Exhibit 99.2

INDEPENDENT AUDITORS’ REPORT

To the Shareholders and the Boards of Directors of
PG&E Corporation and Pacific Gas and Electric Company

We have audited the consolidated financial statements of PG&E Corporation and subsidiaries and of Pacific Gas and Electric Company (a Debtor-in-Possession) and subsidiaries (collectively, the “Companies”) as of December 31, 2003 and 2002, and for each of the three years in the period ended December 31, 2003 and have issued our report thereon dated February 18, 2004 (March 1, 2004 as to the last three paragraphs of Note 1), (which report expresses an unqualified opinion and includes explanatory paragraphs relating to accounting changes, a revision to the 2002 and 2001 financial statements of PG&E Corporation and going concern uncertainties). Such consolidated financial statements of each of the Companies are included in the combined 2003 Annual Report to Shareholders (of PG&E Corporation and Pacific Gas and Electric Company) and are incorporated herein by reference. Our audits also included the respective consolidated financial statement schedules of PG&E Corporation and Pacific Gas and Electric Company, listed in Item 15 (a) 2. These consolidated financial statement schedules are the responsibility of the respective managements of PG&E Corporation and Pacific Gas and Electric Company. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the respective basic consolidated financial statements of PG&E Corporation and Pacific Gas and Electric Company taken as a whole, present fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

San Francisco, California
February 18, 2004

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

CONDENSED BALANCE SHEETS

			Balance at December 31,
			2003			2002
			(In millions)
ASSETS
Cash and cash equivalents			$	673		$	182
Restricted cash				—			377
Advances to affiliates				398			479
Note receivable from subsidiary				—			208
Other current assets				9			1
		Total current assets		1,080			1,247
Equipment				20			20
Accumulated depreciation				(15	)		(12	)
		Net equipment		5			8
Restricted Cash				361			—
Investments in subsidiaries				4,810			2,870
Other investments				24			33
Deferred income taxes				478			702
Other				32			34
		Total Assets	$	6,790		$	4,894
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
	Accounts payable — related parties		$	2		$	31
	Accounts payable — other			28			38
	Income taxes payable			258			133
	Other			158			57
		Total current liabilities		446			259
Noncurrent Liabilities:
	Long-term debt			883			976
	Net investment in NEGT			1,216			—
	Other			30			46
		Total noncurrent liabilities		2,129			1,022
Preferred Stock				—			—
Common Shareholders’ Equity
	Common stock			6,468			6,274
	Common stock held by subsidiary			(690	)		(690	)
	Unearned compensation			(20	)		—
	Accumulated deficit			(1,458	)		(1,878	)
	Accumulated other comprehensive income			(85	)		(93	)
		Total common shareholders’ equity		4,215			3,613
		Total Liabilities and Shareholders’ Equity	$	6,790		$	4,894

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT — (Continued)

CONDENSED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2003, 2002 and 2001

	2003			2002			2001
	(In millions except
	per share amount)
Administrative service revenue	$	101		$	96		$	95
Equity in earnings of subsidiaries		917			1,842			1,087
Operating expenses		(133	)		(141	)		(108	)
Interest income		20			30			35
Interest expense		(200	)		(253	)		(132	)
Other income		2			81			4
Income before income taxes		707			1,655			981
Less: Income tax benefit		(84	)		(68	)		(40	)
Income from continuing operations		791			1,723			1,021
Discontinued operations		(365	)		(2,536	)		69
Cumulative effect of changes in accounting principles		(6	)		(61	)		9
Net income (loss) before intercompany elimination	$	420		$	(874	)	$	1,099
Weighted Average Common Shares Outstanding		385			371			363
Earnings (Loss) Per Common Share, Basic	$	1.09		$	(2.36	)	$	3.03
Earnings (Loss) Per Common Share, Diluted	$	1.06		$	(2.26	)	$	3.02

CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2003, 2002 and 2001

		2003			2002			2001
					(In millions)
Cash Flows from Operating Activities:
Net income (loss)		$	420		$	(874	)	$	1,099
Loss (income) from discontinued operations			365			2,536			(69	)
Cumulative effect of changes in accounting principles			6			61			(9	)
Net income from continuing operations			791			1,723			1,021
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Equity in earnings of subsidiaries		(917	)		(1,842	)		(1,087	)
	Deferred taxes		265			(660	)		(51	)
	Other-net		391			458			237
Net cash provided (used) by operating activities			530			(321	)		120
Cash Flows From Investing Activities:
	Capital expenditures		—			(1	)		(4	)
Net cash used by investing activities			—			(1	)		(4	)
Cash Flows From Financing Activities:
	Common stock issued		166			217			15
	Common stock repurchased		—			—			(1	)
	Long-term debt issued		581			847			907
	Long-term debt redeemed		(787	)		(908	)		—
	Short-term debt issued redeemed		—			—			(931	)
	Dividends paid		—			—			(109	)
	Other-net		1			—			—
Net cash provided (used) by financing activities			(39	)		156			(119	)
Net Change in Cash & Cash Equivalents			491			(166	)		(3	)
Cash & Cash Equivalents at January 1			182			348			351
Cash & Cash Equivalents at December 31		$	673		$	182		$	348

PG&E CORPORATION

SCHEDULE II — CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2003, 2002 and 2001

					Additions
			Balance at		Charged to		Charged						Balance at
			Beginning		Costs and		to Other						End of
Description			of Period		Expenses		Accounts			Deductions			Period
(in millions)
Valuation and qualifying accounts deducted from assets:
	2003:
		Allowance for uncollectible accounts (l)(2)	$	59	$	42	$	—		$	33	(3)	$	68
	2002:
		Allowance for uncollectible accounts(1)(2)	$	48	$	34	$	(2	)	$	23	(3)	$	59
	2001:
		Allowance for uncollectible accounts (1)(2)	$	52	$	24	$	—		$	28	(3)	$	48
		Provision for loss on generation-related regulatory assets and undercollected purchased power costs(4)	$	6,939	$	—	$	—		$	6,939		$	—

(1)	Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”
(2)	Allowance for uncollectible accounts does not include NEGT.
(3)	Deductions consist principally of write-offs, net of collections of receivables previously written off.
(4)	Provision was deduction from “Regulatory Assets.”

PACIFIC GAS AND ELECTRIC COMPANY, A DEBTOR IN POSSESSION

SCHEDULE II — CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2003, 2002 and 2001

						Additions
				Balance at		Charged to		Charged						Balance at
				Beginning		Costs and		to Other						End of
Description				of Period		Expenses		Accounts			Deductions			Period
(in millions)
Valuation and qualifying accounts deducted from assets:
	2003:
		Allowance for uncollectible accounts(1)		$	59	$	42	$	—		$	33	(2)	$	68
	2002:
		Allowance for uncollectible accounts(1)		$	48	$	34	$	(2	)	$	23	(2)	$	59
	2001:
		Allowance for uncollectible accounts(1)		$	52	$	24	$	—		$	28	(2)	$	48
			Provision for loss on generation-related regulatory assets and undercollected purchased power costs(3)	$	6,939	$	—	$	—		$	6,939		$	—

     (1)  Allowance for uncollectible accounts is deducted from “Accounts receivable Customers, net.”

     (2)  Deductions consist principally of write-offs, net of collections of receivables previously written off.

     (3)  Provision was deduction from “Regulatory Assets.”