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.

CHAPTER 11 UPDATE: PACIFIC GAS AND ELECTRIC COMPANY REACHES LONG-TERM AGREEMENTS WITH 131 QFs

Deals Provide Reliable Power to Customers at Reasonable Prices

SAN FRANCISCO - Pacific Gas and Electric Company has signed five-year agreements with 131 of its qualifying facilities (QFs), ensuring the utility and its customers receive a reliable supply of electricity at an average energy price of 5.37 cents per kilowatt-hour.

Under the terms of the agreements, Pacific Gas and Electric Company will assume the QF contracts. The company will pay the pre-petition debt on these 131 QF contracts - totaling $740 million - on the effective date of the plan of reorganization. The total amount the company owed to QFs when it filed for Chapter 11 was approximately $1 billion.

For certain of these QFs, if the effective date has not occurred by July 15, 2003, the company will pay 2% of the principal amount of the pre-petition debt per month until the effective date of the plan of reorganization or until July 15, 2005, when it will pay the remaining pre-petition debt.

By locking into the average fixed cost, Pacific Gas and Electric Company will help protect its customers from the price fluctuations in the wholesale market. A recent CPUC decision (D.01-06-015) allowed QFs to enter into long-term contracts at an average energy price of 5.37 cents per kilowatt-hour.

"We are pleased to have reached agreements with more than 130 of our small power producers," said Joe Henri, Pacific Gas and Electric Company's director of electric portfolio management. "This will help bring stability to the market and allow our customers to receive reliable power at reasonable costs."

The 131 QF contracts represent nameplate capacity of 2,950 megawatts compared to PG&E's total QF contract nameplate capacity of 4,400 megawatts. On an average annual basis, the company receives approximately 2,400 megawatts from all of its QFs, and the 131 QFs represent approximately 1600 megawatts of the total amount.

Each of the agreements requires formal approval from the U.S Bankruptcy Court. Several of the agreements have already been approved, and the company will be making filings for the remainder in the near future.

Attached is a list of the projects.