FOR IMMEDIATE RELEASE
                  July 17, 2002
                  Contact: News Department (415) 973-5930
                  EDITORS: Please do not use "Pacific Gas and Electric" or "PG&E" when referring to PG&E Corporation or its National Energy Group. The PG&E National Energy Group is not the same company as Pacific Gas and Electric Company, the utility, and is not regulated by the California Public Utilities Commission. Customers of Pacific Gas and Electric Company do not have to buy products or services from the National Energy Group in order to continue to receive quality regulated services from Pacific Gas and Electric Company.


                  SAN FRANCISCO - As requested by the U.S. Bankruptcy Court, PG&E Corporation (NYSE: PCG) and Pacific Gas and Electric Company today submitted a summary of their principal objections to confirmation of the California Public Utilities Commission's (CPUC) alternative plan of reorganization.

                  The filing identifies elements of the plan that PG&E believes are not lawful or financially feasible. These include:

                  • A proposed stock sale that would violate various sections of bankruptcy law requiring a plan of reorganization to be "fair and equitable" in its treatment of equity holders. The CPUC plan's proposed stock sale would significantly dilute shareholder equity and illegally confiscate considerable value from shareholders, many of whom are current and retired PG&E employees and others whose pension portfolios include holdings in PG&E Corporation.

                  • A $3.8 billion new debt offering and the failure to restore the utility's investment-grade credit rating. The debt issued under the CPUC's plan likely would be non-investment grade bonds - junk bonds. The recent debt financing under the settlement agreement with Southern California Edison failed to receive investment-grade ratings. PG&E believes it is doubtful that the bond markets would be capable of supporting a junk bond offering that would be more than twice as large as Southern California Edison's financing and would be the largest such bond sale in the last five years.

                  PG&E believes it has developed the only feasible solution that allows the utility to emerge from Chapter 11 as an investment-grade company, gives the State of California a clearly defined path to exit the power buying business and provides for continued environmental protections. The company's plan of reorganization achieves these objectives without asking the Bankruptcy Court to raise rates or the State for a bailout.


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