8-K

_____________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: November 8, 2006

(Date of earliest event reported)

Commission File Number	Exact Name of Registrant as specified in its charter	State or Other Jurisdiction of Incorporation or Organization	IRS Employer Identification Number
1-12609	PG&E CORPORATION	California	94-3234914
1-2348	PACIFIC GAS AND ELECTRIC COMPANY	California	94-0742640

PG&E Corporation One Market, Spear Tower Suite 2400 San Francisco, California 94105 (Address of principal executive offices) (Zip Code) (415) 267-7000 (Registrant's telephone number, including area code)	Pacific Gas and Electric Company 77 Beale Street P.O. Box 770000 San Francisco, California 94177 (Address of principal executive offices) (Zip Code) (415) 973-7000 (Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

The information included in this Current Report on Form 8-K is being furnished, not filed, pursuant to Item 2.02 of Form 8-K.

On November 8, 2006, PG&E Corporation issued the press release attached hereto as Exhibit 99.1 announcing its financial results and the financial results of its subsidiary, Pacific Gas and Electric Company (Utility), for the quarter ended September 30, 2006.  Additional supplemental information relating to PG&E Corporation and the Utility is attached as Exhibit 99.2.  Much of this information is derived from PG&E Corporation’s and the Utility’s combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, to be filed by PG&E Corporation and the Utility with the Securities and Exchange Commission (SEC), and should be read in conjunction with such Form 10-Q.

Exhibits 99.1 and 99.2 to this report also will be posted on the “Investors” section of PG&E Corporation’s website at www.pge-corp.com. 

PG&E Corporation presents results and guidance on an “earnings from operations” basis in order to provide investors with a measure that reflects the underlying financial performance of the business and offers investors a basis on which to compare performance from one period to another, exclusive of items that, in management’s judgment, are not reflective of the normal course of operations.

The attached exhibits contain forward-looking statements regarding management’s guidance for PG&E Corporation’s 2006 and 2007 earnings per share from operations, 2006 and 2007 rate base, and 2006 and 2007 earnings sensitivities. These statements are based on current expectations and various assumptions which management believes are reasonable, including that the Utility earns its authorized rate of return on equity of 11.35% on anticipated rate base for 2006 and 2007. These statements and assumptions are necessarily subject to various risks and uncertainties, the realization or resolution of which are outside of management's control. Actual results may differ materially. Factors that could cause actual results to differ materially include:

·   Unanticipated changes in operating expenses or capital expenditures, which may affect the Utility’s ability to earn its authorized rate of return;

·   How the Utility manages its responsibility to procure electric capacity and energy for its customers;

·   The adequacy and price of natural gas supplies, and the ability of the Utility to manage and respond to the volatility of the natural gas market for its customers;

·   The operation of the Utility’s Diablo Canyon nuclear power plant, which could cause the Utility to incur potentially significant environmental costs and capital expenditures, and the extent to which the Utility is able to timely increase its spent nuclear fuel storage capacity at Diablo Canyon;

·   Whether the Utility is able to recognize the benefits expected to result from its efforts to improve customer service through implementation of specific initiatives to streamline business processes and deploy new technology;

·   The outcome of proceedings pending at the Federal Energy Regulatory Commission (FERC) and the California Public Utilities Commission (CPUC), including the Utility’s 2007 General Rate Case and the Utility’s application for approval of new long-term generation resource commitments;

·   How the CPUC administers the capital structure, stand-alone dividend, and first priority conditions of the CPUC’s decisions permitting the establishment of holding companies for the California investor-owned electric utilities, and the outcome of the CPUC's new rulemaking proceeding concerning the relationship between the California investor-owned energy utilities and their holding companies and non-regulated affiliates;

·   The impact of the recently adopted Energy Policy Act of 2005 and future legislative or regulatory actions or policies affecting the energy industry;

·   Whether the Utility is determined to be in compliance with all applicable rules, regulations, tariffs and orders relating to electricity and natural gas utility operations, including those relating to the procurement of renewable energy, resource adequacy, greenhouse gas emissions, electric reliability standards, and billing and collection practices, and the extent to which a finding of non-compliance could result in customer refunds, penalties or other non-recoverable expenses;

·   Increased municipalization and other forms of bypass in the Utility’s service territory; and

·   Other factors discussed in PG&E Corporation's SEC reports.

Item 7.01 Regulation FD Disclosure

The information included in Exhibit 99.2 is incorporated by reference in response to this Item 7.01, and is deemed to be furnished, not filed, pursuant to Item 7.01 of Form 8-K.

Item 9.01 Financial Statements and Exhibits

Exhibits

The following exhibits are being furnished, and are not deemed to be filed:

Exhibit 99.1	PG&E Corporation Press Release Dated November 8, 2006
Exhibit 99.2	Additional Supplemental Information

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

PG&E CORPORATION
By:	/s/ G. Robert Powell
	G. Robert Powell Vice President and Controller
PACIFIC GAS AND ELECTRIC COMPANY
By:	/s/ G. Robert Powell
	G. Robert Powell Vice President and Controller

Dated:November 8, 2006

Exhibit Index

Exhibit 99.1	PG&E Corporation Press Release Dated November 8, 2006
Exhibit 99.2	Additional Supplemental Information

EX-99.1

                 EXHIBIT 99.1

    Corporate Communications One Market, Spear Tower Suite 2400 San Francisco, CA 94105 1-800-743-6397 NEWS   November 8, 2006

CONTACT: PG&E Corporation

PG&E CORP. RAISES OUTLOOK FOR 2006, REPORTS THIRD QUARTER RESULTS, REAFFIRMS GUIDANCE FOR 2007

§   Consolidated net income reported under GAAP was $1.09 per share for PG&E Corporation for the quarter ended September 30, 2006, compared with $0.65 per share in the same quarter of 2005. (All “per share” amounts are presented on a diluted basis.)

§   Net income for the third quarter was $393 million, compared with $252 million for the same quarter last year. Net income rose primarily due to recovery of costs incurred for electric transmission scheduling services, recovery of interest and litigation costs incurred in connection with disputed generator claims, and higher gas transmission revenue.

§   Earnings from operations for the third quarter were $0.86 per share compared with $0.62 per share in the same quarter of 2005.

§   Guidance for 2006 earnings from operations is raised by $0.05 per share to a range of $2.45-$2.55 per share. Guidance for 2007 earnings from operations is reaffirmed at $2.65-$2.75 per share.

(San Francisco) -- PG&E Corporation’s (NYSE: PCG) consolidated net income reported in accordance with generally accepted accounting principles (GAAP) was $393 million, or $1.09 per share, in the third quarter of 2006. In the same period last year, consolidated net income was $252 million, or $0.65 per share.

On a stand-alone basis, PG&E Corporation’s Pacific Gas and Electric Company subsidiary’s GAAP results were $375 million for the third quarter of 2006, compared with $244 million in the same quarter of 2005.

“Strong operational performance, combined with better than anticipated results in several areas, elevated our overall quarterly results to put the company on course to exceed prior expectations for 2006,” said Peter A. Darbee, PG&E Corporation Chairman, CEO and President. “Looking ahead to 2007, our outlook remains in line with our previous guidance.”

EARNINGS FROM OPERATIONS

On a non-GAAP basis, PG&E Corporation’s earnings from operations for the third quarter were $310 million, or $0.86 per share, compared with $239 million, or $0.62 per share, in the same quarter of 2005.

Positive factors affecting quarter-over-quarter operational results include higher gas transmission revenues in 2006, recovery of litigation costs associated with disputed generator claims stemming from the California energy crisis following regulatory review, and lower costs related to utility litigation compared with 2005 (see “Earnings per Common Share from Operations, Third Quarter 2006 vs. Third Quarter 2005” in the accompanying financial tables).

This income was partially offset by a “carrying cost credit” for the quarter that has been provided to customers since November 2005 to compensate them for pre-funding future tax liabilities associated with the refinancing of a regulatory asset put in place to resolve the utility’s Chapter 11 case (see “Terms in Press Release” below).

Quarter-over-quarter per share amounts were also affected by the positive impact of share repurchases in November 2005, which resulted in fewer shares outstanding for 2006 when compared with 2005.

Earnings from operations for the third quarter were not impacted by the cost of electricity and natural gas provided to customers, or the cost of fuel to generate electricity. Increases or decreases in these expense categories are generally offset by revenue adjustments authorized by the California Public Utilities Commission (CPUC).

ITEMS IMPACTING COMPARABILITY

Earnings from operations for the quarter exclude certain income and expenses reported in GAAP net income that reflect events or circumstances considered to be unusual and generally not reflective of ongoing, core operations. For the third quarter, these include the recent regulatory authorization for recovery of costs associated with electric transmission scheduling services dating back to 1998, as well as recovery of interest costs incurred in connection with disputed generator claims stemming from the California energy crisis (see the accompanying financial tables for a reconciliation of earnings from operations to consolidated net income in accordance with GAAP).

EARNINGS GUIDANCE

As a result of the positive third quarter and year-to-date results, PG&E Corporation raised its guidance for 2006 by $0.05 per share, to a range of $2.45-$2.55 and expects to finish toward the top end of that range. The company reaffirmed its previous guidance for 2007 earnings from operations in the $2.65-$2.75 per share range. Guidance for 2007 assumes that items that have impacted year-to-date 2006 results, such as gas transmission revenues and the level of litigation expenses, return to historical levels.

Guidance assumes that the utility earns its authorized return on equity of 11.35 percent and, for 2007 guidance, that the proposed settlement agreement to resolve the utility’s 2007 general rate case is approved by the CPUC.

PG&E Corporation bases guidance on “earnings from operations” in order to provide a measure that allows investors to compare the underlying financial performance of the business from one period to another, exclusive of items that management believes do not reflect the normal course of operations. Earnings from operations are not a substitute or alternative for consolidated net income presented in accordance with GAAP (see the accompanying financial tables for a reconciliation of guidance of earnings from operations to guidance of consolidated net income in accordance with GAAP).

Supplemental Financial Information:

q   In addition to the financial information accompanying this release, an expanded package of supplemental financial and operational information for the quarter will be furnished to the Securities and Exchange Commission and also will be available shortly on PG&E Corporation’s website (www.pgecorp.com).

Conference Call with the Financial Community to Discuss Third Quarter Results:

q   Today’s call at 2:00 p.m. Eastern time is open to the public on a listen-only basis via webcast. Please visit www.pgecorp.com for more information and instructions for accessing the webcast. The call will be archived on the website. Also, a toll-free replay will be accessible shortly after the live call through 9:00 p.m. EST, on November 14, 2006, by dialing 877-690-2089. International callers may dial 402-220-0645.

Terms used in this press release:

q   Carrying Cost Credit - This is a credit that has been provided to customers since November 2005 to compensate them for the pre-funding of future tax liabilities associated with the refinancing of the regulatory asset, which was put in place as part of Pacific Gas and Electric Company’s bankruptcy settlement. For 2006, this credit reduces customer rates by approximately $125 million. The regulatory asset was established in 2004 to provide the financial stability for the company to emerge from Chapter 11. In order to save customers almost $1 billion in lower financing and tax costs over the 9-year life of the regulatory asset, the company refinanced the regulatory asset in 2005 by issuing two series of energy recovery bonds (ERBs). The first series of ERBs was issued in February 2005 to refinance the after-tax portion of the regulatory asset. The second series of ERBs was issued in November 2005 to pre-fund the utility's tax liability that will be incurred as the utility collects the revenue to pay off the first series of ERBs. The credit is computed at the utility’s authorized rate of return. The carrying cost credit will decline as the taxes are paid, reaching zero in 2012 when the ERBs and related taxes are expected to be paid in full.

This press release contains forward-looking statements regarding management’s guidance for PG&E Corporation’s 2006 and 2007 earnings per share from operations. These statements are based on current expectations and various assumptions which management believes are reasonable, including that Pacific Gas and Electric Company (Utility) earns its authorized rate of return. These statements and assumptions are necessarily subject to various risks and uncertainties, the realization or resolution of which are outside of management's control. Actual results may differ materially. Factors that could cause actual results to differ materially include:

·   Unanticipated changes in operating expenses or capital expenditures, which may affect the Utility’s ability to earn its authorized rate of return;

·   How the Utility manages its responsibility to procure electric capacity and energy for its customers;

·   The adequacy and price of natural gas supplies, and the ability of the Utility to manage and respond to the volatility of the natural gas market for its customers;

·   The operation of the Utility’s Diablo Canyon nuclear power plant, which could cause the Utility to incur potentially significant environmental costs and capital expenditures, and the extent to which the Utility is able to timely increase its spent nuclear fuel storage capacity at Diablo Canyon;

·   Whether the Utility is able to recognize the benefits expected to result from its efforts to improve customer service through implementation of specific initiatives to streamline business processes and deploy new technology;

·   The outcome of proceedings pending at the Federal Energy Regulatory Commission (FERC) and the California Public Utilities Commission (CPUC), including the Utility’s 2007 General Rate Case and the Utility’s application for approval of new long-term generation resource commitments;

·   How the CPUC administers the capital structure, stand-alone dividend, and first priority conditions of the CPUC’s decisions permitting the establishment of holding companies for the California investor-owned electric utilities, and the outcome of the CPUC's new rulemaking proceeding concerning the relationship between the California investor-owned energy utilities and their holding companies and non-regulated affiliates;

·   The impact of the recently adopted Energy Policy Act of 2005 and future legislative or regulatory actions or policies affecting the energy industry;

·   Whether the Utility is determined to be in compliance with all applicable rules, regulations, tariffs and orders relating to electricity and natural gas utility operations, including those relating to the procurement of renewable energy, resource adequacy, greenhouse gas emissions, electric reliability standards, and billing and collection practices, and the extent to which a finding of non-compliance could result in customer refunds, penalties or other non-recoverable expenses;

·   Increased municipalization and other forms of bypass in the Utility’s service territory; and

·   Other factors discussed in PG&E Corporation's SEC reports.

###

PG&E Corporation

Condensed Consolidated Statements of Income

(in millions, except per share amounts)

(Unaudited)

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Operating Revenues
Electric	$	2,470		$	2,107		$	6,547		$	5,546
Natural gas		698			697			2,786			2,424
Total operating revenues		3,168			2,804			9,333			7,970
Operating Expenses
Cost of electricity		884			742			2,195			1,626
Cost of natural gas		298			326			1,539			1,293
Operating and maintenance		795			740			2,639			2,177
Depreciation, amortization         and decommissioning		456			481			1,291			1,320
Total operating expenses		2,433			2,289			7,664			6,416
Operating Income		735			515			1,669			1,554
Interest income		40			22			104			60
Interest expense		(152	)		(145	)		(470	)		(438	)
Other income (expense), net		(22	)		(14	)		6			(16	)
Income Before Income Taxes		601			378			1,309			1,160
Income tax provision		208			139			470			436
Income From Continuing Operations		393			239			839			724
Discontinued Operations		-			13			-			13
Net Income	$	393		$	252		$	839		$	737
Weighted Average Common Shares     Outstanding, Basic		347			372			345			376
Earnings Per Common Share From Continuing     Operations, Basic	$	1.09		$	0.63		$	2.36		$	1.88
Net Earnings Per Common Share, Basic	$	1.09		$	0.66		$	2.36		$	1.91
Earnings Per Common Share From Continuing     Operations, Diluted	$	1.09		$	0.62		$	2.33		$	1.86
Net Earnings Per Common Share, Diluted	$	1.09		$	0.65		$	2.33		$	1.89
Dividends Declared Per Common Share	$	0.33		$	0.30		$	0.99		$	0.90

Reconciliation of PG&E Corporation’s Earnings from Operations to Consolidated Net Income in Accordance with Generally Accepted Accounting Principles (GAAP)

Third Quarter and Year-to-Date, 2006 vs. 2005

(in millions, except per share amounts)

	Three months ended September 30,								Nine months ended September 30,
	Earnings				Earnings per Common Share Diluted				Earnings (Loss)						Earnings (Loss) per Common Share Diluted
	2006		2005		2006		2005		2006			2005			2006			2005
PG&E Corporation Earnings from Operations (1)	$	310	$	239	$	0.86	$	0.62	$	752		$	727		$	2.09		$	1.87
Items Impacting Comparability (2)
Scheduling Coordinator Cost Recovery (3)		55		-		0.15		-		77			-			0.21			-
Environmental Remediation Liability (4)		-		-		-		-		(18	)		-			(0.05	)		-
Recovery of Interest on PX Liability (5)		28		-		0.08		-		28			-			0.08			-
Energy Crisis/Chapter 11 Interest Costs (6)		-		-		-		-		-			(3	)		-			(0.01	)
Total		83		-		0.23		-		87			(3	)		0.24			(0.01	)
Discontinued Operations - NEGT (7)		-		13		-		0.03		-			13			-			0.03
PG&E Corporation Earnings on a GAAP basis	$	393	$	252	$	1.09	$	0.65	$	839		$	737		$	2.33		$	1.89

1.     Earnings from operations exclude items impacting comparability.

2.     Items impacting comparability reconcile earnings from operations with consolidated net income as reported in accordance with GAAP.

3.     Items impacting comparability for the three and nine months ended September 30, 2006 reflect the recovery of approximately $55 million ($0.15 per common share) and $77 million ($0.21 per common share), after-tax, respectively, of Scheduling Coordinator, or SC, costs, incurred from April 1998 through September 2006, which were determined by the Federal Energy Regulatory Commission, or FERC, to be recoverable through the transmission revenue balancing account, or TRBA.

4.     Items impacting comparability for the nine months ended September 30, 2006 reflect an increase of approximately $18 million ($0.05 per common share), after-tax, in the estimated cost of environmental remediation associated with the Utility’s gas compressor station located near Hinkley, California, as a result of changes in the California Regional Water Quality Control Board’s imposed remediation levels.

5.     Items impacting comparability for the three and nine months ended September 30, 2006 reflect the recovery of approximately $28 million ($0.08 per common share), after-tax, of previously recorded net interest expense on the Power Exchange Corporation, or PX, liability from April 12, 2004 to February 10, 2005, in the Energy Recovery Bond Balancing Account as a result of completion of the verification audit by the California Public Utilities Commission, or CPUC, in the Utility's 2005 annual electric true-up proceeding.

6.     Items impacting comparability for the nine months ended September 30, 2005 include the net effect of incremental interest costs of approximately $3 million ($0.01 per common share), after-tax, incurred by the Utility through February 10, 2005 related to generator disputed claims in the Utility's Chapter 11 proceeding, which were not considered recoverable.

7.     During the third quarter of 2005, PG&E Corporation received additional information from NEGT regarding income to be included in PG&E Corporation's 2004 federal income tax return. This information was incorporated in the 2004 tax return, which was filed with the IRS in September 2005. As a result, the 2004 federal income tax liability was reduced by approximately $19 million. In addition, NEGT provided additional information with respect to amounts previously included in PG&E Corporation's 2003 federal income tax return. This change resulted in PG&E Corporation's 2003 federal income tax liability increasing by approximately $6 million. These two adjustments, netting to $13 million, were recognized in income from discontinued operations in the third quarter of 2005.

Reconciliation of Pacific Gas and Electric Company’s Earnings from Operations to Consolidated Net Income in Accordance with GAAP

Third Quarter and Year-to-Date, 2006 vs. 2005

(in millions)

	Three months ended September 30,				Nine months ended  September 30,
	Earnings				Earnings (Loss)
	2006		2005		2006			2005
Pacific Gas and Electric Company Earnings from Operations (1)	$	292	$	244	$	729		$	738
Items Impacting Comparability (2)
Scheduling Coordinator Cost Recovery (3)		55		-		77			-
Environmental Remediation Liability (4)		-		-		(18	)		-
Recovery of Interest on PX Liability (5)		28		-		28			-
Energy Crisis/Chapter 11 Interest Costs (6)		-		-		-			(3	)
Total		83		-		87			(3	)
Pacific Gas and Electric Company Earnings on a GAAP basis	$	375	$	244	$	816		$	735

1.     Earnings from operations exclude items impacting comparability.

2.    Items impacting comparability reconcile earnings from operations with consolidated net income as reported in accordance with GAAP.

3.     Items impacting comparability for the three and nine months ended September 30, 2006 reflect the recovery of approximately $55 million and $77 million, after-tax, respectively, of SC costs incurred from April 1998 through September 2006, which were determined by FERC to be recoverable through the TRBA.

4.    Items impacting comparability for the nine months ended September 30, 2006 reflect an increase of approximately $18 million, after-tax, in the estimated cost of environmental remediation associated with the Utility’s gas compressor station located near Hinkley, California, as a result of changes in the California Regional Water Quality Control Board’s imposed remediation levels.

5.     Items impacting comparability for the three and nine months ended September 30, 2006 reflect the recovery of approximately $28 million, after-tax, of previously recorded net interest expense on the PX liability from April 12, 2004 to February 10, 2005, in the Energy Recovery Bond Balancing Account as a result of completion of the verification audit by the CPUC in the Utility's 2005 annual electric true-up proceeding.

6.     Items impacting comparability for the nine months ended September 30, 2005 include the net effect of incremental interest costs of approximately $3 million, after-tax, incurred by the Utility through February 10, 2005 related to generator disputed claims in the Utility’s Chapter 11 proceeding, which were not considered recoverable.

PG&E Corporation Earnings per Common Share from Operations

Third Quarter 2006 vs. Third Quarter 2005

($/Share, Diluted)

Q3 2005 EPS from Operations (1)	$	0.62
Share variance		0.05
Effect of increase in authorized return on equity		0.01
Electric transmission revenue		0.01
Gas transmission revenue		0.02
LTD Plan savings		0.02
Recovery of energy supplier litigation costs		0.03
Tax benefit for capital loss utilization		0.05
Reduction in litigation settlements (2)		0.02
Refund of overcollection (2)		0.03
Miscellaneous items		0.04
ERB Series 2 equity carrying cost credit		(0.04	)
Q3 2006 EPS from Operations (1)	$	0.86

Year-to-Date 2006 vs. Year-to-Date 2005

($/Share, Diluted)

Q3 2005 YTD EPS from Operations (1)	$	1.87
Share variance		0.15
Effect of increase in authorized return on equity		0.02
Electric transmission revenue		0.01
Gas transmission revenue		0.05
LTD Plan savings		0.02
Recovery of energy supplier litigation costs		0.03
Tax benefit for capital loss utilization		0.05
Environmental remediation (2)		0.04
Reduction in litigation settlements (2)		0.02
Refund of overcollection (2)		0.03
Miscellaneous items		0.03
ERB Series 2 equity carrying cost credit		(0.12	)
Diablo Canyon refueling outage timing		(0.07	)
Elimination of earnings on the settlement regulatory asset (Q1 of 2005)		(0.04	)
Q3 2006 YTD EPS from Operations (1)	$	2.09

1.    See attached tables for a reconciliation of earnings per common share, or EPS, from operations to EPS on a GAAP basis.

2.    Incurred in 2005 with no similar cost in 2006. 

PG&E Corporation Earnings per Common Share (EPS) Guidance

2006 EPS Guidance

	Low			High
EPS Guidance on an Earnings from Operations Basis	$	2.45		$	2.55
Estimated Items Impacting Comparability
Scheduling Coordinator Cost Recovery	$	0.21		$	0.21
Environmental Remediation Liability		(0.05	)		(0.05	)
Recovery of Interest on PX Liability		0.08			0.08
EPS Guidance on a GAAP Basis	$	2.69		$	2.79

2007 EPS Guidance

	Low		High
EPS Guidance on an Earnings from Operations Basis	$	2.65	$	2.75
Estimated Items Impacting Comparability	$	0.00	$	0.00
EPS Guidance on a GAAP Basis	$	2.65	$	2.75

Management's statements regarding 2006 and 2007 guidance for earnings from operations per common share for PG&E Corporation constitute forward-looking statements that are based on current expectations and assumptions which management believes are reasonable, including that the Utility earns its authorized rate of return. These statements and assumptions are necessarily subject to various risks and uncertainties the realization or resolution of which are outside of management's control. Actual results may differ materially. Factors that could cause actual results to differ materially include:

· Unanticipated changes in operating expenses or capital expenditures, which may affect the Utility’s ability to earn its authorized rate of return;

· How the Utility manages its responsibility to procure electric capacity and energy for its customers;

· The adequacy and price of natural gas supplies, the ability of the Utility to manage and respond to the volatility of the natural gas market for its customer;

· The operation of the Utility’s Diablo Canyon nuclear power plant, which could cause the Utility to incur potentially significant environmental costs and capital expenditures, and the extent to which the Utility is able to timely increase its spent nuclear fuel storage capacity at Diablo Canyon;

· Whether the Utility is able to recognize the anticipated cost benefits and savings expected to result from its efforts to improve customer service through implementation of specific initiatives to streamline business processes and deploy new technology;

· The outcome of proceedings pending at the FERC and the CPUC, including the Utility’s 2007 General Rate Case and the Utility’s application for approval of new long-term generation resource commitments;

· How the CPUC administers the capital structure, stand-alone dividend, and first priority conditions of the CPUC’s decisions permitting the establishment of holding companies for the California investor-owned electric utilities, and the outcome of the CPUC's new rulemaking proceeding concerning the relationship between the California investor-owned energy utilities and their holding companies and non-regulated affiliates;

· The impact of the recently adopted Energy Policy Act of 2005 and future legislative or regulatory actions or policies affecting the energy industry;

· Whether the Utility is determined to be in compliance with all applicable rules, regulations, tariffs and orders relating to electricity and natural gas operations, including those related to the procurement of renewable energy, resource adequacy, greenhouse gas emissions, electric reliability standards, and billing and collection practices, and the extent to which a finding of non-compliance could result in customers refunds, penalties or other non-recoverable expenses;

· Increased municipalization and other forms of bypass in the Utility’s service territory; and

· Other factors discussed in PG&E Corporation’s SEC reports.

EX-99.2

  & #160;               

                    EXHIBIT 99.2

Table 1:    PG&E Corporation Business Priorities 2006-2010

1.    Advance business transformation

2.    Provide attractive shareholder returns

3.    Increase investment in utility infrastructure

4.    Implement an effective energy procurement plan

5.    Improve reputation through more effective communications

6.    Evaluate the evolving industry and related investment opportunities

Table 2:    Reconciliation of PG&E Corporation’s Earnings from Operations to Consolidated Net Income in Accordance with Generally Accepted Accounting Principles (GAAP)

Third Quarter and Year-to-Date, 2006 vs. 2005

(in millions, except per share amounts)

	Three months ended September 30,								Nine months ended September 30,
	Earnings				Earnings per Common Share Diluted				Earnings (Loss)						Earnings (Loss) per Common Share Diluted
	2006		2005		2006		2005		2006			2005			2006			2005
PG&E Corporation Earnings from Operations (1)	$	310	$	239	$	0.86	$	0.62	$	752		$	727		$	2.09		$	1.87
Items Impacting Comparability (2)
Scheduling Coordinator Cost Recovery (3)		55		-		0.15		-		77			-			0.21			-
Environmental Remediation Liability (4)		-		-		-		-		(18	)		-			(0.05	)		-
Recovery of Interest on PX Liability (5)		28		-		0.08		-		28			-			0.08			-
Energy Crisis/Chapter 11 Interest Costs (6)		-		-		-		-		-			(3	)		-			(0.01	)
Total		83		-		0.23		-		87			(3	)		0.24			(0.01	)
Discontinued Operations - NEGT (7)		-		13		-		0.03		-			13			-			0.03
PG&E Corporation Earnings on a GAAP basis	$	393	$	252	$	1.09	$	0.65	$	839		$	737		$	2.33		$	1.89

1.     Earnings from operations exclude items impacting comparability.

2.     Items impacting comparability reconcile earnings from operations with consolidated net income as reported in accordance with GAAP.

3.     Items impacting comparability for the three and nine months ended September 30, 2006 reflect the recovery of approximately $55 million ($0.15 per common share) and $77 million ($0.21 per common share), after-tax, respectively, of Scheduling Coordinator, or SC, costs, incurred from April 1998 through September 2006, which were determined by the Federal Energy Regulatory Commission, or FERC, to be recoverable through the transmission revenue balancing account, or TRBA.

4.     Items impacting comparability for the nine months ended September 30, 2006 reflect an increase of approximately $18 million ($0.05 per common share), after-tax, in the estimated cost of environmental remediation associated with the Utility’s gas compressor station located near Hinkley, California, as a result of changes in the California Regional Water Quality Control Board’s imposed remediation levels.

5.     Items impacting comparability for the three and nine months ended September 30, 2006 reflect the recovery of approximately $28 million ($0.08 per common share), after-tax, of previously recorded net interest expense on the Power Exchange Corporation, or PX, liability from April 12, 2004 to February 10, 2005, in the Energy Recovery Bond Balancing Account as a result of completion of the verification audit by the California Public Utilities Commission, or CPUC, in the Utility's 2005 annual electric true-up proceeding.

6.     Items impacting comparability for the nine months ended September 30, 2005 include the net effect of incremental interest costs of approximately $3 million ($0.01 per common share), after-tax, incurred by the Utility through February 10, 2005 related to generator disputed claims in the Utility's Chapter 11 proceeding, which were not considered recoverable.

7.     During the third quarter of 2005, PG&E Corporation received additional information from NEGT regarding income to be included in PG&E Corporation's 2004 federal income tax return. This information was incorporated in the 2004 tax return, which was filed with the IRS in September 2005. As a result, the 2004 federal income tax liability was reduced by approximately $19 million. In addition, NEGT provided additional information with respect to amounts previously included in PG&E Corporation's 2003 federal income tax return. This change resulted in PG&E Corporation's 2003 federal income tax liability increasing by approximately $6 million. These two adjustments, netting to $13 million, were recognized in income from discontinued operations in the third quarter of 2005.

Table 3:    Reconciliation of Pacific Gas and Electric Company’s Earnings from Operations to Consolidated Net Income in Accordance with GAAP

Third Quarter and Year-to-Date, 2006 vs. 2005

(in millions)

	Three months ended September 30,				Nine months ended September 30,
	Earnings				Earnings (Loss)
	2006		2005		2006			2005
Pacific Gas and Electric Company Earnings from Operations (1)	$	292	$	244	$	729		$	738
Items Impacting Comparability (2)
Scheduling Coordinator Cost Recovery (3)		55		-		77			-
Environmental Remediation Liability (4)		-		-		(18	)		-
Recovery of Interest on PX Liability (5)		28		-		28			-
Energy Crisis/Chapter 11 Interest Costs (6)		-		-		-			(3	)
Total		83		-		87			(3	)
Pacific Gas and Electric Company Earnings on a GAAP basis	$	375	$	244	$	816		$	735

1.     Earnings from operations exclude items impacting comparability.

2.     Items impacting comparability reconcile earnings from operations with consolidated net income as reported in accordance with GAAP.

3.     Items impacting comparability for the three and nine months ended September 30, 2006 reflect the recovery of approximately $55 million and $77 million, after-tax, respectively, of SC costs incurred from April 1998 through September 2006, which were determined by FERC to be recoverable through the TRBA.

4.     Items impacting comparability for the nine months ended September 30, 2006 reflect an increase of approximately $18 million, after-tax, in the estimated cost of environmental remediation associated with the Utility’s gas compressor station located near Hinkley, California, as a result of changes in the California Regional Water Quality Control Board’s imposed remediation levels.

5.     Items impacting comparability for the three and nine months ended September 30, 2006 reflect the recovery of approximately $28 million, after-tax, of previously recorded net interest expense on the PX liability from April 12, 2004 to February 10, 2005, in the Energy Recovery Bond Balancing Account as a result of completion of the verification audit by the CPUC in the Utility's 2005 annual electric true-up proceeding.

6.     Items impacting comparability for the nine months ended September 30, 2005 include the net effect of incremental interest costs of approximately $3 million, after-tax, incurred by the Utility through February 10, 2005 related to generator disputed claims in the Utility’s Chapter 11 proceeding, which were not considered recoverable.

Table 4: PG&E Corporation Earnings per Common Share from Operations

Third Quarter 2006 vs. Third Quarter 2005

($/Share, Diluted)

Q3 2005 EPS from Operations (1)	$	0.62
Share variance		0.05
Effect of increase in authorized return on equity		0.01
Electric transmission revenue		0.01
Gas transmission revenue		0.02
LTD Plan savings		0.02
Recovery of energy supplier litigation costs		0.03
Tax benefit for capital loss utilization		0.05
Reduction in litigation settlements (2)		0.02
Refund of overcollection (2)		0.03
Miscellaneous items		0.04
ERB Series 2 equity carrying cost credit		(0.04	)
Q3 2006 EPS from Operations (1)	$	0.86

Year-to-Date 2006 vs. Year-to-Date 2005

($/Share, Diluted)

Q3 2005 YTD EPS from Operations (1)	$	1.87
Share variance		0.15
Effect of increase in authorized return on equity		0.02
Electric transmission revenue		0.01
Gas transmission revenue		0.05
LTD Plan savings		0.02
Recovery of energy supplier litigation costs		0.03
Tax benefit for capital loss utilization		0.05
Environmental remediation (2)		0.04
Reduction in litigation settlements (2)		0.02
Refund of overcollection (2)		0.03
Miscellaneous items		0.03
ERB Series 2 equity carrying cost credit		(0.12	)
Diablo Canyon refueling outage timing		(0.07	)
Elimination of earnings on the settlement regulatory asset (Q1 of 2005)		(0.04	)
Q3 2006 YTD EPS from Operations (1)	$	2.09

1.    See Tables 2 and 3 for a reconciliation of earnings per common share, or EPS, from operations to EPS on a GAAP basis.

2.    Incurred in 2005 with no similar cost in 2006. 

Table 5: PG&E Corporation Common Share Statistics

Third Quarter 2006 vs. Third Quarter 2005

(shares in millions, except per share amounts)

	Third Quarter 2006		Third Quarter 2005		% Change
Book Value per share - end of period (1)	$	21.15	$	20.95		0.95	%
Weighted average common shares outstanding, basic		347		372		(6.72	)%
Employee stock-based compensation and accelerated share repurchase program		2		4		(50.00	)%
Weighted average common shares outstanding, diluted		349		376		(7.18	)%
9.5% Convertible Subordinated Notes
(participating securities)		19		19		-
Weighted average common shares outstanding and participating securities, diluted		368		395		(6.84	)%

1.    Common shareholders’ equity per common share outstanding at period end.

Source:    PG&E Corporation’s Condensed Consolidated Financial Statements and the Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 6: Operational Performance Metrics

Third Quarter Actual 2006 vs. Targets 2006

		2005	2006
		EOY Actual	YTD Actual	YTD Target	EOY Target
1.	Overall customer satisfaction (1) (composite of J.D. Power residential & business customer surveys)	94.0	98.8	93.0	94.0
2.	Timely bills (% of bills issued within 35 days)	99.38%	99.50%	99.55%	99.51%
3.	Estimated Time of Outage Restoration accuracy (% accurate)	47%	66%	50%	50%
4.	System Average Interruption Duration Index (yearly minutes of interruptions per customer)	178.7	166.3	110.0	166.0
5.	System Average Interruption Frequency Index (yearly number of interruptions per customer)	1.34	1.14	0.91	1.31
6.	Energy Availability (2) (composite of owned generation & procured energy availability)	N/A	2.0	1.5	1.5
7.	Telephone service level (% of calls answered within 20 seconds)	75%	80%	74 %	76%
8.	Total expense per customer ($ cost of operations per customer)	$278	$205	$216	$283
9.	Diablo Canyon performance index (3) (composite of plant performance metrics)	94.7	98.1	94.6	94.0
10.	Employee Premier Survey index (4) (average survey index score from employee satisfaction Premier survey)	64%	N/A	N/A	68%
11.	Lost workday case rate (frequency of lost workday cases per 100 employees)	1.04	0.777	0.779	0.878

1.    2006 targets have been adjusted to reflect changes in industry average results for this year’s J.D. Power residential and business customer surveys.

2.    Metric is first applicable in 2006.

3.    2005 results have been restated to maintain consistency withthe actual and target values based on the recently revised industry calculation methodology.

4.    This metric is based on a survey conducted once per calendar year, generally in the fall.

The reconciliation of non-GAAP cost of operations to operating and maintenance expense for the year-to-date period is shown below:

(in millions, except cost per customer)	2005 EOY Actual			2006 9/30 Actual			2006 9/30 Target			2006 EOY Target
GAAP Operating and Maintenance Expense	$	3,399		$	2,637		$	2,655		$	3,552
Public Purpose and Other Balancing Account Programs		(360	)		(312	)		(390	)		(568	)
Property Taxes		(172	)		(138	)		(140	)		(184	)
Franchise Fees & Uncollectible Expense		(123	)		(109	)		(127	)		(171	)
Chromium Litigation		(154	)		-			-			-
Other		(50	)		(182	)		-			-
Cost of Operations	$	2,540		$	1896		$	1,998		$	2,629
Cost of Operations/9.24M Customer Accounts	$	278		$	205		$	216		$	283

DEFINITIONS OF 2006 OPERATIONAL PERFORMANCE METRICS FROM TABLE 6:

1.	Overall customer satisfaction:
	PG&E measures residential and business customer satisfaction with annual industry-wide surveys conducted by J.D. Power and Associates, as well as with proprietary studies using the same survey in intervening quarters. The overall customer satisfaction metric represents the year-to-date average of the residential and business overall customer satisfaction scores from both the J.D. Powers-administered and proprietary surveys. The metric is calculated by first averaging the available residential and business satisfaction scores (each with 50% weighting) in each quarter and then averaging all available quarterly composite scores for the final year-to-date metric value.
2.	Timely bills:
	Measures the percentage of bills that have been issued on a timely basis to customers (i.e., within 35 days of the last scheduled meter read).
3.	Estimated Time of Outage Restoration accuracy (ETOR):
	The percentage of outage occurrences, weighted by customers affected, where the majority of customers have been given accurate outage duration information in the early stages of an outage. If the actual time of outage restoration does not occur within the two-hour window given to customers, the measure is considered “missed” for the customers affected by that outage.
4.	System Average Interruption Duration Index (SAIDI):
	SAIDI is an indicator of system reliability that measures the average outage time (in minutes) that a customer experiences in a year (Sum of Customer interruption durations / Total number of customers served).
5.	System Average Interruption Frequency Index (SAIFI):
	SAIFI is an indicator of system reliability that measures the average number of interruptions that a customer experiences in a year (Total number of customer interruptions / Total number of customers served).
6.	Energy availability:
	Comprised of two, equally-weighted principal components, a generation availability (GA) component and an energy procurement (EP) component, expressed on a scale of zero to two (with two representing the greatest energy availability). The GA component is the annual average percentage of PG&E's total hydroelectric, fossil (excluding Hunters Point) and nuclear generation capacity that is physically capable of producing power. The GA component captures losses of capacity attributed to equipment failures or planned maintenance, including transmission-related events which constrain generation output. The 0.5 to 2 scale for the Generation Availability metric spans between 83.57% and 89.57% availability. The EP component measures whether sufficient resources are in place to meet load requirements and to maximize the availability of ancillary services to the CAISO, in order for the CAISO to maintain system reliability and to minimize the frequency of CAISO stage alerts in PG&E's service area. The combined energy availability score could be impacted by either the energy availability metric which measures the amount of ISO Stage 2 and 3 alerts or the Generation Availability metric.
7.	Telephone service level:
	Measures the percentage of customer calls that have been either (1) completed by automated voice response systems for self-service, or (2) answered in 20 seconds or less by customer service representatives.
8.	Total expense per customer:
	Measures the average annual cost of operations per customer and includes all budget expense items, including business unit and corporate service department expenses, casualty, benefits, severance, and insurance. This metric excludes capital-related costs such as depreciation and interest, and the commodity costs of gas and electricity. The denominator is defined as the average number of active gas and electric customer accounts for the year. This metric is an indicator of overall efficiency and productivity in delivering energy to PG&E customers.
9.	Diablo Canyon composite performance index:
	Performance index is intended to provide a quantitative indication of plant performance in the areas of nuclear plant safety, reliability, and plant efficiency.
10.	Employee Premier Survey index:
	Provides a comprehensive indicator of employee satisfaction that is derived averaging the percentage of favorable responses from all 40 core survey items within the Premier Survey.
11.	Lost workday case rate:
	Measures the number of non-fatal injury and illness cases that (1) satisfy OSHA requirements for recordability, (2) occur in the current year, and (3) result in at least one day away from work. The rate measures how frequently new lost workday cases occur for every 200,000 hours worked, or for approximately every 100 employees.

Table 7: Pacific Gas and Electric Company Operating Statistics

Third Quarter and Year-to-Date, 2006 vs. 2005

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2006			2005			2006			2005
Electric Sales (in millions kWh)
Residential		8,929			8,631			23,770			22,706
Commercial		9,276			8,941			25,211			24,234
Industrial		4,025			3,999			11,407			11,166
Agricultural		1,559			1,523			2,875			2,843
BART, public street and highway lighting		204			205			609			596
Other electric utilities		8			7			14			27
Sales from Energy Deliveries		24,001			23,306			63,886			61,572
Total Electric Customers at September 30 (1)								5,054,722			4,991,797
Bundled Gas Sales (in millions MCF)
Residential		24			26			147			149
Commercial		12			14			55			58
Industrial		-			-			-			-
Total Bundled Gas Sales		36			40			202			207
Transportation Only		185			186			405			420
Total Gas Sales		221			226			607			627
Total Gas Customers at September 30 (1)								4,214,606			4,155,203
Sources of Electric Energy (in millions kWh)
Utility Generation
Nuclear		5,018			4,714			13,622			14,141
Hydro (net)		2,964			3,152			10,924			9,792
Fossil		107			267			514			833
Total Utility Generation		8,089			8,133			25,060			24,766
Purchased Power
Qualifying Facilities		4,543			4,566			12,254			13,505
Irrigation Districts		1,092			1,103			4,544			3,105
Other Purchased Power		1,036			477			1,892			888
Spot Market Purchases/Sales, net		3,605			2,120			4,767			909
Total Purchased Power		10,276			8,266			23,457			18,407
Delivery from DWR		5,357			5,696			14,414			15,265
Delivery to Direct Access Customers		1,981			2,375			5,862			6,701
Other (includes energy loss)		(1,702	)		(1,164	)		(4,907	)		(3,567	)
Total Electric Energy Delivered		24,001			23,306			63,886			61,572
Diablo Canyon Performance
Overall capacity factor (including refuelings)		103	%		98	%		95	%		99	%
Refueling outage period		None			None			4/17/06-5/25/06			None
Refueling outage duration during the period (days)		None			None			38.8			None

1.    Customers reported as number of active service contracts, net of interdepartmental service agreements, at September 30, 2006. Amounts for 2005 have been revised to conform to the 2006 presentation.

Table 8: PG&E Corporation Earnings per Common Share (EPS) Guidance

2006 EPS Guidance

	Low			High
EPS Guidance on an Earnings from Operations Basis	$	2.45		$	2.55
Estimated Items Impacting Comparability
Scheduling Coordinator Cost Recovery	$	0.21		$	0.21
Environmental Remediation Liability		(0.05	)		(0.05	)
Recovery of Interest on PX Liability		0.08			0.08
EPS Guidance on a GAAP Basis	$	2.69		$	2.79

2007 EPS Guidance

	Low		High
EPS Guidance on an Earnings from Operations Basis	$	2.65	$	2.75
Estimated Items Impacting Comparability	$	0.00	$	0.00
EPS Guidance on a GAAP Basis	$	2.65	$	2.75

Management's statements regarding 2006 and 2007 guidance for earnings from operations per common share for PG&E Corporation, estimated rate base for 2006 and 2007, and general sensitivities for 2006 and 2007 earnings, constitute forward-looking statements that are based on current expectations and assumptions which management believes are reasonable, including that the Utility earns its authorized rate of return. These statements and assumptions are necessarily subject to various risks and uncertainties the realization or resolution of which are outside of management's control. Actual results may differ materially. Factors that could cause actual results to differ materially include:

· Unanticipated changes in operating expenses or capital expenditures, which may affect the Utility’s ability to earn its authorized rate of return;

· How the Utility manages its responsibility to procure electric capacity and energy for its customers;

· The adequacy and price of natural gas supplies, the ability of the Utility to manage and respond to the volatility of the natural gas market for its customer;

· The operation of the Utility’s Diablo Canyon nuclear power plant, which could cause the Utility to incur potentially significant environmental costs and capital expenditures, and the extent to which the Utility is able to timely increase its spent nuclear fuel storage capacity at Diablo Canyon;

· Whether the Utility is able to recognize the anticipated cost benefits and savings expected to result from its efforts to improve customer service through implementation of specific initiatives to streamline business processes and deploy new technology;

· The outcome of proceedings pending at the FERC and the CPUC, including the Utility’s 2007 General Rate Case and the Utility’s application for approval of new long-term generation resource commitments;

· How the CPUC administers the capital structure, stand-alone dividend, and first priority conditions of the CPUC’s decisions permitting the establishment of holding companies for the California investor-owned electric utilities, and the outcome of the CPUC's new rulemaking proceeding concerning the relationship between the California investor-owned energy utilities and their holding companies and non-regulated affiliates;

· The impact of the recently adopted Energy Policy Act of 2005 and future legislative or regulatory actions or policies affecting the energy industry;

· Whether the Utility is determined to be in compliance with all applicable rules, regulations, tariffs and orders relating to electricity and natural gas operations, including those related to the procurement of renewable energy, resource adequacy, greenhouse gas emissions, electric reliability standards, and billing and collection practices, and the extent to which a finding of non-compliance could result in customers refunds, penalties or other non-recoverable expenses;

· Increased municipalization and other forms of bypass in the Utility’s service territory; and

· Other factors discussed in PG&E Corporation’s SEC reports.

Table 9: Rate Base - Pacific Gas and Electric Company

	2005		2006		2007
	Recorded		Estimated		Estimated
Total Weighted Average Rate Base (in billions)	$	15.1	$	15.9	$	17.3

The estimate of rate base for 2006 and 2007 and the forecast of capital expenditures that the estimate is based on are forward-looking statements that are subject to various risks and uncertainties, including whether the forecasted expenditures will be made or will be made within the time periods assumed. Actual results may differ materially. For a discussion of the factors that may affect future results, see the discussion of risk factors in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 10: General Earnings Sensitivities for 2006 and 2007

PG&E Corporation and Pacific Gas and Electric Company

Variable	Description of Change	Estimated Earnings Impact for 2006	Estimated Earnings Impact for 2007
Rate base	+/- $100 million change in rate base (1)	+/- $6 million	+/- $6 million
Return on equity (ROE)	+/- 0.1% change in earned ROE	+/- $8 million	+/- $9 million
Share count	+/- 1% change in average shares	-/+ $0.03 per share	-/+ $0.03 per share
Revenues	+/- $7 million change in revenues (pre-tax), including Electric Transmission and California Gas Transmission	+/- $0.01 per share	+/- $0.01 per share

1.    Assumes earning 11.35% on equity portion (52%).

These general earnings sensitivities that may affect 2006 and 2007 earnings are forward looking statements that are based on various assumptions that may prove to be inaccurate. Actual results may differ materially. For a discussion of the factors that may affect future results, see the discussion of risk factors in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 11: Cash Flow Sources and Uses

Year-to-Date 2006

PG&E Corporation Consolidated

(in millions)

Cash and Cash Equivalents, January 1, 2006	$	713
Sources of Cash
Cash from operations	$	2,240
Decrease in restricted cash		58
Net proceeds from sale of assets		11
Net borrowings under credit facilities		21
Common stock issued		108
	$	2,438
Uses of Cash
Capital expenditures	$	1,729
Proceeds from and investments in nuclear decommissioning trust, net		98
Rate reduction bonds matured		214
Energy recovery bonds matured		224
Common stock repurchased		114
Common stock dividends paid		342
Other		8
	$	2,729
Cash and Cash Equivalents, September 30, 2006	$	422

Source: PG&E Corporation’s Condensed Consolidated Statements of Cash Flows included in PG&E Corporation’s and Pacific Gas and Electric Company’s combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 12: PG&E Corporation’s and Pacific Gas and Electric Company’s Consolidated Cash Position

Third Quarter 2006 vs. Third Quarter 2005

(in millions)

	2006		2005			Change
Cash Flows from Operating Activities (YTD September 30)
PG&E Corporation	$	129	$	(10	)	$	139
Pacific Gas and Electric Company		2,111		2,127			(16	)
	$	2,240	$	2,117		$	123
Consolidated Cash Balance (at September 30)
PG&E Corporation	$	354	$	377		$	(23	)
Pacific Gas and Electric Company		68		856			(788	)
	$	422	$	1,233		$	(811	)
Consolidated Restricted Cash Balance (at September 30)
PG&E Corporation	$	-	$	-		$	-
Pacific Gas and Electric Company(1)		1,488		1,527			(39	)
	$	1,488	$	1,527		$	(39	)

1.    Includes $43 million of restricted cash classified as Other Noncurrent Assets.

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company’s combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 and Form 10-Q for the quarter ended September 30, 2005.

Table 13: PG&E Corporation’s and Pacific Gas and Electric Company’s Long-Term Debt

Third Quarter 2006 vs. Year End 2005

(in millions)

	Balance At
	September 30, 2006			December 31, 2005
PG&E Corporation
Convertible subordinated notes, 9.50%, due 2010	$	280		$	280
Less: current portion (1)		(280	)		-
		-			280
Utility
Senior notes
3.60% to 6.05% bonds, due 2009-2034		5,100			5,100
Unamortized discount, net of premium		(17	)		(17	)
Total senior notes		5,083			5,083
Pollution control bond loan agreements, variable rates(2), due 2026(3)		614			614
Pollution control bond loan agreement, 5.35%, due 2016		200			200
Pollution control bond loan agreements, 3.50%, due 2023(4)		345			345
Pollution control bond loan agreements, variable rates(5), due 2016-2026		454			454
Other		1			2
Less: current portion		(1	)		(2	)
Long-term debt, net of current portion		6,696			6,696
Total consolidated long-term debt, net of current portion	$	6,696		$	6,976

1.    The holders of Convertible Subordinated Notes have a one-time right to require PG&E Corporation to repurchase the Convertible Subordinated Notes on June 30, 2007, at a purchase price equal to the principal amount plus accrued and unpaid interest (including liquidated damages and unpaid “pass-through dividends,” if any).

2.    At September 30, 2006, interest rates on these loans ranged from 3.70% to 3.85%.

3.    These bonds are supported by $620 million of letters of credit which expire on April 22, 2010. Although the stated maturity date is 2026, the bonds will remain outstanding only if the Utility extends or replaces the letters of credit.

4.    The $345 million pollution control bonds, due in 2023, are subject to a mandatory tender for purchase on June 1, 2007. Under the loan agreement, unless the Utility remarkets the bonds by June 1, 2007, the bonds will either be returned to the bondholders and bear interest at a daily rate equal to 10% or the Utility has the option to redeem the bonds or purchase the bonds in lieu of redemption.

5.    At September 30, 2006, interest rates on these loans ranged from 3.05% to 3.70%.

Table 14: PG&E Corporation and Pacific Gas and Electric Company Repayment Schedule and Interest Rates - Long-Term Debt, Rate Reduction Bonds and Energy Recovery Bonds

(in millions, except interest rates)

	2006			2007			2008			2009			2010			Thereafter			Total
Long-term debt (as of September 30, 2006)
PG&E Corporation
Average fixed interest rate		-			9.50	%		-			-			-			-			9.50	%
Fixed rate obligations	$	-		$	280(1)		$	-		$	-		$	-		$	-		$	280
Utility
Average fixed interest rate		-			-			-			3.60	%		-			5.42	%		5.22	%
Fixed rate obligations	$	-		$	-		$	-		$	600		$	-		$	5,028(2)		$	5,628
Variable interest rate as of September 30, 2006		-			-			-			-			3.79	%		3.41	%		3.63	%
Variable rate obligations	$	-		$	-		$	-		$	-		$	614(3)		$	454		$	1,068
Other	$	1		$	-		$	-		$	-		$	-		$	-		$	1
Less: current portion	$	(1	)	$	(280	)	$	-		$	-		$	-		$	-		$	(281	)
Total consolidated long term     debt, net of current portion	$	-		$	-		$	-		$	600		$	614		$	5,482		$	6,696
Rate Reduction Bonds and Energy Recovery Bonds (as of September 30, 2006)
Average fixed interest rate		6.48	%		6.48	%		-			-			-			-			6.48	%
Rate reduction bonds	$	76		$	290		$	-		$	-		$	-		$	-		$	366
Average fixed interest rate		4.24	%		4.19	%		4.19	%		4.36	%		4.49	%		4.63	%		4.42	%
Energy recovery bonds	$	91		$	340		$	354		$	370		$	386		$	827		$	2,368

1.     The holders of Convertible Subordinated Notes have a one-time right to require PG&E Corporation to repurchase the Convertible Subordinated Notes on June 30, 2007, at a purchase price equal to the principal amount plus accrued and unpaid interest (including liquidated damages and unpaid “pass-through dividends,” if any).

2.     Amount includes the $345 million pollution control bonds, due in 2023, which are subject to a mandatory tender for purchase on June 1, 2007. Under the loan agreement, unless the Utility remarkets the bonds by June 1, 2007, the bonds will either be returned to the bondholders and bear interest at a daily rate equal to 10% or the Utility has the option to redeem the bonds or purchase the bonds in lieu of redemption.

3.     The $614 million pollution control bonds, due in 2026, are backed by letters of credit which expire on April 22, 2010. The Utility will be subject to a mandatory redemption unless the letters of credit are extended or replaced. Accordingly, the bonds have been classified for repayment purposes in 2010.

Table 15: PG&E Corporation

Condensed Consolidated Statements of Income

(in millions, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Operating Revenues
Electric	$	2,470		$	2,107		$	6,547		$	5,546
Natural gas		698			697			2,786			2,424
Total operating revenues		3,168			2,804			9,333			7,970
Operating Expenses
Cost of electricity		884			742			2,195			1,626
Cost of natural gas		298			326			1,539			1,293
Operating and maintenance		795			740			2,639			2,177
Depreciation, amortization         and decommissioning		456			481			1,291			1,320
Total operating expenses		2,433			2,289			7,664			6,416
Operating Income		735			515			1,669			1,554
Interest income		40			22			104			60
Interest expense		(152	)		(145	)		(470	)		(438	)
Other income (expense), net		(22	)		(14	)		6			(16	)
Income Before Income Taxes		601			378			1,309			1,160
Income tax provision		208			139			470			436
Income From Continuing Operations		393			239			839			724
Discontinued Operations		-			13			-			13
Net Income	$	393		$	252		$	839		$	737
Weighted Average Common Shares     Outstanding, Basic		347			372			345			376
Earnings Per Common Share From Continuing     Operations, Basic	$	1.09		$	0.63		$	2.36		$	1.88
Net Earnings Per Common Share, Basic	$	1.09		$	0.66		$	2.36		$	1.91
Earnings Per Common Share From Continuing     Operations, Diluted	$	1.09		$	0.62		$	2.33		$	1.86
Net Earnings Per Common Share, Diluted	$	1.09		$	0.65		$	2.33		$	1.89
Dividends Declared Per Common Share	$	0.33		$	0.30		$	0.99		$	0.90

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 16: PG&E Corporation

Condensed Consolidated Balance Sheets

(in millions)

	Balance At
	September 30, 2006 (Unaudited)			December 31, 2005
ASSETS
Current Assets
Cash and cash equivalents	$	422		$	713
Restricted cash		1,445			1,546
Accounts receivable:
Customers (net of allowance for doubtful accounts of $47 million in 2006 and $77 million in 2005)		2,183			2,422
Regulatory balancing accounts		521			727
Inventories:
Gas stored underground and fuel oil		235			231
Materials and supplies		137			133
Income taxes receivable		-			21
Prepaid expenses and other		753			187
Total current assets		5,696			5,980
Property, Plant and Equipment
Electric		24,022			22,482
Gas		9,013			8,794
Construction work in progress		749			738
Other		16			16
Total property, plant and equipment		33,800			32,030
Accumulated depreciation		(12,439	)		(12,075	)
Net property, plant and equipment		21,361			19,955
Other Noncurrent Assets
Regulatory assets		5,248			5,578
Nuclear decommissioning funds		1,817			1,719
Other		707			842
Total other noncurrent assets		7,772			8,139
TOTAL ASSETS	$	34,829		$	34,074

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 16 (continued): PG&E Corporation

Condensed Consolidated Balance Sheets

(in millions, except share amounts)

	Balance At
	September 30, 2006 (Unaudited)			December 31, 2005
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings	$	281		$	260
Long-term debt, classified as current		281			2
Rate reduction bonds, classified as current		290			290
Energy recovery bonds, classified as current		343			316
Accounts payable:
Trade creditors		720			980
Disputed claims and customer refunds		1,714			1,733
Regulatory balancing accounts		1,099			840
Other		455			441
Interest payable		481			473
Income taxes payable		192			-
Deferred income taxes		126			181
Other		1,572			1,416
Total current liabilities		7,554			6,932
Noncurrent Liabilities
Long-term debt		6,696			6,976
Rate reduction bonds		76			290
Energy recovery bonds		2,025			2,276
Regulatory liabilities		3,601			3,506
Asset retirement obligations		1,654			1,587
Deferred income taxes		2,980			3,092
Deferred tax credits		107			112
Other		2,124			1,833
Total noncurrent liabilities		19,263			19,672
Commitments and Contingencies
Preferred Stock of Subsidiaries		252			252
Preferred Stock
Preferred stock, no par value, authorized 80,000,000 shares, $100     par value, authorized 5,000,000 shares, none issued		-			-
Common Shareholders’ Equity
Common stock, no par value, authorized 800,000,000 shares,     issued 371,976,417 common and 1,375,576 restricted shares in 2006     and 366,868,512 common and 1,399,990 restricted shares in 2005		5,853			5,827
Common stock held by subsidiary, at cost, 24,665,500 shares		(718	)		(718	)
Unearned compensation		-			(22	)
Reinvested earnings		2,633			2,139
Accumulated other comprehensive loss		(8	)		(8	)
Total common shareholders’ equity		7,760			7,218
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	34,829		$	34,074

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 17: PG&E Corporation

Condensed Consolidated Statements of Cash Flows

(in millions)  (Unaudited)

	Nine Months Ended
	September 30,
	2006			2005
Cash Flows From Operating Activities
Net income	$	839		$	737
Discontinued operations		-			(13	)
Net income from continuing operations		839			724
Adjustments to reconcile net income to net cash provided by     operating activities:
Depreciation, amortization, decommissioning and allowance for equity funds used during         construction		1,343			1,295
Deferred income taxes and tax credits, net		(172	)		(658	)
Other deferred charges and noncurrent liabilities		(37	)		(133	)
Gain on sale of assets		(15	)		-
Net effect of changes in operating assets and liabilities:
Accounts receivable		239			58
Inventories		(8	)		(97	)
Accounts payable		(175	)		(80	)
Accrued taxes		212			14
Regulatory balancing accounts, net		404			940
Other current assets		(71	)		(203	)
Other current liabilities		(325	)		145
Other		6			112
Net cash provided by operating activities		2,240			2,117
Cash Flows From Investing Activities
Capital expenditures		(1,729	)		(1,318	)
Net proceeds from sale of assets		11			19
Decrease in restricted cash		58			453
Proceeds from nuclear decommissioning trust sales		942			2,428
Purchases of nuclear decommissioning trust investments		(1,040	)		(2,492	)
Other		-			67
Net cash used in investing activities		(1,758	)		(843	)
Cash Flows From Financing Activities
Borrowings under accounts receivable facility		50			-
Repayments under working capital facility and accounts receivable facility		(310	)		(300	)
Borrowings under commercial paper facility, net		281			-
Proceeds from issuance of long-term debt, net of issuance costs of $3 million in 2005		-			451
Proceeds from issuance of energy recovery bonds, net of issuance costs of $14 million in 2005		-			1,874
Long-term debt matured, redeemed or repurchased		(1	)		(1,556	)
Rate reduction bonds matured		(214	)		(214	)
Energy recovery bonds matured		(224	)		(77	)
Preferred stock with mandatory redemption provisions redeemed		-			(122	)
Preferred stock without mandatory redemption provisions redeemed		-			(36	)
Common stock issued		108			231
Common stock repurchased		(114	)		(1,087	)
Common stock dividends paid		(342	)		(223	)
Other		(7	)		46

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 17 (continued): PG&E Corporation

Condensed Consolidated Statements of Cash Flows

(in millions)

	Nine Months Ended
	September 30,
	2006			2005
Net cash used in financing activities		(773	)		(1,013	)
Net change in cash and cash equivalents		(291	)		261
Cash and cash equivalents at January 1		713			972
Cash and cash equivalents at September 30	$	422		$	1,233

Supplemental disclosures of cash flow information
Cash paid for:
Interest (net of amounts capitalized)	$	450	$	373
Income taxes paid, net		428		1,051
Supplemental disclosures of noncash investing and financing activities
Common stock dividends declared but not yet paid	$	116	$	111
Capital lease obligation		408		-

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 18: Pacific Gas and Electric Company

Condensed Consolidated Statements of Income

(in millions)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Operating Revenues
Electric	$	2,470		$	2,107		$	6,547		$	5,546
Natural gas		698			697			2,786			2,424
Total operating revenues		3,168			2,804			9,333			7,970
Operating Expenses
Cost of electricity		884			742			2,195			1,626
Cost of natural gas		298			326			1,539			1,293
Operating and maintenance		793			738			2,637			2,179
Depreciation, amortization and decommissioning		456			481			1,290			1,320
Total operating expenses		2,431			2,287			7,661			6,418
Operating Income		737			517			1,672			1,552
Interest income		36			20			94			59
Interest expense		(144	)		(138	)		(447	)		(416	)
Other income (expense), net		(15	)		(3	)		16			9
Income Before Income Taxes		614			396			1,335			1,204
Income tax provision		236			148			509			457
Net Income		378			248			826			747
Preferred stock dividend requirement		3			4			10			12
Income Available for Common Stock	$	375		$	244		$	816		$	735

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 19: Pacific Gas and Electric Company

Condensed Consolidated Balance Sheets

(in millions)

	Balance At
	September 30, 2006 (Unaudited)			December 31, 2005
ASSETS
Current Assets
Cash and cash equivalents	$	68		$	463
Restricted cash		1,445			1,546
Accounts receivable:
Customers (net of allowance for doubtful accounts of $47 million          in 2006 and $77 million in 2005)		2,183			2,422
Related parties		24			3
Regulatory balancing accounts		521			727
Inventories:
Gas stored underground and fuel oil		235			231
Materials and supplies		137			133
Income taxes receivable		-			48
Prepaid expenses and other		753			183
Total current assets		5,366			5,756
Property, Plant and Equipment
Electric		24,022			22,482
Gas		9,013			8,794
Construction work in progress		749			738
Total property, plant and equipment		33,784			32,014
Accumulated depreciation		(12,424	)		(12,061	)
Net property, plant and equipment		21,360			19,953
Other Noncurrent Assets
Regulatory assets		5,248			5,578
Nuclear decommissioning funds		1,817			1,719
Related parties receivable		-			23
Other		612			754
Total other noncurrent assets		7,677			8,074
TOTAL ASSETS	$	34,403		$	33,783

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 19 (continued): Pacific Gas and Electric Company

Condensed Consolidated Balance Sheets

(in millions, except share amounts)

	Balance At
	September 30, 2006 (Unaudited)			December 31, 2005
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings	$	281		$	260
Long-term debt, classified as current		1			2
Rate reduction bonds, classified as current		290			290
Energy recovery bonds, classified as current		343			316
Accounts payable:
Trade creditors		720			980
Disputed claims and customer refunds		1,714			1,733
Related parties		38			37
Regulatory balancing accounts		1,099			840
Other		441			423
Interest payable		474			460
Income taxes payable		65			-
Deferred income taxes		96			161
Other		1,419			1,255
Total current liabilities		6,981			6,757
Noncurrent Liabilities
Long-term debt		6,696			6,696
Rate reduction bonds		76			290
Energy recovery bonds		2,025			2,276
Regulatory liabilities		3,601			3,506
Asset retirement obligations		1,654			1,587
Deferred income taxes		3,116			3,218
Deferred tax credits		107			112
Other		1,984			1,691
Total noncurrent liabilities		19,259			19,376
Commitments and Contingencies
Shareholders’ Equity
Preferred stock without mandatory redemption provisions:
Nonredeemable, 5.00% to 6.00%, outstanding 5,784,825 shares		145			145
Redeemable, 4.36% to 5.00%, outstanding 4,534,958 shares		113			113
Common stock, $5 par value, authorized 800,000,000 shares,         issued 279,624,823 shares		1,398			1,398
Common stock held by subsidiary, at cost, 19,481,213 shares		(475	)		(475	)
Additional paid-in capital		1,818			1,776
Reinvested earnings		5,173			4,702
Accumulated other comprehensive loss		(9	)		(9	)
Total shareholders’ equity		8,163			7,650
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	34,403		$	33,783

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 20: Pacific Gas and Electric Company

Condensed Consolidated Statements of Cash Flows

(in millions)

(Unaudited)

	Nine Months Ended
	September 30,
	2006			2005
Cash Flows From Operating Activities
Net income	$	826		$	747
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, decommissioning and allowance for equity funds used during         construction		1,342			1,294
Deferred income taxes and tax credits, net		(172	)		(638	)
Other deferred charges and noncurrent liabilities		(65	)		(136	)
Gain on sale of assets		(15	)		-
Net effect of changes in operating assets and liabilities:
Accounts receivable		239			58
Inventories		(8	)		(97	)
Accounts payable		(176	)		(83	)
Accrued taxes		113			77
Regulatory balancing accounts, net		404			940
Other current assets		(71	)		(196	)
Other current liabilities		(301	)		141
Other		(5	)		20
Net cash provided by operating activities		2,111			2,127
Cash Flows From Investing Activities
Capital expenditures		(1,729	)		(1,318	)
Net proceeds from sale of assets		11			19
Decrease in restricted cash		58			453
Proceeds from nuclear decommissioning trust sales		942			2,428
Purchases of nuclear decommissioning trust investments		(1,040	)		(2,492	)
Other		-			67
Net cash used in investing activities		(1,758	)		(843	)
Cash Flows From Financing Activities
Borrowings under accounts receivable facility		50			-
Repayments under working capital facility and accounts receivable facility		(310	)		(300	)
Borrowings under commercial paper facility, net		281			-
Proceeds from issuance of long-term debt, net of issuance costs of $3 million in 2005		-			451
Proceeds from issuance of energy recovery bonds, net of issuance costs of $14 million in 2005		-			1,874
Long-term debt matured, redeemed or repurchased		(1	)		(1,554	)
Rate reduction bonds matured		(214	)		(214	)
Energy recovery bonds matured		(224	)		(77	)
Common stock dividends paid		(345	)		(330	)
Preferred stock dividends paid		(10	)		(12	)
Preferred stock with mandatory redemption provisions redeemed		-			(122	)
Preferred stock without mandatory redemption provisions redeemed		-			(36	)
Common stock repurchased		-			(960	)
Other		25			69
Net cash used in financing activities		(748	)		(1,211	)
Net change in cash and cash equivalents		(395	)		73
Cash and cash equivalents at January 1		463			783
Cash and cash equivalents at September 30	$	68		$	856

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Table 20 (continued): Pacific Gas and Electric Company

Condensed Consolidated Statements of Cash Flows

(in millions)

	Nine Months Ended
	September 30,
	2006		2005
Supplemental disclosures of cash flow information
Cash paid for:
Interest (net of amounts capitalized)	$	423	$	360
Income taxes paid, net		562		1,047
Supplemental disclosures of noncash investing and financing activities
Capital lease obligation	$	408	$	-

Source: PG&E Corporation’s and Pacific Gas and Electric Company’s Condensed Consolidated Financial Statements and Notes thereto included in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.