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FERC sets timeline to review the bilateral contract contained in PG&E’s reorganization plan

SAN FRANCISCO, June 14, 2002 — Pacific Gas and Electric Co. issued the following statement after the Federal Energy Regulatory Commission (FERC) issued an order setting a schedule to review one of the key elements of the utility’s plan of reorganization.

Yesterday, the commission issued an order establishing a hearing schedule to review PG&E’s request for approval of a 12-year power sales agreement between the reorganized Pacific Gas and Electric Company and the new generation company created under the plan (Gen).

The proposed contract would be for the 7,100 megawatts of power generated from Diablo Canyon, hydroelectric facilities, and irrigation district agreements. The contract will provide the utility’s customers a stable source of power at reasonable prices — averaging about 5 cents per kilowatt-hour over the life of the contract.

Most important, PG&E’s plan of reorganization, including the bilateral contract, will be accomplished without an increase in existing rates.

“Pacific Gas and Electric Company is pleased with the commission’s schedule to review this element of our plan of reorganization. The hearing schedule set by FERC is consistent with the company’s goal to implement its plan by January 1, 2003.

“Governor Davis and other California officials have expressed a desire to end the state’s role in purchasing power and return that function to the utilities by the beginning of next year. Returning the utilities to an investment-grade credit rating is essential to allowing them to resume buying power.

“In the FERC proceeding, PG&E will demonstrate the many benefits that this contract will provide its customers and creditors. By ensuring stability and reasonable prices for a significant portion of the electricity used by the utility’s customers, this contract will go a long way toward preventing any return of the dramatic price fluctuations California endured during 2000 and 2001.”

The commission’s action comes in response to applications submitted by the utility on November 30, 2001, seeking federal regulatory approval of transactions proposed under the plan of reorganization.

The utility’s FERC applications seek these regulatory approvals under provisions of the Federal Power Act and Natural Gas Act.