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Bankrupt California utility shores up parent company PG&E Corp.

Pacific Gas and Electric Co. grew its earnings from operations by 19 percent to $2.51 per share, or $914 million, over year 2000 results

SAN FRANCISCO, March 5, 2002 — PG&E Corp. announced its earnings from operations had increased by 19 percent to $1.1 billion, or $3.02 per share, for the full year 2001.

The corporation’s results reflected a 19 percent increase over earnings from operations in 2000 of $925 million, or $2.54 per share. Total reported net income for the year was also $1.1 billion, or $3.02 per share.

“The corporation’s financial results for the full year 2001 show that the company’s fundamental operations performed solidly last year,” said PG&E Corp. Chairman, CEO and President Robert D. Glynn, Jr.

Earnings from operations at Pacific Gas and Electric Co., the corporation’s utility business, were $914 million, or $2.51 per share, compared with $769 million, or $2.11 per share, last year. The results included earnings from operations in the fourth quarter of 2001 of $0.94 per share, compared with $0.31 for the year-ago quarter. The fourth quarter 2001 results included the full year of revenues, totaling $151 million, or $0.24 per share, from the retroactive attrition rate adjustment recently authorized by the California Public Utilities Commission (CPUC).

At the PG&E National Energy Group (PG&E NEG), income from operations grew to $209 million, or $0.57 per share, for 2001, compared with $168 million, or $0.45 per share, in the year 2000. The 2001 results included $0.37 per share from the PG&E NEG’s Integrated Energy and Marketing segment, compared with $0.32 per share in 2000, and $0.21 per share from its Interstate Pipeline Operations, compared with $0.16 per share in 2000. PG&E NEG results in 2001 also included $0.01 per share in eliminations, compared with $0.03 per share in eliminations in 2000.

The PG&E NEG’s fourth quarter 2001 earnings from operations were $0.02 per share in the fourth quarter compared with $0.08 in the fourth quarter 2000, a decrease driven primarily by reduced power prices and lower volumes due to mild winter weather in the regions in which the PG&E NEG operates, offset somewhat by increased trading profits.

2001 Total Net Income

PG&E Corp. reported total net income of $1.1 billion, or $3.02 per share, for 2001. For 2000, the corporation reported a total net loss of $3.36 billion, or $9.29 per share, after accounting rules required the company to record a more than $4.1 billion charge for wholesale power costs and transition costs that it could no longer consider “probable” of recovery in light of multiple adverse regulatory decisions by the CPUC.

Prior to the energy crisis, and in accordance with CPUC requirements, any generation-related revenues in excess of Pacific Gas and Electric’s generation and wholesale power costs were used to amortize generation-related transition costs associated with energy industry restructuring. However, throughout much of 2000 and part of 2001, extreme wholesale power costs prevented any such revenues from being available for transition cost recovery.

Ultimately, in the fourth quarter of 2000, the company was forced to write off the balance of these unrecovered transition costs. Beginning in the second quarter of 2001, reductions in the utility’s costs and increases in its retail rates resulted in some revenues once again being available to recover the costs. This recovery totaled $1.26 per share for the full year and is included in the company’s total net income, offsetting costs previously written off.

Total net income for 2001 also includes several other items impacting comparability.

These include an interest expense charge of $0.72 per share, associated with increased amount of and cost of debt resulting from the energy crisis; a charge of $0.21 per share for bankruptcy-related costs; a charge of $0.10 per share to account for the PG&E NEG’s exposure to Enron Corp.; a charge of $0.18 per share for losses at Pacific Gas and Electric Co. stemming from counterparties’ decisions to terminate gas transportation hedges following the decline in the utility’s credit quality; a gain of $0.02 per share from the cumulative effect of a change in accounting principle; and a charge of $0.07 per share associated with the California Public Utilities Commission’s rehearing of the utility’s 1999 General Rate Case.