kW) = One thousand watts 1 Kilowatt-Hour (kWh) = One kilowatt continuously for one hour 1 Megawatt (MW) = One thousand kilowatts 1 Megawatt-Hour (MWh) = One megawatt continuously for one hour 1 Gigawatt (GW) = One million kilowatts 1 Gigawatt HourGigawatt-Hour (GWh)= One gigawatt continuously for one hour 1 Kilovolt (kV) = One thousand volts 1 MVA = One megavolt ampere 1 Mcf = One thousand cubic feet 1 MMcf = One million cubic feet 1Bcf1 Bcf = One billion cubic feet 1MDth1 MDth = One thousand decatherms principally through Pacific Gas and Electric Company, or the Utility, a public utility operating in northern and central California. The Utility engages primarily in the businesses of electricity and natural gas distribution, electricity generation, electricityprocurement and transmission, and natural gas procurement, transportation and storage. The Utility was incorporated in California in 1905. PG&E Corporation became the holding company of the Utility and its subsidiaries on January 1, 1997. The Utility, incorporated in California in 1905, is the predecessor of PG&E Corporation. PG&E Corporation also currently owns National Energy & Gas Transmission, Inc., or NEGT, formerly known as PG&E National Energy Group, Inc., which engages in electricity generation and natural gas transportation in the United States, or U.S.The Utility4.95 million electricity distribution customers and approximately 3.94.2 million natural gas distribution customers at December 31, 2003.2005. The Utility had approximately $29.1$33.8 billion of assets at December 31, 2003,2005, and generated revenues of approximately $10.4$11.7 billion in 2003.2005. Its revenues are generated mainly through the sale and delivery of electricity and natural gas. The Utility is regulated primarily by the California Public Utilities Commission, or the CPUC, and the Federal Energy Regulatory Commission, or the FERC. On April 6, 2001, the Utility filed a voluntary petition for relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code, or Chapter 11, in the U.S. Bankruptcy Court for the Northern District of California. The factors that caused the Utility to take this action are discussed in Management’s DiscussionNEGT
NEGT was incorporated on December 18, 1998, as a wholly owned subsidiary of PG&E Corporation. NEGT’s subsidiaries include: Gas Transmission Northwest Corporation (formerly PG&E Gas Transmission Northwest Corporation), North Baja Pipeline, LLC, National Energy Power Company, LLC (formerly PG&E Generating Power Group, LLC) and its subsidiaries, USGen New England, Inc. and its affiliates, and National Energy & Gas Transmission Trading Holdings Corporation and its subsidiaries.
On July 8, 2003, NEGT filed a voluntary petition for relief under the provisions of Chapter 11 in the U.S. Bankruptcy Court for the District of Maryland, Greenbelt Division. On the same day, each of the following indirect wholly owned subsidiaries of NEGT filed a voluntary petition for relief under Chapter 11: PG&E Energy Trading Holdings Corporation (now NEGT Energy Trading Holdings Corporation), PG&E Energy Trading-Power, L.P. (now NEGT Energy Trading — Power, L.P.), PG&E Energy Trading — Gas Corpora-
1
The factors that caused NEGT and its subsidiaries to take this action are discussed in the MD&A and in Note 5 of the Notes to the Consolidated Financial Statements in the Annual Report. Pursuant to Chapter 11, NEGT and its subsidiaries that filed Chapter 11 petitions retain control of their assets and are authorized to operate their businesses as debtors-in-possession while they are subject to the jurisdiction of the bankruptcy court.
NEGT’s proposed plan of reorganization, if implemented, would eliminate PG&E Corporation’s equity interest in NEGT and its subsidiaries. In anticipation of NEGT’s Chapter 11 filing, PG&E Corporation’s representatives, who previously served as directors of NEGT resigned on July 7, 2003, and were replaced with directors who are not affiliated with PG&E Corporation. As a result, PG&E Corporation no longer retains significant influence over NEGT. Accordingly, effective July 8, 2003, NEGT’s results of operations no longer are consolidated with those of PG&E Corporation. NEGT’s results of operations through July 7, 2003, and for prior years have been reclassified as discontinued operations and PG&E Corporation now accounts for its investment in NEGT using the cost method of accounting.
The principal executive office of PG&E Corporation is located at One Market, Spear Tower, Suite 2400, San Francisco, California 94105, and its telephone number is (415) 267-7000. The principal executive office of the Utility is located at 77 Beale Street, P.O. Box 770000, San Francisco, California 94177, and its telephone number is (415) 973-7000. PG&E Corporation and the Utility file various reports with the Securities and Exchange Commission, or the SEC. These reports, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on both PG&E Corporation’sCorporation's website,www.pge-corp.comwww.pgecorp.com, and the Utility’sUtility's website,www.pge.com. The information contained on these websites is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report.
2009. Forward-Looking Statements are discussed below in Item 1A. Risk Factors. These factors include, but are not limited to:2003,2005, PG&E Corporation and its subsidiaries and affiliates (excluding NEGT) had approximately 20,60019,800 employees, including approximately 20,30019,500 employees of the Utility. Of the Utility’sUtility's employees, approximately 13,50012,800 are covered by collective bargaining agreements with three labor unions: the International Brotherhood of Electrical Workers, Local 1245, AFL-CIO, or IBEW; the Engineers and Scientists of California, IFPTE Local 20, AFL-CIO and CLC, or ESC; and the Service Employees International Union, of Security Officers/ SEIU, Local 24/7, or SEIU. The ESC and IBEW collective bargaining agreements expire on December 31, 2007.2008. The SEIU collective bargaining agreement expires on February 28, 2008.The Utility’s Plan of Reorganization and Settlement Agreement The Plan of Reorganization provides that the Utility will pay all allowed creditor claims in full (except for the claims of holders of certain pollution control-related bond obligations that will be reinstated) from the proceeds of a public offering of long-term debt, cash on hand, and draws on revolving credit facilities. At December 31, 2003, allowed claims in the Utility’s Chapter 11 proceeding amounted to approximately $12.3 billion. The Settlement Agreement permits the Utility to emerge from Chapter 11 as an investment grade entity by generally ensuring that the Utility will have the opportunity to collect in rates reasonable costs of providing its utility service. The Settlement Agreement provides that the Utility’s authorized return on equity will be no less than 11.22% per year and, except for 2004 and 2005, its authorized equity ratio will be no less than 52% until the Utility’s credit rating has increased to a specified level. The Settlement Agreement establishes a2$2.21 billion after-tax regulatory asset and allows for the recognition of an approximately $800 million after-tax regulatory asset related to generation assets. The Settlement Agreement and related decisions by the CPUC provide that the Utility’s revenue requirement will be collected regardless of sales levels and that the Utility’s rates will be adjusted in a timely manner to accommodate changes in costs that the Utility incurs. On January 20, 2004, several parties filed applications with the CPUC requesting that the CPUC rehear and reconsider its decision approving the Settlement Agreement. Although the CPUC is not required to act on these applications within a specific time period, if the CPUC has not acted on an application within 60 days, that application may be deemed denied for purposes of seeking judicial review. In addition, the two CPUC Commissioners who did not vote to approve the Settlement Agreement and a municipality have appealed the bankruptcy court’s confirmation order in the U.S. District Court for the Northern District of California, or the District Court. On January 5, 2004, the bankruptcy court denied a request to stay the implementation of the Plan of Reorganization until the appeals are resolved. The District Court will set a schedule for briefing and argument of the appeals at a later date. No additional parties may request rehearings or make appeals of the CPUC’s approval of the Settlement Agreement or the bankruptcy court’s confirmation order. Implementation of the Plan of Reorganization is subject to various conditions, including the consummation of the public offering of long-term debt, the receipt of investment grade credit ratings and final CPUC approval of the Settlement Agreement. For purposes of these conditions, final approval means approval on behalf of the CPUC that is not subject to any pending appeal or further right of appeal, or approval on behalf of the CPUC that, although subject to a pending appeal or further right of appeal, has been agreed by the Utility and PG&E Corporation to constitute final approval. Thus, the terms of the Plan of Reorganization permit the Utility and PG&E Corporation to cause the Plan of Reorganization to become effective (and permit the Utility to issue the long term debt) while the CPUC’s approvals are subject to pending appeals or further rights of appeal. Until certain conditions or events regarding the effectiveness of the Plan of Reorganization discussed above are resolved further, PG&E Corporation and the Utility cannot conclude that the applicable accounting probability standard needed to record the regulatory assets contemplated by the Settlement Agreement has been met. PG&E Corporation and the Utility believe that the Utility and the long-term debt to be issued will receive investment grade credit ratings. The Utility has targeted April 2004 to complete the sale of the long-term debt, which the Utility expects to be the last condition of the Plan of Reorganization to be satisfied. The Plan of Reorganization provides that the effective date will occur 11 business days after all the conditions have been satisfied or, with respect to all conditions except those relating to investment grade credit ratings, waived by PG&E Corporation and the Utility. There can be no assurance that the Settlement Agreement will not be overturned on rehearing or appeal or that the Plan of Reorganization will become effective.The Settlement Agreement and Plan of Reorganization are discussed further in the MD&A and in Note 2 of the Notes to the Consolidated Financial Statements in the Annual Report.Refinancing Supported by a Dedicated Rate Component Under the Settlement Agreement, PG&E Corporation and the Utility agreed to seek to refinance the remaining unamortized pre-tax balance of the $2.21 billion after-tax regulatory asset and related federal, state and franchise taxes, up to a total of $3.0 billion, as expeditiously as practicable after the effective date of the Plan of Reorganization using a securitized financing supported by a dedicated rate component, provided the following conditions are met:• Authorizing California legislation satisfactory to the CPUC, The Utility Reform Network, or TURN, and the Utility is passed and signed into law allowing securitization of the regulatory asset and associated federal and state income and franchise taxes and providing for the collection in the Utility’s rates of any portion of the associated tax amounts not securitized;• The CPUC determines that, on a net present value basis, the refinancing would save customers money over the term of the securitized debt compared to the regulatory asset;• The refinancing will not adversely affect the Utility’s issuer or debt credit ratings; and3• The Utility obtains, or decides it does not need, a private letter ruling from the Internal Revenue Service, or IRS, confirming that neither the refinancing nor the issuance of the securitized debt is a presently taxable event. The Utility would be permitted to complete the refinancing in up to two tranches up to one year apart, and would issue sufficient callable debt or debt with earlier maturities as part of the Plan of Reorganization to accommodate the refinancing supported by a dedicated rate component. Upon refinancing with securitization, the equity and debt components of the Utility’s rate of return on the regulatory asset would be eliminated. Instead the utility would collect from customers amounts sufficient to service the securitized debt. The Utility would use the securitization proceeds to rebalance its capital structure in order to maintain the capital structure provided for under the Settlement Agreement. and Risk Factorsportions of the Annual Reportinformation incorporated by reference, contains forward-looking statements that are necessarily subject to various risks and uncertainties.uncertainties, the realization or resolution of which are outside of management's control. These statements are based on current expectations and projections about future events, and assumptions which management believes are reasonableregarding these events and onmanagement's knowledge of facts at the information currently available to management.date of this report. These forward-looking statements are identified by words such as “estimates,” “expects,” “anticipates,” “plans,” “believes,” “could,” “should,” “would,” “may”"assume," "expect," "intend," "plan," "project," "believe," "estimate," "predict," "anticipate," "aim, " "may," "might," "should," "would," "could," "goal," "potential" and other similar expressions. ActualPG&E Corporation’s and the Utility’s results could differ materially from those contemplated byof operations and financial condition depend primarily on whether the forward-looking statements. AlthoughUtility is able to operate its business within authorized revenue requirements, timely recover its authorized costs, and earn its authorized rate of return. PG&E Corporation and the Utility are not able to predict all the factors that may affect future results, someresults. Some of the factors that could cause future results to differ materially from those expressed or implied by the forward-looking statements, or from historical results, include:Whether and on What Terms the Plan of Reorganization is ImplementedOperating Environment· How the Utility manages its responsibility to procure electric capacity and energy for its customers; • ·The timingadequacy and resolutionprice of the pending applications for rehearing of the CPUC’s approval of the Settlement Agreement and any appeals that may be filed with respect to the disposition of the rehearing applications;• The timing and resolution of the pending appeals of the bankruptcy court’s confirmation of the Plan of Reorganization;• Whether the investment grade credit ratings and other conditions required to implement the Plan of Reorganization are obtained or satisfied; and• Future equity and debt market conditions, future interest rates, and other factors that may affect the Utility’s ability to implement the Plan of Reorganization or affect the amounts and terms of the debt proposed to be issued under the Plan of Reorganization.Operating Environment• Unanticipated changes in operating expenses or capital expenditures;• The level and volatility of wholesale electricity and natural gas prices and supplies, and the Utility’s ability of the Utility to manage and respond to the levels and volatility successfully;of the natural gas market for its customers;• ·Weather, storms, earthquakes, fires, floods, other natural disasters, explosions, accidents, mechanical breakdowns, acts of terrorism, and other events or hazards that affect demand for electricity or natural gas, result in power outages, reduce generating output, ordisrupt natural gas supply, cause damage to the Utility’sUtility's assets or generating facilities, cause damage to the operations or thoseassets of third parties on which the Utility relies;relies, or subject the Utility to third party claims for damage or injury;• ·Unanticipated population growth or decline, changes in market demand and demographic patterns, and general economic and financial market conditions, including unanticipated changes in interesttechnology including the development of alternative energy sources, all of which may affect customer demand for natural gas or inflation rates;4electricity; · • The extent to which the Utility’s residual net open position (i.e., the amount of electricityWhether the Utility needsis required to meetcease operations temporarily or permanently at its customers’ electricity demands that is not provided by Utility-owned generation, Utility power purchase contracts, or the electricity provided by the California Department of Water Resources, or DWR, and allocated to the Utility) increases or decreases due to changes in customer and economic growth rates, the periodic expiration or termination of Utility or DWR power purchase contracts, the reallocation of the DWR power purchase contracts, whether various counterparties are able to meet their obligations under their power sale agreements with the Utility or with the DWR; the retirement or other closure of the Utility’s electricity generation facilities, the performance of the Utility’s electricity generation facilities, and other factors;• The operation of the Utility’s Diablo Canyon nuclear power plant which exposes the Utility to potentially significant environmental and capital expenditure outlays, and, to the extentbecause the Utility is unable to increase its on-site spent nuclear fuel storage capacity, by 2007find another depositary for spent fuel, or find an alternative depository,timely complete the replacement of the steam generators, or because of mechanical breakdown, lack of nuclear fuel, environmental constraints, or for some other reason and the risk that the Utility may be required to close its Diablo Canyon power plant and purchase electricity from more expensive sources;• Actions of credit rating agencies;• Significant changes in the Utility’s relationship with its employees, the availability of qualified personnel and the potential adverse effects if labor disputes were to occur; and· Whether the Utility is able to recognize the anticipated cost benefits and savings expected to result from its efforts to improve customer service through implementation of specific initiatives to streamline business processes and deploy new technology. · The outcome of the regulatory proceedings pending at the CPUC and the FERC and the impact of future ratemaking actions by the CPUC and the FERC; • Acts of terrorism.Legislative and Regulatory Environment and Pending Litigation• ·The impact of currentthe recently enacted Energy Policy Act of 2005 which, among other provisions, repeals the Public Utility Holding Company Act of 1935 making electric utility industry consolidation more likely; expands the FERC’s authority to review proposed mergers; changes the FERC regulatory scheme applicable to qualifying co-generation facilities, or QFs; authorizes the formation of an Electric Reliability Organization to be overseen by the FERC to establish electric reliability standards; and future ratemaking actionsmodifies certain other aspects of energy regulation and federal tax policies applicable to the CPUC, including the outcome of the Utility’s 2003 General Rate Case, or the GRC;Utility;• Prevailing governmental policies and legislative or regulatory actions generally, including those of the California legislature, U.S. Congress, the CPUC, the FERC and the Nuclear Regulatory Commission, or the NRC, with regard to allowed rates of return, industry and rate structure, recovery of investments and costs, acquisitions and disposal of assets and facilities, treatment of affiliate contracts and relationships, and operation and construction of facilities;• ·The extent to which the CPUC or the FERC delays or denies recovery of the Utility’sUtility's costs, including electricity or gas purchase costs, from customers due to a regulatory determination that such costs were not reasonable or prudent, or for other reasons;reasons, resulting in write-offs of regulatory assets;• ·How the CPUC administers the capital structure, stand-alone dividend, and first priority conditions of the CPUC’sCPUC's past decisions permitting the establishment of holding companies for the California investor-owned electric utilities;utilities and the outcome of the CPUC's new rulemaking proceeding concerning the relationship between the California investor-owned energy utilities and their holding companies and non-regulated affiliates, which may include (1) establishing reporting requirements for the allocation of capital between utilities and their non-regulated affiliates by the parent holding companies, and (2) changing the CPUC's affiliate transaction rules;• ·Whether the Utility is determined to be in compliance with all applicable rules, tariffs and orders relating to electricity and natural gas utility operations, including tariffs related to the Utility’s billing and collection practices, and the extent to which a finding of non-compliance could result in customer refunds, penalties or other non-recoverable expenses;expenses, such as has been recommended with respect to the CPUC’s investigation into the Utility’s billing and collection practices; and• ·Whether the Utility is required to incur material costs or capital expenditures or curtail or cease operations at affected facilities, including the Utility’s natural gas compressor stations, to comply with existing and future environmental laws, regulations and policies; andpolicies.• ·The outcome of pending litigation.Competitionlitigation; and · • Increased competition as a resultThe timing and resolution of the takeover by condemnationpending appeal of the Utility’sbankruptcy court order confirming the Utility's plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code.· Continuing efforts by local public utilities to take over the Utility's distribution assets through exercise of their condemnation power or by duplication of the Utility’sUtility's distribution assets or services by local public utility districts, self-generation by its customersservice, and other forms of competitionmunicipalization that may result in stranded investment capital, decreased customer growth, loss of customer load and additional barriers to cost recovery; and5• ·The extent to which the Utility’sUtility's distribution customers are permitted to switch between purchasing electricity from the Utility and from alternate energy service providers as direct access customers, and the extent to which cities, counties and others in the Utility’sUtility's service territory begin directly serving the Utility’selectricity needs of the Utility's customers, with their own facilities or combine to form community choice aggregators.potentially resulting in stranded generating asset costs and non-recoverable procurement costs.Electricity Distribution Operations
The Utility’sUtility's electricity distribution network extends throughout all or a part of 4647 of California’sCalifornia's 58 counties, comprising most of northern and central California. The Utility’sUtility's network consists of 120,428128,128 circuit miles of distribution lines (of which approximately 20% are underground and approximately 80% are overhead). There are 89 transmission substations and 45 transmission switching48 transmission-switching stations. A transmission substation is a fenced facility where voltage is transformed from one transmission voltage level to another. There are 609611 distribution substations and 117 low voltage118 low-voltage distribution substations. There are 264290 combined transmission and distribution substations. Combined transmission and distribution substations have both transmission and distribution transformers.
classes.
| Agricultural and Other Customers | ||||
| Industrial Customers | ||||
| Residential Customers | ||||
| Commercial Customers |
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| 2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||||||||
| Customers (average for the year): | ||||||||||||||||||||||
| Residential | 4,286,085 | 4,171,365 | 4,165,073 | 4,071,794 | 4,017,428 | |||||||||||||||||
| Commercial | 493,638 | 483,946 | 484,430 | 471,080 | 474,710 | |||||||||||||||||
| Industrial | 1,372 | 1,249 | 1,368 | 1,300 | 1,151 | |||||||||||||||||
| Agricultural | 81,378 | 78,738 | 81,375 | 78,439 | 85,131 | |||||||||||||||||
| Public street and highway lighting | 26,650 | 24,119 | 23,913 | 23,339 | 20,806 | |||||||||||||||||
| Other electric utilities | 4 | 5 | 5 | 8 | 12 | |||||||||||||||||
| Total | 4,889,127 | 4,759,422 | 4,756,164 | 4,645,960 | 4,599,238 | |||||||||||||||||
| Deliveries (in GWh):(1) | ||||||||||||||||||||||
| Residential | 29,024 | 27,435 | 26,840 | 28,753 | 27,739 | |||||||||||||||||
| Commercial | 31,889 | 31,328 | 30,780 | 31,761 | 30,426 | |||||||||||||||||
| Industrial | 14,653 | 14,729 | 16,001 | 16,899 | 16,722 | |||||||||||||||||
| Agricultural | 3,909 | 4,000 | 4,093 | �� | 3,818 | 3,739 | ||||||||||||||||
| Public street and highway lighting | 605 | 674 | 418 | 426 | 437 | |||||||||||||||||
| Other electric utilities | 76 | 64 | 241 | 266 | 167 | |||||||||||||||||
| Subtotal | 80,156 | 78,230 | 78,373 | 81,923 | 79,230 | |||||||||||||||||
| DWR | (23,342 | ) | (21,031 | ) | (28,640 | ) | — | — | ||||||||||||||
| Total non-DWR electricity | 56,814 | 57,199 | 49,733 | 81,923 | 79,230 | |||||||||||||||||
| Revenues (in millions): | ||||||||||||||||||||||
| Residential | $ | 3,671 | $ | 3,646 | $ | 3,396 | $ | 3,062 | $ | 2,975 | ||||||||||||
| Commercial | 4,440 | 4,588 | 4,105 | 3,110 | 2,980 | |||||||||||||||||
| Industrial | 1,410 | 1,449 | 1,554 | 1,053 | 1,044 | |||||||||||||||||
| Agricultural | 522 | 520 | 525 | 420 | 404 | |||||||||||||||||
| Public street and highway lighting | 69 | 73 | 60 | 43 | 49 | |||||||||||||||||
| Other electric utilities | 24 | 10 | 39 | 26 | 17 | |||||||||||||||||
| Subtotal | 10,136 | 10,286 | 9,679 | 7,714 | 7,469 | |||||||||||||||||
| DWR | (2,243 | ) | (2,056 | ) | (2,173 | ) | — | — | ||||||||||||||
| Direct access credits | (277 | ) | (285 | ) | (461 | ) | (1,055 | ) | (348 | ) | ||||||||||||
| Miscellaneous(2) | (52 | ) | 193 | 244 | 202 | 162 | ||||||||||||||||
| Regulatory balancing accounts | 18 | 40 | 37 | (7 | ) | (51 | ) | |||||||||||||||
| Total electricity operating revenues | $ | 7,582 | $ | 8,178 | $ | 7,326 | $ | 6,854 | $ | 7,232 | ||||||||||||
| Other Data: | ||||||||||||||||||||||
| Average annual residential usage (kWh) | 6,772 | 6,577 | 6,444 | 7,062 | 6,905 | |||||||||||||||||
| Average billed revenues (cents per KWh): | ||||||||||||||||||||||
| Residential | 12.65 | 13.29 | 12.65 | 10.65 | 10.72 | |||||||||||||||||
| Commercial | 13.92 | 14.65 | 13.34 | 9.79 | 9.79 | |||||||||||||||||
| Industrial | 9.62 | 9.84 | 9.71 | 6.23 | 6.24 | |||||||||||||||||
| Agricultural | 13.35 | 13.00 | 12.83 | 11.00 | 10.81 | |||||||||||||||||
| Net plant investment per customer | $ | 2,689 | $ | 2,105 | $ | 2,018 | $ | 1,969 | $ | 2,388 | ||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||
| Customers (average for the year): | ||||||||||
| Residential | 4,353,458 | 4,366,897 | 4,286,085 | 4,171,365 | 4,165,073 | |||||
| Commercial | 509,786 | 509,501 | 493,638 | 483,946 | 484,430 | |||||
| Industrial | 1,271 | 1,339 | 1,372 | 1,249 | 1,368 | |||||
| Agricultural | 78,876 | 80,276 | 81,378 | 78,738 | 81,375 | |||||
| Public street and highway lighting | 28,021 | 27,176 | 26,650 | 24,119 | 23,913 | |||||
| Other electric utilities | 4 | 3 | 4 | 5 | 5 | |||||
| Total (1) | 4,971,362 | 4,985,192 | 4,889,127 | 4,759,422 | 4,756,164 | |||||
| Deliveries (in GWh):(2) | ||||||||||
| Residential | 29,752 | 29,453 | 29,024 | 27,435 | 26,840 | |||||
| Commercial | 32,375 | 32,268 | 31,889 | 31,328 | 30,780 | |||||
| Industrial | 14,932 | 14,796 | 14,653 | 14,729 | 16,001 | |||||
| Agricultural | 3,742 | 4,300 | 3,909 | 4,000 | 4,093 | |||||
| Public street and highway lighting | 792 | 2,091 | 605 | 674 | 418 | |||||
| Other electric utilities | 33 | 28 | 76 | 64 | 241 | |||||
| Subtotal | 81,626 | 82,936 | 80,156 | 78,230 | 78,373 | |||||
| California Department of Water Resources (DWR) | (20,476) | (19,938) | (23,554) | (21,031) | (28,640) | |||||
| Total non-DWR electricity | 61,150 | 62,998 | 56,602 | 57,199 | 49,733 | |||||
| Revenues (in millions): | ||||||||||
| Residential | $3,856 | $3,718 | $3,671 | $3,646 | $3,396 | |||||
| Commercial | 4,114 | 4,179 | 4,440 | 4,588 | 4,105 | |||||
| Industrial | 1,232 | 1,204 | 1,410 | 1,449 | 1,554 | |||||
| Agricultural | 446 | 491 | 522 | 520 | 525 | |||||
| Public street and highway lighting | 66 | 71 | 69 | 73 | 60 | |||||
| Other electric utilities | 4 | 22 | 24 | 10 | 39 | |||||
| Subtotal | 9,718 | 9,685 | 10,136 | 10,286 | 9,679 | |||||
| DWR | (1,699) | (1,933) | (2,243) | (2,056) | (2,173) | |||||
| Direct access credits | — | — | (277) | (285) | (461) | |||||
| Miscellaneous(3) | 235 | (248) | (52) | 193 | 244 | |||||
| Regulatory balancing accounts | (327) | 363 | 18 | 40 | 37 | |||||
| Total electricity operating revenues | $7,927 | $7,867 | $7,582 | $8,178 | $7,326 | |||||
| Other Data: | ||||||||||
| Average annual residential usage (kWh) | 6,834 | 6,744 | 6,772 | 6,577 | 6,444 | |||||
| Average billed revenues (cents per kWh): | ||||||||||
| Residential | 12.96 | 12.62 | 12.65 | 13.29 | 12.65 | |||||
| Commercial | 12.71 | 12.95 | 13.92 | 14.65 | 13.34 | |||||
| Industrial | 8.25 | 8.14 | 9.62 | 9.84 | 9.71 | |||||
| Agricultural | 11.92 | 11.41 | 13.35 | 13.00 | 12.83 | |||||
| Net plant investment per customer | $2,966 | $2,790 | $2,689 | $2,105 | $2,018 |
7
| Owned generation (nuclear, fossil fuel-fired and hydroelectric facilities) | ||||
| DWR | ||||
| Qualifying Facilities/Renewables | ||||
| Irrigation Districts | ||||
| Other Power Purchases |
| Number of | Net Operating | |||||||||||
| Generation Type | County Location | Units | Capacity (MW) | |||||||||
| Nuclear: Diablo Canyon | San Luis Obispo | 2 | 2,174 | |||||||||
| Hydroelectric: Conventional | 16 counties in northern and central California | 107 | 2,684 | |||||||||
| Helms pumped storage | Fresno | 3 | 1,212 | |||||||||
| Hydro electric subtotal | 110 | 3,896 | ||||||||||
| Fossil fuel: | ||||||||||||
| Humboldt Bay(1) | Humboldt | 2 | 105 | |||||||||
| Hunters Point(2) | San Francisco | 2 | 215 | |||||||||
| Mobile turbines | Humboldt | 2 | 30 | |||||||||
| Fossil fuel subtotal | 6 | 350 | ||||||||||
| Total | 118 | 6,420 | ||||||||||
Generation Type | County Location | Number of Units | Net Operating Capacity (MW) | |||
| Nuclear: | ||||||
| Diablo Canyon | San Luis Obispo | 2 | 2,174 | |||
| Hydroelectric: | ||||||
| Conventional | 16 counties in northern and central California | 107 | 2,684 | |||
| Helms pumped storage | Fresno | 3 | 1,212 | |||
| Hydroelectric subtotal | 110 | 3,896 | ||||
| Fossil fuel: | ||||||
| Humboldt Bay(1) | Humboldt | 2 | 105 | |||
| Hunters Point(2) | San Francisco | 2 | 215 | |||
| Mobile turbines | Humboldt | 2 | 30 | |||
| Fossil fuel subtotal | 6 | 350 | ||||
| Total | 118 | 6,420 |
8
| 2004 | 2005 | 2006 | 2007 | 2008 | |||||||||||||||||
Unit 1 | |||||||||||||||||||||
| Refueling | March | October | — | April | — | ||||||||||||||||
| Duration (days) | 48 | 45 | — | 35 | — | ||||||||||||||||
| Startup | May | November | June | ||||||||||||||||||
Unit 2 | |||||||||||||||||||||
| Refueling | October | April | February | ||||||||||||||||||
| Duration (days) | 42 | — | 42 | — | 80 | ||||||||||||||||
| Startup | December | — | May | — | April | ||||||||||||||||
During a routine inspection conducted
2006 | 2007 | 2008 | 2009 | 2010 | |||||
Unit 1 | |||||||||
| Refueling | - | April | - | January | October | ||||
| Duration (days) | - | 35 | - | 80 | 35 | ||||
| Startup | - | June | - | April | November | ||||
Unit 2 | |||||||||
| Refueling | April | - | February | October | - | ||||
| Duration (days) | 45 | - | 80 | 35 | - | ||||
| Startup | June | - | April | November | - |
stored.
$43.6 million per one-year policy term.
2007.
9
In January 2001, because of
On September 19, 2002, the CPUC issued a decision allocating electricity from 19 of the DWR’s contracts, or the DWR allocated contracts, to the Utility’s customers. Electricity from DWR allocated contracts represented approximately 29% of the Utility’s total sources of electricity in 2003. In January 2003, the Utility became responsible for scheduling and dispatching the electricity subject to the 19 DWR allocated contracts on a least-cost basis and for many administrative functions associated with those contracts. During 2004, a total average capacity of approximately 2,700 MW of the electricity under the DWR allocated contracts is subject to “must take” provisions that require the DWR to take and pay for the electricity regardless of whether the electricity is needed. A total average capacity for 2004 of approximately 1,200 MW of the electricity under DWR allocated contracts is subject to provisions that require the DWR to pay a capacity charge, but do not require the purchase of electricity unless that electricity is dispatched and delivered.
| After assumption, the |
| The CPUC first makes a finding that the DWR power purchase contracts to be assumed are just and reasonable; and |
10
| The CPUC has acted to ensure that the Utility will receive full and timely recovery in its retail electricity rates of all costs associated with the DWR power purchase contracts to be assumed without further review. |
7 Qualifying Facility Power Purchase Agreements |
The Utility is required by CPUC decisions to purchase energy and capacity from independent power producers that are qualifying facilities under the Public Utility Regulatory Policies Act of 1978, or PURPA. UnderTo implement PURPA, the CPUC required California investor-owned electric utilities to enter into a series of long-term power purchase agreements with qualifying facilities, or QFs, and approved the applicable terms, conditions, price optionsprices and eligibility requirements. These agreements require the Utility to pay for energy and capacity. Energy payments are based on the qualifying facility’sQF's actual electrical output and CPUC-approved energy prices, while capacity payments are based on the qualifying facility’sQF's total available capacity and contractual capacity commitment. Capacity payments may be adjusted if the facilityQF fails to meet or exceeds performance requirements specified in the applicable power purchase agreement.
At December 31, 2003,2005, the Utility had agreements with 300 qualifying facilities280 QFs for approximately 4,400 megawatts, or4,200 MW that are in operation. Agreements for approximately 4,0003,900 MW expire at various dates between 20042006 and 2028. Qualifying facilityQF power purchase agreements for approximately 400300 MW have no specific expiration dates and will terminate only when the owner of the qualifying facilityQF exercises its termination option. The Utility also has power purchase agreements with 50 qualifying facilities that are not currently providing or expected to provide electricity.approximately 60 inoperative QFs. The total of approximately 4,4004,200 MW consists of approximately 2,600 MW from cogeneration projects, 800600 MW from wind projects and 1,000 MW from projects with other projects,fuel sources, including biomass, waste-to-energy, geothermal, solar and hydroelectric.
Irrigation Districts and Water Agencies |
The Utility has contracts with various irrigation districts and water agencies to purchase hydroelectric power. Under these contracts, the Utility must make specified semi-annual minimum payments based on the irrigation districts’districts' and water agencies’agencies' debt service requirements, regardless ifof whether or not any hydroelectric power is supplied, and variable payments for operation and maintenance costs incurred by the suppliers. These contracts expire on various dates from 20042005 to 2031. The Utility’sUtility's irrigation district and water agency contracts accounted for approximately 5% of 2003the Utility’s 2005 electricity sources, approximately 4%5% of 2002the Utility's 2004 electricity sources and approximately 3%5% of 2001the Utility's 2003 electricity sources.
11
In 1967,purchases to approximately 800-900 GWh. During 2005, the Utility and the Western Area Power Administration, or WAPA, entered into several long-termnew renewable power purchase contracts governing the interconnection of the Utility’s and WAPA’s electricity transmission systems, the use of the Utility’s electricity transmission and distribution system by WAPA, and the integration of the Utility’s and WAPA’s customer demands and electricity resources. The contracts givethat will help the Utility access to WAPA’s excess hydroelectric power and obligate the Utility to provide WAPA with electricity when its own resources are not sufficient to meet its requirements. The contracts are scheduled to terminate on December 31, 2004, but termination is subject to FERC approval, which the Utility expects to receive.
The costs to fulfill the Utility’s obligations to WAPA under the contracts cannot be accurately estimated at this time since both the purchase price and the amount of electricity WAPA will need from the Utility in 2004 are uncertain. However, the Utility expects that the cost of meeting its contractual obligations to WAPA will be greater than the price the Utility receives from WAPA under the contracts. Although it is not indicative of future sales commitments or sales-related costs, WAPA’s net amount purchased from the Utility was approximately 4,804 GWh, in 2003, 3,619 GWh in 2002 and 4,823 GWh in 2001.
goals.
At December 31, 2003,2005, the Utility owned 18,61218,616 circuit miles of interconnected transmission lines operated at voltages of 500 kV to 60 kV and transmission substations with a capacity of 42,79849,158 MVA. Electricity is transmitted across these lines and substations and is then distributed to customers through 120,428128,128 circuit miles of distribution lines and substations with a capacity of 24,21825,254 MVA. In 2003,2005, the Utility delivered 80,15681,626 GWh to its customers, including 8,9798,867 GWh delivered to direct access customers. The Utility is interconnected with electric power systems in the Western Electricity Coordinating Council which includes 14 western states, Alberta and British Columbia, Canada, and parts of Mexico.
12
system is maintained.
April 2006.
Since 1991,
13
In accordance with a ratemaking settlement agreement implemented in 1998 called the Gas Accord, the
Customers pay a distribution rate that reflects the Utility’s costs to serve each customer class.
| Residential Customers | 28% | |||
| 60% | ||||
| Commercial Customers | 12% |
14
| 2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||||||||
| Customers (average for the year): | ||||||||||||||||||||||
| Residential | 3,744,011 | 3,738,524 | 3,705,141 | 3,642,266 | 3,593,355 | |||||||||||||||||
| Commercial | 208,857 | 206,953 | 205,681 | 203,355 | 203,342 | |||||||||||||||||
| Industrial | 1,988 | 1,819 | 1,764 | 1,719 | 1,625 | |||||||||||||||||
| Other gas utilities | 6 | 5 | 6 | 6 | 4 | |||||||||||||||||
| Total | 3,954,862 | 3,947,301 | 3,912,592 | 3,847,346 | 3,798,326 | |||||||||||||||||
| 2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||||||||||
| Gas supply (MMcf): | |||||||||||||||||||||||
| Purchased from suppliers in: | |||||||||||||||||||||||
| Canada | 196,278 | 210,716 | 209,630 | 216,684 | 230,808 | ||||||||||||||||||
| California | (7,421 | ) | 19,533 | 20,352 | 32,167 | 18,956 | |||||||||||||||||
| Other states | 102,941 | 67,878 | 76,589 | 75,834 | 107,226 | ||||||||||||||||||
| Total purchased | 291,798 | 298,127 | 306,571 | 324,685 | 356,990 | ||||||||||||||||||
| Net (to storage) from storage | 1,359 | (218 | ) | (27,027 | ) | 19,420 | (980 | ) | |||||||||||||||
| Total | 293,157 | 297,909 | 279,544 | 344,105 | 356,010 | ||||||||||||||||||
| Utility use, losses, etc.(1) | (14,307 | ) | (16,393 | ) | (8,988 | ) | (62,960 | ) | (47,152 | ) | |||||||||||||
| Net gas for sales | 278,850 | 281,516 | 270,556 | 281,145 | 308,858 | ||||||||||||||||||
| Bundled gas sales (MMcf): | |||||||||||||||||||||||
| Residential | 198,580 | 202,141 | 197,184 | 210,515 | 233,482 | ||||||||||||||||||
| Commercial | 79,891 | 78,812 | 72,528 | 66,443 | 70,093 | ||||||||||||||||||
| Industrial | 379 | 563 | 831 | 4,146 | 5,255 | ||||||||||||||||||
| Other gas utilities | — | — | 13 | 41 | 28 | ||||||||||||||||||
| Total | 278,850 | 281,516 | 270,556 | 281,145 | 308,858 | ||||||||||||||||||
| Transportation only (MMcf): | 525,353 | 508,090 | 646,079 | 606,152 | 484,218 | ||||||||||||||||||
| Revenues (in millions): | |||||||||||||||||||||||
| Bundled gas sales: | |||||||||||||||||||||||
| Residential | $ | 1,836 | $ | 1,379 | $ | 2,308 | $ | 1,681 | $ | 1,543 | |||||||||||||
| Commercial | 697 | 499 | 783 | 513 | 449 | ||||||||||||||||||
| Industrial | 1 | 3 | 16 | 35 | 24 | ||||||||||||||||||
| Other gas utilities | 1 | 1 | — | — | — | ||||||||||||||||||
| Miscellaneous | (31 | ) | 127 | (93 | ) | 84 | (47 | ) | |||||||||||||||
| Regulatory balancing accounts | 68 | 11 | (253 | ) | 132 | (260 | ) | ||||||||||||||||
| Bundled gas revenues | 2,572 | 2,020 | 2,761 | 2,445 | 1,709 | ||||||||||||||||||
| Transportation service only revenue | 284 | 316 | 375 | 338 | 287 | ||||||||||||||||||
| Operating revenues | $ | 2,856 | $ | 2,336 | $ | 3,136 | $ | 2,783 | $ | 1,996 | |||||||||||||
| Selected Statistics: | |||||||||||||||||||||||
| Average annual residential usage (Mcf) | 53 | 54 | 53 | 59 | 65 | ||||||||||||||||||
| Average billed bundled gas sales revenues per Mcf: | |||||||||||||||||||||||
| Residential | $ | 9.25 | $ | 6.82 | $ | 11.70 | $ | 7.98 | $ | 6.61 | |||||||||||||
| Commercial | 8.73 | 6.33 | 10.80 | 7.72 | 6.40 | ||||||||||||||||||
| Industrial | 2.48 | 4.35 | 19.15 | 8.53 | 4.69 | ||||||||||||||||||
| Average billed transportation only revenue per Mcf | 0.54 | 0.62 | 0.58 | 0.56 | 0.59 | ||||||||||||||||||
| Net plant investment per customer | $ | 1,261 | $ | 1,006 | $ | 970 | $ | 1,003 | $ | 1,011 | |||||||||||||
15
The Utility purchases natural gas to serve the Utility’sUtility's core customers directly from producers and marketers in both Canada and the United States. The contract lengths and natural gas sources of the Utility’sUtility's portfolio of natural gas purchase contracts have fluctuated, generally based on market conditions. During 2003,2005, the Utility purchased approximately 292,000289,000 MMcf of natural gas (net of the sale of excess supply) from 4857 suppliers. SubstantiallyConsistent with existing CPUC policy directives, substantially all this natural gas was purchased under contracts with a term of less than one year.year or less. The Utility’sUtility's largest individual supplier represented approximately 9.6%10.4% of the total natural gas volume the Utility purchased during 2003.
2005.
| 2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||||||||||||||||||||||||||
| Avg. | Avg. | Avg. | Avg. | Avg. | ||||||||||||||||||||||||||||||||||||
| MMcf | Price | MMcf | Price | MMcf | Price | MMcf | Price | MMcf | Price | |||||||||||||||||||||||||||||||
| Canada | 196,278 | $ | 4.73 | 210,716 | $ | 2.42 | 209,630 | $ | 4.43 | 216,684 | $ | 4.05 | 230,808 | $ | 2.50 | |||||||||||||||||||||||||
| California(1) | (7,421 | ) | $ | 3.39 | 19,533 | $ | 2.88 | 20,352 | $ | 11.55 | 32,167 | $ | 8.20 | 18,956 | $ | 2.45 | ||||||||||||||||||||||||
| Other states (substantially all U.S southwest) | 102,941 | $ | 4.63 | 67,878 | $ | 3.04 | 76,589 | $ | 10.41 | 75,834 | $ | 5.99 | 107,226 | $ | 2.42 | |||||||||||||||||||||||||
| Total/weighted average | 291,798 | $ | 4.73 | 298,127 | $ | 2.59 | 306,571 | $ | 6.40 | 324,685 | $ | 4.92 | 356,990 | $ | 2.47 | |||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||||||
MMcf | Avg. Price | MMcf | Avg. Price | MMcf | Avg. Price | MMcf | Avg. Price | MMcf | Avg. Price | |||||||||||||||||||||
| Canada | 204,884 | $ | 7.12 | 205,180 | $ | 5.37 | 196,278 | $ | 4.73 | 210,716 | $ | 2.42 | 209,630 | $ | 4.43 | |||||||||||||||
| California(1) | (18,951 | ) | $ | 7.70 | (9,108 | ) | $ | 4.89 | (7,421 | ) | $ | 3.39 | 19,533 | $ | 2.88 | 20,352 | $ | 11.55 | ||||||||||||
| Other states (substantially all U.S southwest) | 103,237 | $ | 7.10 | 103,801 | $ | 5.44 | 102,941 | $ | 4.63 | 67,878 | $ | 3.04 | 76,589 | $ | 10.41 | |||||||||||||||
| Total/weighted average | 289,170 | $ | 7.07 | 299,873 | $ | 5.41 | 291,798 | $ | 4.73 | 298,127 | $ | 2.59 | 306,571 | $ | 6.40 | |||||||||||||||
In 2003,2005, approximately 67%65% of the Utility’s natural gas suppliestransported on the Utility's system came from western Canada. The Utility has a number of arrangements with interstate and Canadian third-party transportation service providers to serve core customers’customers' service demands. The Utility has firm transportation agreements for delivery of natural gas from western Canada to the United States- Canadian border with TransCanada NOVA Gas Transmission, Ltd. and TransCanada PipeLines Ltd., B.C. System. These companies’companies' pipeline systems connect at the border to the pipeline system owned by Gas Transmission Northwest Corporation which provides natural gas transportation services to interconnection points with the Utility’sUtility's natural gas transportation system in the area of California near Malin, Oregon. The Utility has a firm transportation agreement with Gas Transmission Northwest Corporation for these services.
16
| Demand Charges | ||||||||||||
| Expiration | Quantity | for the Year Ended | ||||||||||
| Pipeline | Date | MDth per day | December 31, 2003 | |||||||||
| (In millions) | ||||||||||||
| El Paso Natural Gas Company | 10/31/2003 | 100 | $ | 9.5 | ||||||||
| El Paso Natural Gas Company | 12/31/2004 | 64 | 4.5 | |||||||||
| TransCanada NOVA Gas Transmission, Ltd. | 12/31/2005 | 593 | 23.6 | |||||||||
| TransCanada PipeLines Ltd., B.C. System | 10/31/2005 | 584 | 10.6 | |||||||||
| Gas Transmission Northwest Corporation | 10/31/2005 | 610 | 55.0 | |||||||||
| Transwestern Pipeline Co. | 03/31/2007 | 150 | 15.8 | |||||||||
| El Paso Natural Gas Company | 03/31/2007 | 40 | 3.8 | |||||||||
| El Paso Natural Gas Company | 04/30/2005 | 100 | 1.1 | |||||||||
Pipeline | Expiration Date | Quantity MDth per day | Demand Charges for the Year Ended December 31, 2005 (In millions) | ||||
| TransCanada NOVA Gas Transmission, Ltd. | 12/31/2007 | (a) | 616 | 28.0 | |||
| TransCanada PipeLines Ltd., B.C. System | 10/31/2007 | 607 | 13.0 | ||||
| Gas Transmission Northwest Corporation | 10/31/2007 | 610 | 54.8 | ||||
| Transwestern Pipeline Co. | 03/31/2007 | 150 | 20.5 | ||||
| El Paso Natural Gas Company (b) | Various | 202 | 19.2 |
| (a) | A small portion (23 MDth/d) of the Utility’s capacity is due to expire on October 31, 2007. |
| (b) | As of December 31, 2005, the Utility has three active contracts with El Paso with expiration dates ranging from June 30, 2007 to June 30, 2010. |
The driving forces behind these competitive pressures have been customers who believe they can obtain energy at lower unit prices and competitors who want access to those customers. Regulators and legislators responded to these forces by providing for more competition in the energy industry. Regulators and legislators, to varying degrees, have required utilities to unbundle rates in order to allow customers to compare unit prices of the utilities and other providers when selecting their energy service provider.
17
implemented as early as November 2007.
the Utility in its overall transmission rates.
In October 2003, the CPUC instituted a rulemaking implementing
18
The Utility faces competition In December 2005, the CPUC adopted rules that allow for the implementation of community choice aggregation.
FERC Order 636, issued in 1992, required interstate natural gas pipeline companies to divide their services into separate gas commodity sales, transportation and storage services. Under Order 636, interstate natural gas pipeline companies must provide transportation service regardless of whether the customer (often a local gas distribution company) buys the natural gas commodity from these companies.
The Utility’s natural gas pipelines are located within the State of California and are exempt from FERC rules and regulations applicable to interstate pipelines.
2007.
19
PG&E Corporation and its subsidiaries are exempt from all provisions, except Section 9(a)(2), of the
During 2003, proposed federal energy legislation was considered by the U.S. Senate. If adopted, the legislation would, among other things, repeal PUHCA. PUHCA currently imposes significant regulatory barriersFERC's authority and standard of review with respect to mergers and acquisitions involving public utilities and public utility holding companies.consolidations. The repeal of PUHCA couldis expected to trigger a period of consolidation among public utilities, as well as
PG&E Corporation is not a public utility under the laws of California and is not subject to regulation as such by the CPUC. However, the CPUC approval authorizing the Utility to form aformation of holding company wascompanies has been granted subject to various conditions set forth in CPUC decisions issued in 1996 and 1999 related to finance, human resources, records and bookkeeping, and the transfer of customer information. In 2004, the California Court of Appeal issued an opinion finding that the CPUC has limited jurisdiction over the holding companies to enforce these conditions. The financial conditions provide that:
| · | ||
| · | ||
| · | ||
20
| · | ||
On April 3, 2001,
On January 9, 2002, the CPUC issued two decisions in its pending investigation. In one decision, the CPUC, for the first time, adopted a broad interpretation of the first priority condition and concluded that the condition, at least under certain circumstances, includes the requirement that each of the holding companies “infuse the utility with all types of capital necessary for the utility to fulfill its obligation to serve.” The three major California investor owned electricenergy utilities and their parent holding companies had opposed this broader interpretation as being inconsistent with the prior 15 years’ understanding of that condition as applying more narrowly to a priority on capital needed for investment purposes.and affiliates. The CPUC also interpretednoted that in light of the first priority conditionrepeal of PUHCA, as prohibiting adiscussed above, the parent holding company from acquiring assetscompanies of the California energy utilities may try to expand the unregulated activities of their affiliates, may try to merge with or acquire other companies or may be acquired by other companies, and that it was necessary for the CPUC to review its utility subsidiary for inadequate considerationexisting regulations and acquiring assets of its utility subsidiary at any price, if such acquisition would impairto consider whether additional, new rules or regulations are needed. The CPUC stated that it may propose rules to ensure that the utility’sCalifornia energy utilities retain sufficient capital and the ability to fulfill its obligationaccess capital in order to serve ormeet their customers' needs, and to operateaddress the potential conflicts between the utilities' ratepayers' interests and the parent holding companies' and affiliates' interests in a prudent and efficient manner. Inorder to ensure that these conflicts do not undermine the other decision,utilities' ability to meet their public service obligations at the lowest possible cost. The CPUC assertedstated that it maintains jurisdictionmay propose additional rules or regulations regarding, but not necessarily limited to, enforce(1) reporting requirements for the conditions against PG&E Corporationallocation of capital between utilities and similartheir non-regulated affiliates by the parent holding companies, and to modify, clarify or add(2) changes to the conditions.
21
In a related decision, the CPUC denied the motions filed by the California utility holding companies to dismiss the holding companies from the pending investigation on the basis that the CPUC lacks jurisdiction over the holding companies. However, in the interim decision interpreting the first priority condition discussed above, the CPUC separately dismissed PG&E Corporation (but no other utility holding company) as a respondent to the proceeding. In its written decision adopted on January 9, 2002, the CPUC stated that PG&E Corporation was being dismissed so that an appropriate legal forum could decide expeditiously whether adoption of the Utility’s original proposed plan of reorganization would violate the first priority condition. On November 26, 2003, the California Court of Appeals for the First Appellate District in San Francisco agreed to hear the petitions for review of the CPUC’s decisions. Oral argument before the appellate court is set for March 5, 2004.
PG&E Corporation and the Utility believe that they have complied with applicable statutes CPUC decisions, rules and orders. Under the Settlement Agreement the CPUC has agreed to dismiss PG&E Corporation from the CPUC’s investigation as to past practices.
On January 10, 2002, the California Attorney General filed a complaint in the San Francisco Superior Court against PG&E Corporation and its directors, as well as against the directors of the Utility, based on allegations of unfair or fraudulent business acts or practices in violation of California Business and Professions Code Section 17200. Among other allegations, the California Attorney General alleges that PG&E Corporation violated the various conditions established by the CPUC in decisions approving the holding company formation. After the California Attorney General’s complaint was filed, two other complaints containing substantially similar allegations were filed by the City and County of San Francisco and by a private plaintiff. These complaints are not affected by the Settlement Agreement. For more information, see “Item 3 — Legal Proceedings” below.
CPUC's affiliate transaction rules.
22
In February 2004, The FERC has proposed to repeal these behavioral conditions in favor of its more generalized prohibition on market manipulation that it adopted in January 2006 based on SEC Rule 10b-5, as discussed above. On January 13, 2006, the FERC is expectedapproved an increase in the energy price cap, from $250 to $400 per MWh, in response to the ISO’s request to reflect natural gas price increases. The FERC's January 13 order also initiated a proceeding to consider ISO market monitoring and oversight in connection withwhether to extend the FERC’s review ofenergy price cap increase throughout the ISO’s standard market design proposals. Market monitoring and mitigation also may be affected by anyWestern Electricity Coordinating Council area, as well as whether to increase the price cap for ancillary services to the same level as the energy legislation Congress may pass.
price cap.
During 2003, the FERC confirmed most of the administrative law judge’s findings, but partially modified the refund methodology to include use of a new natural gas price methodology as the basis for mitigated prices. The FERC indicated that it would consider later allowances claimed by sellers for natural gas costs above the natural gas prices in the refund methodology. In addition, the FERC directed the ISO and the California Power Exchange, or PX, which operates solely to reconcile remaining refund amounts owed, to make compliance filings establishing refund amounts by March 2004. The ISO has indicated that it plans to make its compliance filing by August 2004. The actual refunds will not be determined until the FERC issues a final decision following the ISO and PX compliance filings. The FERC is uncertain when it will issue a final decision in this proceeding. In addition, future refunds could increase or decrease as a result of an alternative calculation proposed by the ISO, which incorporates revised data provided by the Utility and other entities.
Under the Settlement Agreement, the Utility and PG&E Corporation agreed to continue to cooperate with the CPUC and the State of California in seeking refunds from generators and other energy suppliers. The net after-tax amount of any refunds, claim offsets or other credits from generators or other energy suppliers relating to the Utility’s ISO, PX, qualifying facilities or energy service provider costs that are actually realized in cash or by offset of creditor claims in its Chapter 11 proceeding would reduce the balance of the $2.21 billion after-tax regulatory asset created by the Settlement Agreement.
judicial proceedings. The Utility has recorded approximately $1.8 billionentered into settlements with various power suppliers resolving certain disputed claims and the Utility's refund claims against these power suppliers. For further discussion of claims filed by various electricity generators in its Chapter 11 proceeding as liabilities subjectthese settlements, see the section of Note 17: Commitments and Contingencies—California Energy Crisis Proceedings, of the Notes to compromise. This amount is subject to a pre-petition offset of approximately $200 million, reducing the net liability recorded to approximately $1.6 billion. The Utility currently estimates that the claims filed would have been reduced to approximately $1.2 billion based on the refund methodology recommendedConsolidated Financial Statements in the administrative law judge’s initial decision, resulting in a net liability of approximately $1.0 billion after the approximately $200 million pre-petition offset. 2005 Annual Report.
The NRC oversees the licensing, construction, operation and decommissioning of nuclear facilities, including the Utility’sUtility's Diablo Canyon power plant and Humboldt Bay Unit 3. NRC regulations require extensive monitoring and review of the safety, radiological, environmental and security aspects of these facilities. In the event of non-compliance, the NRC has the authority to impose fines or to force a shutdown of a nuclear plant, or both. Safety requirements promulgated by the NRC have, in the past, necessitated substantial capital expenditures at the Utility’sUtility's Diablo Canyon power plant and additional significant capital expenditures could be required in the future.
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Over the last several years, the Utility’s operations have been significantly affected by statutes passed by the California legislature, including:
One of PG&E Corporation and the Utility’s obligations under the Settlement Agreement is seeking to refinance the remaining unamortized pre-tax balance of the regulatory asset and related federal, state and franchise taxes using a securitized financing supported by a dedicated rate component that would require enactment of authorizing California legislation. On January 22, 2004, the CPUC approved proposed legislation, Senate Bill 772, that would authorize a dedicated rate component to securitize the regulatory asset and the related taxes.
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Development Commission
The Utility obtains a number of permits, authorizations and licenses in connection with the construction and operation of the Utility’sUtility's generation facilities, electricity transmission lines, natural gas transportation pipelines and gas compressor station facilities. Discharge permits, various Air Pollution Control District permits, U.S. Department of Agriculture-Forest Service permits, FERC hydroelectric generation facility and transmission line licenses, and NRC licenses are some of the more significant examples. Some licenses and permits may be revoked or modified by the granting agency if facts develop or events occur that differ significantly from the facts and projections assumed in granting the approval. Furthermore, discharge permits and other approvals and licenses are granted for a term less than the expected life of the associated facility. Licenses and permits may require periodic renewal, which may result in additional requirements being imposed by the granting agency. The Utility currently has seven hydroelectric projects and one transmission line project undergoing FERC relicensing. The Utility will begin relicensing proceedings on two additional hydroelectric projects within the next two years.
Frozen electricity rates, which began on January 1, 1998, were designed to allow the Utility to recover its authorized utility costs, and to the extent frozen rates generated revenues in excess of these costs, to recover the Utility’s transition costs. Although the surcharges implemented in 2001 effectively increased the actual rate, under the frozen rate structure, increases in the Utility’s authorized revenue requirements did not increase the Utility’s revenues. In addition, DWR revenue requirements reduced the Utility’s revenues under the frozen rate structure. As a result of revised electricity rates discussed below and a January 2004 CPUC decision determining that the rate freeze ended on January 18, 2001, the Utility expects that once approved by the CPUC, its rates will reflect its costs of service whereby the
On January 26, 2004, the Utility filed revised electricity rates with the CPUC based on the Utility’s 2004 forecast revenue requirements and requested implementation of the rate changes. These rates reflect allocation of the Utility’s revenue requirements in accordance with a January 20, 2004 rate design settlement agreement entered into with a number of consumer groups and government agencies, including TURN and the CPUC’s Office of Ratepayer Advocates, or ORA. The rate design settlement agreement has been submitted to the
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Based on the revised rates filed by the Utility on January 26, 2004, current electricity revenues are expected to be reduced by approximately $860 million as compared to revenues generated at current rates. On February 11, 2004, a proposed decision was issued which, if ultimately approved by the CPUC, instead is expected to reduce the Utility’s current electricity revenues by $799 million. The most significant portion of the difference between the $799 million included in the draft decision and the $860 million filed by the Utility relates to a proposed decrease in the DWR’s revenue requirement included in the Utility’s January 26, 2004 rate filing. In the January 26, 2004 rate filing, the Utility had estimated that the DWR’s revenue requirement would be reduced by approximately $79 million related to the DWR’s share of the settlement agreement of CPUC litigation reached with El Paso. However, the DWR protested the Utility’s rate filing, indicating that the amount of its share of the El Paso settlement was unknown and that the DWR had not changed its revenue requirement as a result of the El Paso settlement.
The February 11, 2004 proposed decision orders the Utility to amend its January 26, 2004 filing containing the revised electricity rates before March 1, 2004. The CPUC is expected to consider the rate design settlement at its meeting on February 26, 2004. If approved, the new rates will be effective March 1, 2004 or shortly thereafter, and the revenue reduction will be retroactive to January 1, 2004.
Before the rates for the Utility’s electricity and natural gas utility services are based on its costs of service. Before rates can be set, the CPUC and the FERC must determine the amount of “revenue requirements” the Utility is authorized to collect from its customers to recover the Utility’s operating and capital costs. The CPUC determines the Utility’s revenue requirements must first be determined.associated with electricity and gas distribution operations, electricity generation, and natural gas transportation and storage. The Utility’s revenue requirements associated with its electricity transmission operations are established by the FERC. Revenue
General Rate Cases |
The Utility’sUtility's primary revenue requirement proceeding is the general rate case, or GRC, filed with the CPUC. In the GRC, the CPUC authorizes the Utility to collect from customers an amount known as base revenues to recover base business and operational costs related to the Utility’sUtility's electricity and natural gas distribution and electricity generation operations. The GRC typically sets annual revenue requirement levels for a three-year rate period. The CPUC authorizes these revenue requirements in GRC proceedings based on a forecast of costs for the first, or test, year. After authorizing the revenue requirements, the CPUC allocates revenue requirements among customer classes (mainly residential, commercial, industrial and agricultural) and establishes specific rate levels. Typical intervenorsinterveners in the Utility’sUtility's GRC include the Office of Ratepayer Advocate, or ORA, and The Utility Reform Network, or TURN.
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On December 2, 2005, the Utility filed its 2007 GRC application with the CPUC. For more information, see “Regulatory Matters—2007 General Rate Case” in the MD&A in the 2005 Annual Report.
In addition to the amounts required to be authorized by California law, the CPUC has authorized the Utility to collect approximately $50 million from retail electricity customers to recover the cost of additional energy efficiency programs put in place in accordance with the “loading order” stated in the CPUC’s Energy Action Plan for meeting the state’s energy resource needs. The “loading order” requires optimization of energy efficiency measures first, followed by demand response initiatives, and the use of renewable energy, before conventional generation is sought to be developed. The Utility also provides a discount rate called the California Alternate Rates for Energy, or CARE, for low-income customers. This rate subsidy of approximately $220 million per year (including avoided surcharges) is paid for by the Utility's other customers. The CPUC is responsible for authorizing the programs, funding levels and cost recovery mechanisms for the Utility's operation of both energy efficiency and low-income energy efficiency programs. The CEC administers both the electric public interest research and development program and the renewable energy program on a statewide basis. In 2005, the Utility transferred $102 million to the CEC for these two programs. On September 22, 2005, the CPUC authorized 2006 through 2008 energy efficiency portfolio plans and program funding levels, not including funding for evaluation, measurement and verification activities, or EM&V, for the Utility and the other investor-owned California utilities. The CPUC approved funding of approximately $850 million for the Utility's energy efficiency programs over the 2006 through 2008 period, 20% of which is to be awarded to third-parties through a competitive bid process. On November 18, 2005, the CPUC authorized funding for EM&V activities of approximately $75 million for the Utility over the 2006 through 2008 period. The increased energy efficiency funding level is part of a larger effort by the state of California to reduce consumption of fossil fuels. The increased funding level will enable both residential and business customers to take more advantage of the diverse mix of energy efficiency programs. On January 12, 2006, the CPUC authorized increased funding to provide customer incentives and set additional policies to develop solar resources in California over the next 11 years, 2006 through 2017. This program, called the California Solar Initiative, or CSI, was designed with the objective of bringing 3,000 MW of solar power on-line by 2017. The CPUC’s decision consolidates existing and anticipated solar incentives for the California investor-owned utilities, including a $300 million increase in 2006 funding for the Self Generation Incentive Program that was authorized in December 2005. In total, the CPUC authorized the California investor-owned utilities to collect an additional $2.8 billion over the 2006 through 2017 period from their customers to fund customer incentives for the installation of retail solar energy projects to serve onsite load. The intent of the CSIisto help California move toward a cleaner energy future and bring the costs of solar electricity down for California consumers so that solar products will be cost-effective without incentives. Of the total amount authorized, the Utility has been allocated $1.2 billion to fund customer incentives. When combined with previously authorized funding, the total funds to be provided to achieve the CSI’s objectives are $3.25 billion, of which $1.4 billion is allocated to the Utility. The CSI also allocates up to 5% of the annual budget for research, development and demonstration activities, with emphasis on the demonstration of solar and solar-related technologies. |
As a consequence of the California energy crisis and the resulting inability of the California investor-owned utilities to purchase electricity in the wholesale market, on January 17, 2001, the Governor of California signed an order declaring an emergency and authorizing the DWR to purchase electricity to maintain the continuity of supply to retail customers. This was followed by AB 1X, which authorized the DWR to purchase electricity and sell that electricity directly to the California investor-owned utilities’utilities' retail end-user customers and to issue revenue bonds to finance electricity purchases. AB 1X also
utilities.
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The DWR provided approximately 29% of the electricity delivered to the Utility’s customers for the year ended December 31, 2003. The DWR purchased the electricity under contracts with various generators
On January 1, 2003, the California investor-owned electric utilities resumed responsibility for procuring electricity to meet their residual net open positions. They also became responsible for scheduling and dispatching the electricity subject to the DWR allocated contracts on a least-cost basis and for many administrative functions associated with those contracts. The utilities also were required by SB 1976 to submit short-term and long-term procurement plans to the CPUC for approval. In December 2002, the CPUC adopted a 2003 short-term procurement plan for the Utility. The CPUC also authorized the California investor-owned electric utilities to extend their planning into the first quarter of 2004 and directed the Utility to hedge its 2004 first quarter residual net open position with transactions entered into in 2003.
In December 2003, the CPUC approved the Utility’s short-term 2004 procurement plan. In the January 2004 CPUC decision discussed below, the CPUC also adopted short-term procurement authority for 2005 for the utilities in order to allow them to begin the normal cycle for procuring products required for summer 2005, but contracts for 2005 cannot exceed one year.
On January 22, 2004, the CPUC adopted an interim decision establishing the long-term regulatory framework under which the California investor-owned electric utilities are required to plan for and procure
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| · | The decision finds that the Utility's strategy of adding approximately 1,200 MW of capacity and new peaking generation in 2008 and approximately 1,000 MW of new peaking and dispatchable generation in 2010 through requests for offers, or RFOs, is reasonable and compatible with the Utility's resource needs under its medium load preferred case scenario, does not crowd out policy-preferred resources, and is a reasonable level of commitment given load uncertainty. |
| · | To meet the utilities' resource requirements, the utilities are required to solicit bids from providers of all potential sources of new generation (e.g. conventional or renewable resources to be provided under turnkey developments, buyouts, or power purchase agreements, or PPAs) through a single, open, transparent and competitive RFO process, although an utility can tailor a RFO to meet specific resource needs. In particular, bids for long-term generation resources (whether PPAs or utility-owned) would be evaluated side-by-side. In evaluating bids, the IOUs are required to: |
| · | To meet the utilities' resource requirements, the utilities are required to solicit bids from providers of all potential sources of new generation (e.g. conventional or renewable resources to be provided under turnkey developments, buyouts, or power purchase agreements, or PPAs) through a single, open, transparent and competitive RFO process, although an utility can tailor a RFO to meet specific resource needs. In particular, bids for long-term generation resources (whether PPAs or utility-owned) would be evaluated side-by-side. In evaluating bids, the IOUs are required to: | |
| Ø | procure the maximum amount of renewable generation resources, and be prepared to defend any selection of fossil-fuel generation resources over renewable resources, | |
| Ø | employ the Least-Cost Best-Fit methodology when evaluating bids for PPAs and utility-owned generation resources, taking into account the qualitative and quantitative attributes (such as performance risk, credit risk, price diversity, term and operational flexibility) associated with each bid, and | |
| Ø | employ a "greenhouse gas adder" to evaluate fossil-fuel generation bids as a method to recognize the risk of future greenhouse gas emissions costs to develop a more accurate price comparison between fossil-fuel, renewable and demand-side bids (the greenhouse gas adder would be used for analytical purposes only and would not be paid to a generator). | |
| · | The CPUC has agreed that it will consider the debt equivalence impact of procurement contracts on credit ratings in future cost of capital proceedings. The Utility is required to employ S&P’s method for assessing the debt equivalence of power purchase agreements when evaluating bids in an all-source solicitation, except that the debt equivalence factor should be 20% instead of 30%. | |
| · | The utilities are prohibited from recovering initial capital costs in excess of their final bid price for utility-owned generation resources. If final project costs are less than the final bid price, the savings would be shared with customers and any cost overruns would be absorbed by the utilities. Costs of future plant additions and annual operating and maintenance costs and similar costs incurred by a utility would be eligible for cost-of service ratemaking treatment. | |
| · | Affiliates of the utilities are permitted to participate in the bidding process for long-term generation resources, subject to certain guidelines and safeguards, including a requirement that the utility use an independent third-party evaluator in resource solicitations where there are bids that involve affiliates or utility-built or utility-turnkey development projects. The independent evaluator will not be able to make binding decisions on behalf of the utility. | |
| · | The utilities are permitted to recover their net stranded costs of all new fossil-fuel generation resources from all customers, including departing customers, for a period of 10 years or the life of the PPA, whichever is less, provided that the CPUC will allow the utilities an opportunity to justify a longer recovery period on a case-by-case basis. Stranded costs arising from renewable generation procurement activities can be collected from all customers, including departing load, over the life of the contract. The utilities are required to take appropriate steps to minimize potential stranded costs by selling excess energy and capacity needs into the marketplace and crediting the revenues from these sales against the utilities' costs. | |
| · | The CPUC extended the mandatory rate adjustment mechanism provided under SB 1976 (which otherwise expired on January 1, 2006) to the length of a resource commitment or 10 years, whichever is longer. Under this rate adjustment mechanism, the CPUC has agreed to adjust retail electricity rates or order refunds, as appropriate, when the aggregate over-collections or under-collections exceed 5% of the utility's prior-year electricity procurement revenues, excluding amounts collected for the DWR allocated contracts. | |
| · | With respect to the utilities' contracting authority, the decision permits the utilities to enter into short-term, mid-term and long-term contracts with starting delivery dates through 2014, provided the utilities submit necessary compliance filings and provided that contracts with terms five years or longer are submitted to the CPUC for pre-approval. The decision adopts a rolling 10-year procurement period, noting that the LTPPs cover a 10-year period and will be updated and reviewed every 2 years. | |
Under the FERC’sFERC's regulatory regime, the Utility is able to file a new base transmission rate case under the Utility’sUtility's transmission owner tariff whenever the Utility deems it necessary to increase its rates within certain guidelines set forth by the FERC. The Utility is typically able to charge new rates, subject to refund, before the outcome of the FERC ratemaking review process.
| Base transmission rates, which are intended to recover the |
| Rates to recover the pass-through of ISO charges for |
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Transmission Control Agreement |
The Utility is a party tohas entered into a Transmission Control Agreement, or TCA, with the ISO and other participating transmission owners. As a transmission owner, the Utility is required to give two years notice and receive regulatory approval if it wishes to withdraw from the TCA. Under this agreement, the transmission owners which also include(including Southern California Edison, or SCE, San Diego Gas & Electric Company, and several California municipal utilities, assignutilities) under which the transmission owners have assigned operational control of their electricity transmission systems to the ISO. In addition,The Utility is required to give the ISO two years’ notice and receive approval from the FERC if it wishes to withdraw from the TCA.
At December 31, 2003, the ISO had RMR agreements for which the Utility could be obligated to pay the ISO an estimated $446 million in net costs during the period January 1, 2004 to December 31, 2005. These costs are recoverable under applicable ratemaking mechanisms.
It is possible that the Utility may receive a refund of RMR costs that the Utility previously paid to the ISO. In June 2000, a FERC administrative law judge issued an initial decision approving rates that, if affirmed by the FERC, would require the subsidiaries of Mirant Corporation, or Mirant, that are parties to three RMR agreements with the ISO to refund to the ISO, and the ISO to refund to the Utility, excess payments of2005 was approximately $340 million, including interest, for availability of Mirant’s RMR Plants under these agreements. However, on July 14, 2003, Mirant filed a petition for reorganization under Chapter 11 and on December 15, 2003, the Utility filed claims in Mirant’s Chapter 11 proceeding including a claim for an RMR refund. The Utility is unable to predict at this time when the FERC will issue a final decision on this issue, what the FERC’s decision will be, and the amount of any refunds, which may be impacted by Mirant’s Chapter 11 filing. It is uncertain how the resolution of this matter would be reflected in rates.
The ISO bills the Utility for reliability services based on payments that the ISO makes to generators under reliability must run agreements and to others to support reliability of the Utility’s transmission system. The costs of reliability must run agreements attributed to supporting the Utility’s historic transmission control area are charged to the Utility as a participating transmission owner. These costs were approximately $330 million in 2003.$217 million. Under the Utility’s transmission owner tariff, the Utility charges its customers rates designed to recoverrecovers these reliability service charges,costs, without mark-up or service fees. The Utility also received approximately $59 million in 2005 under the RMR agreements that the Utility entered into with the ISO for the Utility’s units that have been designated as RMR units. The Utility tracks these costs and revenues related to reliability services in the reliability services balancing account. Periodically, the Utility’s electricity transmission rates are adjusted to refund over-collections to the Utility’s customers or to collect any under-collections from customers.
In March 2000, For further discussion of other RMR-related issues, see the section of Note 17: Commitments and Contingencies— Reliability Must Run Agreements, of the Notes to the Consolidated Financial Statements in the 2005 Annual Report.
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Natural Gas Procurement |
The Utility sets the natural gas procurement rate for core customers monthly based on the forecasted costs of natural gas, core pipeline capacity and storage costs. The Utility reflects the difference between actual natural gas purchase costs and forecasted natural gas purchase costs in several natural gas balancing accounts, with under-collections and over-collections taken into account in subsequent monthly rates.
Interstate and Canadian Natural Gas Transportation and Storage |
The Utility’sUtility's interstate and Canadian natural gas transportation agreements with third party service providers are governed by tariffs that detail rates, rules and terms of service for the provision of natural gas transportation services to the Utility on interstate and Canadian pipelines. United States tariffs are approved for each pipeline for service to all of its shippers, including the Utility, by the FERC in a FERC ratemaking review process and the applicable Canadian tariffs are approved by the Alberta Energy and Utilities Board and the National Energy Board. The Utility’sUtility's agreements with interstate and Canadian natural
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In July 2002, the CPUC ordered California investor-owned electric utilities to contract for additional amounts of El Paso pipeline capacity to gain firm access to the southwest natural gas producing basins. The CPUC believed that if the utilities had firm access rights, they would have been able to mitigate the gas price spikes that occurred during the energy crisis when shippers raised the price of gas at the California border. The CPUC pre-approved the costs of these contracts as just and reasonable. Since the July 2002 decision, the Utility has signed contracts for capacity on the El Paso pipeline costing approximately $50.8 million for the period from November 2002 to December 2007. The July 2002 decision also ordered the California investor-owned electric utilities to retain their then-current interstate pipeline capacity levels and sell any excess capacity to third parties under short-term capacity release arrangements. It also ordered that, to the extent the California investor-owned electric utilities comply with the decision, they will be able to fully recover their costs associated with existing capacity contracts.
Under a previous CPUC decision, the Utility could not recover in rates any costs paid to Transwestern for natural gas pipeline capacity through 1997. The Utility pays approximately $22 million in annual reservation charges under the Transwestern contract. The Gas Accord provided for partial recovery of Transwestern costs after 1997. In January 2004, the CPUC approved a settlement with TURN that allows the Utility to fully recover Transwestern costs retroactive to July 2003.
In December 2002, the CPUC granted the Utility’s request to recover in rates El Paso pipeline capacity costs and prepayments made to El Paso from all natural gas customers. The Utility began recovering these costs from all natural gas customers in March 2003. In January 2004, the CPUC re-allocated all the costs, including Transwestern costs incurred since July 2003, to the Utility’s core customers, because the pipeline capacity is used to serve core customers. The Utility’s noncore customers and core aggregation customers will receive a refund or bill credit for El Paso capacity costs paid by these customers between March 2003 and January 2004.
owner’sowner's responsibility and the availability of recoveries or contributions from third parties.General
The Utility is subject to a number of federal, state and local laws and requirements relating to the protection of the environment and the safety and health of the Utility’sUtility's personnel and the public. These laws and requirements relate to a broad range of activities, including:
| The discharge of pollutants into air, water and soil; |
| The identification, generation, storage, handling, transportation, treatment, disposal, record keeping, labeling, reporting of, remediation of and emergency response in connection with hazardous and radioactive substances; and |
| Land use, including endangered species and habitat protection. |
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In 1994, the CPUC established a ratemaking mechanism under which the Utility is authorized to recover hazardous waste remediation costs for environmental claims (e.g., for cleaning up the Utility’sUtility's facilities and sites where the Utility has sent hazardous substances) from customers. ThatThis mechanism allows the Utility to include 90% of the hazardous waste remediation costs in the Utility’sUtility's rates without a reasonableness review. Hazardous waste remediation costs in the future are likely to be significant. However, based on the Utility’s past experience, it believes that it can recover most of these costs in rates and through insurance claims.
Ten percent of any net insurance recoveries associated with hazardous waste remediation sites are assigned to the Utility’sUtility's customers. The balance of any insurance recoveries, (90%) are retained by the Utility until it has been reimbursed for the 10% share of clean-up costs not included in rates. There also is a special sharingAny insurance recoveries above full cost reimbursement levels would then be allocated 60% to customers and 40% to the Utility. Finally, 10% of any recoveries from the Utility's claims against third parties associated with hazardous waste remediation sites are retained by the Utility; 90% of any such recoveries are assigned to the Utility's customers.
The Utility’sUtility's generation plants and natural gas pipeline operations are subject to numerous air pollution control laws, including the Federalfederal Clean Air Act and similar state and local statutes. These laws and regulations cover, among other pollutants, those contributing to the formation of ground-level ozone, carbon monoxide, sulfur dioxide, nitrogen oxide and particulate matter.
Various
As a result of the Utility’s divestiture of most of its fossil fuel-fired and geothermal generation facilities, the Utility’s nitrogen oxide emission reduction compliance costs have been reduced significantly.2006. Two of the local air districts in which the Utility owns and operates fossil fuel-fired generation facilities have adopted final rules under the California Clean Air Act and the federal Clean Air Act that required reductions in nitrogen oxide emissions from the facilities of approximately 90% by 2004. The Utility is in compliance with these rules. The Utility is permitted to recover in customer rates through 2004 the Utility’sUtility's costs for its nitrogen oxide retrofit projects related to natural gas compressor stations on the Utility’sUtility's Line 300, which delivers gas from the southwest. Several other air districts are considering nitrogen oxide rules that would apply to the Utility’sUtility's other natural gas compressor stations in California. Eventually, the rules are likely to require nitrogen oxide reductions of up to 80% at many of these natural gas compressor stations. Substantially all these costs will be capital costs which the Utility expects to recover through rates.
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The federal Clean Water Act generally prohibits the discharge of any pollutants, including heat, into any body of surface water, except in compliance with a discharge permit issued by a state environmental regulatory agency and/or the U.S. Environmental Protection Agency, or the EPA. The Utility’sUtility's generation facilities are subject to federal and state water quality standards with respect to discharge constituents and thermal effluents. The Utility’sUtility's steam-electric generation facilities comply in all material respects with the discharge constituents standards and the thermal standards. In addition, under the federal Clean Water Act, the Utility is required to demonstrate that the location, design, construction and capacity of generation facility cooling water intake structures reflect the best technology available for minimizing adverse environmental impacts at its existing water-cooled thermal plants. The Utility has submitted detailed studies of each steam-electric generation facility’sfacility's intake structure to various governmental agencies and each power plant’splant's existing intake structure was found to meet the best technology available requirements.
In October 2000, the Utility andJanuary 2005, the Central Coast Board reachedpublished a tentative settlementdraft report prepared by a team of this matter pursuantscientists recommending several measures to whichmitigate the effect of the cooling water system. If the Central Coast Board has agreed to find thatadopts the Utility’s discharge of cooling water from the Diablo Canyon power plant protects beneficial usesscientists' recommendations, and that the intake technology meets the best technology available requirements. As part of the Central Coast settlement agreement,if the Utility has agreedultimately is required to take measuresimplement the projects proposed in the draft report, it could incur costs of up to preserve certain acreage north of the plant and will fund approximately $6 million in environmental projects and future environmental monitoring related$30 million. The Utility would seek to coastal resources. On March 21, 2003, the Central Coast Board votedrecover these costs through rates charged to accept the Central Coast settlement agreement. On June 17, 2003, the Central Coast settlement agreement was executed by the Utility, the Central Coast Board and the California Attorney General’s Office. A condition to the effectivenesscustomers. For a further discussion of this settlement agreement is that the Central Coast Board renew Diablo Canyon’s NPDES permit. However, at its July 10, 2003 meeting, the Central Coast Board did not renew the NPDES permit and continued the permit renewal hearing indefinitely. Several Central Coast Board members indicated that they no longer supported this settlement agreement, and the Central Coast Board requested its staff to develop additional information on possible mitigation measures. The California Attorney General filed a claim in the Utility’s Chapter 11 proceeding on behalf of the Central Coast Board seeking unspecified penalties and other relief in connection with the Diablo Canyon power plant’s operation of its cooling water system. The Utility is seeking withdrawal of this claim from the Utility’s Chapter 11 proceeding.
matter, see “Item 3. Legal Proceedings,” below.
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The Utility’sUtility's facilities are subject to the requirements issued by the EPA under the Resource Conservation and Recovery Act, or RCRA, and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or CERCLA, as well as other state hazardous waste laws and other environmental requirements. CERCLA and similar state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that contributed to the release of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Under CERCLA, these persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, damages to natural resources and the costs of required health studies. In the ordinary course of the Utility’sUtility's operations, the Utility generates waste that falls within CERCLA’sCERCLA's definition of a hazardous substance and, as a result, has been and may be jointly and severally liable under CERCLA for all or part of the costs required to clean up sites at which these hazardous substances have been released into the environment.
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customers. The Utility’sUtility's undiscounted future costs could increase to as much as $422$680 million if the other potentially responsible parties are not financially able to contribute to these costs, or if the extent of contamination or necessary remediation is greater than anticipated. The $422amount of approximately $680 million amount does not include an estimate for the costscost of remediation at known sites owned or operated in the past by the Utility’sUtility's predecessor corporations for which the Utility has not been able to determine whether a liability exists.
Under the Nuclear Waste Policy Act of 1982, or Nuclear Waste Act, the DOE is responsible for the transportation, and ultimate long-termpermanent storage and disposal of spent nuclear fuel and high-level radioactive waste. Under the Nuclear Waste Act, utilities are required to provide interim storage facilities until permanent storage facilities are provided by the federal government. The Nuclear Waste Act mandates that one or more permanent disposal sites be in operation by 1998. Consistent with the law, the Utility entered into a contract with the DOE providing for the disposal of the spent nuclear fuel and high-level radioactive waste from the Utility’sUtility's nuclear power facilities beginning not later than January 1998. The DOE has been unable to meet its contractual commitment to begin accepting spent fuel. First, there was a delay in identifying a storage site. Then, after the DOE selected Yucca Mountain, Nevada for the site, protracted litigation has prevented the DOE from constructing the storage facility. The DOE’sDOE's current estimate for an available site to begin accepting physical possession of the spent nuclear fuel is 2010. However, considerable uncertainty exists regarding when the DOE will begin to accept spent fuel for storage or disposal. Under the Utility’sUtility's contract with the DOE, if the DOE completes a storage facility by 2010, the earliest Diablo Canyon’sCanyon's spent fuel would be accepted for storage or disposal would be 2018.
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Under current operating procedures, Trial is scheduled to begin on June 5, 2006.
Nuclear decommissioning requires the safe removal of nuclear facilities from service and the reduction of residual radioactivity to a level that permits termination of the NRC license and release of the property for unrestricted use. The Utility’s nuclear power facilities consist of two units at the Diablo Canyon power plant and the retired facility at Humboldt Bay Unit 3. For ratemaking purposes, the eventual decommissioning of Diablo Canyon Unit 1 is scheduled to begin in 2021 and to be completed in 2040. Decommissioning of Diablo Canyon Unit 2 is scheduled to begin in 2025 and to be completed in 2041, and decommissioning of Humboldt Bay Unit 3 is scheduled to begin in 20062009 and to be completed in 2015.
The
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asset retirement costs regulatory liability. The Utility’s revenue requirements fortotal nuclear decommissioning obligation accrued in accordance with GAAP was approximately $1.3 billion at December 31, 2005 and $1.2 billion at December 31, 2004. The primary difference between the Utility's estimated nuclear decommissioning obligation as recorded in accordance with GAAP and the estimate prepared in accordance with the CPUC requirements is that GAAP incorporates various potential settlement dates for the obligation and includes an estimated amount for third-party labor costs are recovered from ratepayers through a nonbypassable charge that will continue until those costs are fully recovered. into the fair value calculation.
In 2003,
Electric and |
Electric magnetic fields, or EMFs, naturally result from the generation, transmission, distribution and use of electricity. In January 1991, the CPUC opened an investigation to address increasing public concern, especially with respect to schools, regarding potential health risks that may be associated with EMFs from utility facilities. In its order instituting the investigation, the CPUC acknowledged that the scientific community has not reached consensus on the nature of any health impacts from contact with EMFs, but went on to state that a body of evidence has been compiled that raises the question of whether adverse health impacts might exist.
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It is not yet clear what actions
matters.
The Utility’s corporate headquarters consist
As contemplated in the Settlement Agreement, the Utility formed an entity, the Pacific Forest Watershed Lands Stewardship Council, or the Council, to oversee the development and implementation of a Land Conservation Plan, or LCP, that will articulate the long-term management objectives for the 140,000 acres. The Council is guided by an 18-member Board of Directors that represent a range of diverse interests, including the CPUC, California environmental agencies, organizations representing underserved and minority constituencies, agricultural and business interests, and public officials. The Utility has appointed one out of 18 members of the Board of Directors of the Council. The Council is charged to adopt and present the LCP to the Utility by April 2007. The Utility will then seek authorization from the CPUC, the FERC and other approving entities to proceed with the transactions necessary to implement the LCP. If the Council is unable to reach consensus on all or part of the LCP, the Utility will seek regulatory approval of the transactions required to implement its own plan, along with a description of the positions of the disputing board members before April 2013.
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In addition to the following legal proceedings, PG&E Corporation and the Utility are involved in various legal proceedings in the ordinary course of their business.
40
David A. Coulter, a director of the Utility, is Vice Chairman of J.P. Morgan Chase & Co. and J.P. Morgan Chase Bank. J.P. Morgan Trust Co. of Delaware submitted a proof of claim in the Utility’s Chapter 11 case for approximately $1.45 million relating to its ownership interest in shares of the Utility’s preferred stock. J.P. Morgan Chase Bank submitted a proof of claim for approximately $173 million, related to its provision of a stand-by letter of credit which provides credit and liquidity support for certain of the Utility’s pollution control bonds. Both entities are subsidiaries of J.P. Morgan Chase & Co.
In September 2001, PG&E Corporation and the Utility submitted aUtility's plan of reorganization that proposed to disaggregateunder Chapter 11 became effective. On this date, the Utility’s current businesses. effective date, the Utility emerged from Chapter 11. On the effective date, the Utility paid all valid claims, deposited funds into escrow accounts for the payment of disputed claims upon their resolution, reinstated certain obligations, and paid other obligations.
On December 30, 2003, the City of Palo Alto filed a motion with the bankruptcy court for a stay of the bankruptcy court’s order confirming the Plan of Reorganization pending the City of Palo Alto’s appeal of the confirmation order to the U.S. District Court for the Northern District of California, or District Court. The two CPUC Commissioners who did not vote to approve the Settlement Agreement joined in the City of Palo Alto’s motion. On January 5, 2004, the bankruptcy court denied the request for a stay. In January 2004, the City of Palo Alto and the two CPUC Commissioners filed appeals in the District Court of the bankruptcy court’s confirmation order.
On January 20, 2004, the City of Palo Alto, the City and County of San Francisco, or CCSF, and Aglet Consumer Alliance, or Aglet, filed separate applications with the CPUC requesting that the CPUC rehear and reconsider its decision approving the Settlement Agreement. CCSF, Aglet and the ORA also filed a joint application for rehearing. Although the CPUC is not required to act on the applications within a specific time period, if the CPUC has not acted on an application within 60 days, that application may be deemed denied for purposes of seeking judicial review.
Under the Settlement Agreement, the CPUC has waived all existing and future rights of sovereign immunity, and all other similar immunities, as a defense in connection with any action or proceeding concerning the enforcement of, or other determination of the parties’parties' rights under the Settlement Agreement, the Planplan of Reorganizationreorganization or the confirmation order. The CPUC also consented to the jurisdiction of any court or other tribunal or forum for those actions or proceedings, including the bankruptcy court.Bankruptcy Court. The CPUC’sCPUC's waiver is irrevocable and applies to the jurisdiction of any court, legal process, suit, judgment, attachment in aid of execution of a judgment, attachment before judgment, set-off or any other legal process with respect to the enforcement of, or other determination of the parties’parties' rights under, the Settlement Agreement, the Planplan of Reorganizationreorganization or the confirmation order. The Settlement Agreement contemplates that neither the CPUC nor any other California entity acting on its behalf may assert immunity in an action or proceeding concerning the parties’parties' rights under the Settlement Agreement, the Planplan of Reorganizationreorganization or the confirmation order.
41
As required by
There are several legal proceedings still pending in connectionBankruptcy Court's confirmation order with the original planU.S. District Court for the Northern District of reorganization.California, or the District Court. On May 14, 2003,July 15, 2004, the District Court dismissed their appeal. The former commissioners have appealed the District Court's order to the U.S. Court of Appeals for the Ninth Circuit, or Ninth Circuit. The Ninth Circuit heard oral argument inarguments on the appeal filed byon February 13, 2006. It is uncertain when a decision will be issued.
On November 19, 2003, the Ninth Circuit issued a decision agreeing with the District Court’s finding that a Chapter 11 reorganization plan expressly preempts otherwise applicable non-bankruptcy laws. However, the Ninth Circuit ruled that the scope of such express preemption is limited to those non-bankruptcy laws relating to financial condition. The Ninth Circuit determined that neither the bankruptcy court nor the District Court had applied the proper standard of express preemption. It therefore reversed the District Court’s August 30, 2002, decision and remanded the matter back to the bankruptcy court for further proceedings to determine whether the Utility’s and PG&E Corporation’s original plan of reorganization satisfied the express preemption standard announced by the Ninth Circuit.
Although the Ninth Circuit stated that the question of implied preemption was not before it in the appeal, it reaffirmed that implied preemption could apply under the Bankruptcy Code, even if express preemption did not. On December 10, 2003, the Utility and PG&E Corporation filed a petition to rehear the Ninth Circuit’s decision with the panel that issued the decision, and suggested that the full Ninth Circuit should rehear the issue, since it conflicts with other Ninth Circuit cases and cases from other Circuits.
The Utility’s current Settlement Agreement and the confirmed Plan of Reorganization do not rely on the bankruptcy law preemption issues addressed in the Ninth Circuit decision.
Implementation of the Plan of Reorganization is subject to various conditions, including the consummation of the public offering of long-term debt, the receipt of investment grade credit ratings and final CPUC approval of the Settlement Agreement. For purposes of these conditions, final approval means approval on behalf of the CPUC that is not subject to any pending appeal or further right of appeal, or approval on behalf of the CPUC that, although subject to a pending appeal or further right of appeal, has been agreed by the Utility and PG&E Corporation to constitute final approval. Thus, the terms of the Plan of Reorganization permit the Utility and PG&E Corporation to cause the Plan of Reorganization to become effective (and permit the Utility to issue the long term debt) while the CPUC’s approvals are subject to pending appeals or further rights of appeal. Until certain conditions or events regarding the effectiveness of the Plan of Reorganization discussed above are resolved further, PG&E Corporation and the Utility cannot conclude that the applicable accounting probability standard needed to record the regulatory assets contemplated by the Settlement Agreement has been met.materially adversely affected. PG&E Corporation and the Utility believe that the Utility and the long-term debt to be issued will receive investment grade credit ratings.The Utility has targeted April 2004 to complete the saleformer commissioners' appeal of the long-term debt, which the Utility expects toconfirmation order is without merit and will be the last condition of the Plan of Reorganization to be satisfied. The Plan of Reorganization provides that the effective date will occur 11 business days after all the conditions have been satisfied or, with respect to all conditions except those relatingrejected.
42
Utility’sUtility's customers are recoverable in retail rates under the federal filed rate doctrine. The Utility’s complaint alleges that the wholesale electricity costs that the Utility has prudently incurred are paid pursuant to filed tariffs that the FERC has authorized and approved, and that, under the U.S. Constitution and numerous court decisions, such costs cannot be disallowed by state regulators. The Utility’s complaint also alleges that, to the extent that the Utility is denied recovery of these wholesale electricity costs by order of the CPUC, such action constitutes an unlawful taking and confiscation of the Utility’s property. The Utility argues that the CPUC’s decisions are preempted by federal law under the filed rate doctrine, which requires the CPUC to allow the Utility to recover in full it’s reasonable purchase costs incurred under lawful rates and tariffs approved by the FERC, a federal governmental agency. The complaint also asserts claims under the Commerce Clause and the Due Process Clause of the U.S. Constitution. On January 29, 2001, the Utility’s lawsuit was transferred to the U.S. District Court for the Central District of California, where a similar lawsuit filed by Southern California Edison Company was pending. On May 2, 2001, the court dismissed the Utility’s complaints without prejudice to re-filing at a later date, on the ground that the lawsuit was premature, since two CPUC decisions referenced in the complaint had not become final under California law. The court rejected all of the CPUC’s other arguments for dismissal of the Utility’s complaint. In August 2001, the Utility re-filed the Utility’s complaint in the District Court based on the Utility’s belief that the CPUC decisions referenced in the court’s May 2001 order had become final under California law. On October 31, 2001, the CPUC moved to dismiss the action. While the motion was under submission, the parties filed cross-motions for summary judgment. On July 25, 2002, the court denied the CPUC’s motion to dismiss on all grounds, as well as the parties’ motions for summary judgment. While the court agreed with the Utility’s position that the filed rate doctrine applies to the federally-tariffed wholesale costs at which the Utility had purchased electricity, it held that certain triable issues of fact precluded entry of summary judgment in the Utility’s favor. On August 23, 2002, the CPUC filed an appeal to the U.S. Court of Appeals for the Ninth Circuit, or Ninth Circuit. Pursuant to the Utility’s request, the District Court certified the appeal as “wholly without merit and, therefore, frivolous,” and rejected the CPUC’s request to stay the proceedings. On November 21,432002, the Ninth Circuit stayed the District Court’s proceedings pending the CPUC’s appeal. The appeal was fully briefed and the Ninth Circuit heard oral argument on March 10, 2003.
In re: Natural Gas Royalties Qui Tam Litigation
This litigation involves the consolidation of approximately 77 False Claims Act cases filed in various federal district courts by Jack J. Grynberg (referred to as a relator in the terminology of the False Claims Act) on behalf of the United States of America against more than 330 defendants, including the Utility. The cases were consolidated for pretrial purposes in the U.S. District Court for the District of Wyoming. The current case grows out of prior litigation brought by the same relator in 1995 that wasnot yet dismissed in 1998.
Under procedures established by the False Claims Act, the United States, acting through the DOJ, is given an opportunity to investigate the allegations and to intervene in the case and take over its prosecution if it chooses to do so. In April 1999, the DOJ declined to intervene in any of the cases.
The complaints allege that the various defendants, most of whom are natural gas pipeline companies or their affiliates, incorrectly measured the volume and heating content of natural gas produced from federal or Indian leases. As a result, the relator alleges that the defendants underpaid, or caused others to underpay, the royalties that were due to the United States for the production of natural gas from those leases.
The complaints do not seek a specific dollar amount or quantify the royalties claim. The complaints seek unspecified treble damages, civil penalties and reasonable expenses associated with the litigation. The relator has filed a claim in the Utility’s Chapter 11 case for $2.5 billion, $2.0 billion of which is based upon the relator’s calculation of penalties against the Utility.
The Utility believes the allegations to be without merit and intends to present a vigorous defense. The Utility believes that the ultimate outcome of the litigation will not have a material adverse effect on the Utility’s financial condition or results of operations.
complaint.
44
The California Attorney General has filed a claim in the Utility’s Chapter 11 case on behalf ofmeasures for Central Coast Board staff. In January 2005, the Central Coast Board seeking unspecified penaltiespublished the scientists' draft report recommending several such mitigation measures. If the Central Coast Board adopts the scientists' recommendations, and other reliefif the Utility ultimately is required to implement the projects proposed in connection with the Diablo Canyon power plant’s operationdraft report, it could incur costs of its cooling water system.up to approximately $30 million. The Utility is seeking withdrawal of this claim.
On June 13, 2002, the Utility received a draft enforcement order from the California Department of Toxic Substances Control, or DTSC, alleging that the Utility’s Diablo Canyon power plant failedwould seek to maintain an adequate financial assurance mechanismrecover these costs through rates charged to cover closure costs for its hazardous waste storage facility for several months after the Utility’s Chapter 11 filing in 2001. The draft order sought $340,000 in civil penalties for the period during which the Utility were unable to comply with the DTSC’s requirements. The draft order also directed the Utility to maintain appropriate financial assurance on a going forward basis. On September 4, 2002, the Utility received a draft enforcement order from DTSC alleging a variety of hazardous waste violations at the Utility’s Diablo Canyon power plant. This draft order sought $24,330 in civil penalties.
In April 2003, the Utility signed a final settlement agreement with DTSC, under which the Utility agreed to pay approximately $165,000 in civil penalties and approximately $30,000 in costs. The Utility paid these amounts in May 2003. The California Attorney General filed a claim in the Utility’s Chapter 11 case on behalf of DTSC, and the Utility is currently seeking withdrawal of those portions of the claim relating to financial assurance and hazardous waste matters.
customers.
energy crisis.
45
On August 9, 2002, the California Attorney General filed its amended complaint in the San Francisco Superior Court, omitting the allegations concerning PG&E Corporation’s participation in the Utility’s Chapter 11 proceedings. PG&E Corporation and the directors named in the complaint have filed motions to strike certain allegations of the amended complaint. On February 28, 2003, the court denied the three motions to strike on the grounds that they were premature and stated that it would defer making a judgment on the merits of the defendants’ arguments until the factual context of the cases was more fully developed.
On February 11, 2002, a complaint entitledCity and County of San Francisco; People of the State of California v. PG&E Corporation, and Does 1-150, was filed in San Francisco Superior Court. The complaint contains some of the same allegations contained in the California Attorney General’s complaint, including allegations of unfair competition. In addition, the complaint alleges causes of action for conversion, claiming that PG&E Corporation “took at least $5.2 billion from the Utility,” and for unjust enrichment. The City seeks injunctive relief, the appointment of a receiver, payment to customers, disgorgement, the imposition of a constructive trust, civil penalties and costs of suit.
After removing the City’s action to the bankruptcy court in February 2002, PG&E Corporation filed a motion to dismiss the complaint. Subsequently, the City filed a motion to remand the action to state court. In June 2002, the bankruptcy court issued an amended order on motion to remand stating that the bankruptcy courtBankruptcy Court retained jurisdiction over theCCSF’s causes of action for conversion and unjust enrichment, finding that these claims belong solely to the Utility and cannot be asserted by the City and County,CCSF, but remanding theremanded CCSF’s Section 17200 cause of action to state court. BothIn both cases, the parties appealed the bankruptcy court’sBankruptcy Court’s remand order to the District Court.
In addition, a third case, entitledCynthia Behr v. PG&E Corporation, et al., was filed on February 14,August 2002, by a private plaintiff (who also has filed a claim under Chapter 11) in Santa Clara Superior Court also alleging a violation of Section 17200. The Behr complaint also names the directors of PG&E Corporation and the Utility as defendants. The allegations of the complaint are similar to the allegations contained in the California Attorney General’s complaint, but also include allegations of conspiracy, fraudulent transfer and violation of the California bulk sales laws. The plaintiff requests the same remedies as the California Attorney General and, in addition, requests damages, attachment and restraints upon the transfer of defendants’ property. In March 2002, PG&E Corporation filed a notice of removalits amended complaint in the bankruptcy court to transfer the complaint to the bankruptcy court. Subsequently, the plaintiff filed a motion to remand the action to state court. In its June 2002 ruling mentioned above as to the California Attorney General’s and the City’s cases, the bankruptcy court retained jurisdiction over Behr’s fraudulent transfer claim and bulk sales claim, finding them to belong to the Utility’s estate. The bankruptcy court remanded Behr’s Section 17200 claim to the Santa Clara Superior Court. Both parties appealed the bankruptcy court’s remand order to the District Court.
The San Francisco Superior Court has coordinated the California Attorney General’s case with the casescase filed by the City and County of San Francisco and Cynthia Behr.
On July 24, 2003, the District Court heard oral argument on the appeal and cross-appeal of the bankruptcy court’s remand order in the three cases. CCSF.
46
The defendants filed a motionwill continue to seek clarification from the District Court regarding whether the District Court’s October 2003 order reaches the restitution claimsvigorously respond to and defend against the director defendants, as distinct from PG&E Corporation. At a hearing in November 2003, the District Court confirmed that its October 2003 order holds that the defendants’ restitution claims against the directors are also the property of the Utility’s estate.
litigation.
PG&E Corporation believes that the" These claims were not discharged when the Utility’s plan of reorganization became effective.
47
settlement agreement:
Aguayo, Aguilar, Acosta, Baldonado, Bowers, Boyd, Gale, Martinez, Miller and Puckett. The UtilityTo assist in managing and resolving litigation with this many plaintiffs, the parties agreed to select plaintiffs from theAguayo, AcostaandAguilar cases for a test trial. Plaintiffs’ counsel selected ten of these initial trial plaintiffs,, defense counsel selected seven of the plaintiffs, and one plaintiff and two alternates were selected at random. The Utility has filed 13 summary judgment motions or motions in limine (motions to exclude potentially prejudicial information) challenging the claims of the trial test plaintiffs. Two of these motions are scheduled for hearing in the first quarter of 2004, with the others to be scheduled thereafter. The trial of the test cases is scheduled to begin in March 2004. The Utility’s motion to dismiss the complaint in theAdamscase was granted. The plaintiffs in that case have until April 12, 2004 to file an amended complaint.
Not applicable.
Name | Age | Position | ||||
| 53 | Chairman of the Board, Chief Executive Officer and President | |||||
| Senior Vice President, Communications and Public Affairs | ||||||
| K.M. Harvey | 47 | Senior Vice President and Chief | ||||
| R. M. Jackson | 48 | Senior Vice President, Human Resources | ||||
| C. P. Johns | 45 | Senior Vice President, Chief Financial Officer and | ||||
| 44 | Senior Vice President; President and Chief Executive Officer, Pacific Gas and Electric Company | |||||
| 52 | Senior Vice President, | |||||
| B. R. Worthington | 56 | Senior Vice President and General Counsel | ||||
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Name | Position | Period Held Office | ||
| Chairman of the Board, Chief Executive Officer and President | January 1, | |||
| Chairman of the Board, Pacific Gas and Electric Company | January 1, | |||
| President and Chief Executive Officer | January 1, 2005 to December 31, 2005 | |||
| Senior Vice President and Chief Financial Officer | July 9, 2001 to | |||
| Senior Vice President, Chief Financial Officer, and Treasurer | September 20, 1999 to July 8, 2001 | |||
| L. H. Everett | Senior Vice President, Communications and Public Affairs | January 9, 2006 to present | ||
| Senior Vice President and Assistant to the Chief Executive Officer | January 1, 2005 to January 8, 2006 | |||
| Senior Vice President and Assistant to the Chairman | August 2, 2004 to December 31, 2004 | |||
| Vice President and Assistant to the Chairman | June 1, 2001 to August 1, 2004 | |||
| Vice President, Corporate Secretary, and Assistant to the Chairman | May 1, 2001 to May 31, 2001 | |||
| Vice President and Corporate Secretary | July 1, 1997 to April 30, 2001 | |||
| Vice President and Corporate Secretary, Pacific Gas and Electric Company | November 1, 1996 to May 31, 2001 | |||
| K. M. Harvey | Senior Vice President and Chief Risk and Audit Officer | October 1, 2005 to present | ||
| Senior Vice President - Chief Financial Officer | November 1, 2000 to September 30, 2005 | |||
| Senior Vice President - Chief Financial Officer, Controller, and Treasurer, Pacific Gas and Electric Company | January 1, 2000 to October 31, 2000 | |||
| R. M. Jackson | Senior Vice President, Human Resources, PG&E Corporation and Pacific Gas and Electric Company | August 2, 2004 to present | ||
| Vice President, Human Resources, PG&E Corporation | June | |||
| Vice President, Human Resources, Pacific Gas and Electric Company | June 1, 1999 to August 1, 2004 | |||
| C. P. Johns | Senior Vice President, Chief Financial Officer and Treasurer | October 4, 2005 to present | ||
| Senior Vice President, Chief Financial Officer and Treasurer, Pacific Gas and Electric Company | October 1, 2005 to present | |||
| Senior Vice President, Chief Financial Officer and Controller | January 1, 2005 to October 3, 2005 | |||
| Senior Vice President and Controller | September 19, 2001 to | |||
| Vice President and Controller | July 1, 1997 to September 18, 2001 | |||
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“The names, ages and position’s of the Utility’s executive officers,” as defined by Rule 3b-7 of the General Rules and Regulations under the Exchange Act at December 31, 2003 are as follows:
| T. B. King | ||||||
All officers of the Utility serve at the pleasure of the Board of Directors. During the past five years, the executive officers of the Utility had the following business experience. Except as otherwise noted, all positions have been held at Pacific Gas and Electric Company.
| Senior Vice President, PG&E Corporation | January 1, | |||
| January 1, | ||||
| July 1, | ||||
| Executive Vice President and Chief of Utility Operations, Pacific Gas and Electric Company | August 2, 2004 to June 30, 2005 | |||
| Senior Vice President and Chief of Utility Operations, Pacific Gas and Electric Company | November 1, 2003 to | |||
| Senior Vice President, PG&E Corporation | January 1, 1999 to October 31, 2003 | |||
| President, PG&E National Energy Group, Inc. | November 15, 2002 to July 8, 2003 | |||
| President and Chief Operating Officer, PG&E Gas Transmission Corporation | August 27, 2002 to July 8, 2003 | |||
| President and Chief Operating Officer, Gas Transmission, PG&E National Energy Group, Inc. | August 9, 2002 to November 14, 2002 | |||
| President and Chief Operating Officer, West Region, PG&E National Energy Group, Inc. | July 1, 2000 to August 8, 2002 | |||
| President and Chief Operating Officer, PG&E Gas Transmission Corporation | November 23, 1998 to September 10, | |||
| R. | Senior Vice President, Corporate Strategy and Development | November 1, 2005 to present | ||
| Executive Vice President and Chief Financial Officer, Infospace, Inc. | September 2000 to January 20, 2001 | |||
| Chief Financial Officer and Senior Vice President, Finance and Corporate Development, Infospace, Inc. | June 2000 to September 2000 | |||
| B. R. Worthington | Senior Vice President and General Counsel |
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Name | Age | Position | ||
T. B. King | 44 | President and Chief Executive Officer | ||
| 52 | Senior Vice President, Regulatory Relations | |||
| J. D. Butler | 50 | Senior Vice President, Energy Delivery | ||
| L.H. Everett | 55 | Senior Vice President, Communications and Public Affairs, | ||
| R.M. Jackson | 48 | Senior Vice President, Human Resources | ||
| C. P. Johns | 45 | Senior Vice President, Chief Financial Officer and Treasurer | ||
| J. S. Keenan | 57 | Senior Vice President, Generation and Chief Nuclear Officer | ||
| S. M. Ramsay | 47 | Vice President, Asset Management and Electric Transmission | ||
| F Wan | 44 | Vice President, Energy Procurement | ||
| B. R. Worthington | 56 | Senior Vice President and General Counsel, PG&E Corporation |
Name | Position | Period Held Office | ||
| P. A. Darbee | Chairman of the Board, Pacific Gas and Electric Company | January 1, 2006 to present | ||
| Chairman of the Board, Chief Executive Officer and President, PG&E Corporation | January 1, 2006 to present | |||
| President and Chief Executive Officer, PG&E Corporation | January 1, 2005 to December 31, 2005 | |||
| Senior Vice President and Chief Financial Officer, PG&E Corporation | July 9, 2001 to December 31, 2004 | |||
| Senior Vice President, Chief Financial Officer, and Treasurer, PG&E Corporation | September 20, 1999 to July 8, 2001 | |||
| T. B. King | President and Chief Executive Officer | January 1, 2006 to present | ||
| Senior Vice President, PG&E Corporation | January 1, 2006 to present | |||
| Executive Vice President and Chief Operating Officer | July 1, 2005 to December 31, 2005 | |||
| Executive Vice President and Chief of Utility Operations | August 2, 2004 to June 30, 2005 | |||
| Senior Vice President and Chief of Utility Operations | November 1, 2003 to August 1, 2004 | |||
| Senior Vice President, PG&E Corporation | January 1, 1999 to October 31, 2003 | |||
| President, PG&E National Energy Group, Inc. | November 15, 2002 to July 8, 2003 | |||
| President and Chief Operating Officer, PG&E Gas Transmission Corporation | August 27, 2002 to July 8, 2003 | |||
| President and Chief Operating Officer, Gas Transmission, PG&E National Energy Group, Inc. | August 9, 2002 to November 14, 2002 | |||
| President and Chief Operating Officer, West Region, PG&E National Energy Group, Inc. | July 1, 2000 to August 8, 2002 | |||
| President and Chief Operating Officer, PG&E Gas Transmission Corporation | November 23, 1998 to September 10, 2002 | |||
| T. E. Bottorff | Senior Vice President, Regulatory Relations | October 14, 2005 to present | ||
| Senior Vice President, Customer Service and Revenue | March 1, 2004 to October 13, 2005 | |||
| Vice President, Customer Service | June 1, 1999 to February 29, 2004 | |||
| J. D. Butler | Senior Vice President, Energy Delivery | January 9, 2006 to present | ||
| Senior Vice President, Transmission and Distribution | March 1, 2004 to January 8, 2006 | |||
| Vice President, Operations, Maintenance and Construction | June 12, 2000 to February 29, 2004 | |||
| L. H. Everett | Senior Vice President, Communications and Public Affairs, PG&E Corporation | January 9, 2006 to present | ||
| Senior Vice President and Assistant to the Chief Executive Officer, PG&E Corporation | January 1, 2005 to January 8, 2006 | |||
| Senior Vice President and Assistant to the Chairman, PG&E Corporation | August 2, 2004 to December 31, 2004 | |||
| Vice President and Assistant to the Chairman, PG&E Corporation | June 1, 2001 to August 1, 2004 | |||
| Vice President, Corporate Secretary, and Assistant to the Chairman, PG&E Corporation | May 1, | |||
| Vice President and Corporate Secretary, PG&E Corporation | July 1, 1997 to April 30, 2001 | |||
| Vice President and Corporate Secretary | November 1, 1996 to May 31, 2001 | |||
| R. M. Jackson | Senior Vice President, Human Resources, Pacific Gas and Electric Company and PG&E Corporation | August 2, 2004 to present | ||
| Vice President, Human Resources, PG&E Corporation | June 1, 2004 to August 1, 2004 | |||
| Vice President, Human Resources | June 1, 1999 to August 1, 2004 | |||
| C. P. Johns | Senior Vice President, Chief Financial Officer and Treasurer | October 1, 2005 to present | ||
| Senior Vice President, Chief Financial Officer and Treasurer, PG&E Corporation | October 4, 2005 to present | |||
| Senior Vice President, Chief Financial Officer and Controller, PG&E Corporation | January 1, 2005 to October 3, 2005 | |||
| Senior Vice President and Controller, PG&E Corporation | September 19, 2001 to December 31, 2004 | |||
| Vice President and Controller, PG&E Corporation | July 1, 1997 to September 18, 2001 | |||
| J. S. Keenan | Senior Vice President, Generation and Chief Nuclear Officer | |||
| Vice President, Fossil Generation, Progress Energy | November 10, 2003 to December 18, 2005 | |||
| Vice President, Brunswick Nuclear Plant, Progress Energy | May 1, 1998 to November 9, 2003 | |||
| S. M. Ramsay | Vice President, Asset Management and Electric Transmission | January 9, 2006 to present | ||
| Vice President, Electric Transmission | July 1, 2005 to January 8, 2006 | |||
| Vice President, Distribution Asset Management, American Electric Power | February 1, 2004 to June 30, 2005 | |||
| Senior Vice President, Power and | October 1, 2001 to January 31, 2004 | |||
| Managing Director, UK Operations, UMS Group, Inc. | January 2, 2001 to September 30, 2001 | |||
| F. Wan | Vice President, Energy Procurement | January 9, 2006 to present | ||
| Vice President, Power | May 1, 2004 to January 8, 2006 | |||
| Vice President, Risk Initiatives, PG&E Corporation Support Services, Inc. | November 1, |
PART II
| 30, 2004 | ||||
| B. R. Worthington | Senior Vice President and | June 1, 1997 to present |
Information responding to part
On July 2, 2003,
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)(2)(3) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | |||||||||
| October 1 through October 31, 2005 | - | $ | - | - | $ | - | |||||||
| November 1 through November 30, 2005 | 31,650,300 | $ | 34.75 | 31,650,300 | $ | 500,000,000 | |||||||
| December 1 through December 31, 2005 | - | $ | - | - | $ | - | |||||||
Total | 31,650,300 | $ | 34.75 | 31,650,300 | $ | 500,000,000 | |||||||
(1) | On September 15, 2004, the PG&E Corporation Board of Directors authorized PG&E Corporation and its subsidiaries to repurchase shares of PG&E Corporation's common stock with an aggregate purchase price not to exceed PG&E Corporation's net cash proceeds from sales of PG&E Corporation's common stock upon exercise of options granted under PG&E Corporation's Stock Option Plan. The program was publicly announced in a Current Report on Form 8-K filed by PG&E Corporation on October 14, 2004. The program expired on December 31, 2005. |
| On December 15, 2004, the PG&E Corporation Board of Directors authorized the repurchase of up to $975 million in PG&E Corporation common stock. The program was publicly announced in a Current Report on Form 8-K filed by PG&E Corporation on December 16, 2004. On February 16, 2005, the Board of Directors increased the repurchase authorization to $1.05 billion, which was announced in PG&E Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004. PG&E Corporation used all of this authorization to enter into an accelerated share repurchase arrangement on March 4, 2005 with Goldman, Sachs & Co., Inc., or GS&Co, to repurchase 29,489,400 shares at an initial price of $35.60 per share. Under the share forward component of the March 2005 arrangement, certain additional payments were required by both PG&E Corporation and GS&Co upon termination. Most significantly, PG&E Corporation was to receive from, or be required to pay to, GS&Co a price adjustment on the repurchased shares based on the difference between the amount it paid and the daily volume weighted average price, or VWAP, of PG&E Corporation common stock over the approximately six-month intended arrangement period. PG&E Corporation made additional payments to GS&Co of $78,000 on June 30, 2005 and $22 million on September 12, 2005. The amount of the price adjustment based on the VWAP of PG&E Corporation common stock over the term of the arrangement increased the average purchase price per share to $36.19. | |
| On October 19, 2005, the PG&E Corporation Board of Directors authorized the repurchase of up to $1.6 billion in shares of PG&E Corporation's common stock, from time to time, but no later than December 31, 2006. The program was publicly announced in a Current Report on Form 8-K filed by PG&E Corporation on October 21, 2005. As described in a Current Report on Form 8-K filed by PG&E Corporation on November 18, 2005, PG&E Corporation entered into an accelerated share repurchase arrangement with GS&Co on November 16, 2005 under which PG&E Corporation repurchased 31,650,300 shares of its outstanding common stock at an initial price of $34.75 per share and an aggregate price of approximately $1.1 billion. As with the March 2005arrangement, PG&E Corporation may receive from, or be required to pay, GS&Co various payments, including a price adjustment based on the daily VWAP of PG&E Corporation common stock over a period of approximately seven months. |
A discussion of PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's consolidated results of operations and financial condition is set forth on under the heading “Management’s"Management's Discussion and Analysis
51
39 |
Based on an evaluation of PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sthe Utility's disclosure controls and procedures as of December 31, 2003,2005, PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sthe Utility's respective principal executive officers and principal financial officers have concluded that such controls and procedures are effective to ensure that information required to be disclosed by PG&E Corporation and Pacific Gas and Electric Company’sthe Utility in reports the companies file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms.
Directors
The authorized number of directors of PG&E Corporation currently is 10, and the authorized number of directors of the Utility currently is 11. On February 18, 2004, each Board of Directors approved amendments to the respective company’s bylaws to reduce the authorized number of directors effective upon adjournment of the 2004 Joint Annual Meeting of shareholders. After these amendments become effective, the bylaws will provide that the authorized number of directors of PG&E Corporation will be eight, and the authorized number of directors of Pacific Gas and Electric Company will be nine.
Information is provided below about the directorsManagement of PG&E Corporation and the Utility includinghave prepared an annual report on internal control over financial reporting. Management's report, together with the report of the independent registered public accounting firm, appears in their principal occupations forjoint 2005 Annual Report to Shareholders under the past five years, certain other directorships, age,heading "Management's Report on Internal Control Over Financial Reporting" and length"Report of serviceIndependent Registered Public Accounting Firm," which information is hereby incorporated by reference and filed as part of Exhibit 13 to this report.
52
Information regarding executive officers of PG&E Corporation and Pacific Gas and Electric Company is included above in a separate item captioned reference. Equity Compensation Plan Information 2006 Annual Meetings of Shareholders, which information is hereby incorporated by reference. REGISTERED PUBLIC ACCOUNTING FIRMPepsiCo, Inc. (food and beverage businesses), and has heldthe term “change in control” that position since February 2002. Prior to joining PepsiCo, Inc., Mr. Andrews was a partnerappears in the law firmPG&E Corporation Officer Severance Policy, or the Officer Severance Policy, and the PG&E Corporation 2006 Long-Term Incentive Plan, or the 2006 LTIP. The definition of McCutchen, Doyle, Brown & Enersen, LLP from May 2000the term “change in control” has been amended so that a “change in control” will occur upon the consummation of a consolidation or merger of PG&E Corporation, other than a merger or consolidation that would result in the voting securities of PG&E Corporation outstanding immediately prior thereto continuing to January 2002represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent of such surviving entity) at least 70 percent of the combined voting power of PG&E Corporation, such surviving entity, or the parent of such surviving entity outstanding immediately after the merger or consolidation. Under the prior definition, a “change in control” would have occurred upon shareholder approval of such a transaction. Certain other events, including the turnover of two-thirds of the incumbent board members without incumbent board member approval within two years, the acquisition of a 20 percent voting stake in PG&E Corporation, and from 1981shareholder approval of certain asset sales or a plan of liquidation or dissolution, will continue to July 1997. From August 1997 to April 2000, he served as the legal advisorconstitute a change in control.U.S. DepartmentOfficer Severance Policy became subject to the Golden Parachute Restriction Policy and the new definition of State“change in control” effective as of February 15, 2006, subject to existing contractual obligations. The Officer Severance Policy provides that any changes which would reduce the aggregate level of benefits provided under the policy will become effective three years after the covered officers receive notice of those changes. The Golden Parachute Restriction Policy and former Secretary Madeleine Albright. Mr. Andrews, 62,the amendments to the Officer Severance Policy would reduce the aggregate level of benefits, and therefore will become effective three years after the covered officers receive notice of those changes. PG&E Corporation intends to provide such notice shortly.directorchange in control, benefits conditioned upon continued future employment will accelerate in full. These amendments became effective on February 15, 2006.since 2000. He also servesare provided an opportunity to receive annual incentive cash payments. For these officers, corporate financial performance, as a directormeasured by corporate earnings from operations, will account for 70 percent of UnionBanCal Corporation.Leslie S. Biller. Mr. Biller is retired Vice Chairmanthe award and Chief Operating OfficerUtility operational performance, as measured by 11 equally weighted financial, operating, and service measures, will account for 30 percent of Wells Fargo & Company (financial services and retail banking). He heldthe award. At its meeting on February 15, 2006, the Committee approved the specific performance scale that positionwill be used to determine the extent to which the corporate financial objective, as measured by earnings from November 1998 until his retirement in October 2002. Mr. Biller was President and Chief Operating Officer of Norwest Corporation (bank holding company) from 1997 until it merged with Wells Fargo & Company in 1998. Mr. Biller, 55,operations, has been an advisory directormet. The Committee used the same methodology to establish the performance scale for the corporate financial performance portion of the 2006 STIP as was used for the 2005 STIP. The corporate financial performance measure is based on PG&E Corporation's budgeted earnings from operations that were previously approved by the Board, consistent with the basis for reporting and guidance to the financial community. As with previous earnings performance scales, unbudgeted items impacting comparability such as changes in accounting methods, workforce restructuring, and one-time occurrences will be excluded. 1. 94.0 96.0 2. Timely bills (% issued within 35 days) 99.38% 99.51% 3. Estimate of Outage Restoration Accuracy 47% 50% 4. 178.7 166 5. 1.344 1.31 6. 7. 75/20 76/20 8. Expense Per Customer $278 9. 98.2 98.2 10. Employee survey (Premier) index 64.0% 68.0% 11. 1.04 0.878 andhas the Utility since January 2003, and was elected a director of PG&E Corporation and the Utility on February 18, 2004. He also serves as a director of Ecolab Inc.David A. Coulter. Mr. Coulter is Vice Chairman of J.P. Morgan Chase & Co. and J.P. Morgan Chase Bank, responsible for its investment bank, investment management, and private banking., and has held that position since January 2001. Priordiscretion to recommend to the merger with J.P. Morgan & Co. Incorporated, he was Vice ChairmanCommittee an additional performance rating for an individual officer. This rating will be determined by such officer’s efforts to manage their organization’s respective financial budget. This additional performance rating can modify (up or down) an individual officer’s final STIP award by no more than 15 percent. The Committee will continue to retain full discretion as to the determination of The Chase Manhattan Corporation (bank holding company) from August 2000 to December 2000. He was a partner in the Beacon Group, L.P. (investment banking firm) from January 2000 to July 2000,final officer STIP awards.Robert D. Glynn, Jr. Mr. Glynn is Chairman of the Board, Chief Executive Officer, and President of PG&E Corporation and Chairman of the Board of the Utility. He has been an officer of PG&E Corporation since December 1996 and an officer of the Utility since January 1988. Mr. Glynn, 61, has been a director of the Utility since 1995 and a director of PG&E Corporation since 1996.David M. Lawrence, MD Dr. Lawrence is retired Chairman and Chief Executive Officer of Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals, and was an executive officer of those companies from 1991 until his retirement in 2002. Dr. Lawrence, 63, has been a director of the Utility since 1995 and a director of PG&E Corporation since 1996. He also serves as a director of Agilent Technologies Inc. and McKesson Corporation.Mary S. Metz. Dr. Metz is President of S. H. Cowell Foundation, and has held that position since January 1999. Prior to that date, she was Dean of University Extension, University of California, Berkeley from July 1991 to June 1998. Dr. Metz, 66, has been a director of the Utility since 1986 and a director of PG&E Corporation since 1996. She also serves as a director of Longs Drug Stores Corporation, SBC Communications Inc., and UnionBanCal Corporation.Carl E. Reichardt. Mr. Reichardt served as Vice Chairman of Ford Motor Company from October 2001 to July 2003. He is retired Chairman of the Board and Chief Executive Officer of Wells Fargo &53Company (bank holding company) and Wells Fargo Bank, N.A. He was an executive officer of Wells Fargo Bank from 1978 until his retirement in December 1994. Mr. Reichardt, 72, has been a director of the Utility since 1985 and a director of PG&E Corporation since 1996. He also serves as a director of ConAgra Foods, Inc. and Ford Motor Company.Gordon R. Smith. Mr. Smith is President and Chief Executive Officer of the Utility, and has been an officer of the Utility since 1980. Mr. Smith, 56, has been a director of the Utility since 1997.Barry Lawson Williams. Mr. Williams is President of Williams Pacific Ventures, Inc. (business investment and consulting), and has held that position since 1987. He also served as interim President and Chief Executive Officer of the American Management Association (management development organization) from November 2000 to June 2001. Mr. Williams, 59, has been a director of the Utility since 1990 and a director of PG&E Corporation since 1996. He also serves as a director of CH2M Hill Companies, Ltd., The Northwestern Mutual Life Insurance Company, R.H. Donnelley Corporation, The Simpson Manufacturing Company Inc., and SLM Corporation.Executive Officers“Executive"Executive Officers of the Registrants” contained on pages 48 through 50 inRegistrants" at the end of Part I of this report.Section 16 Beneficial Ownership Reporting Compliance In accordance with Section 16(a) of Other information responding to Item 10 is included under the Securities Exchange Act of 1934 and Securities and Exchange Commission (SEC) regulations, PG&E Corporation’s and the Utility’s directors and certain officers, and persons who own greater than 10 percent of PG&E Corporation’s or the Utility’s equity securities must file reports of ownership and changes in ownership of such equity securities with the SEC and the principal national securities exchange on which those securities are registered, and must furnish PG&E Corporation or the Utility with copies of all such reports they file. Based solely on its review of copies of such reports received or written representations from certain reporting persons, PG&E Corporation and the Utility believe that during 2003 all filing requirements applicable to their respective directors, officers, and 10 percent shareholders were satisfied, except that a Statement of Changes of Beneficial Ownership of Securities on Form 4 was filed late for Thomas B. King due to internal corporate administrative delays. No information is reported for individuals during periods in which they were not directors, officers, or 10 percent shareholders of the respective company.Audit Committee Members and Financial Expert The members of the Audit Committees for each of PG&E Corporation and the Utility are C. Lee Cox, David R. Andrews, William S. Davila, Mary S. Metz, and Barry Lawson Williams. The Boardsheading "Item No. 1: Election of Directors of PG&E Corporation and Pacific Gas and Electric Company" and under the Utility each have determined that both C. Lee Cox and Barry Lawson Williams, membersheading "Section 16(a) Beneficial Ownership Reporting Compliance" in the Joint Proxy Statement relating to the 2006 Annual Meetings of each company’s Audit Committee, each are “audit committee financial experts” as definedShareholders, which information is hereby incorporated by the SEC regulations, implementing Section 407 of the Sarbanes-Oxley Act of 2002. Each Board of Directors has determined that Mr. Cox and Mr. Williams each are “independent” as defined by current listing standards of the New York Stock Exchange and the American Stock Exchange, as applicable.Corporation’sCorporation's website www.pgecorp.com, and Pacific Gas and Electric Company’sCompany's website,www.pge.com: (1) the codes of conduct and ethics adopted by PG&E Corporation and Pacific Gas and Electric Company applicable to their respective directors and employees, including their respective Chief Executive Officers, Chief Financial Officers, Controllers and other executive officers, (2) PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's corporate54companies’companies' Audit Committees and the PG&E Corporation Nominating, Compensation, and Governance Committee. Shareholders also may obtain print copies of these documents by submitting a written request to Linda Y.H. Cheng, Corporate Secretary of both PG&E Corporation and Pacific Gas and Electric Company, One Market, Spear Tower, Suite 2400, San Francisco, California 94105.website.Item 11.Executive Compensation.Compensation of Directors Each director who is not an officer or employee of PG&E Corporation or the Utility receives a quarterly retainer of $7,500 plus a fee of $1,000 for each Board or Board committee meeting attended. Non-employee directors who chair Board committees receive an additional quarterly retainer of $625. Under the Deferred Compensation Plan for Non-Employee Directors, directors of PG&E Corporation or the Utility may elect to defer all or part of such compensation for varying periods. Directors who participate in the Deferred Compensation Plan may convert their deferred compensation into common stock equivalents, the value of which is tiedwebsite and any waivers to the market value of PG&E Corporation common stock. Alternatively, participating directors may elect that their deferred compensationcode will be investeddisclosed in the Utility Bond Fund. No director who servesa Current Report on both the PG&E Corporation and Utility Boards and corresponding committees is paid additional compensation for concurrent service on the Utility’s Board or its committees, except that separate meeting fees are paid for each meetingForm 8-K filed within 4 business days of the Utility Board, or a Utility Board committee, that is not held concurrently or sequentially with a meeting of the PG&E Corporation Board or a corresponding PG&E Corporation Board committee. It is the usual practicewaiver. Utility that meetingsheading "Compensation of Directors" and under the respective Boardsheadings "Summary Compensation Table," "Option/SAR Grants in 2005," "Aggregated Option/SAR Exercises in 2005 and corresponding committees are held concurrentlyYear-End Option/SAR Values," "Long-Term Incentive Program—Awards in 2005," "Retirement Benefits," and therefore, that a single meeting fee"Employment Contracts, Termination of Employment, and Change In Control Provisions" in the Joint Proxy Statement relating to the 2006 Annual Meetings of Shareholders, which information is paidhereby incorporated by reference.each directorItem 12, for each set of meetings. Directors of PG&E Corporation or the Utility are reimbursed for reasonable expenses incurred for participating in Board meetings, committee meetings, or other activities undertaken on behalf of PG&E Corporation or the Utility. Effective January 1, 1998, the PG&E Corporation Retirement Plan for Non-Employee Directors was terminated. Directors who had accrued benefits under the Plan were given a one-time option of receiving at retirement the benefit accrued through 1997, or of converting the present value of their accrued benefit into a PG&E Corporation common stock equivalent investment held in the Deferred Compensation Plan for Non-Employee Directors. The payment of frozen accrued retirement benefits, or distributions from the Deferred Compensation Plan attributable to the conversion of retirement benefits, cannot be made until the later of age 65 or retirement from the Board. Under the Non-Employee Director Stock Incentive Plan, which is a component of the PG&E Corporation Long-Term Incentive Program, on the first business day of January of each year, each non-employee director of PG&E Corporation is entitled to receive stock-based grants with a total aggregate equity value of $30,000, composed of (1) restricted shares of PG&E Corporation common stock valued at $10,000 (based on the closing price of PG&E Corporation common stock on the first business day of the year), and (2) a combination, as elected by the director, of non-qualified stock options and common stock equivalents with a total equity value of $20,000, based on equity value increments of $5,000. The exercise price of stock options is equal to the market value of PG&E Corporation common stock (i.e., the closing price) on the date of grant. Restricted stock and stock options vest over the five-year period following the date of grant, except that restricted stock and stock options will vest immediately upon mandatory retirement from the Board, upon a director’s death or disability, or in the event of a change in control. Common stock equivalents awarded to non-employee directors are payable only in the form of PG&E Corporation common stock following a55director’s retirement from the Board, upon a director’s death or disability, or in the event of a change in control. Unvested awards are forfeited if the recipient ceases to be a director for any other reason.On January 2, 2003, each non-employee director received 684 restricted shares of PG&E Corporation common stock. In addition, directors who were granted stock options received options to purchase 1,101 shares of PG&E Corporation common stock for each $5,000 increment of equity value (subject to the aggregate $20,000 limit) at an exercise price of $14.61 per share, and directors who were granted common stock equivalents received 342 common stock equivalent units for each $5,000 increment of equity value (subject to the aggregate $20,000 limit).Summary Compensation TableThis table summarizes the principal components of compensation paid to the Chief Executive Officers and the other most highly compensated executive officers of PG&E Corporation and Pacific Gas and Electric Company, is included under the Utility duringheading "Security Ownership of Management" and under the past year. Annual Compensation Long-Term Compensation Awards Payouts Other Annual Restricted Securities All Other Compen- Stock Underlying LTIP Compen- Salary Bonus sation Award(s) Options/SARs Payouts sation Name and Principal Position Year ($) ($)(1) ($)(2) ($)(3) (# of Shares) ($)(4) ($)(5) Robert D. Glynn, Jr. 2003 $ 1,050,000 $ 0 $ 3,154,268 $ 2,169,950 486,000 $ 9,879,911 $ 666,050 Chairman of the Board, Chief 2002 1,050,000 787,500 4,833,389 0 150,000 632,461 79,777 Executive Officer, and 2001 900,000 1,181,700 4,817 3,000,000 470,800 74,588 413,196 President of PG&E Corporation; Chairman of the Board of Pacific Gas and Electric Company Peter A. Darbee 2003 $ 490,000 $ 0 $ 2,368 $ 678,269 101,300 $ 4,023,098 $ 329,140 Senior Vice President and 2002 490,000 220,500 4,862 0 0 115,244 62,355 Chief Financial Officer 2001 455,000 328,578 4,817 1,125,000 183,800 26,105 613,596 of PG&E Corporation Bruce R. Worthington 2003 $ 425,000 $ 0 $ 836,295 $ 530,708 79,300 $ 2,310,713 $ 306,575 Senior Vice President and 2002 425,000 175,313 1,220,913 0 0 205,801 43,893 General Counsel of PG&E 2001 400,000 288,860 4,817 625,000 145,000 24,617 171,353 Corporation G. Brent Stanley 2003 $ 305,000 $ 0 $ 2,368 $ 353,927 52,900 $ 2,141,176 $ 204,782 Senior Vice President — 2002 305,000 114,375 4,862 0 0 84,311 18,010 Human Resources of PG&E 2001 285,000 187,103 4,817 625,000 102,800 15,385 110,691 Corporation P. Chrisman Iribe 2003 $ 450,000 $ 0 $ 0 $ 471,903 70,400 $ 3,017,831 $ 151,934 Senior Vice President of 2002 450,000 93,163 0 0 0 94,863 75,620 PG&E Corporation; Executive 2001 425,000 306,914 0 1,125,000 186,400 25,355 57,846 Vice President of National Energy & Gas Transmission, Inc. Gordon R. Smith 2003 $ 735,000 $ 0 $ 2,402,048 $ 943,441 140,900 $ 5,842,500 $ 453,723 Senior Vice President of 2002 735,000 519,278 4,310,520 0 0 182,009 37,173 PG&E Corporation; President 2001 630,000 664,808 937 1,750,000 272,000 40,282 241,302 and Chief Executive Officer of Pacific Gas and Electric Company Thomas B. King 2003 $ 500,000 $ 0 $ 23,780 $ 530,708 79,300 $ 2,938,351 $ 659,488 Senior Vice President and 2002 450,000 93,163 0 0 0 94,863 89,263 Chief of Utility Operations 2001 425,000 306,914 0 1,125,000 186,400 41,020 1,090,207 of Pacific Gas and Electric Company (November 1, 2003) Senior Vice President of PG&E Corporation (January 1, 1999 - October 31, 2003) 56 Annual Compensation Long-Term Compensation Awards Payouts Other Annual Restricted Securities All Other Compen- Stock Underlying LTIP Compen- Salary Bonus sation Award(s) Options/SARs Payouts sation Name and Principal Position Year ($) ($)(1) ($)(2) ($)(3) (# of Shares) ($)(4) ($)(5) Gregory M. Rueger 2003 $ 358,000 $ 0 $ 642,860 $ 272,477 40,700 $ 1,563,204 $ 243,325 Senior Vice President — 2002 358,000 194,215 1,007,117 0 0 42,166 16,646 Generation and Chief Nuclear 2001 340,000 257,550 0 625,000 79,400 15,385 129,145 Officer of Pacific Gas and Electric Company Kent M. Harvey 2003 $ 302,000 $ 0 $ 0 $ 272,477 40,700 $ 1,557,466 $ 209,703 Senior Vice President, 2002 302,000 173,952 0 0 0 41,434 18,812 Chief Financial Officer, and 2001 285,000 213,465 0 625,000 76,000 15,385 113,462 Treasurer of Pacific Gas and Electric Company Roger J. Peters 2003 $ 302,000 $ 0 $ 0 $ 272,477 40,700 $ 1,557,466 $ 204,502 Senior Vice President and 2002 302,000 166,402 0 0 0 41,434 19,385 General Counsel of Pacific Gas 2001 285,000 212,753 0 625,000 76,000 15,385 112,619 and Electric Company James K. Randolph 2003 $ 337,000 $ 0 $ 669,741 $ 265,537 39,700 $ 1,557,466 $ 233.943 Senior Vice President and 2002 337,000 165,130 1,282,378 0 0 41,434 15,602 Chief of Utility Operations of 2001 325,000 218,725 0 625,000 72,600 15,385 123,028 Pacific Gas and Electric Company (retired October 31, 2003) (1) Represents payments received or deferred in 2003 and 2002 for achievement of corporate and organizational objectives in 2002 and 2001, respectively, under the Short-Term Incentive Plan. No decision has been made with respect to the 2003 Short-Term Incentive Plan.(2) Amounts reported consist of (i) reportable officer perquisite allowances and, for 2002 and 2003, amounts for non-business related travel (Mr. Glynn $35,000 and $62,998, respectively), (ii) payments of related taxes, and (iii) for 2002 and 2003, the cost of annuities to replace existing retirement benefits, at the time they are due under the Supplemental Executive Retirement Plan (SERP). The annuities will not change the after-tax benefits that would have been provided upon retirement under the existing arrangements. The cost of the annuity and associated tax restoration payments during 2003 for retirement obligations as of December 31, 2002, are: Mr. Glynn $3,048,972, Mr. Worthington $833,927, Mr. Smith $2,402,048, Mr. Rueger $642,860, and Mr. Randolph $669,741.(3) As of the end of the year, the aggregate number of shares or units of restricted stock held by each named executive officer, and the value using the year-end closing price of a share of PG&E Corporation common stock, were: Mr. Glynn 148,525 (with a value of $4,124,539), Mr. Darbee 46,425 (with a value of $1,289,222), Mr. Worthington 36,325 (with a value of $1,008,745), Mr. Stanley 24,225 (with a value of $672,728), Mr. Iribe 32,300 (with a value of $896,971), Mr. Smith 64,575 (with a value of $1,793,248), Mr. King 36,325 (with a value of $1,008,745), Mr. Rueger 18,650 (with a value of $517,911), Mr. Harvey 18,650 (with a value of $517,911), Mr. Peters 18,650 (with a value of $517,911), and Mr. Randolph 18,175 (with a value of $504,720). The restrictions lapse in annual increments of up to 25 percent on the first business day of 2004, 2005, 2006, and 2007, subject to the recipient’s continued employment. In general, 20 percent of each year’s increment is subject to forfeiture if PG&E Corporation fails to be in the top quartile of the comparator group as measured by relative annual total shareholder return at the end of the prior year. With respect to the Chairman, Chief Executive Officer, and President of PG&E Corporation, 25 percent of each year’s increment is subject to forfeiture if PG&E Corporation fails to be in the top quartile of the comparator group as measured by total shareholder return at the end of the prior year, and an additional 25 percent is subject to forfeiture if PG&E Corporation fails to be in the top half of the comparator group. The shares of restricted stock have the same dividend rights as unrestricted shares of PG&E Corporation common stock.(4) Represents (i) payments received or deferred in 2004, 2003, and 2002 for achievement of corporate performance objectives for the periods 2001 through 2003, 2000 through 2002, and 1999 through 2001,57respectively, under the Performance Unit Plan (Mr. Glynn $1,292,837, Mr. Darbee $669,876, Mr. Worthington $522,915, Mr. Stanley $325,427, Mr. Iribe $533,063, Mr. Smith $799,143, Mr. King $533,063, Mr. Rueger $234,201, Mr. Harvey $228,463, Mr. Peters $228,463, and Mr. Randolph $228,463), (ii) common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) earned by executive officers under the Executive Stock Ownership Program and vested during 2003, and additional common stock equivalents reflecting dividends accrued on those SISOPs as follows: Mr. Glynn 2,948 (with a value of $42,453), Mr. Darbee 10,346 (with a value of $148,981), Mr. Worthington 533 (with a value $7,672), Mr. Stanley 2,474 (with a value of $35,623), Mr. Iribe 6,430 (with a value of $92,591), Mr. Smith 4,096 (with a value of $58,989), and Mr. King 910 (with a value of $13,111), and (iii) amounts representing one-half of the phantom restricted stock units granted in 2001 under the Senior Executive Retention Program that were subject to a performance measure (Mr. Glynn 307,692.5 units with a value of $8,544,621, Mr. Darbee 115,385 units with a value of $3,204,241, Mr. Worthington 64,102.5 units with a value of $1,780,126, Mr. Stanley 64,102.5 units with a value of $1,780,126, Mr. Iribe 86,142.5 units with a value of $2,392,177, Mr. Smith 179,487.5 units with a value of $4,984,368, Mr. King 86,142.5 units with a value of $2,392,177, Mr. Rueger 47,857.5 units with a value of $1,329,003, Mr. Harvey 47,857.5 units with a value of $1,329,003, Mr. Peters 47,857.5 units with a value of $1,329,003, and Mr. Randolph 47,857.5 units with a value of $1,329,003). The value of all phantom restricted units granted under the Senior Executive Retention Program is based solely on the closing price of PG&E Corporation common stock on the date that the units vested, December 31, 2003. As previously reported, the total number of phantom restricted stock units granted under the Program and their value as of their vesting date of December 31, 2003, inclusive of the performance-based units described above, were: Mr. Glynn 615,385 units with a value of $17,089,241, Mr. Darbee 230,770 units with a value of $6,408,483, Mr. Worthington 128,205 units with a value of $3,560,253, Mr. Stanley 128,205 units with a value of $3,560,253, Mr. Iribe 172,285 units with a value of $4,784,354, Mr. Smith 358,975 units with a value of $9,968,736, Mr. King 172,285 units with a value of $4,784,354, Mr. Rueger 95,715 units with a value of $2,658,006, Mr. Harvey 95,715 units with a value of $2,658,006, Mr. Peters 95,715 units with a value of $2,658,006, and Mr. Randolph 95,715 units with a value of $2,658,006.(5) Amounts reported for 2003 consist of: (i) contributions to defined contribution retirement plans (Mr. Glynn $9,000, Mr. Darbee $16,125, Mr. Worthington $3,953, Mr. Stanley $3,853, Mr. Iribe $20,000, Mr. Smith $9,000, Mr. King $20,000, Mr. Rueger $9,000, Mr. Harvey $9,000, Mr. Peters $9,000, and Mr. Randolph $9,000), (ii) contributions received or deferred under excess benefit arrangements associated with defined contribution retirement plans (Mr. Glynn $38,250, Mr. Darbee $5,925, Mr. Worthington $15,172, Mr. Stanley $9,872, Mr. Iribe $25,000, Mr. Smith $24,075, Mr. King $2,500, Mr. Rueger $7,110, Mr. Harvey $4,590, Mr. Peters $4,590, and Mr. Randolph $6,165), (iii) above-market interest on deferred compensation (Mr. Glynn $18,800, Mr. Darbee $3,757, Mr. Worthington $350, Mr. Stanley $1,057, Mr. Iribe $203, Mr. Smith $648, Mr. King $1,285, Mr. Rueger $548, Mr. Harvey $306, Mr. Peters $331, and Mr. Randolph $167), (iv) relocation allowances and other one-time payments, Mr. King $374,645, (v) sale of vacation (Mr. Worthington $20,433, Mr. Iribe $69,231, Mr. King $36,058, Mr. Harvey $5,807, Mr. Peters $581, and Mr. Randolph $1,944), and (vi) amounts received pursuant to management retention programs (Mr. Glynn $600,000, Mr. Darbee $303,333, Mr. Worthington $266,667, Mr. Stanley $190,000, Mr. Iribe $37,500, Mr. Smith $420,000, Mr. King $225,000, Mr. Rueger $226,667, Mr. Harvey $190,000, Mr. Peters $190,000, and Mr. Randolph $216,667).58Option/SAR Grants in 2003This table summarizes the distribution and the terms and conditions of stock options granted to the executive officers namedheading "Principal Shareholders" in the Summary Compensation Table during the past year. Grant Individual Grants Date Value Number of % of Total Securities Options/SARs Underlying Granted to Exercise or Grant Date Options/SARs Employees in Base Price Expiration Present Name Granted (#)(1)(2) 2003(2) ($/Sh)(3) Date(4) Value ($)(5) Robert D. Glynn, Jr. 486,000 13.32 % 14.61 01-03-2013 $ 2,760,480 Peter A. Darbee 101,300 2.78 % 14.61 01-03-2013 575,384 Bruce R. Worthington 79,300 2.17 % 14.61 01-03-2013 450,424 G. Brent Stanley 52,900 1.45 % 14.61 01-03-2013 300,472 P. Chrisman Iribe 70,400 1.93 % 14.61 01-03-2013 399,872 Gordon R. Smith 140,900 3.86 % 14.61 01-03-2013 800,312 Thomas B. King 79,300 2.17 % 14.61 01-03-2013 450,424 Gregory M. Rueger 40,700 1.12 % 14.61 01-03-2013 231,176 Kent M. Harvey 40,700 1.12 % 14.61 01-03-2013 231,176 Roger J. Peters 40,700 1.12 % 14.61 01-03-2013 231,176 James K. Randolph 39,700 1.09 % 14.61 01-03-2013 225,496 (1) All options granted to executive officers in 2003 are exercisable as follows: 25 percent of the options may be exercised on or after the first anniversary of the date of grant, 50 percent on or after the second anniversary, 75 percent on or after the third anniversary, and 100 percent on or after the fourth anniversary, provided that options will vest immediately upon the occurrence of certain events. No options were accompanied by tandem dividend equivalents.(2) No stock appreciation rights (SARs) have been granted since 1991.(3) The exercise price is equal to the closing price of PG&E Corporation common stock on the date of grant.(4) All options granted to executive officers in 2003 expire ten years and one day from the date of grant, subject to earlier expiration in the event of the officer’s termination of employment with PG&E Corporation, the Utility, or one of their respective subsidiaries.(5) Estimated present values are based on the Black-Scholes Model, a mathematical formula used to value options traded on stock exchanges. The Black-Scholes Model considers a number of factors, including the expected volatility and dividend rate of the stock, interest rates, and time of exercise of the option. The following assumptions were used in applying the Black-Scholes Model to the 2003 option grant shown in the table above: volatility of 45.0 percent, risk-free rate of return of 3.94 percent, dividend yield of $0.00 (the annual dividend rate on the grant date), and an exercise date ten years after the date of grant. The ultimate value of the options will depend on the future market price of PG&E Corporation common stock, which cannot be forecast with reasonable accuracy. That value will depend on the future success achieved by employees for the benefit of all shareholders. The estimated grant date present value for the options shown in the table was $5.68 per share.59Aggregated Option/SAR Exercises in 2003 and Year-End Option/SAR ValuesThis table summarizes exercises of stock options and tandem stock appreciation rights (granted in prior years) by the executive officers named in the Summary Compensation Table during the past year, as well as the number and value of all unexercised options held by such named executive officers at the end of 2003. Value of Number of Securities Unexercised Underlying Unexercised In-the-Money Options/SARs at Options/SARs at Shares Acquired End of 2003 (#) End of 2003 ($)(1) on Exercise Value Realized (Exercisable/ (Exercisable/ Name (#) ($) Unexercisable) Unexercisable) Robert D. Glynn, Jr. 0 0 1,363,492/1,057,232 $ 5,306,585/$12,720,407 Peter A. Darbee 0 0 309,402/272,898 $ 1,608,109/$3,371,912 Bruce R. Worthington 0 0 369,268/215,232 $ 1,633,980/$2,656,447 G. Brent Stanley 0 0 204,902/149,798 $ 1,069,201/$1,843,813 P. Chrisman Iribe 31,000 323,537 315,034/235,566 $ 1,203,811/$2,923,614 Gordon R. Smith 0 0 612,302/393,098 $ 2,824,560/$4,857,529 Thomas B. King 0 0 293,934/244,466 $ 1,486,781/$3,040,738 Gregory M. Rueger 82,402 210,363 135,132/113,598 $ 139,168/$1,406,559 Kent M. Harvey 31,334 378,715 151,734/111,332 $ 359,225/$1,376,076 Roger J. Peters(2) 2,000 $ (12,740 ) 183,568/111,332 $ 736,723/$1,376,076 James K. Randolph(2) 4,500 $ (30,375 ) 189,267/108,066 $ 773,373/$1,332,432 (1) Based on the difference between the option exercise price (without reduction for the amount of accrued dividend equivalents, if any) and a fair market value of $27.77, which was the closing price of PG&E Corporation common stock on December 31, 2003.(2) The options exercised would have expired on January 4, 2004. After accounting for accrued dividend equivalents, Mr. Peters realized $8,240 and Mr. Randolph realized $16,830.Long-Term Incentive Program — Awards in 2003This table summarizes the long-term incentive grants made to the executive officers named in the Summary Compensation Table during the past year.AwardsPerformance orOther PeriodNumber of Shares,Until MaturationNameUnits, or Other Rightsor PayoutGregory M. Rueger2,601(1)3 yearsKent M. Harvey3,915(1)3 yearsRoger J. Peters631(1)3 yearsJames K. Randolph177(1)3 years(1) Represents common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) earned under the Executive Stock Ownership Program. SISOPs are earned by eligible officers who achieve and maintain minimum PG&E Corporation common stock ownership levels as set by the Nominating, Compensation, and Governance Committee. All of the officers named in the Summary Compensation Table are eligible officers. Each SISOP represents a share of PG&E Corporation common stock that vests at the end of three years. Units can be forfeited prior to vesting if an eligible officer fails to maintain his or her minimum stock ownership level. Upon retirement or termination, vested SISOPs are distributed in the form of an equivalent number of shares of PG&E Corporation common stock.60Retirement Benefits PG&E Corporation and the Utility provide retirement benefits to some of the executive officers named in the Summary Compensation Table. The benefit formula for eligible executive officers is 1.7 percent of the average of the three highest combined salary and annual Short-Term Incentive Plan payments during the last ten years of service multiplied by years of credited service. During 2002 and 2003, annuities were purchased to replace a significant portion of the unfunded retirement benefits for certain officers whose entire accrued benefit could not be provided under the Retirement Plan due to tax code limits. The annuities will not change the amount or timing of the after-tax benefits that would have been provided upon retirement under the Supplemental Executive Retirement Plan (SERP) or similar arrangements. In connection with the annuities, tax restoration payments were made such that the annuitization was tax-neutral to the executive officer. Effective July 1, 2003, Mr. Darbee and Mr. King became participants in the SERP with five years of credited service. Mr. Darbee and Mr. King will each earn an additional five years of credited service provided that they are employed by PG&E Corporation or a subsidiary on July 1, 2008. As of December 31, 2003, the estimated pre-tax annual retirement benefits payable under the SERP or similar arrangements (assuming credited service to age 65), adjusted to reflect the effect of the annuities, for the most highly compensated executive officers were as follows: Mr. Glynn $309,602, Mr. Darbee $286,570, Mr. Worthington $285,740, Mr. Stanley $117,610, Mr. Smith $430,326, Mr. King $421,200, Mr. Rueger $287,450, Mr. Harvey $330,436, Mr. Peters $306,808, and Mr. Randolph $220,617. The estimated annual retirement benefits are single life annuity benefits and would not be subject to any Social Security offsets.Termination of Employment and Change in Control Provisions The PG&E Corporation Officer Severance Policy, which covers most officers of PG&E Corporation and its subsidiaries, including the executive officers named in the Summary Compensation Table, provides benefits if a covered officer is terminated without cause. In most situations, benefits under the policy include (1) a lump sum payment of one and one-half or two times annual base salary and Short-Term Incentive Plan target (the applicable severance multiple being dependent on an officer’s level), (2) continued vesting of equity-based incentives for 18 months or two years after termination (depending on the applicable severance multiple), (3) accelerated vesting of up to two-thirds of the common stock equivalents granted under the Executive Stock Ownership Program (depending on an officer’s level), and (4) payment of health care insurance premiums for 18 months or two years after termination (depending on the applicable severance multiple). In lieu of all or a portion of the lump sum payment, a terminated officer who is covered by PG&E Corporation’s Supplemental Executive Retirement Plan can elect additional years of service and/or age for purposes of calculating pension benefits. Effective July 21, 1999, the policy was amended to provide covered officers with alternative benefits that apply upon actual or constructive termination following a change in control or potential change in control. For these purposes, “change in control” has the same definition as under the Long-Term Incentive Program (see below). Constructive termination includes certain changes to a covered officer’s responsibilities. In the event of a change in control or potential change in control, the policy provides for a lump sum payment of the total of (1) unpaid base salary earned through the termination date, (2) Short-Term Incentive Plan target calculated for the fiscal year in which termination occurs (Target Bonus), (3) any accrued but unpaid vacation pay, and (4) three times the sum of Target Bonus and the officer’s annual base salary in effect immediately before either the date of termination or the change in control, whichever base salary is greater. Change in control termination benefits also include reimbursement of excise taxes levied upon the severance benefit pursuant to Internal Revenue Code Section 4999. The Long-Term Incentive Program (LTIP) permits the grant of various types of stock-based incentives, including performance shares, stock options, restricted stock, performance units, and incentives granted under the Non-Employee Director Stock Incentive Plan. The LTIP and the component plans provide that, upon the occurrence of a change in control, (1) any time periodsJoint Proxy Statement relating to the exercise or realization2006 Annual Meetings of any incentive (including common stock equivalents granted under the Executive Stock Ownership Program) will be accelerated so that such incentive may be exercised or realized in full immediately upon the change in control, (2) all shares of restricted stock will immediately cease to be forfeitable, and (3) all conditions relating to the realization of any stock-based incentive will terminate immediately. Under the LTIP, a “change in control”61will be deemed to have occurred if any of the following occurs: (1) any “person” (as such termShareholders, which information is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, but excluding any benefit plan for employees or any trustee, agent, or other fiduciary for any such plan acting in such person’s capacity as such fiduciary), directly or indirectly, becomes the beneficial owner of securities of PG&E Corporation representing 20 percent or more of the combined voting power of PG&E Corporation’s then outstanding securities, (2) during any two consecutive years, individuals who at the beginning of such a period constitute the Board of Directors cease for any reason to constitute at least a majority of the Board of Directors, unless the election, or the nomination for electionhereby incorporated by the shareholders of the Corporation, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, or (3) the shareholders of the Corporation shall have approved (i) any consolidation or merger of the Corporation other than a merger or consolidation that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent of such surviving entity) at least 70 percent of the combined voting power of the Corporation, such surviving entity, or the parent of such surviving entity outstanding immediately after the merger or consolidation, (ii) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation, or (iii) any plan or proposal for the liquidation or dissolution of the Corporation. For purposes of this definition, the term “combined voting power” means the combined voting power of the then outstanding voting securities of the Corporation or the other relevant entity.reference.Item 12.Security Ownership of Certain Beneficial Owners and Management.Security Ownership of ManagementThe following table sets forth the number of shares of PG&E Corporation common stock beneficially owned (as defined in the rules of the Securities and Exchange Commission) as of January 31, 2004, by the respective directors of PG&E Corporation and the Utility, the executive officers of PG&E Corporation and the Utility named in the Summary Compensation Table, and all directors and executive officers of PG&E Corporation and the Utility as a group. As of January 31, 2004, no director, nominee for director, or executive officer owned shares of any class of the Utility’s securities. The table also sets forth common stock equivalents credited to the accounts of directors and executive officers under PG&E Corporation’s deferred compensation and equity plans. Percent Common Beneficial Stock of Stock Name Ownership(1)(2)(3) Class(4) Equivalents(5) Total David R. Andrews(6) 4,054 * 767 4,821 Leslie S. Biller(6) 1,051 * 4,083 5,134 David A. Coulter(6) 5,681 * 22,897 28,578 C. Lee Cox(6) 47,207 * 3,609 50,816 William S. Davila(6) 21,517 * 12,949 34,466 Robert D. Glynn, Jr.(7) 1,901,961 * 99,181 2,001,142 David M. Lawrence, MD(6) 45,197 * 3,041 48,238 Mary S. Metz(6) 24,276 * 4,366 28,642 Carl E. Reichardt(6) 26,197 * 14,335 40,532 Gordon R. Smith(8) 804,073 * 20,059 824,132 Barry Lawson Williams(6) 22,109 * 5,689 27,798 Peter A. Darbee(9) 437,150 * 10,346 447,496 Bruce R. Worthington(9) 416,605 * 7,917 424,522 G. Brent Stanley(9) 289,592 * 4,262 293,854 P. Chrisman Iribe(9) 428,890 * 99,008 527,898 Thomas B. King(10) 435,614 * 49,366 484,980 62 Percent Common Beneficial Stock of Stock Name Ownership(1)(2)(3) Class(4) Equivalents(5) Total Gregory M. Rueger(10) 227,225 * 0 227,225 Kent M. Harvey(10) 138,918 * 0 138,918 Roger J. Peters(10) 262,930 * 86,144 349,074 James K. Randolph(11) 268,569 * 141 268,710 All PG&E Corporation directors and executive officers as a group (16 persons) 4,436,002 1.1 227,291 4,663,293 All Pacific Gas and Electric Company directors and executive officers as a group (16 persons) 4,192,772 1.1 328,184 4,520,956 *Less than 1 percent(1) Includes any shares held in the name of the spouse, minor children, or other relatives sharing the home of the director or executive officer and, in the case of executive officers, includes shares of PG&E Corporation common stock held in the defined contribution retirement plans maintained by PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries. Except as otherwise indicated below, the directors, nominees for director, and executive officers have sole voting and investment power over the shares shown. Voting power includes the power to direct the voting of the shares held, and investment power includes the power to direct the disposition of the shares held.Also includes the following shares of PG&E Corporation common stock in which the beneficial owners share voting and investment power: Mr. Andrews 2,076 shares, Mr. Biller 1,051 shares, Mr. Coulter 5,681 shares, Mr. Cox 24,192 shares, Mr. Davila 200 shares, Dr. Lawrence 15,676 shares, Dr. Metz 7,681 shares, Mr. Smith 3,884 shares, Mr. Darbee 69,818, Mr. Worthington 2,288 shares, Mr. Rueger 13,987 shares, Mr. Peters 184 shares, all PG&E Corporation directors and executive officers as a group 132,547 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 74,612 shares.(2) Includes shares of PG&E Corporation common stock which the directors and executive officers have the right to acquire within 60 days of January 31, 2004, through the exercise of vested stock options granted under the PG&E Corporation Long-Term Incentive Program, as follows: Mr. Andrews 1,978 shares, Mr. Cox 23,015 shares, Mr. Glynn 1,713,325 shares, Dr. Lawrence 23,015 shares, Dr. Metz 14,368 shares, Mr. Reichardt 20,141 shares, Mr. Smith 702,392 shares, Mr. Williams 16,254 shares, Mr. Darbee 353,159 shares, Mr. Iribe 404,601 shares, Mr. Stanley 263,626 shares, Mr. Worthington 374,701 shares, Mr. King 385,726 shares, Mr. Rueger 178,506 shares, Mr. Harvey 97,300 shares, Mr. Peters 226,376 shares, Mr. Randolph 231,258 shares, all PG&E Corporation directors and executive officers as a group 3,845,092 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 3,589,855 shares. The directors and executive officers have neither voting power nor investment power with respect to shares shown unless and until such shares are purchased through the exercise of the options, pursuant to the terms of the PG&E Corporation Long-Term Incentive Program.(3) Includes restricted shares of PG&E Corporation common stock awarded under the PG&E Corporation Long-Term Incentive Program. As of January 31, 2004, directors and executive officers of PG&E Corporation and Pacific Gas and Electric Company held the following numbers of restricted shares that may not be sold or otherwise transferred until certain vesting conditions are satisfied: Mr. Andrews 2,076 shares, Mr. Biller 1,051 shares, Mr. Coulter 3,703 shares, Mr. Cox 3,703 shares, Mr. Davila 4,056 shares, Mr. Glynn 163,393 shares, Dr. Lawrence 4,056 shares, Dr. Metz 4,056 shares, Mr. Reichardt 4,056 shares, Mr. Smith 70,321 shares, Mr. Williams 4,056 shares, Mr. Darbee 48,498 shares, Mr. Iribe 24,225 shares, Mr. Stanley 25,008 shares, Mr. Worthington 39,553 shares, Mr. King 39,553 shares, Mr. Rueger 18,777 shares, Mr. Harvey 19,797 shares, Mr. Peters 19,797 shares, Mr. Randolph 13,631 shares, all PG&E Corporation directors and executive officers as a group 417,498 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 381,892 shares.63(4) The percent of class calculation is based on the number of shares of PG&E Corporation common stock outstanding as of January 31, 2004, excluding shares held by a subsidiary.(5) Reflects the number of stock units purchased by directors and executive officers through salary and other compensation deferrals or awarded under equity compensation plans. The value of each stock unit is equal to the value of a share of PG&E Corporation common stock and fluctuates daily based on the market price of PG&E Corporation common stock. The directors and officers who own these stock units share the same market risk as PG&E Corporation shareholders, although they do not have voting rights with respect to these stock units.(6) Mr. Andrews, Mr. Biller, Mr. Coulter, Mr. Cox, Mr. Davila, Dr. Lawrence, Dr. Metz, Mr. Reichardt, and Mr. Williams are directors of both PG&E Corporation and Pacific Gas and Electric Company.(7) Mr. Glynn is a director and executive officer of PG&E Corporation, and also is a director of Pacific Gas and Electric Company. He is named in the Summary Compensation Table.(8) Mr. Smith is a director and an executive officer of Pacific Gas and Electric Company, and also is an executive officer of PG&E Corporation. He is named in the Summary Compensation Table.(9) Mr. Darbee, Mr. Iribe, Mr. Stanley, and Mr. Worthington are executive officers of PG&E Corporation named in the Summary Compensation Table.(10) Mr. Harvey, Mr. King, Mr. Peters, and Mr. Rueger are executive officers of Pacific Gas and Electric Company named in the Summary Compensation Table.(11) Mr. Randolph retired as an executive officer of Pacific Gas and Electric Company in 2003. He is named in the Summary Compensation Table.Principal ShareholdersThe following table presents certain information regarding shareholders that PG&E Corporation and the Utility know are the beneficial owners of more than 5 percent of any class of voting securities of PG&E Corporation or the Utility as of January 31, 2004: Amount and Nature of Beneficial Percent Class of Stock Name and Address of Beneficial Owner Ownership of Class Pacific Gas and PG&E Corporation(2) 321,314,760 94.90 % Electric Company stock(1) One Market, Spear Tower, Suite 2400 San Francisco, CA 94105 PG&E Corporation State Street Bank and Trust Company(3) 31,626,606 8.01 % Common stock 225 Franklin Street Boston, MA 02110 (1) Pacific Gas and Electric Company’s common stock and preferred stock vote together as a single class. Each share is entitled to one vote.(2) As a result of the formation of the holding company on January 1, 1997, PG&E Corporation became the holder of all issued and outstanding shares of Pacific Gas and Electric Company common stock. As of January 31, 2004, PG&E Corporation and a subsidiary held 100 percent of the issued and outstanding shares of Pacific Gas and Electric Company common stock, and neither PG&E Corporation nor any of its subsidiaries held shares of Pacific Gas and Electric Company preferred stock.(3) The information relating to State Street Bank and Trust Company is based on beneficial ownership as of December 31, 2003, as reported in a Schedule 13G, dated February 5, 2004, filed with the Securities and Exchange Commission. The bank held 19,204,598 shares in its capacity as Trustee of the Pacific Gas and Electric Company Savings Fund Plan. The Trustee may not vote these shares in the absence of voting instructions from the Plan participants. The bank also held 12,422,008 shares of PG&E Corporation common stock in various other fiduciary capacities. The bank has sole voting power with respect to 11,500,089 of these shares, shared voting power with respect to 13,495 of these shares, sole investment64power with respect to 12,386,522 of these shares, and shared investment power with respect to 31,486 of these shares.2003,2005 concerning shares of PG&E Corporation common stock authorized for issuance under PG&E Corporation’sCorporation's existing equity compensation plans. (c) Number of Securities (a) (b) Remaining Available for Number of Securities to Weighted Average Future Issuance Under be Issued Upon Exercise Exercise Price of Equity Compensation Plans of Outstanding Options, Outstanding Options, (Excluding Securities Plan Category Warrants and Rights Warrants and Rights Reflected in Column(a)) Equity compensation plans approved by shareholders 27,541,6291 $ 21.26 12,572,096 (1) Equity compensation plans not approved by shareholders — $ — — Total equity compensation plans 27,541,629 $ 21.26 12,572,096 (1) Represents the total number of shares available for issuance under PG&E Corporation’s Long-Term Incentive Program (LTIP) as of December 31, 2003. Outstanding stock-based awards granted under the LTIP include stock options, restricted stock, performance shares, and phantom stock payable in an equal number of shares upon termination of employment or service as a director. No more than 5,000,000 of the reserved shares under the LTIP may be awarded as restricted stock. For a description of the LTIP, see Note 14 to the Consolidated Financial Statements. Equity compensation plans approved by shareholders 12,012,774 $23.26 8,952,785(1) Equity compensation plans not approved by shareholders — $— — Total equity compensation plans 12,012,774 $23.26 8,952,785 14. Principal Accountant Fees and ServicesFees Paid to Independent Public Accountants The Audit Committees have reviewed the audit and non-audit fees that PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries have paid to the independent public accountants13, for purposeseach of considering whether such fees are compatible with maintaining the auditor’s independence.Audit Fees.Estimated fees billed for services rendered by Deloitte & Touche LLP for the reviews of Forms 10-Q and for the audits of the financial statements of PG&E Corporation and its subsidiaries were $9.8 million for 2002 and $6.5 million for 2003. These amounts include fees for stand-alone audits of various subsidiaries, including estimated fees of $4.4 million for 2002 and $2.8 million for 2003 for Pacific Gas and Electric Company and its subsidiaries.Audit-Related Fees.Aggregate fees billed for all audit-related services rendered by Deloitte & Touche LLP to PG&E Corporation and its subsidiaries consisted of $0.9 million of fees in 2002 and $0.7 million of fees for 2003. These amounts include $206,000 of audit-related fees in 2002 and $351,000 of audit-related fees in 2003 for Pacific Gas and Electric Company and its subsidiaries. Specific services for both PG&E Corporation and its subsidiaries and Pacific Gas and Electric Company and its subsidiaries in both years include employee benefit plan audits, consultations on financial accounting and reporting standards, a required transition property procedures report, and nuclear decommissioning trust audits. Amounts in 2003 also include Sarbanes-Oxley Section 404 readiness work.Tax Fees.Aggregate fees billed for permissible tax services rendered by Deloitte & Touche LLP to PG&E Corporation and its subsidiaries consisted of $2.2 million of fees during 2002 and $1.1 million of fees during 2003. These amounts for 2002 include $4,000 for Pacific Gas and Electric Company and its subsidiaries. Specific services in both years include services to support IRS audit appeals and questions, tax65strategy services, and review of tax returns. Amounts in 2002 also include a review of a private letter ruling request.All Other Fees.Aggregate fees billed for all other services rendered by Deloitte & Touche LLP to PG&E Corporation and its subsidiaries consisted of $1.1 million in 2002. These services were consulting services for the implementation of risk management software. None of these services were for Pacific Gas and Electric Company. No such services were rendered in 2003.Pre-Approval of Services Provided by the Independent Public Accountant As of June 2002, PG&E Corporation and its controlled subsidiaries have entered into new engagements with Deloitte & Touche LLP and its affiliate, Deloitte Consulting, only for audit services, audit-related services, or tax services, which Deloitte & Touche LLP and its affiliates may provide to Deloitte & Touche LLP’s audit clients under the Sarbanes-Oxley Act of 2002. PG&E Corporation and its subsidiaries traditionally have obtained these types of services from its independent public accountants.Since November 2002, the Audit Committees have been responsible for pre-approving all audit and non-audit services provided by Deloitte & Touche LLP to PG&E Corporation, Pacific Gas and Electric Company, or their controlled subsidiaries, pursuant to Committee pre-approval procedures that are reviewed and amended from time to time. At the beginning of each fiscal year, the PG&E Corporation and Pacific Gas and Electric Company, Audit Committees approve the selection of the independent public accountants for that fiscal year, and approve obtaining from the auditors a detailed list of (1) audit services, (2) audit-related services, and (3) tax services, up to specified fee amounts.“Audit services”generally includes audit and review of annual and quarterly financial statements and services that only the external auditors reasonably can provide (e.g., comfort letters, statutory audits, attest services, consents, and assistance with and review of documents filed with the Securities and Exchange Commission).“Audit-related services”generally include assurance and related services that traditionally are performed by the independent public accountants (e.g., employee benefit plan audits, due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, and attest services that are not required by statute or regulation).“Tax services”generally includes compliance, tax strategy, tax appeals, and specialized tax issues, all of which also must be permissibleis included under the Sarbanes-Oxley Actheading "Certain Relationships and Related Transactions" in the Joint Proxy Statement relating to the 2006 Annual Meetings of 2002. In determining whetherShareholders, which information is hereby incorporated by reference.pre-approve any services from the independent public accountants, the Audit Committees assess, among other things, the impactItem 14, for each of that service on the auditor’s independence. Following the initial annual pre-approval, the Audit Committees must pre-approve any proposed engagement of the independent public accountants for any audit, audit-related, and tax services that are not included on the list of pre-approved services, and must pre-approve any listed pre-approved services that would cause PG&E Corporation or Pacific and Electric Company to exceed the authorized fee amounts. Other services may be obtained from the independent public accountants only following review and approval from the applicable company’s management and review and pre-approval by the applicable Audit Committee. Each Audit Committee has delegated to one or more members of the Committee the authority to pre-approve audit and non-audit services provided by the respective company’s independent public accountants. Any pre-approvals granted pursuant to this authority must be presented to the full Audit Committee at the next regularly scheduled Committee meeting. No such pre-approvals were granted for 2003. At each regular meeting of the Audit Committees, management reports the specific non-audit services being performed by Deloitte & Touche LLP for the respective company and its subsidiaries, the dollar amounts associated with these services, and a comparison of fees paid to date to the pre-approved amounts. During 2003, all services provided by Deloitte & Touche LLP to PG&E Corporation, Pacific Gas and Electric Company, is included under the heading "Information Regarding the Independent Registered Public Accounting Firm of PG&E Corporation and their consolidated affiliates were approved pursuantPacific Gas and Electric Company" in the Joint Proxy Statement relating to the applicable pre-approval procedures.661. independent auditors’ report of independent registered public accounting firm are contained in the 2005 Annual Report and are incorporated by reference in this report: Annual Report, which have been incorporated by reference in this report:Consolidated Statements of Operations for the Years Ended December 31, 2003, 2002, and 2001, for each of PG&E Corporation and Pacific Gas and Electric Company.2.1 Order of the U.S. Bankruptcy Court for the Northern District of California dated December 22, 2003, Confirming Plan of Reorganization of Pacific Gas and Electric Company, including Plan of Reorganization, dated July 31, 2003 as modified by modifications dated November 6, 2003 and December 19, 2003 (Exhibit B to Confirmation Order and Exhibits B and C to the Plan of Reorganization omitted) (incorporated by reference to Pacific Gas and Electric Company's Registration Statement on Form S-3 No. 333-109994, Exhibit 2.1) 2.2 Order of the U.S. Bankruptcy Court for the Northern District of California dated February 27, 2004 Approving Technical Corrections to Plan of Reorganization of Pacific Gas and Electric Company and Supplementing Confirmation Order to Incorporate such Corrections (incorporated by reference to Pacific Gas and Electric Company's Registration Statement on Form S-3 No. 333-109994, Exhibit 2.2) 3.1 Restated Articles of Incorporation of PG&E Corporation effective as of May 29, 2002 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609), Exhibit 3.1) 3.2 Certificate of Determination for PG&E Corporation Series A Preferred Stock filed December 22, 2000 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 3.2) 3.3 Bylaws of PG&E Corporation amended as of January 1, 2006 3.4 Restated Articles of Incorporation of Pacific Gas and Electric Company effective as of April 12, 2004 (incorporated by reference to Pacific Gas and Electric Company's Form 8-K filed April 12, 2004 (File No. 1-2348), Exhibit 3) 3.5 Bylaws of Pacific Gas and Electric Company amended as of January 1, 2006 4.1 Indenture, dated as of April 22, 2005, supplementing, amending and restating the Indenture of Mortgage, dated as of March 11, 2004, as supplemented by a First Supplemental Indenture, dated as of March 23, 2004, and a Second Supplemental Indenture, dated as of April 12, 2004, between Pacific Gas and Electric Company and The Bank of New York Trust Company, N.A. (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company.Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 4.1)4.2 Indenture related to PG&E Corporation's 7.5% Convertible Subordinated Notes due June 2007, dated as of June 25, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation's Form 8-K filed June 26, 2002 (File No. 1-12609), Exhibit 99.1). 4.3 Supplemental Indenture related to PG&E Corporation's 9.50% Convertible Subordinated Notes due June 2010, dated as of October 18, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.1) 4.4 Consolidated Balance Sheets at December 31, 2003,Warrant Agreement, dated as of October 18, 2002, by and among PG&E Corporation, LB I Group Inc., and each other entity named on the signature pages thereto (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 for each(File No. 1-12609), Exhibit 4.2)10.1 Credit Agreement dated as of April 8, 2005, among Pacific Gas and Electric Company, Citicorp North America, Inc., as administrative agent and a lender, JP Morgan Chase Bank, N.A., as syndication agent and a lender, Barclays Bank PLC, BNP Paribas and Deutsche Bank Securities Inc., as documentation agents and lenders, ABN Amro Bank N.V., Lehman Brothers Bank, FSB, Mellon Bank, N.A., Royal Bank of Canada, The Bank of New York, The Bank of Nova Scotia, UBS Loan Finance LLC, and Union Bank of California, N.A., as senior managing agents, and KBC Bank, NV, Morgan Stanley Bank and William Street Commitment Corporation, as lenders (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company.Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 10.3)10.2 Consolidated StatementsFirst Amendment, dated as of Common Shareholders’ Equity forNovember 30, 2005, to the Years Ended December 31, 2003, 2002, and 2001, for PG&E Corporation.Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2003, 2002, and 2001 forCredit Agreement among Pacific Gas and Electric Company.Company, Citicorp North America, Inc., as administrative agent and a lender, JPMorgan Chase Bank, N.A., as syndication agent and a lender, Barclays Bank PLC and BNP Paribas as documentation agents and lenders, Deutsche Bank Securities Inc., as documentation agent, and the following other lenders: Deutsche Bank AG New York Branch, ABN Amro Bank N.V., Lehman Brothers Bank, FSB, Mellon Bank, N.A., Royal Bank of Canada, The Bank of New York, UBS Loan Finance LLC, Union Bank of California, N.A., KBC Bank, N.V., Morgan Stanley Bank and William Street Commitment Corporation.10.3 Notes to Consolidated Financial Statements.Quarterly Consolidated Financial Data (Unaudited).Independent Auditors’ Report (Deloitte & Touche LLP).2.Independent Auditors’ Report (Deloitte & Touche LLP) included at page 77 of this Form 10-K.3.Financial statement schedules:I — Condensed Financial Information of ParentCredit Agreement, dated as of December 31, 200310, 2004, among PG&E Corporation, BNP Paribas, as administrative agent and 2002a lender, Deutsche Bank Securities, as syndication agent, ABN Amro Bank, N.V., Goldman Sachs Credit Partners L.P., and forUnion Bank of California, N.A., as documentation agents and lenders, and the Years Ended December 31, 2003, 2002,following other lenders: Barclays Bank PLC, Citicorp USA, Inc., Deutsche Bank AG New York Branch, JP Morgan Chase Bank, N.A., Lehman Brothers Bank, FSB, Morgan Stanley Bank, Royal Bank of Canada, The Bank of Nova Scotia, and 2001.II — Consolidated Valuation and Qualifying Accounts for eachThe Bank of New York (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company for the Years EndedCompany's Form 8-K filed December 31, 2003, 2002,15, 2004 (File No. 1-12609 and 2001.File No. 1-2348), Exhibit 99) Schedules not included are omitted because of the absence of conditions under which they are required or because the required information is provided in the consolidated financial statements including the notes thereto.45 4.10.4Exhibits requiredFirst Amendment, dated as of April 8, 2005, to bethe Credit Agreement dated as of December 10, 2004, among PG&E Corporation, BNP Paribas, as administrative agent and a lender, Deutsche Bank Securities Inc., as syndication agent and a lender, ABN Amro Bank, N.V., Goldman Sachs Credit Partners L.P., and Union Bank of California, N.A., as documentation agents and lenders, and the following other lenders: Barclays Bank PLC, Citicorp USA, Inc., Deutsche Bank AG New York Branch, JP Morgan Chase Bank, N.A., Lehman Brothers Bank, FSB, Morgan Stanley Bank, Royal Bank of Canada, The Bank of Nova Scotia, KBC Bank N.V., and The Bank of New York (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 10-Q filed by Item 601 of Regulation S-K: Exhibit Number Exhibit Description 3 .1 Restated Articles of Incorporation of PG&E Corporation effective as of May 5, 2000 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended March 31, 2000 (File No. 1-12609), Exhibit 3.1) 3 .2 Certificate of Determination for PG&E Corporation Series A Preferred Stock filed December 22, 2000 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 3.2) 3 .3 Bylaws of PG&E Corporation amended as of February 18, 2004 3 .4 Restated Articles of Incorporation of Pacific Gas and Electric Company effective as of May 6, 1998 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-Q for the quarter ended March 31, 1998 (File No. 1-2348), Exhibit 3.1) 3 .5 Bylaws of Pacific Gas and Electric Company amended as of February 18, 2004 67 Exhibit Number Exhibit Description 4 .1 First and Refunding Mortgage of Pacific Gas and Electric Company dated December 1, 1920, and supplements thereto dated April 23, 1925, October 1, 1931, March 1, 1941, September 1, 1947, May 15, 1950, May 1, 1954, May 21, 1958, November 1, 1964, July 1, 1965, July 1, 1969, January 1, 1975, June 1, 1979, August 1, 1983, and December 1, 1988 (incorporated by reference to Registration No. 2-1324, Exhibits B-1, B-2, and B-3; Registration No. 2-4676, Exhibit B-22; Registration No. 2-7203, Exhibit B-23; Registration No. 2-8475, Exhibit B-24; Registration No. 2-10874, Exhibit 4B; Registration No. 2-14144, Exhibit 4B; Registration No. 2-22910, Exhibit 2B; Registration No. 2-23759, Exhibit 2B; Registration No. 2-35106, Exhibit 2B; Registration No. 2-54302, Exhibit 2C; Registration No. 2-64313, Exhibit 2C; Registration No. 2-86849, Exhibit 4.3; and Pacific Gas and Electric Company’s Form 8-K dated January 18, 1989 (File No. 1-2348), Exhibit 4.2) 4 .2 Indenture related to PG&E Corporation’s 7.5% Convertible Subordinated Notes due June 2007, dated as of June 25, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation’s Form 8-K filed June 26, 2002 (File No. 1-12609), Exhibit 99.1). 4 .3 Supplemental Indenture related to PG&E Corporation’s 9.50% Convertible Subordinated Notes due June 2010, dated as of October 18, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.1) 4 .4 Warrant Agreement, dated as of June 25, 2002, by and among PG&E Corporation, LB I Group Inc., and each other entity named on the signature pages thereto (incorporated by reference to PG&E Corporation’s Form 8-K filed June 26, 2002 (File No. 1-12609), Exhibit 99.9). 4 .5 Warrant Agreement, dated as of October 18, 2002, by and among PG&E Corporation, LB I Group Inc., and each other entity named on the signature pages thereto (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.2) 4 .6 Form of Rights Agreement dated as of December 22, 2000, between PG&E Corporation and Mellon Investor Services LLC, including the Form of Rights Certificate as Exhibit A, the Summary of Rights to Purchase Preferred Stock as Exhibit B, and the Form of Certificate of Determination of Preferences for the Preferred Stock as Exhibit C (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 4.2) 4 .7 Amendment to Rights Agreement dated February 18, 2004, between PG&E Corporation and Mellon Investor Services LLC (incorporated by reference to PG&E Corporation’s Form 8-K filed February 19, 2004 (File No. 1-12609), Exhibit 99) 4 .8 Indenture dated as of July 2, 2003, by and between PG&E Corporation and Bank One, N.A. (incorporated by reference to PG&E Corporation’s Form 8-K filed July 2, 2003 (File No. 1-12609), Exhibit 4.1) 4 .9 Utility Stock Base Pledge Agreement dated as of July 2, 2003, by and among PG&E Corporation, Bank One, N.A. and Deutsche Bank Trust Company Americas (incorporated by reference to PG&E Corporation’s Form 8-K filed July 2, 2003 (file No. 1-12609), Exhibit 4.2) 4 .10 Utility Stock Protective Pledge Agreement dated as of July 2, 2003, by and among PG&E Corporation, Bank One, N.A. and Deutsche Bank Trust Company Americas (incorporated by reference to PG&E Corporation’s Form 8-K filed July 2, 2003 (file No. 1-12609), Exhibit 4.3) 4 .11 Form of 6 7/8 percent Senior Secured Note due 2008 (incorporated by reference to PG&E Corporation’s Form 8-K filed July 2, 2003 (file No. 1-12609), Exhibit 4.4) 68 Exhibit Number Exhibit Description 10 .1 The Gas Accord Settlement Agreement, together with accompanying tables, adopted by the California Public Utilities Commission on August 1, 1997, in Decision 97-08-055 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 1997 (File No. 1-12609 and File No. 1-2348), Exhibit 10.2), as amended by Operational Flow Order (OFO) Settlement Agreement, approved by the California Public Utilities Commission on February 17, 2000, in Decision 00-02-050, as amended by Comprehensive Gas OII Settlement Agreement, approved by the California Public Utilities Commission on May 18, 2000, in Decision 00-05-049 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10); and the Gas Accord II Settlement Agreement, approved by the California Public Utilities Commission on August 22, 2002, in Decision 01-09-016 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609 and File No. 1-2348), Exhibit 10.1) 10 .2 Commitment Letter dated March 5, 2003, between PG&E Corporation and Lehman Brothers, Inc. (incorporated by reference to PG&E Corporation’s Form 8-K filed March 6, 2003 (File No. 1-12609), Exhibit 99.2) 10 .3 Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric Company and PG&E Corporation, dated as of December 19, 2003, together with appendices (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 8-K filed December 22, 2003 (File No. 1-12609 and File No. 1-2348) Exhibit 99) 10 .4 Firm Transportation Service Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated October 26, 1993, Rate Schedule FTS-1, and general terms and conditions 10 .5 Operating Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated July 9, 1996 10 .6 PG&E Trans-User Agreement between Pacific Gas and Electric Company and PG&E Gas Transmission, Northwest Corporation dated November 15, 1999 10 .7 Electronic Commerce System User Agreement between Pacific Gas and Electric Company and PG&E Gas Transmission, Northwest Corporation, effective as of September 28, 2001 10 .8 Operating Agreement effective as of April 1, 2003, between the State of California Department of Water Resources and Pacific Gas and Electric Company (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609 and File No. 1-2348) Exhibit 10.1) *10 .9 PG&E Corporation Supplemental Retirement Savings Plan amended effective as of September 19, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2001 (File No. 1-12609), Exhibit 10.4) *10 .10 Agreement and Release between PG&E Corporation and Thomas G. Boren dated December 18, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.23) *10 .11 Description of Compensation Arrangement between PG&E Corporation and Peter Darbee (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 1999 (File No. 1-12609), Exhibit 10.3) *10 .12 Letter regarding Compensation Arrangement between PG&E Corporation and Thomas B. King dated November 4, 1998 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.6) 69May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 10.2) Exhibit10.5NumberExhibit Description*10.13Letter regarding Compensation ArrangementMaster Confirmation dated November 16, 2005, for accelerated share repurchase arrangements between PG&E Corporation and Lyn E. MaddoxGoldman, Sachs & Co.10.6 Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric Company and PG&E Corporation, dated April 25, 1997as of December 19, 2003, together with appendices (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 8-K filed December 22, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 99)10.7 Firm Transportation Service Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated October 26, 1993, Rate Schedule FTS-1, and general terms and conditions (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.4) 10.8 Operating Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated July 9, 1996 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.5) 10.9 PG&E Trans-User Agreement between Pacific Gas and Electric Company and PG&E Gas Transmission, Northwest Corporation dated November 15, 1999 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.6) 10.10 Transmission Control Agreement among the California Independent System Operator (CAISO) and the Participating Transmission Owners, including Pacific Gas and Electric Company, effective as of March 31, 1998, as amended (CAISO, FERC Electric Tariff No. 7) (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.8) 10.11 Operating Agreement, as amended on November 12, 2004, effective as of December 22, 2004, between the State of California Department of Water Resources and Pacific Gas and Electric Company (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.9) *10.12 PG&E Corporation Supplemental Retirement Savings Plan amended effective as of September 19, 2001, and frozen after December 31, 2004 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 20002004) (File No. 1-12609), Exhibit 10.7)10.10) *10.14 46 Letter Regarding Relocation Arrangement Between PG&E Corporation and Thomas B. King dated March 16, 2000 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended March 31, 2000 (File No. 1-12609), Exhibit 10) * 1010.13.15Description of Relocation Arrangement Between PG&E Corporation and Lyn E. MaddoxSupplemental Retirement Savings Plan effective as of January 1, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.11)*10.14 Description of Compensation Arrangement between PG&E Corporation and Peter Darbee (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-12609), Exhibit 10.3) *10.15 Letter regarding Compensation Arrangement between PG&E Corporation and Peter Darbee effective July 1, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609), Exhibit 10.4) *10.16 Letter regarding Compensation Arrangement between PG&E Corporation and Thomas B. King dated November 4, 1998 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.9)10.6)* 10.1610.17 Letter regarding Compensation Arrangement between PG&E Corporation and Thomas B. King dated June 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609), Exhibit 10.3)* 10.1710.18 Letter regarding Compensation Arrangement between PG&E Corporation and Peter A. Darbee effective June 18, 2003Rand L. Rosenberg dated October 19, 2005*10.19 Severance Agreement and Release by and between Pacific Gas and Electric Company and Gordon R. Smith dated September 21, 2005 (incorporated by reference to Pacific Gas and Electric Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (File No. 1-2348), Exhibit 10.1) *10.20 Actions taken by the Nominating, Compensation and Governance Committee of the PG&E Corporation Board of Directors on October 19, 2005, regarding the 2006 Officer Compensation Program (incorporated by reference to PG&E Corporation’s Quarterly Report on Form 10-Q for the quarter ended JuneSeptember 30, 20032005 (File No. 1-12609), Exhibit 10.4)10.2)* 10.1810.21 PG&E Corporation Senior Executive Officer Retention Program approved December 20, 20002005 Deferred Compensation Plan for Non-Employee Directors, effective as of January 1, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 20002004) (File No. 1-12609), Exhibit 10.10)10.17)* 10.19.1Letter regarding retention award to Robert D. Glynn, Jr. dated January 22, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.1)*10.19.2Letter regarding retention award to Gordon R. Smith dated January 22, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.2)*10.19.3Letter regarding retention award to Peter A. Darbee dated January 22, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.3)*10.19.4Letter regarding retention award to Bruce R. Worthington dated January 22, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.4)*10.19.5Letter regarding retention award to G. Brent Stanley dated January 22, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.5)*10.19.6Letter regarding retention award to Daniel D. Richard, Jr. dated January 22, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.6)*10.19.7Letter regarding retention award to James K. Randolph dated February 27, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.7)*10.19.8Letter regarding retention award to Gregory M. Rueger dated February 27, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.8)*10.19.9Letter regarding retention award to Kent M. Harvey dated February 27, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.9)70ExhibitNumberExhibit Description*10.19.10Letter regarding retention award to Roger J. Peters dated February 27, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.10)*10.19.11Letter regarding retention award to Lyn E. Maddox dated February 27, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.12)*10.19.12Letter regarding retention award to P. Chrisman Iribe dated February 27, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.13)*10.19.13Letter regarding retention award to Thomas B. King dated February 27, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.14)*10.20Pacific Gas and Electric Company Management Retention Program (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-Q for the quarter ended September 30, 2001 (File No. 1-12609 and File No. 1-2348), Exhibit 10.1)*10.21PG&E Corporation Management Retention Program (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 2001 (File No. 1-12609), Exhibit 10.2)*10.22PG&E Corporation Deferred Compensation Plan for Non-Employee Directors, as amended and restated effective as of July 22, 1998 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 1998 (File No. 1-12609), Exhibit 10.2)*10.2310.22 Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2003 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.35)2006* 10.2410.23 Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.18) *10.24 Schedule of 2006 Base Salary and Short-Term Incentive Plan Target Participation Rates for certain officers of PG&E Corporation and its subsidiaries * 1010.25.25Schedule of 2006 award values under the PG&E Corporation 2006 Long-Term Incentive Plan for certain officers of PG&E Corporation and its subsidiaries*10.26 Supplemental Executive Retirement Plan of the Pacific Gas and Electric Company amended effective as of September 19, 2001December 31, 2004, and frozen as of January 1, 2005 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 20012004) (File No. 1-2248)1-2348), Exhibit 10.16)10.20)*10.27 Supplemental Executive Retirement Plan of PG&E Corporation as amended effective as of January 1, 2006 * 10.26.110.28.1 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Robert D. Glynn, Jr. dated December 20, 2002 (incorporated by reference to PG&E Corporation’sCorporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.37.1)* 10.26.210.28.2 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Bruce R. Worthington dated December 20, 2002 (incorporated by reference to PG&E Corporation’sCorporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.37.2)* 10.26.310.28.3 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Gregory M. Rueger dated December 20, 2002 (incorporated by reference to PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's Form 10-K for the year ended December 31, 2002 (File No. 1-12609 and File No. 1-2348), Exhibit 10.37.3)* 10.26.410.28.4 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Gordon R. Smith dated December 20, 2002 (incorporated by reference to PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's Form 10-K for the year ended December 31, 2002 (File No. 1-12609 and File No. 1-2348), Exhibit 10.37.4)71ExhibitNumberExhibit Description* 10.26.5Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and James K. Randolph dated December 20, 2002 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609 and File No. 1-2348), Exhibit 10.37.5)*10.26.6Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Thomas G. Boren dated December 20, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.37.6)*10.27.110.29.1 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Robert D. Glynn, Jr. dated April 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609);, Exhibit 10.2.1) 47 * 10.27.210.29.2 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Gordon R. Smith dated April 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609 and File No. 1-2348);, Exhibit 10.2.2)* 10.27.3Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and James K. Randolph dated April 18, 2003 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609 and File No. 1-2348); Exhibit 10.2.3)*10.27.410.29.3 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Gregory M. Rueger dated April 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609 and File No. 1-2348);, Exhibit 10.2.4)* 10.27.510.29.4 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Bruce R. Worthington dated April 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609);, Exhibit 10.2.5)* 10.2810.30 Pacific Gas and Electric Company Relocation Assistance Program for Officers (incorporated by reference to Pacific Gas and Electric Company’sCompany's Form 10-K for fiscal year 1989 (File No. 1-2348), Exhibit 10.16)* 10.2910.31 Postretirement Life Insurance Plan of the Pacific Gas and Electric Company (incorporated by reference to Pacific Gas and Electric Company’sCompany's Form 10-K for fiscal year 1991 (File No. 1-2348), Exhibit 10.16)*10.32 *10.30RetirementNon-Employee Director Stock Incentive Plan for Non-Employee Directors,(a component of the PG&E Corporation Long-Term Incentive Program) as amended effective as of July 1, 2004 (reflecting amendments adopted by the PG&E Corporation Board of Directors on June 16, 2004 set forth in resolutions filed as Exhibit 10.3 to PG&E Corporation's and terminated January 1, 1998 (incorporatedPacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004) (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 19972004 (File No. 1-12609)1-12609 and File No. 1-2348), Exhibit 10.13)10.27)*10.33 Resolution of the PG&E Corporation Board of Directors dated June 16, 2004, adopting director compensation arrangement (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12609 and File No. 12348), Exhibit 10.1) * 1010.34.31*10.35 *10.36 PG&E Corporation Long-Term Incentive Program as amended May 16, 2001, including(including the PG&E Corporation Stock Option Plan and Performance Unit Plan, and Non-Employee Director Stock Incentive PlanPlan), as amended May 16, 2001, (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (File No. 1-12609), Exhibit 10)*10.37 Form of Restricted Stock Award Agreement for 2003 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.46) * 1010.38.32Form of Restricted Stock Award Agreement for 2004 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2003 (File No. 1-12609), Exhibit 10.37)*10.39 Form of Restricted Stock Agreement for 2005 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.3) *10.40 Form of Restricted Stock Agreement for 2006 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 9, 2006, Exhibit 99.1) *10.41 Form of Non-Qualified Stock Option Agreement under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.1) *10.42 Form of Performance Share Award Agreement for 2004 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2003 (File No. 1-12609), Exhibit 10.38) *10.43 Form of Performance Share Agreement for 2005 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.2) *10.44 Form of Performance Share Agreement for 2006 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 9, 2006, Exhibit 99.2) 48 *10.45 PG&E Corporation Executive Stock Ownership Program Guidelines dated as of February 19, 2003 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609) Exhibit 10.2)10. 2)*10.46 PG&E Corporation Executive Stock Ownership Program Guidelines as amended February 15, 2006 * 10.3310.47 PG&E Corporation Officer Severance Policy, as amended effective as of December 19, 2001January 1, 2005 (incorporated by reference to PG&E Corporation’sCorporation's Form 10-K for the year ended December 31, 20022004 (File No. 1-12609), Exhibit 10.43)72 Exhibit Number Exhibit Description *10 .34 PG&E Corporation Director Grantor Trust Agreement dated April 1, 1998 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12609), Exhibit 10.1) *10 .35 PG&E Corporation Officer Grantor Trust Agreement dated April 1, 1998 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12609), Exhibit 10.2) *10 .36 PG&E Corporation Form of Restricted Stock Award Agreement for 2003 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.46) *10 .37 Form of Restricted Stock Award Agreement for 2004 grants made under the PG&E Corporation Long-Term Incentive Program *10 .38 Form of Performance Share Award Agreement granted under the PG&E Corporation Long-Term Incentive Program *10 .39 PG&E National Energy Group, Inc. Management Retention/ Performance Award Program (incorporated by reference to PG&E Corporation’s Form 10-K/ A Amendment No. 2 for the year ended December 31, 2002 (File No. 1-12609) Exhibit 10.47) *10 .39.1 Letter regarding retention award to Thomas B. King dated September 9, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K/ A Amendment No. 2 for the year ended December 31, 2002 (File No. 1-12609) Exhibit 10.47.1) *10 .39.2 Letter regarding retention award to P. Chrisman Iribe dated September 9, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K/ A Amendment No. 2 for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.47.2) *10 .39.3 Letter regarding retention award to Lyn E. Maddox dated September 9, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K/ A Amendment No. 2 for the year ended December 31, 2002 (File No. 1-12609) Exhibit 10.47.3) 11 Computation of Earnings Per Common Share 12 .1 Computation of Ratios of Earnings to Fixed Charges for Pacific Gas and Electric Company 12 .2 Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends for Pacific Gas and Electric Company 13 The following portions of the 2003 Annual Report to Shareholders of PG&E Corporation and Pacific Gas and Electric Company are included: “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Independent Auditors’ Report,” “Responsibility for Consolidated Financial Statements,” financial statements of PG&E Corporation entitled “Consolidated Statements of Operations,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” and “Consolidated Statements of Common Shareholders’ Equity,” financial statements of Pacific Gas and Electric Company entitled “Consolidated Statements of Operations,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” “Consolidated Statements of Shareholders’ Equity,” “Notes to Consolidated Financial Statements,” and “Quarterly Consolidated Financial Data (Unaudited)” 21 Subsidiaries of the Registrant 23 Independent Auditors’ Consent (Deloitte & Touche LLP) 24 .1 Resolutions of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company authorizing the execution of the Form 10-K 24 .2 Powers of Attorney 73 Exhibit Number Exhibit Description 31 .1 Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 302 of the Sarbanes-Oxley Act of 2002 31 .2 Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 302 of the Sarbanes-Oxley Act of 2002 **32 .1 Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 906 of the Sarbanes-Oxley Act of 2002 **32 .2 Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 906 of the Sarbanes-Oxley Act of 2002 * Management contract or compensatory agreement.10.37) * * 10.48Pursuant to Item 601(b)(32)PG&E Corporation Officer Severance Policy, as amended effective as of SEC Regulation S-K, these exhibits are furnished rather than filed with this report.(b) The following Current Reports on Form 8-K(1) were filed, or furnished as indicated, during the quarter ended December 31, 2003, and through the date hereof:February 15, 2006 1.*10.49PG&E Corporation Golden Parachute Restriction Policy effective as of February 15, 2006 *10.50 October 3, 2003PG&E Corporation Director Grantor Trust Agreement dated April 1, 1998 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12609), Exhibit 10.1)*10.51 PG&E Corporation Officer Grantor Trust Agreement dated April 1, 1998, as updated effective January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.39) *10.52 Item 9.Resolution of the Board of Directors of PG&E Corporation regarding indemnification of officers and directors dated December 18, 1996 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.40)*10.53 Regulation FD Disclosure (furnished toResolution of the SEC)Exhibit 1 —Board of Directors of Pacific Gas and Electric Company Income Statementregarding indemnification of officers and directors dated July 19, 1995 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-K for the monthyear ended AugustDecember 31, 2003 and Balance Sheet dated August 31, 20032004 (File No. 1-2348), Exhibit 10.41)2.11October 15, 2003Item 5.Other EventsDistrict Court ruling regarding California Business and Professions Code Section 17200 lawsuitsComputation of Earnings Per Common Share12.1 Item 9.Regulation FD Disclosure (furnishedComputation of Ratios of Earnings to the SEC)Exhibit 1 — Revised Financial Projections Relating to the Settlement PlanFixed Charges for Pacific Gas and Electric Company3.12.2October 24, 2003Item 5.Other EventsA. Credit Rating ChangeB. DepartmentComputation of Water Resources’ (DWR) 2001-2002 Revenue Requirement True-Up ProceedingRatios of Earnings to Combined Fixed Charges and Preferred Stock Dividends for Pacific Gas and Electric Company4.13November 12, 2003Item 12.ResultsThe following portions of Operationsthe 2005 Annual Report to Shareholders of PG&E Corporation and Financial Condition (furnished to the SEC)Release of Third Quarter Earnings Results5.November 20, 2003Item 5.Other EventsA. Proposed Decisions Regarding Proposed Settlement AgreementB. Conclusion of Confirmation Trial Testimony in Utility’s Chapter 11 ProceedingC. Ninth Circuit Preemption Decision6.December 2, 2003Item 9.Regulation FD Disclosure (furnished to the SEC)Exhibit 1 — Pacific Gas and Electric Company Income Statement for the month ended October 31, 2003are included: "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," financial statements of PG&E Corporation entitled "Consolidated Statements of Income," "Consolidated Balance Sheet dated October 31, 20037.December 9, 2003Item 5.Other EventsA. Additional Proposed Decisions Regarding Proposed Settlement AgreementB. Credit Rating Agency Announcement748.December 12, 2003Item 5.Other EventsProposed Decision Issued in the California DepartmentSheets," "Consolidated Statements of Water Resources” (DWR) 2001-2002 Revenue Requirement True-Up ProceedingCash Flows," and the DWR 2004 Revenue Requirement Proceeding9.December 15, 2003Item 5.Other EventsBankruptcy Court Decision Approving Proposed Chapter 11 Settlement Agreement and Plan"Consolidated Statements of Reorganization10.December 16, 2003Item 5.Other EventsComments Regarding Proposed Settlement Agreement Filed by the Utility and TURN11.December 22, 2003Item 5.Other EventsA. California Public Utilities Commission Approves Proposed Settlement Agreement as Recommended to be Modified byShareholders' Equity," financial statements of Pacific Gas and Electric Company entitled "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows," and The Utility Reform NetworkB. CPUC Approves Gas Accord II"Consolidated Statements of Shareholders' Equity," "Notes to the Consolidated Financial Statements," and "Quarterly Consolidated Financial Data (Unaudited)," "Management's Report on Internal Control Over Financial Reporting," "Report of Independent Registered Public Accounting Firm," and "Report of Independent Registered Public Accounting Firm."21 Subsidiaries of the Registrant 23 Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) 24.1 Item 7.Financial Statements, Pro Forma Financial Information,Resolutions of the Boards of Directors of PG&E Corporation and Exhibits Exhibit 99 — Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric Company authorizing the execution of the Form 10-K24.2 Powers of Attorney 31.1 Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation dated asrequired by Section 302 of December 19, 2003, together with appendicesthe Sarbanes-Oxley Act of 200212.31.2December 23, 2003Item 5.Other EventsBankruptcy Court Confirms Utility’s PlanCertifications of Reorganization13.December 31, 2003Item 9.Regulation FD Disclosure (furnished to the SEC) Exhibit 1 —Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company Income Statement forrequired by Section 302 of the month ended November 30, 2003 and Balance Sheet dated November 30, 2003Sarbanes-Oxley Act of 200214.**32.1Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 906 of the Sarbanes-Oxley Act of 2002 **32.2 January 22, 2004Item 5.Other EventsApplications Filed for RehearingCertifications of CPUC Decision Approving Chapter 11 Settlement Agreementthe Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 906 of the Sarbanes-Oxley Act of 2002 Item 7.Financial Statements, Pro Forma Financial Information, and Exhibits Exhibit 99 — Notice to Directors and Executive Officers, dated January 22, 2004Item 11.Temporary Suspension of Trading Under Registrant’s Employee Benefits Plan15.February 3, 2004Item 5.Other EventsImplementation of Chapter 11 Settlement Rate Reduction16.February 19, 2004Item 5.Other EventsItem 7.Financial Statements, Pro Forma Financial Information, and Exhibits Exhibit 99 — Amendment to Rights Agreement dated February 18, 2004, between PG&E Corporation and Mellon Investor Services LLCItem 12.Results of Operations and Financial Condition (furnished to the SEC)Release of Third Quarter Earnings Results(1) Unless otherwise noted, all reports were filed under Commission File Number 1-2348 (Pacific Gas and Electric Company) and Commission File Number 1-12609 (PG&E Corporation).7520032005 to be signed on their behalf by the undersigned, thereunto duly authorized, in the City and County of San Francisco, on the 19th day of February, 2004.authorized. PG&E CORPORATION PACIFIC GAS AND ELECTRIC COMPANY By By Date: Date: (Registrant)ByByGARY P. ENCINASGARY P. ENCINAS(Gary P. Encinas, Attorney-in-Fact)(Gary P. Encinas, Attorney-in-Fact) SignatureTitleDate*PETER A. Principal Executive Officers*ROBERT D. GLYNN, JR.DARBEE Chairman of the Board, Chief Executive Officer and President (PG&E Corporation) February 19, 200417, 2006 *GORDON R. SMITH*THOMAS B. KING President and Chief Executive Officer (Pacific Gas and Electric Company) February 19, 200417, 2006 *PETER A. DARBEE Senior Vice President and Chief Financial Officer (PG&E Corporation)February 19, 2004 *KENT M. HARVEY*CHRISTOPHER P. JOHNS Senior Vice President, Chief Financial Officer and Treasurer (Pacific Gas and Electric Company)February 19, 2004C. Principal Accounting Officers*CHRISTOPHER P. JOHNSSenior Vice President and Controller (PG&E Corporation)February 19, 2004 *DINYAR B. MISTRYVice President-Controller (Pacific Gas and Electric Company)February 19, 2004D. Directors*LESLIE S. BILLER*DAVID A. COULTER*C. LEE COX*WILLIAM S. DAVILA*ROBERT D. GLYNN, JR.*DAVID M. LAWRENCE, M.D.*MARY S. METZ*CARL E. REICHARDT*GORDON R. SMITH (Director of Pacific Gas and Electric Company only)*BARRY LAWSON WILLIAMSDirectors of PG&E Corporation and Pacific Gas and Electric Company except as noted)February 17, 2006 February 19, 2004*By GARY P. ENCINAS*G. ROBERT POWELLVice President and Controller (PG&E Corporation and Pacific Gas and Electric Company) February 17, 2006 Gary P. Encinas,Director of Pacific Gas andElectric Company only)February 17, 2006 *By 76AUDITORS’ REPORT the Shareholders and the Boards of Directors and Shareholders of of Pacific Gas and Electric Company (a Debtor-in-Possession) and subsidiaries (collectively, the “Companies”(the “Utility”) as of December 31, 20032005 and 2002,2004, and for each of the three years in the period ended December 31, 20032005, management’s assessment of the effectiveness of the Company’s and the Utility’s internal control over financial reporting as of December 31, 2005, and the effectiveness of the Company’s and the Utility’s internal control over financial reporting as of December 31, 2005, and have issued our reportreports thereon dated February 18, 2004 (which report expresses an unqualified opinion and includes explanatory paragraphs relating to accounting changes, a revision to the 2002 and 2001 financial statements of PG&E Corporation and going concern uncertainties). Such15, 2006; such consolidated financial statements of each of the Companiesand reports are included in the combined 2003your 2005 Annual Report to Shareholders (of PG&E Corporationof the Company and Pacific Gas and Electric Company)the Utility and are incorporated herein by reference. Our audits also included the respective consolidatedcondensed financial statement schedules of PG&E Corporationthe Company and Pacific Gas and Electric Company,the Utility listed in Item 15(a)15 (a) 2. These consolidatedcondensed financial statement schedules are the responsibility of the respective managements of PG&E CorporationCompany’s and Pacific Gas and Electric Company.the Utility’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidatedcondensed financial statement schedules, when considered in relation to the respective basic consolidated financial statements of PG&E Corporation and Pacific Gas and Electric Company taken as a whole, present fairly, in all material respects, the information set forth therein.18, 200415, 200677 Balance at December 31, 2003 2002 (In millions) ASSETS Cash and cash equivalents $ 673 $ 182 Restricted cash — 377 Advances to affiliates 398 479 Note receivable from subsidiary — 208 Other current assets 9 1 Total current assets 1,080 1,247 Equipment 20 20 Accumulated depreciation (15 ) (12 ) Net equipment 5 8 Restricted Cash 361 — Investments in subsidiaries 4,810 2,870 Other investments 24 33 Deferred income taxes 478 702 Other 32 34 Total Assets $ 6,790 $ 4,894 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable — related parties $ 2 $ 31 Accounts payable — other 28 38 Income taxes payable 258 133 Other 158 57 Total current liabilities 446 259 Noncurrent Liabilities: Long-term debt 883 976 Net investment in NEGT 1,216 — Other 30 46 Total noncurrent liabilities 2,129 1,022 Preferred Stock — — Common Shareholders’ Equity Common stock 6,468 6,274 Common stock held by subsidiary (690 ) (690 ) Unearned compensation (20 ) — Accumulated deficit (1,458 ) (1,878 ) Accumulated other comprehensive income (85 ) (93 ) Total common shareholders’ equity 4,215 3,613 Total Liabilities and Shareholders’ Equity $ 6,790 $ 4,894 78 Cash and cash equivalents $ 250 $ 183 Advances to affiliates 38 22 Other current assets 3 3 Total current assets 291 208 Equipment 15 15 Accumulated depreciation (14 ) (13 ) Net equipment 1 2 Investments in subsidiaries 7,401 8,848 Other investments 71 31 Deferred income taxes 127 104 Other 15 14 Total Assets $ 7,906 $ 9,207 Current Liabilities Accounts payable—related parties $ 27 $ 3 Accounts payable—other 17 15 Income taxes payable 28 83 Other 193 53 Total current liabilities 265 154 Noncurrent Liabilities: Long-term debt 280 280 Other 143 140 Total noncurrent liabilities 423 420 Preferred stock — — Common Shareholders' Equity Common stock 5,827 6,518 Common stock held by subsidiary (718 ) (718 ) Unearned compensation (22 ) (26 ) Reinvested earnings 2,139 2,863 Accumulated other comprehensive loss (8 ) (4 ) Total common shareholders' equity 7,218 8,633 Total Liabilities and Shareholders' Equity $ 7,906 $ 9,207 OPERATIONSINCOME Administrative service revenue $ 97 $ 85 $ 101 Equity in earnings of subsidiaries 918 3,959 917 Operating expenses (97 ) (110 ) (133 ) Interest income 9 15 20 Interest expense (35 ) (132 ) (200 ) Other income (expense) (17 ) (91 ) 2 Income before income taxes 875 3,726 707 Income tax benefit 29 94 84 Income from continuing operations 904 3,820 791 Gain on disposal of NEGT 13 684 — Discontinued operations — — (365 ) Cumulative effect of changes in accounting principles — — (6 ) Net income before intercompany eliminations $ 917 $ 4,504 $ 420 372 398 385 $ 2.40 $ 10.80 $ 1.04 $ 2.37 $ 10.57 $ 1.02 Cash Flows from Operating Activities: Net income $ 917 $ 4,504 $ (420 ) Gain on disposal of NEGT (net of income tax benefit of $13 million in 2005 and income tax expense of $374 million in 2004) (13 ) (684 ) — Loss from operations of NEGT (net of income tax benefit of $320 million) — — 365 Cumulative effect of changes in accounting principles — — 6 Net income from continuing operations 904 3,820 791 Adjustments to reconcile net income to net cash provided by operating activities: Equity in earnings of subsidiaries (918 ) (3,959 ) (917 ) Deferred taxes (23 ) 27 265 NEGT settlement payment — (30 ) — Other 86 160 391 Net cash provided by operating activities 49 18 530 Cash Flows From Investing Activities: Capital expenditures (1 ) — — Investment in subsidiaries — (28 ) — Stock repurchase by subsidiary 1,910 — — Dividends received from subsidiaries 445 — — Increase in restricted cash — 361 — Other (38 ) — — Net cash provided by investing activities 2,316 333 — Common stock issued 243 162 166 Common stock repurchased (2,188 ) (350 ) — Common stock dividends paid (334 ) — — Long-term debt issued — — 581 Long-term debt redeemed (2 ) (652 ) (787 ) Other (17 ) (1 ) 1 Net cash used by financing activities (2,298 ) (841 ) (39 ) Net change in cash and cash equivalents 67 (490 ) 491 Cash and cash equivalents at January 1 183 673 182 Cash and cash equivalents at December 31 $ 250 $ 183 $ 673 PG&E Corporation adopted the consensus reached by Emerging Issues Task Force, or EITF, in EITF issue No. 03-06, "Participating Securities and the Two-Class Method under FASB Statement No. 128," or EITF 03-06, as ratified by the Financial Accounting Standards Board on March 31, 2004. PG&E Corporation currently has outstanding $280 million principal amount of convertible subordinated 9.50% notes due 2010, or Convertible Notes, that are entitled to receive (non-cumulative) dividend payments without exercising the conversion option. These Convertible Notes, which were issued in June 2002, meet the criteria of a participating security in the calculation of earnings per share using the "two-class" method. Accordingly, the basic and diluted earnings per share calculations for each of the years in the three year period ended December 31, 2005 reflect the allocation of earnings between PG&E Corporation common stock and the participating security. On April 15, July 15 and October 17, 2005, PG&E Corporation paid a quarterly common stock dividend of $0.30 per share, totaling approximately $356 million. Of the total dividend payments made by PG&E Corporation in 2005, approximately $22 million was paid to Elm Power Corporation, a wholly owned subsidiary of PG&E Corporation. PG&E Corporation did not pay any dividends during 2004 and 2003. 2002 and 20012004 2003 2002 2001 (In millions except per share amounts) Administrative service revenue $ 101 $ 96 $ 95 Equity in earnings of subsidiaries 917 1,842 1,087 Operating expenses (133 ) (141 ) (108 ) Interest income 20 30 35 Interest expense (200 ) (253 ) (132 ) Other income 2 81 4 Income before income taxes 707 1,655 981 Less: Income tax benefit (84 ) (68 ) (40 ) Income from continuing operations 791 1,723 1,021 Discontinued operations (365 ) (2,536 ) 69 Cumulative effect of changes in accounting principles (6 ) (61 ) 9 Net income (loss) before intercompany elimination $ 420 $ (874 ) $ 1,099 Weighted Average Common Shares Outstanding 385 371 363 Earnings (Loss) Per Common Share, Basic $ 1.09 $ (2.36 ) $ 3.03 Earnings (Loss) Per Common Share, Diluted $ 1.06 $ (2.26 ) $ 3.02 2005 $ 93 $ 21 $ — $ 37 $ 77 2004: $ 68 $ 85 $ — $ 60 $ 93 2003: $ 59 $ 42 $ — $ 33 $ 68 CONDENSED STATEMENTS OF CASH FLOWS __________________________________2003, 20022005, 2004 and 20012003 2003 2002 2001 (In millions) Cash Flows from Operating Activities: Net income (loss) $ 420 $ (874 ) $ 1,099 Loss (income) from discontinued operations 365 2,536 (69 ) Cumulative effect of changes in accounting principles 6 61 (9 ) Net income from continuing operations 791 1,723 1,021 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Equity in earnings of subsidiaries (917 ) (1,842 ) (1,087 ) Deferred taxes 265 (660 ) (51 ) Other-net 391 458 237 Net cash provided (used) by operating activities 530 (321 ) 120 Cash Flows From Investing Activities: Capital expenditures — (1 ) (4 ) Net cash used by investing activities — (1 ) (4 ) Cash Flows From Financing Activities: Common stock issued 166 217 15 Common stock repurchased — — (1 ) Long-term debt issued 581 847 907 Long-term debt redeemed (787 ) (908 ) — Short-term debt issued redeemed — — (931 ) Dividends paid — — (109 ) Other-net 1 — — Net cash provided (used) by financing activities (39 ) 156 (119 ) Net Change in Cash & Cash Equivalents 491 (166 ) (3 ) Cash & Cash Equivalents at January 1 182 348 351 Cash & Cash Equivalents at December 31 $ 673 $ 182 $ 348 79 2005 $ 93 $ 21 $ — $ 37 $ 77 2004: $ 68 $ 85 $ — $ 60 $ 93 2003: $ 59 $ 42 $ — $ 33 $ 68 PG&E CORPORATIONEXHIBIT INDEXSCHEDULE II — CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2003, 2002 and 2001 Additions Balance at Charged to Charged Balance at Beginning Costs and to Other End of Description of Period Expenses Accounts Deductions Period (in millions) Valuation and qualifying accounts deducted from assets: 2003: $ 59 $ 42 $ — $ 33 (3) $ 68 2002: $ 48 $ 34 $ (2 ) $ 23 (3) $ 59 2001: $ 52 $ 24 $ — $ 28 (3) $ 48 $ 6,939 $ — $ — $ 6,939 $ — �� (1)2.1AllowanceOrder of the U.S. Bankruptcy Court for uncollectible accounts is deducted from “Accounts receivable Customers, net.”the Northern District of California dated December 22, 2003, Confirming Plan of Reorganization of Pacific Gas and Electric Company, including Plan of Reorganization, dated July 31, 2003 as modified by modifications dated November 6, 2003 and December 19, 2003 (Exhibit B to Confirmation Order and Exhibits B and C to the Plan of Reorganization omitted) (incorporated by reference to Pacific Gas and Electric Company's Registration Statement on Form S-3 No. 333-109994, Exhibit 2.1)2.2 Order of the U.S. Bankruptcy Court for the Northern District of California dated February 27, 2004 Approving Technical Corrections to Plan of Reorganization of Pacific Gas and Electric Company and Supplementing Confirmation Order to Incorporate such Corrections (incorporated by reference to Pacific Gas and Electric Company's Registration Statement on Form S-3 No. 333-109994, Exhibit 2.2) (2)3.1Allowance for uncollectible accounts does not include NEGT.(3)Deductions consist principallyRestated Articles of write-offs, netIncorporation of collections of receivables previously written off.(4)Provision was deduction from “Regulatory Assets.”80PACIFIC GAS AND ELECTRIC COMPANY, A DEBTOR IN POSSESSIONSCHEDULE II — CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2003, 2002 and 2001 Additions Balance at Charged to Charged Balance at Beginning Costs and to Other End of Description of Period Expenses Accounts Deductions Period (in millions) Valuation and qualifying accounts deducted from assets: 2003: $ 59 $ 42 $ — $ 33 (2) $ 68 2002: $ 48 $ 34 $ (2 ) $ 23 (2) $ 59 2001: $ 52 $ 24 $ — $ 28 (2) $ 48 $ 6,939 $ — $ — $ 6,939 $ — (1) Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”(2) Deductions consist principally of write-offs, net of collections of receivables previously written off.(3) Provision was deduction from “Regulatory Assets.”81EXHIBIT INDEX Exhibit Number Exhibit Description 3 .1 Restated Articles of Incorporation of PG&E Corporation effective as of May 5, 2000 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended March 31, 2000 (File No. 1-12609), Exhibit 3.1) 3 .2 Certificate of Determination for PG&E Corporation Series A Preferred Stock filed December 22, 2000 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 3.2) 3 .3 Bylaws of PG&E Corporation amended as of February 18, 2004 3 .4 Restated Articles of Incorporation of Pacific Gas and Electric Company effective as of May 6, 1998 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-Q for the quarter ended March 31, 1998 (File No. 1-2348), Exhibit 3.1) 3 .5 Bylaws of Pacific Gas and Electric Company amended as of February 18, 2004 4 .1 First and Refunding Mortgage of Pacific Gas and Electric Company dated December 1, 1920, and supplements thereto dated April 23, 1925, October 1, 1931, March 1, 1941, September 1, 1947, May 15, 1950, May 1, 1954, May 21, 1958, November 1, 1964, July 1, 1965, July 1, 1969, January 1, 1975, June 1, 1979, August 1, 1983, and December 1, 1988 (incorporated by reference to Registration No. 2-1324, Exhibits B-1, B-2, and B-3; Registration No. 2-4676, Exhibit B-22; Registration No. 2-7203, Exhibit B-23; Registration No. 2-8475, Exhibit B-24; Registration No. 2-10874, Exhibit 4B; Registration No. 2-14144, Exhibit 4B; Registration No. 2-22910, Exhibit 2B; Registration No. 2-23759, Exhibit 2B; Registration No. 2-35106, Exhibit 2B; Registration No. 2-54302, Exhibit 2C; Registration No. 2-64313, Exhibit 2C; Registration No. 2-86849, Exhibit 4.3; and Pacific Gas and Electric Company’s Form 8-K dated January 18, 1989 (File No. 1-2348), Exhibit 4.2) 4 .2 Indenture related to PG&E Corporation’s 7.5% Convertible Subordinated Notes due June 2007, dated as of June 25, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation’s Form 8-K filed June 26, 2002 (File No. 1-12609), Exhibit 99.1). 4 .3 Supplemental Indenture related to PG&E Corporation’s 9.50% Convertible Subordinated Notes due June 2010, dated as of October 18, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.1) 4 .4 Warrant Agreement, dated as of June 25, 2002, by and among PG&E Corporation, LB I Group Inc., and each other entity named on the signature pages thereto (incorporated by reference to PG&E Corporation’s Form 8-K filed June 26, 2002 (File No. 1-12609), Exhibit 99.9). 4 .5 Warrant Agreement, dated as of October 18, 2002, by and among PG&E Corporation, LB I Group Inc., and each other entity named on the signature pages thereto (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.2) 4 .6 Form of Rights Agreement dated as of December 22, 2000, between PG&E Corporation and Mellon Investor Services LLC, including the Form of Rights Certificate as Exhibit A, the Summary of Rights to Purchase Preferred Stock as Exhibit B, and the Form of Certificate of Determination of Preferences for the Preferred Stock as Exhibit C (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 4.2) 4 .7 Amendment to Rights Agreement dated February 18, 2004, between PG&E Corporation and Mellon Investor Services LLC (incorporated by reference to PG&E Corporation’s Form 8-K filed February 19, 2004 (file No. 1-12609), Exhibit 99) 4 .8 Indenture dated as of July 2, 2003, by and between PG&E Corporation and Bank One, N.A. (incorporated by reference to PG&E Corporation’s Form 8-K filed July 2, 2003 (file No. 1-12609), Exhibit 4.1) 4 .9 Utility Stock Base Pledge Agreement dated as of July 2, 2003, by and among PG&E Corporation, Bank One, N.A. and Deutsche Bank Trust Company Americas (incorporated by reference to PG&E Corporation’s Form 8-K filed July 2, 2003 (file No. 1-12609), Exhibit 4.2) Exhibit Number Exhibit Description 4 .10 Utility Stock Protective Pledge Agreement dated as of July 2, 2003, by and among PG&E Corporation, Bank One, N.A. and Deutsche Bank Trust Company Americas (incorporated by reference to PG&E Corporation’s Form 8-K filed July 2, 2003 (file No. 1-12609), Exhibit 4.3) 4 .11 Form of 6 7/8 percent Senior Secured Note due 2008 (incorporated by reference to PG&E Corporation’s Form 8-K filed July 2, 2003 (file No. 1-12609), Exhibit 4.4) 10 .1 The Gas Accord Settlement Agreement, together with accompanying tables, adopted by the California Public Utilities Commission on August 1, 1997, in Decision 97-08-055 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 1997 (File No. 1-12609 and File No. 1-2348), Exhibit 10.2), as amended by Operational Flow Order (OFO) Settlement Agreement, approved by the California Public Utilities Commission on February 17, 2000, in Decision 00-02-050, as amended by Comprehensive Gas OII Settlement Agreement, approved by the California Public Utilities Commission on May 18, 2000, in Decision 00-05-049 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10); and the Gas Accord II Settlement Agreement, approved by the California Public Utilities Commission on August 22, 2002, in Decision 01-09-016 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609 and File No. 1-2348), Exhibit 10.1) 10 .2 Commitment Letter dated March 5, 2003, between PG&E Corporation and Lehman Brothers, Inc. (incorporated by reference to PG&E Corporation’s Form 8-K filed March 6, 2003) (File No. 1-12609), Exhibit 99.2) 10 .3 Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric Company and PG&E Corporation, dated as of December 19, 2003, together with appendices (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 8-K filed December 22, 2003) (File No. 1-12609 and File No. 1-2348); Exhibit 99) 10 .4 Firm Transportation Service Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated October 26, 1993, Rate Schedule FTS-1, and general terms and conditions 10 .5 Operating Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated July 9, 1996 10 .6 PG&E Trans-User Agreement between Pacific Gas and Electric Company and PG&E Gas Transmission, Northwest Corporation dated November 15, 1999 10 .7 Electronic Commerce System User Agreement between Pacific Gas and Electric Company and PG&E Gas Transmission, Northwest Corporation, effective as of September 28, 2001 10 .8 Operating Agreement effective as of April 1, 2003, between the State of California Department of Water Resources and Pacific Gas and Electric Company (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609 and File No. 1-2348); Exhibit 10.1) *10 .9 PG&E Corporation Supplemental Retirement Savings Plan amended effective as of September 19, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2001 (File No. 1-12609), Exhibit 10.4) *10 .10 Agreement and Release between PG&E Corporation and Thomas G. Boren, dated December 18, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.23) *10 .11 Description of Compensation Arrangement between PG&E Corporation and Peter Darbee (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 1999 (File No. 1-12609), Exhibit 10.3) *10 .12 Letter regarding Compensation Arrangement between PG&E Corporation and Thomas B. King dated November 4, 1998 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.6) *10 .13 Letter regarding Compensation Arrangement between PG&E Corporation and Lyn E. Maddox dated April 25, 1997 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.7) ExhibitNumberExhibit Description*10.14Letter Regarding Relocation Arrangement Between PG&E Corporation and Thomas B. King dated March 16, 2000effective as of May 29, 2002 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609), Exhibit 3.1)3.2 Certificate of Determination for PG&E Corporation Series A Preferred Stock filed December 22, 2000 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10)3.2)3.3 *10Bylaws of PG&E Corporation amended as of January 1, 20063.4 .15Restated Articles of Incorporation of Pacific Gas and Electric Company effective as of April 12, 2004 (incorporated by reference to Pacific Gas and Electric Company's Form 8-K filed April 12, 2004 (File No. 1-2348), Exhibit 3)3.5 Bylaws of Pacific Gas and Electric Company amended as of January 1, 2006 4.1 DescriptionIndenture, dated as of Relocation Arrangement BetweenApril 22, 2005, supplementing, amending and restating the Indenture of Mortgage, dated as of March 11, 2004, as supplemented by a First Supplemental Indenture, dated as of March 23, 2004, and a Second Supplemental Indenture, dated as of April 12, 2004, between Pacific Gas and Electric Company and The Bank of New York Trust Company, N.A. (incorporated by reference to PG&E Corporation and Lyn E. MaddoxPacific Gas and Electric Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 4.1)4.2 Indenture related to PG&E Corporation's 7.5% Convertible Subordinated Notes due June 2007, dated as of June 25, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation's Form 8-K filed June 26, 2002 (File No. 1-12609), Exhibit 99.1). 4.3 Supplemental Indenture related to PG&E Corporation's 9.50% Convertible Subordinated Notes due June 2010, dated as of October 18, 2002, between PG&E Corporation and U.S. Bank, N.A., as Trustee (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.1) 4.4 Warrant Agreement, dated as of October 18, 2002, by and among PG&E Corporation, LB I Group Inc., and each other entity named on the signature pages thereto (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-12609), Exhibit 4.2) 10.1 Credit Agreement dated as of April 8, 2005, among Pacific Gas and Electric Company, Citicorp North America, Inc., as administrative agent and a lender, JP Morgan Chase Bank, N.A., as syndication agent and a lender, Barclays Bank PLC, BNP Paribas and Deutsche Bank Securities Inc., as documentation agents and lenders, ABN Amro Bank N.V., Lehman Brothers Bank, FSB, Mellon Bank, N.A., Royal Bank of Canada, The Bank of New York, The Bank of Nova Scotia, UBS Loan Finance LLC, and Union Bank of California, N.A., as senior managing agents, and KBC Bank, NV, Morgan Stanley Bank and William Street Commitment Corporation, as lenders (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 10.3) 10.2 First Amendment, dated as of November 30, 2005, to the Credit Agreement among Pacific Gas and Electric Company, Citicorp North America, Inc., as administrative agent and a lender, JPMorgan Chase Bank, N.A., as syndication agent and a lender, Barclays Bank PLC and BNP Paribas as documentation agents and lenders, Deutsche Bank Securities Inc., as documentation agent, and the following other lenders: Deutsche Bank AG New York Branch, ABN Amro Bank N.V., Lehman Brothers Bank, FSB, Mellon Bank, N.A., Royal Bank of Canada, The Bank of New York, UBS Loan Finance LLC, Union Bank of California, N.A., KBC Bank, N.V., Morgan Stanley Bank and William Street Commitment Corporation. 10.3 Credit Agreement, dated as of December 10, 2004, among PG&E Corporation, BNP Paribas, as administrative agent and a lender, Deutsche Bank Securities, as syndication agent, ABN Amro Bank, N.V., Goldman Sachs Credit Partners L.P., and Union Bank of California, N.A., as documentation agents and lenders, and the following other lenders: Barclays Bank PLC, Citicorp USA, Inc., Deutsche Bank AG New York Branch, JP Morgan Chase Bank, N.A., Lehman Brothers Bank, FSB, Morgan Stanley Bank, Royal Bank of Canada, The Bank of Nova Scotia, and The Bank of New York (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed December 15, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 99) 57 10.4 First Amendment, dated as of April 8, 2005, to the Credit Agreement dated as of December 10, 2004, among PG&E Corporation, BNP Paribas, as administrative agent and a lender, Deutsche Bank Securities Inc., as syndication agent and a lender, ABN Amro Bank, N.V., Goldman Sachs Credit Partners L.P., and Union Bank of California, N.A., as documentation agents and lenders, and the following other lenders: Barclays Bank PLC, Citicorp USA, Inc., Deutsche Bank AG New York Branch, JP Morgan Chase Bank, N.A., Lehman Brothers Bank, FSB, Morgan Stanley Bank, Royal Bank of Canada, The Bank of Nova Scotia, KBC Bank N.V., and The Bank of New York (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 10-Q filed May 4, 2005 (File No. 1-12609 and File No. 1-2348), Exhibit 10.2) 10.5 Master Confirmation dated November 16, 2005, for accelerated share repurchase arrangements between PG&E Corporation and Goldman, Sachs & Co. 10.6 Settlement Agreement among California Public Utilities Commission, Pacific Gas and Electric Company and PG&E Corporation, dated as of December 19, 2003, together with appendices (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 8-K filed December 22, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 99) 10.7 Firm Transportation Service Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated October 26, 1993, Rate Schedule FTS-1, and general terms and conditions (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.4) 10.8 Operating Agreement between Pacific Gas and Electric Company and Pacific Gas Transmission Company dated July 9, 1996 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.5) 10.9 PG&E Trans-User Agreement between Pacific Gas and Electric Company and PG&E Gas Transmission, Northwest Corporation dated November 15, 1999 (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Form 10-K for the year ended December 31, 2003) (File No. 1-12609 and File No. 1-2348), Exhibit 10.6) 10.10 Transmission Control Agreement among the California Independent System Operator (CAISO) and the Participating Transmission Owners, including Pacific Gas and Electric Company, effective as of March 31, 1998, as amended (CAISO, FERC Electric Tariff No. 7) (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.8) 10.11 Operating Agreement, as amended on November 12, 2004, effective as of December 22, 2004, between the State of California Department of Water Resources and Pacific Gas and Electric Company (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-12609 and File No. 1-2348), Exhibit 10.9) *10.12 PG&E Corporation Supplemental Retirement Savings Plan amended effective as of September 19, 2001, and frozen after December 31, 2004 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.10) *10.13 PG&E Corporation Supplemental Retirement Savings Plan effective as of January 1, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2004) (File No. 1-12609), Exhibit 10.11) *10.14 Description of Compensation Arrangement between PG&E Corporation and Peter Darbee (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-12609), Exhibit 10.3) *10.15 Letter regarding Compensation Arrangement between PG&E Corporation and Peter Darbee effective July 1, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609), Exhibit 10.4) *10.16 Letter regarding Compensation Arrangement between PG&E Corporation and Thomas B. King dated November 4, 1998 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.9)10.6)* 10.1610.17 Letter regarding Compensation Arrangement between PG&E Corporation and Thomas B. King dated June 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609);, Exhibit 10.3)* 10.1710.18 Letter regarding Compensation Arrangement between PG&E Corporation and Peter A. Darbee effective June 18, 2003Rand L. Rosenberg dated October 19, 2005 58 *10.19 Severance Agreement and Release by and between Pacific Gas and Electric Company and Gordon R. Smith dated September 21, 2005 (incorporated by reference to Pacific Gas and Electric Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (File No. 1-2348), Exhibit 10.1) *10.20 Actions taken by the Nominating, Compensation and Governance Committee of the PG&E Corporation Board of Directors on October 19, 2005, regarding the 2006 Officer Compensation Program (incorporated by reference to PG&E Corporation’s Quarterly Report on Form 10-Q for the quarter ended JuneSeptember 30, 20032005 (File No. 1-12609);, Exhibit 10.4)10.2)* 10.1810.21 PG&E Corporation Senior Executive Officer Retention Program approved December 20, 20002005 Deferred Compensation Plan for Non-Employee Directors, effective as of January 1, 2005 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 20002004) (File No. 1-12609), Exhibit 10.10)]10.17)* 10.19.1Letter regarding retention award to Robert D. Glynn, Jr. dated January 22, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.1)*10.19.2Letter regarding retention award to Gordon R. Smith dated January 22, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.2)*10.19.3Letter regarding retention award to Peter A. Darbee dated January 22, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.3)*10.19.4Letter regarding retention award to Bruce R. Worthington dated January 22, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.4)*10.19.5Letter regarding retention award to G. Brent Stanley dated January 22, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.5)*10.19.6Letter regarding retention award to Daniel D. Richard, Jr. dated January 22, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.6)*10.19.7Letter regarding retention award to James K. Randolph dated February 27, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.7)*10.19.8Letter regarding retention award to Gregory M. Rueger dated February 27, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.8)*10.19.9Letter regarding retention award to Kent M. Harvey dated February 27, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.9)*10.19.10Letter regarding retention award to Roger J. Peters dated February 27, 2001 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609 and File No. 1-2348), Exhibit 10.10.10)*10.19.11Letter regarding retention award to Lyn E. Maddox dated February 27, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.12)*10.19.12Letter regarding retention award to P. Chrisman Iribe dated February 27, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.13)ExhibitNumberExhibit Description*10.19.13Letter regarding retention award to Thomas B. King dated February 27, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2000 (File No. 1-12609), Exhibit 10.10.14)*10.20Pacific Gas and Electric Company Management Retention Program (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-Q for the quarter ended September 30, 2001 (File No. 1-12609 and File No. 1-2348), Exhibit 10.1)*10.21PG&E Corporation Management Retention Program (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 2001 (File No. 1-12609), Exhibit 10.2)*10.22PG&E Corporation Deferred Compensation Plan for Non-Employee Directors, as amended and restated effective as of July 22, 1998 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended September 30, 1998 (File No. 1-12609), Exhibit 10.2)*10.2310.22 Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2003 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.35)2006* 10.2410.23 Description of Short-Term Incentive Plan for Officers of PG&E Corporation and its subsidiaries, effective January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.18) *10.24 Schedule of 2006 Base Salary and Short-Term Incentive Plan Target Participation Rates for certain officers of PG&E Corporation and its subsidiaries * 1010.25.25Schedule of 2006 award values under the PG&E Corporation 2006 Long-Term Incentive Plan for certain officers of PG&E Corporation and its subsidiaries*10.26 Supplemental Executive Retirement Plan of the Pacific Gas and Electric Company amended effective as of September 19, 2001December 31, 2004, and frozen as of January 1, 2005 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 20012004) (File No. 1-2248)1-2348), Exhibit 10.16)10.20)*10.27 Supplemental Executive Retirement Plan of PG&E Corporation as amended effective as of January 1, 2006 * 10.26.110.28.1 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Robert D. Glynn, Jr. dated December 20, 2002 (incorporated by reference to PG&E Corporation’sCorporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.37.1)* 10.26.210.28.2 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Bruce R. Worthington dated December 20, 2002 (incorporated by reference to PG&E Corporation’sCorporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.37.2)* 10.26.310.28.3 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Gregory M. Rueger dated December 20, 2002 (incorporated by reference to PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's Form 10-K for the year ended December 31, 2002 (File No. 1-12609 and File No. 1-2348), Exhibit 10.37.3)* 10.26.410.28.4 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Gordon R. Smith dated December 20, 2002 (incorporated by reference to PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's Form 10-K for the year ended December 31, 2002 (File No. 1-12609 and File No. 1-2348), Exhibit 10.37.4)* 10.26.5Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and James K. Randolph dated December 20, 2002 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609 and File No. 1-2348), Exhibit 10.37.5)*10.26.6Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Thomas G. Boren dated December 20, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.37.6)*10.27.110.29.1 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Robert D. Glynn, Jr. dated April 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609);, Exhibit 10.2.1)* 10.27.210.29.2 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Gordon R. Smith dated April 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609 and File No. 1-2348);, Exhibit 10.2.2)ExhibitNumberExhibit Description* 10.27.3Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and James K. Randolph dated April 18, 2003 (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609 and File No. 1-2348); Exhibit 10.2.3)*10.27.410.29.3 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Gregory M. Rueger dated April 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's and Pacific Gas and Electric Company’sCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609 and File No. 1-2348);, Exhibit 10.2.4)* 10.27.510.29.4 Agreement and Release regarding annuitization of SERP benefits by and between PG&E Corporation and Bruce R. Worthington dated April 18, 2003 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-12609);, Exhibit 10.2.5)* 10.2810.30 Pacific Gas and Electric Company Relocation Assistance Program for Officers (incorporated by reference to Pacific Gas and Electric Company’sCompany's Form 10-K for fiscal year 1989 (File No. 1-2348), Exhibit 10.16)* 10.2910.31 Postretirement Life Insurance Plan of the Pacific Gas and Electric Company (incorporated by reference to Pacific Gas and Electric Company’sCompany's Form 10-K for fiscal year 1991 (File No. 1-2348), Exhibit 10.16)*10.32 *10.30RetirementNon-Employee Director Stock Incentive Plan for Non-Employee Directors,(a component of the PG&E Corporation Long-Term Incentive Program) as amended effective as of July 1, 2004 (reflecting amendments adopted by the PG&E Corporation Board of Directors on June 16, 2004 set forth in resolutions filed as Exhibit 10.3 to PG&E Corporation's and terminated January 1, 1998 (incorporatedPacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004) (incorporated by reference to PG&E Corporation’s and Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 19972004 (File No. 1-12609)1-12609 and File No. 1-2348), Exhibit 10.13)10.27) 59 * 1010.33.31Resolution of the PG&E Corporation Board of Directors dated June 16, 2004, adopting director compensation arrangement (incorporated by reference to PG&E Corporation's and Pacific Gas and Electric Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12609 and File No. 12348), Exhibit 10.1)*10.34 *10.35 *10.36 PG&E Corporation Long-Term Incentive Program as amended May 16, 2001, including(including the PG&E Corporation Stock Option Plan and Performance Unit Plan, and Non-Employee Director Stock Incentive PlanPlan), as amended May 16, 2001, (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (File No. 1-12609), Exhibit 10)*10.37 *10.32PG&E Corporation Executive Stock Ownership Program Guidelines dated as of February 19, 2003 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609); Exhibit 10.2)*10.33PG&E Corporation Officer Severance Policy, amended as of December 19, 2001 (incorporated by reference to PG&E Corporation’s Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.43)*10.34PG&E Corporation Director Grantor Trust Agreement dated April 1, 1998 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12609), Exhibit 10.1)*10.35PG&E Corporation Officer Grantor Trust Agreement dated April 1, 1998 (incorporated by reference to PG&E Corporation’s Form 10-Q for the quarter ended March 31, 1998 (File No. 1-12609), Exhibit 10.2)*10.36PG&E Corporation Form of Restricted Stock Award Agreement for 2003 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation’sCorporation's Form 10-K for the year ended December 31, 2002 (File No. 1-12609), Exhibit 10.46)* 10.3710.38 Form of Restricted Stock Award Agreement for 2004 grants made under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2003 (File No. 1-12609), Exhibit 10.37) *10.39 Form of Restricted Stock Agreement for 2005 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.3) * 1010.40.38Form of Restricted Stock Agreement for 2006 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 9, 2006, Exhibit 99.1)*10.41 Form of Non-Qualified Stock Option Agreement under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 6, 2005 (File No. 12609 and File No. 1-2348), Exhibit 99.1) *10.42 Form of Performance Share Award Agreement grantedfor 2004 grants under the PG&E Corporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2003 (File No. 1-12609), Exhibit 10.38)*10.43 *10.39Form of Performance Share Agreement for 2005 grants under the PG&E National Energy Group, Inc. Management Retention/ Performance AwardCorporation Long-Term Incentive Program (incorporated by reference to PG&E Corporation’sCorporation and Pacific Gas and Electric Company's Form 10-K/A Amendment8-K filed January 6, 2005 (File No. 212609 and File No. 1-2348), Exhibit 99.2)*10.44 Form of Performance Share Agreement for 2006 grants under the PG&E Corporation 2006 Long-Term Incentive Plan (incorporated by reference to PG&E Corporation and Pacific Gas and Electric Company's Form 8-K filed January 9, 2006, Exhibit 99.2) *10.45 PG&E Corporation Executive Stock Ownership Program Guidelines dated as of February 19, 2003 (incorporated by reference to PG&E Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-12609) Exhibit 10. 2) *10.46 PG&E Corporation Executive Stock Ownership Program Guidelines as amended February 15, 2006 *10.47 PG&E Corporation Officer Severance Policy, as amended effective as of January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 20022004 (File No. 1-12609);, Exhibit 10.47)10.37)*10.48 PG&E Corporation Officer Severance Policy, as amended effective as of February 15, 2006 * 1010.49.39.1PG&E Corporation Golden Parachute Restriction Policy effective as of February 15, 2006*10.50 Letter regarding retention award to Thomas B. KingPG&E Corporation Director Grantor Trust Agreement dated September 9, 2002April 1, 1998 (incorporated by reference to PG&E Corporation’sCorporation's Quarterly Report on Form 10-K/ A Amendment10-Q for the quarter ended March 31, 1998 (File No. 21-12609), Exhibit 10.1)*10.51 PG&E Corporation Officer Grantor Trust Agreement dated April 1, 1998, as updated effective January 1, 2005 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 20022004 (File No. 1-12609);, Exhibit 10.47.1)10.39) Exhibit Number Exhibit Description *10 .39.2 Letter regarding retention award to P. Chrisman Iribe dated September 9, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K/ A Amendment No. 2 for the year ended December 31, 2002 (File No. 1-12609); Exhibit 10.47.2) *10 .39.3 Letter regarding retention award Lyn E. Maddox dated September 9, 2002 (incorporated by reference to PG&E Corporation’s Form 10-K/ A Amendment No. 2 for the year ended December 31, 2002 (File No. 1-12609); Exhibit 10.47.3) 11 Computation of Earnings Per Common Share 12 .1 Computation of Ratios of Earnings to Fixed Charges for Pacific Gas and Electric Company 12 .2 Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends for Pacific Gas and Electric Company 13 The following portions of the 2003 Annual Report to Shareholders of PG&E Corporation and Pacific Gas and Electric Company are included: “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Independent Auditors’ Report,” “Responsibility for Consolidated Financial Statements,” financial statements of PG&E Corporation entitled “Consolidated Statements of Operations,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” and “Consolidated Statements of Common Shareholders’ Equity,” financial statements of Pacific Gas and Electric Company entitled “Consolidated Statements of Operations,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” “Consolidated Statements of Shareholders’ Equity,” “Notes to Consolidated Financial Statements,” and “Quarterly Consolidated Financial Data (Unaudited)” 21 Subsidiaries of the Registrant 23 Independent Auditors’ Consent (Deloitte & Touche LLP) 24 .1 Resolutions of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company authorizing the execution of the Form 10-K 24 .2 Powers of Attorney 31 .1 Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 302 of the Sarbanes-Oxley Act of 2002 31 .2 Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 302 of the Sarbanes-Oxley Act of 2002 **32 .1 Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 906 of the Sarbanes-Oxley Act of 2002 **32 .2 Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 906 of the Sarbanes-Oxley Act of 2002 *10.52 Resolution of the Board of Directors of PG&E Corporation regarding indemnification of officers and directors dated December 18, 1996 (incorporated by reference to PG&E Corporation's Form 10-K for the year ended December 31, 2004 (File No. 1-12609), Exhibit 10.40) 60 *10.53 Resolution of the Board of Directors of Pacific Gas and Electric Company regarding indemnification of officers and directors dated July 19, 1995 (incorporated by reference to Pacific Gas and Electric Company’s Form 10-K for the year ended December 31, 2004 (File No. 1-2348), Exhibit 10.41) 11 Computation of Earnings Per Common Share 12.1 Computation of Ratios of Earnings to Fixed Charges for Pacific Gas and Electric Company 12.2 Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends for Pacific Gas and Electric Company 13 The following portions of the 2005 Annual Report to Shareholders of PG&E Corporation and Pacific Gas and Electric Company are included: "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," financial statements of PG&E Corporation entitled "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows," and "Consolidated Statements of Shareholders' Equity," financial statements of Pacific Gas and Electric Company entitled "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows," and "Consolidated Statements of Shareholders' Equity," "Notes to the Consolidated Financial Statements," and "Quarterly Consolidated Financial Data (Unaudited)," "Management's Report on Internal Control Over Financial Reporting," "Report of Independent Registered Public Accounting Firm," and "Report of Independent Registered Public Accounting Firm." 21 Subsidiaries of the Registrant 23 Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) 24.1 Resolutions of the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company authorizing the execution of the Form 10-K 24.2 Powers of Attorney 31.1 Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 302 of the Sarbanes-Oxley Act of 2002 **32.1 Certifications of the Chief Executive Officer and the Chief Financial Officer of PG&E Corporation required by Section 906 of the Sarbanes-Oxley Act of 2002 **32.2 Certifications of the Chief Executive Officer and the Chief Financial Officer of Pacific Gas and Electric Company required by Section 906 of the Sarbanes-Oxley Act of 2002 * Management contract or compensatory agreement.** Pursuant to Item 601(b)(32) of SEC Regulation S-K, these exhibits are furnished rather than filed with this report.