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: May 3, 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 May 3, 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 March 31, 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 March 31, 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.

Exhibit 99.3 attached to this report is a list of agreements the Utility entered into with third parties following the Utility’s request for offers for long-term generation resources. On April 11, 2006, the Utility filed an application with the California Public Utilities Commission (CPUC) seeking approval of these agreements.

Exhibits 99.1, 99.2, and 99.3 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;  

- 2 -

·   Whether the Utility is able to recognize the anticipated cost benefits and savings 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 and the CPUC, including the Utility’s 2007 General Rate Case and the CPUC’s pending investigation into the Utility’s billing and collection practices;  

·   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;  

·   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 Exhibits 99.2 and 99.3 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 May 3, 2006
Exhibit 99.2	Additional Supplemental Information
Exhibit 99.3	Agreements Executed Pursuant to Request for Offers (RFO) for Long-Term Generation Resources

- 3 -

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:	LINDA Y.H. CHENG
	LINDA Y.H. CHENG
	Vice President, Corporate Governance and Corporate Secretary
PACIFIC GAS AND ELECTRIC COMPANY
By:	LINDA Y.H. CHENG
	LINDA Y.H. CHENG
	Vice President, Corporate Governance and Corporate Secretary

Dated:May 3, 2006

EX-99.1

Exhibit 99.1

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

FOR IMMEDIATE RELEASE   May 3, 2006

CONTACT: PG&E Corporation

PG&E CORPORATION REPORTS FIRST QUARTER FINANCIAL PERFORMANCE

§	Consolidated net income reported under GAAP was $0.60 per share for PG&E Corporation for the quarter ended March 31, 2006, compared with $0.54 per share in the same quarter of 2005. (All “per share” amounts are presented on a diluted basis.)
§	Earnings from operations were $0.60 per share, up from $0.56 per share in the same quarter of 2005.
§	Guidance for 2006 earnings from operations is reaffirmed in the $2.40-$2.50 per share range. 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 $214 million, or $0.60 per share, in the first quarter of 2006. In the same period last year, consolidated net income was $218 million, or $0.54 per share.

On a stand-alone basis, PG&E Corporation’s Pacific Gas and Electric Company subsidiary GAAP results were $214 million for the first quarter of 2006, compared with $219 million in the same quarter of 2005.

“We are on track to deliver on our objectives for 2006,” said Peter A. Darbee, PG&E Corporation Chairman, CEO and President. “Since the beginning of the year, we’ve made good progress on our business priorities. We’ve advanced a number of initiatives to improve customer service. We’ve continued to make investments in our infrastructure and new technology. And we’ve executed long-term contracts that could lead to one of the largest single infusions of new generation in California in decades. We intend to build on

-MORE-

Page 1 of 4

these efforts throughout the year to strengthen service and ensure a reliable energy future for California.”

EARNINGS FROM OPERATIONS

On a non-GAAP basis, PG&E Corporation’s earnings from operations for the first quarter were $214 million, or $0.60 per share, compared with $226 million, or $0.56 in the same quarter of 2005.

Earnings from operations exclude certain non-operating income and expenses reported in GAAP net income (see “Items Impacting Comparability” in the accompanying financial tables, which reconcile earnings from operations with consolidated net income in accordance with GAAP).

QUARTER-OVER-QUARTER COMPARISON

Earnings from operations for the first quarter of 2006 were $0.04 per share above levels for the same period in 2005. The quarter-over-quarter difference primarily reflects the effects of share repurchases, which led to fewer shares outstanding in 2006, offset by the reduction in earnings associated with the elimination of the regulatory asset established as part of the resolution of Pacific Gas and Electric Company’s Chapter 11 case, in addition to the net effects of other items (see “First Quarter 2006 vs. First Quarter 2005” in the accompanying financial tables).

EARNINGS GUIDANCE

PG&E Corporation reaffirmed its previous guidance for earnings from operations in the range of $2.40-$2.50 per share for 2006 and $2.65-$2.75 per share for 2007.

Guidance assumes that the utility earns its authorized return on equity of 11.35 percent on anticipated rate base for 2006 and 2007, and that earnings are decreased by the impact of the equity carrying cost credit associated with the Rate Reduction Bonds and Energy Recovery Bonds, and the interest expense of PG&E Corporation debt.

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

-MORE-

Page 2 of 4 

alternative for consolidated net income presented 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 First Quarter Results:

q   Today’s call at 11:30 a.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. EDT, on May 10, 2006, by dialing 877-690-2092. International callers may dial 402-220-0647.  

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 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 anticipated cost benefits and savings 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 CPUC’s pending investigation into the Utility’s billing and collection practices;
	-MORE- Page 3 of 4
·	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;
·	Increased municipalization and other forms of bypass in the Utility’s service territory; and
·	Other factors discussed in PG&E Corporation's SEC reports.

###

 

-MORE-

Page 4 of 4 

PG&E Corporation

Condensed Consolidated Statements of Income

(in millions, except per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2006			2005
Operating Revenues
Electric	$	1,863		$	1,660
Natural gas		1,285			1,009
Total operating revenues		3,148			2,669
Operating Expenses
Cost of electricity		530			396
Cost of natural gas		873			620
Operating and maintenance		862			767
Depreciation, amortization and decommissioning		414			385
Total operating expenses		2,679			2,168
Operating Income		469			501
Interest income		23			21
Interest expense		(154	)		(161	)
Other expense, net		-			(1	)
Income Before Income Taxes		338			360
Income tax provision		124			142
Net Income	$	214		$	218
Weighted Average Common Shares Outstanding, Basic		344			388
Net Earnings Per Common Share, Basic	$	0.61		$	0.55
Net Earnings Per Common Share, Diluted	$	0.60		$	0.54
Dividends Declared Per Common Share	$	0.33		$	0.30

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 March 31, 2006.

-1-

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

First Quarter 2006 vs. First Quarter 2005

(in millions, except per share amounts)

	Three months ended March 31,
	Earnings (Loss)					Earnings (Loss) per Common Share (Diluted)
	2006		2005			2006		2005
PG&E Corporation Earnings from Operations 1	$	214	$	226		$	0.60	$	0.56
Items Impacting Comparability 2
Energy Crisis / Chapter 11 Interest Costs 3		-		(8	)		-		(0.02	)
Total		-		(8	)		-		(0.02	)
PG&E Corporation Earnings on a GAAP Basis	$	214	$	218		$	0.60	$	0.54

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	The net effect of incremental interest costs of $8 million ($0.02 per common share), after-tax, related to remaining generator disputed claims in the Utility’s Chapter 11 proceeding, which are subject to resolution by the bankruptcy court.

-2-

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

First Quarter 2006 vs. First Quarter 2005

(in millions)

	Three months ended March 31,
	Earnings (Loss)
	2006		2005
Pacific Gas and Electric Company Earnings from Operations 1	$	214	$	227
Items Impacting Comparability 2
Energy Crisis / Chapter 11 Interest Costs 3		-		(8	)
Total		-		(8	)
Pacific Gas and Electric Company Earnings on a GAAP Basis	$	214	$	219

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	The net effect of incremental interest costs of $8 million, after-tax, related to remaining generator disputed claims in the Utility’s Chapter 11 proceeding, which are subject to resolution by the bankruptcy court.

-3-

PG&E Corporation 2006 Earnings per Common Share (EPS) Guidance

	Low		High
EPS Guidance on an Earnings from Operations Basis	$	2.40	$	2.50
Estimated Items Impacting Comparability	$	0.00	$	0.00
EPS Guidance on a GAAP Basis	$	2.40	$	2.50

PG&E Corporation 2007 Earnings per Common Share (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

-4-

Pacific Gas and Electric Company - Agreements Executed Pursuant to Request for Offers (RFO) for Long Term Generation Resources ⁽¹⁾

	Counterparty/Facility	Size (MW)	Contract Type (2) (3) (4)	Operational Date	Plant Type	Term
Long-Term Need:
	Calpine Hayward	601	PPA	2010	Combined cycle	10
	EIF Firebaugh	399	PPA	2009	Combustion turbine	20
	EIF Fresno	196	PPA	2009	Combustion turbine	20
	Starwood Firebaugh	118	PPA	2009	Combustion turbine	15
	Tierra Energy Hayward	116	PPA	2009	Reciprocating engine	20
	E&L Westcoast Colusa	657	Utility-owned (PSA)	2010	Combined cycle	life of asset
Total Long-Term Need		2,087
Humboldt:
	Wartsila Humboldt	163	Utility-owned (EPC)	2009	Reciprocating engine	life of asset
Total		2,250

1	On April 11, 2006, Pacific Gas and Electric Company filed an application with the CPUC seeking approval of these agreements. Other than requirements to use their best efforts to obtain CPUC approval, the parties’ material obligations under these agreements are conditioned upon CPUC approval of the agreements and applicable ratemaking mechanisms. As described in note 2 below, additional conditions must be satisfied for the Calpine Hayward project to proceed.
2	Under a power purchase agreement (PPA) the Utility is responsible for arranging for gas transportation and supplying gas to the generation facility, and is entitled to receive all capacity, energy, and other products generated by the facility. Under a PPA, development, construction, and operation are all performed by a third party. The agreement related to the Calpine Hayward project is a letter of intent to execute a PPA. The execution of the PPA is subject to certain financial conditions, including that the associated Calpine entity emerge from bankruptcy or transfer the project site to a bankruptcy remote entity. If these conditions are not satisfied by October 2006, the letter of intent will terminate.
3	A purchase and sale agreement (PSA) provides for a turnkey acquisition by the Utility of a fully operational, fully permitted generation facility that has been developed, constructed, commissioned, and successfully tested by the seller. Under a PSA, development and construction are performed by a third party. The Utility would own and operate the facility upon closing.
4	A turnkey engineering, procurement, and construction (EPC) agreement permits the Utility either to acquire fully or partially developed projects with rights to permits and site control, or to perform the development activities itself and then engage a contractor to complete the engineering and construction of the facility. The Utility currently owns the site on which the facility will be located and will fund all costs related to the development and construction of the facility.

EX-99.2

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

First Quarter 2006 vs. First Quarter 2005

(in millions, except per share amounts)

	Three months ended March 31,
	Earnings (Loss)					Earnings (Loss) per Common Share (Diluted)
	2006		2005			2006		2005
PG&E Corporation Earnings from Operations 1	$	214	$	226		$	0.60	$	0.56
Items Impacting Comparability 2
Energy Crisis / Chapter 11 Interest Costs 3		-		(8	)		-		(0.02	)
Total		-		(8	)		-		(0.02	)
PG&E Corporation Earnings on a GAAP Basis	$	214	$	218		$	0.60	$	0.54

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	The net effect of incremental interest costs of $8 million ($0.02 per common share), after-tax, related to remaining generator disputed claims in the Utility’s Chapter 11 proceeding, which are subject to resolution by the bankruptcy court.

 

Table 2B: Reconciliation of Pacific Gas and Electric Company’s Earnings from Operations to Consolidated Net Income in Accordance with GAAP

First Quarter 2006 vs. First Quarter 2005

(in millions)

	Three months ended March 31,
	Earnings (Loss)
	2006		2005
Pacific Gas and Electric Company Earnings from Operations 1	$	214	$	227
Items Impacting Comparability 2
Energy Crisis / Chapter 11 Interest Costs 3		-		(8	)
Total		-		(8	)
Pacific Gas and Electric Company Earnings on a GAAP Basis	$	214	$	219

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	The net effect of incremental interest costs of $8 million, after-tax, related to remaining generator disputed claims in the Utility’s Chapter 11 proceeding, which are subject to resolution by the bankruptcy court.

Table 3: PG&E Corporation Earnings per Common Share from Operations

First Quarter 2006 vs. First Quarter 2005

($/Share, Diluted)

Q1 2005 EPS from Operations 1	$	0.56
Fewer shares outstanding		0.07
Effect of increase in authorized return on equity 2		0.01
Gas transmission revenue		0.01
Environmental remediation 3		0.04
Elimination of earnings on the settlement regulatory asset 4		(0.04	)
ERB Series 2 equity carrying cost credit		(0.04	)
Miscellaneous items		(0.01	)
Q1 2006 EPS from Operations 1	$	0.60

1	See Tables 2A and 2B for a reconciliation of earnings per common share, or EPS, from operations to EPS on a GAAP basis.
2	For 2005, Pacific Gas and Electric Company’s authorized rate of return (ROE) was 11.22%. The authorized ROE for 2006 was increased to 11.35%.
3	For the quarter ending March 31, 2005 Pacific Gas and Electric Company took a charge for the increased estimate of environmental remediation costs. There was no comparable charge for the quarter ending March 31, 2006.
4	The Utility earned a return on equity on the settlement regulatory asset through February 10, 2005 (when the first series of energy recovery bonds were issued to refinance the after-tax portion of the settlement regulatory asset) compared to 2006.

Table 4: PG&E Corporation Share Statistics

First Quarter 2006 vs. First Quarter 2005

(shares in millions, except per share amounts)

	First Quarter 2006		First Quarter 2005		% Change
Common Stock Data
Book Value per share - end of period 1	$	20.14	$	20.13		0.05	%
Weighted average common shares outstanding, basic		344		388		(11.34	)%
Employee stock-based compensation, warrants and accelerated share repurchase program		5		4		25.00	%
Weighted average common shares outstanding, diluted		349		392		(10.97	)%
9.5% Convertible Subordinated Notes (participating securities)		19		19		-
Weighted average common shares outstanding and participating securities, diluted		368		411		(10.46	)%

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 March 31, 2006.

Table 5: Operational Performance Metrics

First Quarter 2006

		2005	2006
		EOY Actual	YTD Actual	YTD Target	EOY Target
1.	Overall customer satisfaction (composite of J.D. Power residential and business customer surveys)	94.0	94.5	94.0	96.0
2.	Timely bills (% billed within 35 days)	99.38%	99.53%	99.53%	99.51%
3.	Estimate of outage restoration time accuracy (% accurate)	47%	64%	50%	50%
4.	System average interruption duration index (yearly minutes per customer)	178.7	67.6	46.0	166.0
5.	System Average Interruption Frequency Index (yearly interruptions per customer)	1.34	0.43	0.33	1.31
6.	Energy Availability 1 (composite of owned generation and procured energy availability)	N/A	2.0	1.7	1.5
7.	Telephone service level (% answered within 20 seconds)	75%	76%	73%	76%
8.	Total expense per customer ($ cost of operations per customer) *	$278	$75	$74	$283
9.	Diablo Canyon performance index 2 (composite of plant performance metrics)	94.7	95.2	94.9	94.0
10.	Employee Premier Survey index 3 (composite of employee satisfaction Premier survey metrics)	64%	N/A	N/A	68%
11.	Lost workday case rate (lost workday case rate per 100 employees)	1.04	0.47	0.45	0.88

1	Metric is first applicable in 2006.
2	2005 results have been restated to maintain consistency withthe actual and target values based on the recently revised industry calculation methodology.
3	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)

GAAP Operating and Maintenance Expense, YTD Actual	$	862
Public Purpose and Other Balancing Account Programs		(90	)
Property Taxes		(44	)
Franchise Fees & Uncollectible Expense		(31	)
Cost of Operations, YTD Actual	$	697
Cost of Operations, YTD Actual / 9.3MM customers	$	75

DEFINITIONS OF 2006 OPERATIONAL REFORMANCE METRICS FROM TABLE 5:

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 the 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.	Estimate of outage restoration time 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 (Total 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.	Combined 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 0 to 2 (with 2 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 GA component 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 EP component or the GA component.
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 6: Pacific Gas and Electric Company Operating Statistics

First Quarter 2006 vs. First Quarter 2005

	Three Months Ending March 31,
	2006	2005
Electric Sales (in millions kWh)
Residential	7,741	7,442
Commercial	7,806	7,466
Industrial	3,634	3,455
Agricultural	525	471
BART, public street and highway lighting	205	193
Other electric utilities	3	7
Sales from Energy Deliveries	19,914	19,034
Total Electric Customers at March 31	5,025,303	4,958,963
Bundled Gas Sales (in millions MCF)
Residential	79	82
Commercial	25	26
Industrial	-	-
Total Bundled Gas Sales	104	108
Transportation Only	115	133
Total Gas Sales	219	241
Total Gas Customers at March 31	4,201,151	4,132,323
Sources of Electric Energy (in millions kWh)
Utility Generation
Nuclear	4,805	4,653
Hydro (net)	3,738	2,947
Fossil	266	242
Total Utility Generation	8,809	7,842
Purchased Power
Qualifying Facilities	3,590	4,354
Irrigation Districts	1,655	498
Other Purchased Power	206	154
Spot Market Purchases/Sales, net	37	(19)
Total Purchased Power	5,488	4,987
Delivery from DWR	4,796	5,044
Delivery to Direct Access Customers	1,981	2,102
Others (includes energy loss)	(1,160)	(941)
Total Electric Energy Delivered	19,914	19,034
Diablo Canyon Performance
Overall capacity factor (including refuelings)	103%	99%
Refueling outage period	None	None
Refueling outage duration during the period (days)	-	-

Table 7: PG&E Corporation 2006 Earnings per Common Share (EPS) Guidance

	Low		High
EPS Guidance on an Earnings from Operations Basis	$	2.40	$	2.50
Estimated Items Impacting Comparability	$	0.00	$	0.00
EPS Guidance on a GAAP Basis	$	2.40	$	2.50

 Table 8: PG&E Corporation 2007 Earnings per Common Share (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 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 an authorized return on equity of 11.35% and that the Utility makes certain capital expenditures as projected. 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 anticipated cost benefits and savings 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 CPUC, including the Utility's 2007 General Rate Case and the CPUC’s pending investigation into the Utility’s billing and collection practices;

· 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;

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

· Other factors discussed in PG&E Corporation’s and Pacific Gas and Electric Company's combined Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

Table 9: Rate Base - Pacific Gas and Electric Company

(in billions)

	2005		2006		2007
	Recorded		Estimated		Estimated
Total Weighted Average Rate Base	$	15.1	$	15.9	$	17.4

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 March 31, 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	-/+ $0.02 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 March 31, 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	$	1,129
Decrease in restricted cash		52
Common stock issued		66
Other		126
	$	1,373
Uses of Cash
Capital expenditures		576
Proceeds from and investments in nuclear decommissioning trust, net		42
Net repayments under credit facilities		260
Rate reduction bonds matured		74
Energy recovery bonds matured		56
Common stock repurchased		58
Preferred dividends paid		3
Common stock dividends paid		114
	$	1,183
Cash and Cash Equivalents, March 31, 2006	$	903

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 March 31, 2006.

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

First Quarter 2006 vs. First Quarter 2005

(in millions)

	2006		2005		Change
Cash Flow from Operating Activities (YTD March 31)
PG&E Corporation	$	35	$	14	$	21
Pacific Gas and Electric Company		1,094		938		156
	$	1,129	$	952	$	177
Consolidated Cash Balance (at March 31)
PG&E Corporation	$	299	$	325	$	(26	)
Pacific Gas and Electric Company		604		1,056		(452	)
	$	903	$	1,381	$	(478	)
Consolidated Restricted Cash Balance (at March 31)
PG&E Corporation	$	-	$	1	$	(1	)
Pacific Gas and Electric Company		1,494		1,857		(363	)
	$	1,494	$	1,858	$	(364	)

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 March 31, 2006 and the Form 10-Q for the quarter ended March 31, 2005, included as exhibit 99.3 to the Current Report on Form 8-K filed on October 28, 2005. (The Form 10-Q for the quarter ended March 31, 2005 was revised to show the reclassification of restricted cash for the quarter ended March 31, 2005.)

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

2006 vs. 2005

(in millions)

	Balance At
	March 31, 2006			December 31, 2005
PG&E Corporation
Convertible subordinated notes, 9.50%, due 2010	$	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 rates1, due 20262		614			614
Pollution control bond loan agreement, 5.35%, due 2016		200			200
Pollution control bond loan agreements, 3.50%, due 20233		345			345
Pollution control bond loan agreements, variable rates4, due 2016-2026		454			454
Other		2			2
Less: current portion		(2	)		(2	)
		6,696			6,696
Total consolidated long-term debt, net of current portion	$	6,976		$	6,976

1	At March 31, 2006, interest rates on these loans ranged from 3.15% to 3.19%.
2	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.
3	These bonds are subject to a mandatory tender for purchase on June 1, 2007 and the interest rates for these bonds are set until that date.
4	At March 31, 2006, interest rates on these loans ranged from 2.70% to 3.29%.

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

(in millions, except interest rates)

	2006			2007			2008			2009			2010			Thereafter			Total
Long-term debt:
PG&E Corporation
Average fixed interest rate		-			-			-			-			9.50	%					9.50	%
Fixed rate obligations	$	-		$	-		$	-		$	-		$	280					$	$280
Utility
Average fixed interest rate		-			3.50	%		-			3.60	%					5.56	%		5.22	%
Fixed rate obligations	$	-		$	345	1	$	-		$	600					$	$4,683		$	5,628
Variable interest rate as of March 31, 2006		-			-			-			-			3.16	%		3.07	%		3.12	%
Variable rate obligations	$	-		$	-		$	-		$	-		$	614	2	$	454		$	1,068
Other	$	2		$	-		$	-		$	-		$	-		$	-		$	2
Total consolidated long-term debt	$	2		$	345		$	-		$	600		$	894		$	5,137		$	6,978
Utility
Average fixed interest rate		6.45	%		6.48	%		-			-			-			-			6.47	%
Rate reduction bonds	$	216		$	290		$	-		$	-		$	-		$	-		$	506
Average fixed interest rate		4.08	%		4.19	%		4.19	%		4.36	%		4.49	%		4.63	%		4.39	%
Energy recovery bonds	$	259		$	340		$	354		$	370		$	386		$	827		$	2,536

1

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. Accordingly, these bonds are classified for repayment purposes in 2007.

2

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 March 31,
	2006			2005
Operating Revenues
Electric	$	1,863		$	1,660
Natural gas		1,285			1,009
Total operating revenues		3,148			2,669
Operating Expenses
Cost of electricity		530			396
Cost of natural gas		873			620
Operating and maintenance		862			767
Depreciation, amortization and decommissioning		414			385
Total operating expenses		2,679			2,168
Operating Income		469			501
Interest income		23			21
Interest expense		(154	)		(161	)
Other expense, net		-			(1	)
Income Before Income Taxes		338			360
Income tax provision		124			142
Net Income	$	214		$	218
Weighted Average Common Shares Outstanding, Basic		344			388
Net Earnings Per Common Share, Basic	$	0.61		$	0.55
Net Earnings Per Common Share, Diluted	$	0.60		$	0.54
Dividends Declared Per Common Share	$	0.33		$	0.30

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 March 31, 2006.

Table 16: PG&E Corporation

Condensed Consolidated Balance Sheets

(in millions)

	Balance At
	March 31, 2006			December 31, 2005
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	903		$	713
Restricted cash		1,494			1,546
Accounts receivable:
Customers (net of allowance for doubtful accounts of $40 million in 2006 and $77 million in 2005)		2,121			2,422
Regulatory balancing accounts		999			727
Inventories:
Gas stored underground and fuel oil		81			231
Materials and supplies		137			133
Income taxes receivable		-			21
Prepaid expenses and other		256			187
Total current assets		5,991			5,980
Property, Plant and Equipment
Electric		22,733			22,482
Gas		8,858			8,794
Construction work in progress		897			738
Other		15			16
Total property, plant and equipment		32,503			32,030
Accumulated depreciation		(12,249	)		(12,075	)
Net property, plant and equipment		20,254			19,955
Other Noncurrent Assets
Regulatory assets		5,361			5,578
Nuclear decommissioning funds		1,761			1,719
Other		707			842
Total other noncurrent assets		7,829			8,139
TOTAL ASSETS	$	34,074		$	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 March 31, 2006.

Table 16 (continued): PG&E Corporation

Condensed Consolidated Balance Sheets

(in millions, except share amounts)

	Balance At
	March 31, 2006			December 31, 2005
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings	$	-		$	260
Long-term debt, classified as current		2			2
Rate reduction bonds, classified as current		290			290
Energy recovery bonds, classified as current		343			316
Accounts payable:
Trade creditors		760			980
Disputed claims and customer refunds		1,731			1,733
Regulatory balancing accounts		1,057			840
Other		470			441
Interest payable		441			473
Income taxes payable		229			-
Deferred income taxes		195			181
Other		1,555			1,416
Total current liabilities		7,073			6,932
Noncurrent Liabilities
Long-term debt		6,976			6,976
Rate reduction bonds		216			290
Energy recovery bonds		2,193			2,276
Regulatory liabilities		3,392			3,506
Asset retirement obligations		1,611			1,587
Deferred income taxes		3,046			3,092
Deferred tax credits		111			112
Other		1,847			1,833
Total noncurrent liabilities		19,392			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 370,282,838 common and 1,349,490 restricted shares in 2006 and 366,868,512 common and 1,399,990 restricted shares in 2005		5,844			5,827
Common stock held by subsidiary, at cost, 24,665,500 shares		(718	)		(718	)
Unearned compensation		-			(22	)
Reinvested earnings		2,239			2,139
Accumulated other comprehensive loss		(8	)		(8	)
Total common shareholders’ equity		7,357			7,218
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	34,074		$	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 March 31, 2006.

Table 17: PG&E Corporation

Condensed Consolidated Statements of Cash Flows

(in millions)

(Unaudited)

	Three Months Ended March 31,
	2006			2005
Cash Flows From Operating Activities
Net income	$	214		$	218
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, decommissioning and allowance for equity funds used during construction		402			385
Deferred income taxes and tax credits, net		(30	)		(63	)
Other deferred charges and noncurrent liabilities		58			(45	)
Net effect of changes in operating assets and liabilities:
Accounts receivable		303			169
Inventories		146			90
Accounts payable		(124	)		(115	)
Accrued taxes		250			202
Regulatory balancing accounts, net		(55	)		254
Other current assets		(80	)		(14	)
Other current liabilities		16			(168	)
Other		29			39
Net cash provided by operating activities		1,129			952
Cash Flows From Investing Activities
Capital expenditures		(576	)		(349	)
Net proceeds from sale of assets		3			11
Decrease in restricted cash		52			122
Proceeds from nuclear decommissioning trust sales		435			1,675
Purchases of nuclear decommissioning trust investments		(477	)		(1,673	)
Other		11			24
Net cash used in investing activities		(552	)		(190	)
Cash Flows From Financing Activities
Borrowings under accounts receivable facility		50			-
Repayments under working capital facility and accounts receivable facility		(310	)		(300	)
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		-			(902	)
Rate reduction bonds matured		(74	)		(74	)
Energy recovery bonds matured		(56	)		-
Preferred stock with mandatory redemption provisions redeemed		-			(2	)
Common stock issued		66			120
Common stock repurchased		(58	)		(1,065	)
Preferred dividends paid		(3	)		(4	)
Common stock dividends paid		(114	)		-
Other		112			-

Table 17 (continued): PG&E Corporation

Condensed Consolidated Statements of Cash Flows

(in millions)

	Three Months Ended March 31,
	2006			2005
Net cash used in financing activities		(387	)		(353	)
Net change in cash and cash equivalents		190			409
Cash and cash equivalents at January 1		713			972
Cash and cash equivalents at March 31	$	903		$	1,381

Supplemental disclosures of cash flow information
Cash received for:
Reorganization interest income	$	-		$	6
Cash paid for:
Interest (net of amounts capitalized)		167			267
Income taxes refunded, net		(103	)		(14	)
Supplemental disclosures of noncash investing and financing activities
Common stock dividends declared but not yet paid	$	114		$	111

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 March 31, 2006.

Table 18: Pacific Gas and Electric Company

Condensed Consolidated Statements of Income

(in millions)

(Unaudited)

	Three Months Ended March 31,
	2006			2005
Operating Revenues
Electric	$	1,863		$	1,660
Natural gas		1,285			1,009
Total operating revenues		3,148			2,669
Operating Expenses
Cost of electricity		530			396
Cost of natural gas		873			620
Operating and maintenance		862			773
Depreciation, amortization and decommissioning		413			385
Total operating expenses		2,678			2,174
Operating Income		470			495
Interest income		19			20
Interest expense		(146	)		(154	)
Other income, net		6			4
Income Before Income Taxes		349			365
Income tax provision		132			142
Net Income		217			223
Preferred stock dividend requirement		3			4
Income Available for Common Stock	$	214		$	219

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 March 31, 2006.

Table 19: Pacific Gas and Electric Company

Condensed Consolidated Balance Sheets

(in millions)

	Balance At
	March 31, 2006			December 31, 2005
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	604		$	463
Restricted cash		1,494			1,546
Accounts receivable:
Customers (net of allowance for doubtful accounts of $40 million in 2006 and $77 million in 2005)		2,121			2,422
Related parties		1			3
Regulatory balancing accounts		999			727
Inventories:
Gas stored underground and fuel oil		81			231
Materials and supplies		137			133
Income tax receivable		-			48
Prepaid expenses and other		253			183
Total current assets		5,690			5,756
Property, Plant and Equipment
Electric		22,733			22,482
Gas		8,858			8,794
Construction work in progress		897			738
Total property, plant and equipment		32,488			32,014
Accumulated depreciation		(12,235	)		(12,061	)
Net property, plant and equipment		20,253			19,953
Other Noncurrent Assets
Regulatory assets		5,361			5,578
Nuclear decommissioning funds		1,761			1,719
Related parties receivable		22			23
Other		617			754
Total other noncurrent assets		7,761			8,074
TOTAL ASSETS	$	33,704		$	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 March 31, 2006.

Table 19 (continued): Pacific Gas and Electric Company

Condensed Consolidated Balance Sheets

(in millions, except share amounts)

	Balance At
	March 31, 2006			December 31, 2005
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short term borrowings	$	-		$	260
Long-term debt, classified as current		2			2
Rate reduction bonds, classified as current		290			290
Energy recovery bonds, classified as current		343			316
Accounts payable:
Trade creditors		760			980
Disputed claims and customer refunds		1,731			1,733
Related parties		33			37
Regulatory balancing accounts		1,057			840
Other		457			423
Interest payable		435			460
Income taxes payable		154			-
Deferred income taxes		176			161
Other		1,407			1,255
Total current liabilities		6,845			6,757
Noncurrent Liabilities
Long-term debt		6,696			6,696
Rate reduction bonds		216			290
Energy recovery bonds		2,193			2,276
Regulatory liabilities		3,392			3,506
Asset retirement obligations		1,611			1,587
Deferred income taxes		3,177			3,218
Deferred tax credits		111			112
Other		1,702			1,691
Total noncurrent liabilities		19,098			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		1,788			1,776
Reinvested earnings		4,801			4,702
Accumulated other comprehensive loss		(9	)		(9	)
Total shareholders’ equity		7,761			7,650
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	33,704		$	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 March 31, 2006.

Table 20: Pacific Gas and Electric Company

Condensed Consolidated Statements of Cash Flows

(in millions)

(Unaudited)

	Three Months Endeed March 31,
	2006			2005
Cash Flows From Operating Activities
Net income	$	217		$	223
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, decommissioning and allowance for equity funds used during construction		401			385
Deferred income taxes and tax credits, net		(27	)		(70	)
Other deferred charges and noncurrent liabilities		55			(49	)
Net effect of changes in operating assets and liabilities:
Accounts receivable		303			169
Inventories		146			90
Accounts payable		(124	)		(115	)
Accrued taxes		202			220
Regulatory balancing accounts, net		(55	)		254
Other current assets		(80	)		(11	)
Other current liabilities		41			(168	)
Other		15			10
Net cash provided by operating activities		1,094			938
Cash Flows From Investing Activities
Capital expenditures		(576	)		(349	)
Net proceeds from sale of assets		3			11
Decrease in restricted cash		52			123
Proceeds from nuclear decommissioning trust sales		435			1,675
Purchases of nuclear decommissioning trust investments		(477	)		(1,673	)
Other		11			24
Net cash used in investing activities		(552	)		(189	)
Cash Flows From Financing Activities
Borrowings under accounts receivable facility		50			-
Repayments under working capital facility and accounts receivable facility		(310	)		(300	)
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		-			(900	)
Rate reduction bonds matured		(74	)		(74	)
Energy recovery bonds matured		(56	)		-
Common stock dividends paid		(115	)		(110	)
Preferred dividends paid		(3	)		(4	)
Preferred stock with mandatory redemption provisions redeemed		-			(2	)
Common stock repurchased		-			(960	)
Other		107			-
Net cash used in financing activities		(401	)		(476	)
Net change in cash and cash equivalents		141			273
Cash and cash equivalents at January 1		463			783
Cash and cash equivalents at March 31	$	604		$	1,056

Table 20 (continued): Pacific Gas and Electric Company

Condensed Consolidated Statements of Cash Flows

(in millions)

	Three Months Ended March 31,
	2006			2005
Supplemental disclosures of cash flow information
Cash received for:
Reorganization interest income	$	-		$	6
Cash paid for:
Interest (net of amounts capitalized)		154			169
Income taxes refunded, net		(42	)		-

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 March 31, 2006.

EX-99.3

Exhibit 99.3

Pacific Gas and Electric Company - Agreements Executed Pursuant to Request for Offers (RFO) for Long Term Generation Resources ⁽¹⁾

	Counterparty/Facility	Size (MW)	Contract Type (2)(3)(4)	Operational Date	Plant Type	Term
Long-Term Need:
	Calpine Hayward	601	PPA	2010	Combined cycle	10
	EIF Firebaugh	399	PPA	2009	Combustion turbine	20
	EIF Fresno	196	PPA	2009	Combustion turbine	20
	Starwood Firebaugh	118	PPA	2009	Combustion turbine	15
	Tierra Energy Hayward	116	PPA	2009	Reciprocating engine	20
	E&L Westcoast Colusa	657	Utility-owned (PSA)	2010	Combined cycle	life of asset
Total Long-Term Need		2,087
Humboldt:
	Wartsila Humboldt	163	Utility-owned (EPC)	2009	Reciprocating engine	life of asset
Total		2,250

(1)	On April 11, 2006, Pacific Gas and Electric Company filed an application with the CPUC seeking approval of these agreements. Other than requirements to use their best efforts to obtain CPUC approval, the parties’ material obligations under these agreements are conditioned upon CPUC approval of the agreements and applicable ratemaking mechanisms. As described in note 2 below, additional conditions must be satisfied for the Calpine Hayward project to proceed.
(2)	Under a power purchase agreement (PPA) the Utility is responsible for arranging for gas transportation and supplying gas to the generation facility, and is entitled to receive all capacity, energy, and other products generated by the facility. Under a PPA, development, construction, and operation are all performed by a third party. The agreement related to the Calpine Hayward project is a letter of intent to execute a PPA. The execution of the PPA is subject to certain financial conditions, including that the associated Calpine entity emerge from bankruptcy or transfer the project site to a bankruptcy remote entity. If these conditions are not satisfied by October 2006, the letter of intent will terminate.
(3)	A purchase and sale agreement (PSA) provides for a turnkey acquisition by the Utility of a fully operational, fully permitted generation facility that has been developed, constructed, commissioned, and successfully tested by the seller. Under a PSA, development and construction are performed by a third party. The Utility would own and operate the facility upon closing.
(4)	A turnkey engineering, procurement, and construction (EPC) agreement permits the Utility either to acquire fully or partially developed projects with rights to permits and site control, or to perform the development activities itself and then engage a contractor to complete the engineering and construction of the facility. The Utility currently owns the site on which the facility will be located and will fund all costs related to the development and construction of the facility.