FOR IMMEDIATE RELEASE
                  February 08, 2002
                  Contact: News Department (415) 973-5930
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                  SAN FRANCISCO - Pacific Gas and Electric Company today issued the following statement after the U.S. Bankruptcy Court issued its decision on preemption and sovereign immunity:

                  "Based on the Court's ruling, PG&E will be able to proceed with its plan of reorganization.

                  "The court concluded that state law may be preempted based on a showing of the need for preemption in order to implement the plan. Therefore, the Court's decision allows PG&E to proceed with its plan of reorganization, with preemption issues ultimately being addressed in the confirmation process.

                  "Specifically, the Court found:

                  'Nonetheless, the court believes that the Plan could be confirmed if Proponents are able to establish with particularity the requisite elements of implied preemption. If the Disclosure Statement is amended consistent with this Memorandum Decision, the court will approve it and let the Proponents test preemption at confirmation.'

                  "Thus, while the Court did not accept the utility's argument that federal law automatically preempts state law, the ruling does provide that preemption is possible, if necessary to confirm the utility's plan of reorganization.

                  "The Court also rejected arguments made by the California Public Utilities Commission and the Attorney General that PG&E's plan inappropriately seeks to escape from state regulation. '?/span>

                  The State, the Commission and other objectors have argued that Proponents are abusing the bankruptcy process to escape the Commission's jurisdiction. To the extent that this is a 'facial invalidity' objection the court rejects it.'

                  "PG&E intends to move forward with its plan, taking into account the Court's direction in this ruling."


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