Pacific Gas & Electric Co 8-k (events Or Changes Between Quarterly Reports) 2009-02-24

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_____________________________________________________________________________________ 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: February 24, 2009 (Date of earliest event reported)

Commission Exact Name of Registrant File Number as specified in its charter 1-12609 PG&E CORPORATION 1-2348 PACIFIC GAS AND ELECTRIC COMPANY

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)

State or Other Jurisdiction of Incorporation or Organization California California

IRS Employer Identification Number 94-3234914 94-0742640

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 o o o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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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 February 24, 2009, 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 year ended December 31, 2008. 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 Annual Report on Form 10-K for the year ended December 31, 2008, 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 Annual Report on Form 10-K. 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. 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, PG&E Corporation presents results and guidance on an “earnings from operations” basis, which excludes items that are not reflective of the normal course of operations.

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 February 24, 2009

Exhibit 99.2

Additional Supplemental Information

2

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SIGNATURES 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:

STEPHEN J. CAIRNS Stephen J. Cairns Vice President, Controller

PACIFIC GAS AND ELECTRIC COMPANY By:

Dated:

February 24, 2009

3

STEPHEN J.CAIRNS Stephen J. Cairns Vice President, Controller

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Exhibit Index

Exhibit 99.1

PG&E Corporation Press Release Dated February 24, 2009

Exhibit 99.2

Additional Supplemental Information

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Exhibit 99.1 Corporate Relations One Market, Spear Tower Suite 2400 San Francisco, CA 94105 1-800-743-6397 FOR IMMEDIATE RELEASE

PG&E CORPORATION REPORTS 2008 RESULTS; REAFFIRMS GUIDANCE FOR 2009 ●

PG&E Corporation’s consolidated net income reported under GAAP was $1.34 billion, or $3.63 per share, for the yea $2.78 per share, in 2007. All per-share amounts are presented on a diluted basis.

●

Consolidated net income reported under GAAP for the 2008 fourth quarter was $517 million, or $1.37 per share, com quarter of 2007.

●

Net income for the year and quarter ended December 31, 2008 was increased substantially by the benefits of a multiutility capital investments by subsidiary Pacific Gas and Electric Company.

●

Guidance for 2009 earnings from operations is reaffirmed at $3.15 to $3.25 per share.

(San Francisco) – PG&E Corporation’s (NYSE:PCG) consolidated net income for the year ended December 31, 2008 reported principles (GAAP), was $1.34 billion, or $3.63 per share, compared with $1 billion, or $2.78 per share, in 2007. Per-share earnings on a 2001-2004 tax audits, totaling $257 million or $0.68 per share.

On a non-GAAP earnings from operations basis, which excludes the benefits of the tax settlement, PG&E Corporation’s resu share in 2007.

For the fourth quarter of 2008, PG&E Corporation’s consolidated net income was $517 million, or $1.37 per share, reflecting $203 million, or $0.56 per share, in the same quarter of 2007. On a non-GAAP earnings from operations basis, PG&E Corporation’s res compared with $0.56 per share in the fourth quarter of 2007.

The year-over-year increase in earnings from operations primarily reflects earnings from higher authorized capital investmen incentive revenues, partially offset by higher expenses due to storm-related outages, natural gas system maintenance activities, and one unit of the Diablo Canyon nuclear generating facility.

“Our results for 2008 were in line with our commitments to investors and continue to support our longer-term earnings grow President of PG&E Corporation. “Looking ahead, we are confident that we are well positioned to

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continue making the needed investments to strengthen energy reliability and services for our customers.”

Earnings Guidance

PG&E Corporation reaffirms guidance for 2009 earnings from operations in the $3.15-$3.25 per share range. Guidance assum maintains a ratemaking capital structure of 52 percent equity, that it maintains its California Public Utilities Commission (CPUC)-autho least a 12 percent return on equity on its Federal Energy Regulatory Commission jurisdictional assets, while growing its asset base in revenues for energy efficiency achievements with an anticipated CPUC decision before the end of 2009, and that the Utility realizes p

Guidance excludes three anticipated items impacting comparability forecast to total between $0.05 and $0.11 per share. The t refund claims for the 1998 and 1999 tax years that are anticipated to be finalized this year; forecasted recovery of hydroelectric divesti connection with the proposed divestiture of its hydroelectric generation facilities; and forecasted costs to accelerate the completion remedial work. When added to earnings from operations, the net effect of these items impacting comparability results in 2009 GAAP

PG&E Corporation discloses historical financial results and bases guidance on “earnings from operations” in order to provi underlying financial performance of the business from one period to another, exclusive of items that do not reflect the normal course substitute or alternative for consolidated net income presented in accordance with GAAP (see the accompanying financial tables for earnings from operations to results and guidance based on consolidated net income in accordance with GAAP).

Supplemental Financial Information

●

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

February 26 Investor Conference

●

PG&E Corporation senior management will provide an overview of the business and discuss the company’s strategic focus at its upcoming Investor Conference with members of the financial community on Thursday, February 26, 2009 in New York web cast beginning at 2:00 p.m. Eastern Standard Time at (www.pgecorp.com/investors/investor_info/conference/index.sht earnings announcement, PG&E Corporation will not hold its regular quarterly conference call.

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This press release contains forward-looking statements regarding management’s guidance for PG&E Corporation’s 2009 earning expectations and various assumptions that management believes are reasonable. These statements and assumptions are necessarily or resolution of which may be outside of management's control. Actual results may differ materially. Factors that could cause actual

●

the Utility’s ability to manage capital expenditures and its operating and maintenance expenses within authorized levels

●

the outcome of pending and future regulatory proceedings and whether the Utility is able to timely recover its costs thr

●

the adequacy and price of electricity and natural gas supplies, and the ability of the Utility to manage and respond to th including the ability of the Utility and its counterparties to post or return collateral;

●

the effect of weather, storms, earthquakes, fires, floods, disease, other natural disasters, explosions, accidents, mechani hazards on the Utility’s facilities and operations, its customers, and third parties on which the Utility relies;

●

the potential impacts of climate change on the Utility’s electricity and natural gas businesses;

●

changes in customer demand for electricity and natural gas resulting from unanticipated population growth or decline, changes in technology, including the development of alternative energy sources, or other reasons;

●

operating performance of Diablo Canyon, the availability of nuclear fuel, the occurrence of unplanned outages at Diabl operations at Diablo Canyon;

●

whether the Utility can maintain the cost savings it has recognized from operating efficiencies it has achieved and iden cost-saving measures;

●

whether the Utility incurs substantial expense to improve the safety and reliability of its electric and natural gas system

●

whether the Utility achieves the CPUC’s energy efficiency targets and recognizes any incentives the Utility may earn in

●

the impact of changes in federal or state laws, or their interpretation, on energy policy and the regulation of utilities and

●

the impact of changing wholesale electric or gas market rules, including new rules of the California Independent System electricity market;

●

how the CPUC administers the conditions imposed on PG&E Corporation when it became the Utility’s holding compan

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the extent to which PG&E Corporation or the Utility incurs costs and liabilities in connection with litigation that are not third parties;

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the ability of PG&E Corporation, the Utility, and counterparties to access capital markets and other sources of credit in the recent deteriorating conditions in the economy and financial markets;

●

the impact of environmental laws and regulations and the costs of compliance and remediation;

●

the effect of municipalization, direct access, community choice aggregation, or other forms of bypass;

●

the impact of changes in federal or state tax laws, policies, or regulations; and

●

other factors and risks discussed in PG&E Corporation’s and the Utility’s 2008 Annual Report on Form 10-K and other Commission. For more information about PG&E Corporation and Pacific Gas and Electric Company, please visit our web sites ###

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PG&E Corporation Consolidated Statements of Income (Unaudited) (in millions, except per share amounts)

Year ended December 31, 2008 2007 2006 Operating Revenues Electric Natural gas Total operating revenues Operating Expenses Cost of electricity Cost of natural gas Operating and maintenance Depreciation, amortization, and decommissioning Total operating expenses Operating Income Interest income Interest expense Other income (expense), net Income Before Income Taxes Income tax provision Income From Continuing Operations Discontinued Operations NEGT income tax benefit Net Income Weighted Average Common Shares Outstanding, Basic Weighted Average Common Shares Outstanding, Diluted Earnings Per Common Share from Continuing Operations, Basic Net Earnings Per Common Share, Basic Earnings Per Common Share from Continuing Operations, Diluted Net Earnings Per Common Share, Diluted Dividends Declared Per Common Share

$

$

$ $ $ $ $

10,738 $ 3,890 14,628

9,480 $ 3,757 13,237

8,752 3,787 12,539

4,425 2,090 4,201 1,651 12,367 2,261 94 (728) (18) 1,609 425 1,184

3,437 2,035 3,881 1,770 11,123 2,114 164 (762) 29 1,545 539 1,006

2,922 2,097 3,703 1,709 10,431 2,108 188 (738) (13) 1,545 554 991

154 1,338 $ 357 358 3.23 3.64 3.22 3.63 1.56

$ $ $ $ $

1,006 $ 351 353 2.79 2.79 2.78 2.78 1.44

$ $ $ $ $

991 346 349 2.78 2.78 2.76 2.76 1.32

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Reconciliation of PG&E Corporation's Earnings from Operations to Consolidated Net Income in Accordance with Generally Accepted Accounting Principles (GAAP) Fourth Quarter and Year-to-Date, 2008 vs. 2007 (in millions, except per share amounts)

Three months ended December 31, Earnings per Common Share (Diluted)

Earnings 2008 PG&E Corporation Earnings from Operations (1) Items Impacting Comparability (2) Tax settlement PG&E Corporation Earnings on a GAAP basis

$

260 $

257

$

517 $

Twelve months ended December 31,

2007

2008

203 $

-

203 $

0.70 $

0.67

1.37 $

Earnings per Common Share (Diluted)

Earnings

2007

2008

0.56 $

-

0.56 $

1,081 $

257

1,338 $

2007

2008

1,006 $

-

1,006 $

2007

2.95 $

0.68

3.63 $

2.78

-

2.78

1. "Earnings from operations" is not calculated in accordance with GAAP and excludes items impacting comparability as described in Note (2) below.

2. Items impacting comparability reconcile earnings from operations with consolidated net income as reported in accordance with GAAP. For the three and twelve months ended December 31, 2008, PG&E Corporation recognized $257 million of net income resulting from a settlement of tax audits for tax years 2001 through 2004. Of this amount, $154 million was related to PG&E Corporation's former subsidiary, National Energy & Gas Transmission, Inc., and was recorded as income from discontinued operations.

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Reconciliation of Pacific Gas and Electric Company's Earnings from Operations to Consolidated Net Income in Accordance with GAAP Fourth Quarter and Year-to-Date, 2008 vs. 2007 (in millions)

Three months ended December 31, Earnings 2008 2007

Pacific Gas and Electric Company Earnings from Operations (1) Items Impacting Comparability (2) Tax settlement Pacific Gas and Electric Company Earnings on a GAAP basis

$

265 $ 60

$

325 $

Twelve months ended December 31, Earnings 2008 2007

203 $

1,125 $

-

60

203 $

1,185 $

1,010 1,010

1.

"Earnings from operations" is not calculated in accordance with GAAP and excludes items impacting comparability as described in Note (2) below.

2.

Items impacting comparability reconcile earnings from operations with consolidated net income as reported in accordance with GAAP. For the three and twelve months ended December 31, 2008, Pacific Gas and Electric Company recognized net income of $60 million, a portion of the $257 million in net income recognized by PG&E Corporation resulting from a settlement of tax audits for tax years 2001 through 2004.

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PG&E Corporation Earnings per Common Share from Operations Fourth Quarter and Year-to-Date, 2008 vs. 2007 ($/Share, Diluted)

Q4 2007 EPS from Operations (1) Increase in rate base revenues Energy efficiency incentive revenues Recovery of storm and outage expenses Miscellaneous items

$

Increase in shares outstanding Operating and maintenance - gas system Expenses for statewide and local initiatives

0.56 0.07 0.07 0.02 0.02 (0.02) (0.01) (0.01)

Q4 2008 EPS from Operations (1)

$

0.70

2007 YTD EPS from Operations (1) Increase in rate base revenues Energy efficiency incentive revenues Recovery of storm and outage expenses Billing OII (2) Gas transmission revenues Miscellaneous items

$

2.78 0.27 0.07 0.02 0.02 0.01 0.03

Storm and outage expenses Operating and maintenance - gas system Increase in shares outstanding Expenses for statewide and local initiatives Nuclear refueling outage (3) 2008 YTD EPS from Operations (1)

(0.08) (0.06) (0.05) (0.04) (0.02) $

2.95

1.

For a reconciliation of EPS from operations to EPS on a GAAP basis, see table titled Reconciliation of PG&E Corporation's Earnings from Operations to Consolidated Net Income in Accordance with GAAP.

2.

Charge for customer refunds related to a delayed billing investigation that was incurred in 2007. There was no similar charge in 2008.

3.

There were no refueling outages during the three months ended December 31, 2008 and 2007. During the twelve months ended December 31, 2008, the refueling outage to replace the steam generators lasted for 69 days compared to the same period in 2007 when the outage lasted only 30 days.

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PG&E Corporation EPS Guidance

2009 EPS Guidance EPS Guidance on an Earnings from Operations Basis

Low $

Estimated Items Impacting Comparability Tax refunds (1) Recovery of hydro divestiture costs (2) Accelerated work on gas system (3) Estimated EPS on a GAAP Basis

$

High

3.15 $

3.25

0.13 0.07 (0.15)

0.16 0.07 (0.12)

3.20 $

3.36

(1) Tentative agreement to resolve federal tax refund claims related to tax years 1998 and 1999. (2) Anticipated recovery of costs incurred in connection with efforts to determine the market value of hydroelectric generation facilities. (3) Forecasted costs to accelerate the performance of system-wide gas integrity surveys and remedial work.

Management's guidance for PG&E Corporation's 2009 EPS from operations constitute forward-looking statements that are based on current expectations and various assumptions which management believes are reasonable. These statements and assumptions are necessarily subject to various risks and uncertainties, the realization or resolution of which may be outside of management's control. Actual results may differ materially. Factors that could cause actual results to differ materially include: the Utility's ability to manage capital expenditures and its operating and maintenance expenses within authorized levels; the outcome of pending and future regulatory proceedings and whether the Utility is able to timely recover its costs through rates; the adequacy and price of electricity and natural gas supplies, and the ability of the Utility to manage and respond to the volatility of the electricity and natural gas markets, including the ability of the Utility and its counterparties to post or return collateral; the effect of weather, storms, earthquakes, fires, floods, disease, other natural disasters, explosions, accidents, mechanical breakdowns, acts of terrorism, and other events or hazards on the Utility's facilities and operations, its customers, and third parties on which the Utility relies; the potential impacts of climate change on the Utility's electricity and natural gas businesses; changes in customer demand for electricity and natural gas resulting from unanticipated population growth or decline, general economic and financial market conditions, changes in technology, including the development of alternative energy sources, or other reasons; operating performance of Diablo Canyon, the availability of nuclear fuel, the occurrence of unplanned outages at Diablo Canyon, or the temporary or permanent cessation of operations at Diablo Canyon; whether the Utility can maintain the cost savings it has recognized from operating efficiencies it has achieved and identify and successfully implement additional sustainable cost-saving measures; whether the Utility incurs substantial expense to improve the safety and reliability of its electric and natural gas systems;

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(continued): PG&E Corporation Earnings per Common Share Guidance

whether the Utility achieves the CPUC's energy efficiency targets and recognizes any incentives the Utility may earn in a timely manner; the impact of changes in federal or state laws, or their interpretation, on energy policy and the regulation of utilities and their holding companies; the impact of changing wholesale electric or gas market rules, including new rules of the California Independent System Operator ("CAISO") to restructure the California wholesale electricity market; how the CPUC administers the conditions imposed on PG&E Corporation when it became the Utility's holding company; the extent to which PG&E Corporation or the Utility incurs costs and liabilities in connection with litigation that are not recoverable through rates, from insurance, or from other third parties; the ability of PG&E Corporation, the Utility, and counterparties, to access capital markets and other sources of credit in a timely manner on acceptable terms, especially given the recent deteriorating conditions in the economy and financial markets; the impact of environmental laws and regulations and the costs of compliance and remediation; the effect of municipalization, direct access, community choice aggregation, or other forms of bypass; the impact of changes in federal or state tax laws, policies, or regulations; and other factors and risks discussed in PG&E Corporation and Pacific Gas and Electric Company's 2008 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission.

Exhibit 99.2

Table 1: PG&E Corporation Business Priorities 2008-2011

1. Deliver on Earnings Per Share (EPS) goals 2. Improve system reliability 3. Identify and capture operating efficiencies 4.

Focus on customer service and satisfaction

5. Ensure workforce readiness and alignment

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Table 2: Reconciliation of PG&E Corporation’s Earnings from Operations to Consolidated Net Income in Accordance with Generally Accepted Accounting Principles (GAAP) Fourth Quarter and Year-to-Date, 2008 vs. 2007 (in millions, except per share amounts)

Three months ended December 31, Earnings per Common Share (Diluted)

Earnings 2008 PG&E Corporation Earnings from Operations (1) Items Impacting Comparability (2) Tax settlement PG&E Corporation Earnings on a GAAP basis

$

260 $

257

$

517 $

Twelve months ended December 31,

2007

2008

203 $

-

203 $

0.70 $

0.67

1.37 $

Earnings per Common Share (Diluted)

Earnings

2007

2008

0.56 $

-

0.56 $

1,081 $

257

1,338 $

2007

2008

1,006 $

-

1,006 $

2007

2.95 $

0.68

3.63 $

2.78

-

2.78

1. “Earnings from operations” is not calculated in accordance with GAAP and excludes items impacting comparability as described in Note (2) below. 2. Items impacting comparability reconcile earnings from operations with consolidated net income as reported in accordance with GAAP. For the three and twelve months ended December 31, 2008, PG&E Corporation recognized $257 million of net income resulting from a settlement of tax audits for tax years 2001 through 2004. Of this amount, $154 million was related to PG&E Corporation’s former subsidiary, National Energy & Gas Transmission, Inc., and was recorded as income from discontinued operations.

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Table 3: Reconciliation of Pacific Gas and Electric Company’s Earnings from Operations to Consolidated Net Income in Accordance with GAAP Fourth Quarter and Year-to-Date, 2008 vs. 2007 (in millions)

Three months ended December 31, Earnings 2008 2007

Pacific Gas and Electric Company Earnings from Operations (1) Items Impacting Comparability (2) Tax settlement Pacific Gas and Electric Company Earnings on a GAAP basis

1.

$

265 $ 60

$

325 $

Twelve months ended December 31, Earnings 2008 2007

203 $

1,125 $

-

60

203 $

1,185 $

1,010 1,010

“Earnings from operations” is not calculated in accordance with GAAP and excludes items impacting comparability as described in Note (2) below.

2. Items impacting comparability reconcile earnings from operations with consolidated net income as reported in accordance with GAAP. For the three and twelve months ended December 31, 2008, Pacific Gas and Electric Company recognized net income of $60 million, a portion of the $257 million in net income recognized by PG&E Corporation resulting from a settlement of tax audits for tax years 2001 through 2004.

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Table 4: PG&E Corporation Earnings per Common Share from Operations Fourth Quarter and Year-to-Date, 2008 vs. 2007 ($/Share, Diluted)

Q4 2007 EPS from Operations (1) Increase in rate base revenues Energy efficiency incentive revenues Recovery of storm and outage expenses Miscellaneous items

$

Increase in shares outstanding Operating and maintenance – gas system Expenses for statewide and local initiatives

0.56 0.07 0.07 0.02 0.02 (0.02) (0.01) (0.01)

Q4 2008 EPS from Operations (1)

$

0.70

2007 YTD EPS from Operations (1) Increase in rate base revenues Energy efficiency incentive revenues Recovery of storm and outage expenses Billing OII (2) Gas transmission revenues Miscellaneous items

$

2.78 0.27 0.07 0.02 0.02 0.01 0.03

Storm and outage expenses Operating and maintenance – gas system Increase in shares outstanding Expenses for statewide and local initiatives Nuclear refueling outage (3) 2008 YTD EPS from Operations (1)

(0.08) (0.06) (0.05) (0.04) (0.02) $

2.95

1.

See Table 2 for a reconciliation of EPS from operations to EPS on a GAAP basis.

2.

Charge for customer refunds related to a delayed billing investigation that was incurred in 2007. There was no similar charge in 2008.

3.

There were no refueling outages during the three months ended December 31, 2008 and 2007. During the twelve months ended December 31, 2008, the refueling outage to replace the steam generators lasted for 69 days compared to the same period in 2007 when the outage lasted only 30 days.

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Table 5: PG&E Corporation Share Statistics Year-to-Date 2008 vs. Year-to-Date 2007 (shares in millions, except per share amounts)

Year-toDate 2008

Year-toDate 2007

% Change

Common Stock Data Book Value per share – end of period (1) Weighted average common shares outstanding, basic Employee share-based compensation Weighted average common shares outstanding, diluted 9.5% Convertible Subordinated Notes (participating securities) Weighted average common shares outstanding and participating securities, diluted

1.

$

24.64 $

22.91

7.55%

357 1 358 19

351 2 353 19

1.71% (50.00)% 1.42% -

377

372

1.34%

Common shareholders’ equity per common share outstanding at period end (includes the effect of participating securities).

PG&E Corporation’s Consolidated Financial Statements and the Notes thereto included in PG&E Source: Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 6: Operational Performance Metrics Year-to-Date Actual 2008 vs. Targets 2008

2008 Percentage Weight (1)

YTD Actual

1,081

YTD Target See note (2)

1. Earnings from Operations (in millions)

40% $

2. Customer Satisfaction & Brand Health Index

20%

76.1

77.0

3. Reliable Energy Delivery Index

20%

1.443

1.000

4. Employee Engagement Premier Survey

10%

5. Safety Performance

10%

68.6% 3.241

66.0% 3.483

1. Represents weighting used in calculating performance under the PG&E Corporation Short-Term Incentive Plan for management employees. 2. Internal target not publicly disclosed but is consistent with publicly disclosed guidance for 2008 EPS from operations of $2.90-$3.00.

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DEFINITIONS OF 2008 OPERATIONAL PERFORMANCE METRICS FROM TABLE 6: 1. Earnings from Operations: Earnings from operations measures PG&E Corporation’s earnings power from ongoing core operations. It 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 (items impacting comparability). The measurement is not in accordance with GAAP. For a reconciliation of earnings from operations to consolidated net income in accordance with GAAP, see Tables 2 and 3. The 2008 target for earnings from operations is based on the Utility’s 2008 authorized return on equity. This target is not publicly reported but is consistent with PG&E Corporation’s publicly disclosed guidance range provided for 2008 EPS from operations of $2.90-$3.00. 2. Customer Satisfaction & Brand Health Index: The Customer Satisfaction & Brand Health Index is a combination of a Customer Satisfaction Score, which has a 75 percent weighting and a Brand Favorability Score, which has a 25 percent weighting in the composite. The Customer Satisfaction Score is a measure of overall satisfaction with PG&E’s operational performance in delivering services such as reliability, pricing of services, and customer service experience. The Brand Favorability Score is a measure of the overall favorability towards the PG&E brand, and measures the emotional connection that customers have with the brand and is based on assessing perceptions regarding PG&E’s images, such as trust, heritage, and social responsibility. The Brand Favorability Score will measure residential, small business, and medium business customer perceptions, with weightings based on revenue: 60 percent for residential customers and 40 percent for business customers. 3. Reliable Energy Delivery Index: Reliable Energy Delivery Index is a composite of four categories outlined below. Overall, these metrics provide a balanced view on the number and duration of electric systems unplanned interruptions, the integrity of the gas transmission and distribution system, and performance of the appropriate level of maintenance and focused investment on the system infrastructure. 1. System Average Interruption Frequency Index (SAIFI) 2. Customer Average Interruption Duration Index (CAIDI) 3. Execution of Electric-Based Work Units 4. Gas Transmission and Distribution Integrity 4. Employee Engagement Premier Survey: The employee engagement premier survey is designed around 15 key drivers of employee engagement. The average overall employee engagement score provides a comprehensive metric that is derived by averaging the percent favorable responses from all 40 core survey items (all fall into one of the 15 key drivers). 5. Safety Performance: The Occupational Safety & Health Administration (OSHA) Recordable Rate measures the number of OSHA Recordable injuries, illnesses, or exposures that (1) satisfy OSHA requirements for recordability, and (2) occur in the current year. In general, an injury must result in medical treatment beyond first aid or result in work restrictions, death, or loss of consciousness to be OSHA Recordable. The rate measures how frequently OSHA Recordable cases occur for every 200,000 hours worked, or for approximately every 100 employees.

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Table 7: Pacific Gas and Electric Company Operating Statistics Fourth Quarter and Year-to-Date, 2008 vs. 2007

Three Months Ended December 31, 2008 Electric Sales (in millions kWh) Residential Commercial Industrial Agricultural BART, public street and highway lighting Other electric utilities Sales from Energy Deliveries

Twelve Months Ended December 31,

2007

7,421 8,360 4,126 1,222 213 1 21,343

2008

7,216 8,389 3,874 1,150 217 20,846

Total Electric Customers at December 31 Bundled Gas Sales (in millions MCF) Residential Commercial Total Bundled Gas Sales Transportation Only Total Gas Sales

46 15 61 133 194

48 15 63 151 214

Total Gas Customers at December 31 Sources of Electric Energy (in millions kWh) Utility Generation Nuclear Hydro (net) Fossil Total Utility Generation Purchased Power Qualifying Facilities Irrigation Districts Other Purchased Power Spot Market Purchases/Sales, net Total Purchased Power (1) Delivery from DWR

2007

31,454 34,053 16,148 5,594 877 1 88,127

30,796 33,986 15,159 5,402 833 3 86,179

5,134,423

5,118,593

199 64 263 570 833

197 67 264 605 869

4,271,214

4,270,270

4,846 1,645 125 6,616

4,870 1,874 135 6,879

17,096 7,865 518 25,479

18,588 7,652 483 26,723

3,579 285 500 6,751 11,115 3,220

3,962 302 204 3,752 8,220 5,504

15,758 2,094 2,562 27,254 47,668 13,344

16,579 2,497 2,390 14,691 36,157 21,193

Delivery to Direct Access Customers

1,505

1,610

6,191

6,724

Other (includes energy loss)

(1,113)

(1,367)

(4,555)

(4,618)

Total Electric Energy Delivered

21,343

20,846

88,127

86,179

87% 2/3/084/12/08 68.9

95% 4/30/075/29/07 29.8

Diablo Canyon Performance Overall capacity factor (including refuelings) Refueling outage period Refueling outage duration during the period (days)

1.

98% None None

99% None None

For the three months ended December 31, 2008 and 2007, Total Purchased Power is net of Spot Market Sales of 608 million kWh and 633 million kWh, respectively. For the twelve months ended December 31, 2008 and 2007, Total Purchased Power is net of Spot Market Sales of 3,432 million kWh and 2,671 million kWh, respectively.

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Table 8: PG&E Corporation EPS Guidance

2009 EPS Guidance EPS Guidance on an Earnings from Operations Basis

Low $

Estimated Items Impacting Comparability Tax refunds (1) Recovery of hydro divestiture costs (2) Accelerated work on gas system (3) Estimated EPS on a GAAP Basis

$

High

3.15 $

3.25

0.13 0.07 (0.15)

0.16 0.07 (0.12)

3.20 $

3.36

1.

Tentative agreement to resolve federal tax refund claims related to tax years 1998 and 1999.

2.

Anticipated recovery of costs incurred in connection with efforts to determine the market value of hydroelectric generation facilities.

3.

Forecasted costs to accelerate the performance of system-wide gas integrity surveys and remedial work.

Management's statements regarding 2009 guidance for earnings from operations per common share for PG&E Corporation, estimated rate base for 2009, and general sensitivities for 2009 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. Actual results may differ materially. Factors that could cause actual results to differ materially include: •

the Utility’s ability to manage capital expenditures and its operating and maintenance expenses within authorized levels;

•

the outcome of pending and future regulatory proceedings and whether the Utility is able to timely recover its costs through rates;

•

the adequacy and price of electricity and natural gas supplies, and the ability of the Utility to manage and respond to the volatility of the electricity and natural gas markets, including the ability of the Utility and its counterparties to post or return collateral;

•

the effect of weather, storms, earthquakes, fires, floods, disease, other natural disasters, explosions, accidents, mechanical breakdowns, acts of terrorism, and other events or hazards on the Utility’s facilities and operations, its customers, and third parties on which the Utility relies;

•

the potential impacts of climate change on the Utility’s electricity and natural gas businesses;

•

changes in customer demand for electricity and natural gas resulting from unanticipated population growth or decline, general economic and financial market conditions, changes in technology, including the development of alternative energy sources, or other reasons;

•

operating performance of Diablo Canyon, the availability of nuclear fuel, the occurrence of unplanned outages at Diablo Canyon, or the temporary or permanent cessation of operations at Diablo Canyon;

•

whether the Utility can maintain the cost savings it has recognized from operating efficiencies it has achieved and identify and successfully implement additional sustainable cost-saving measures;

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•

whether the Utility incurs substantial expense to improve the safety and reliability of its electric and natural gas systems;

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

•

whether the Utility achieves the CPUC’s energy efficiency targets and recognizes any incentives the Utility may earn in a timely manner;

•

the impact of changes in federal or state laws, or their interpretation, on energy policy and the regulation of utilities and their holding companies;

•

the impact of changing wholesale electric or gas market rules, including new rules of the California Independent System Operator (“CAISO”) to restructure the California wholesale electricity market;

•

how the CPUC administers the conditions imposed on PG&E Corporation when it became the Utility’s holding company;

•

the extent to which PG&E Corporation or the Utility incurs costs and liabilities in connection with litigation that are not recoverable through rates, from insurance, or from other third parties;

•

the ability of PG&E Corporation, the Utility, and counterparties, to access capital markets and other sources of credit in a timely manner on acceptable terms, especially given the recent deteriorating conditions in the economy and financial markets;

•

the impact of environmental laws and regulations and the costs of compliance and remediation;

•

the effect of municipalization, direct access, community choice aggregation, or other forms of bypass;

•

the impact of changes in federal or state tax laws, policies, or regulations; and

•

other factors and risks discussed in PG&E Corporation and Pacific Gas and Electric Company’s 2008 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission.

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Table 9: Rate Base - Pacific Gas and Electric Company

Total Weighted Average Rate Base (in billions)

2008 2009 Recorded Estimated $ 18.2 $ 20.1

The estimate of rate base for 2009 and the forecast of capital expenditures that the estimate is based on are forward-looking state uncertainties, including whether the amount and timing of actual expenditures are consistent with the forecasted amount and timi discussion of the factors that may affect future results, see the factors listed in Table 8 and the discussion of risk factors in PG&E Company's Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 10: General Earnings Sensitivities PG&E Corporation and Pacific Gas and Electric Company

Variable Rate base

Description of Change +/- $100 million change in rate base (1)

Estimated 2009 Earnings Impact +/- $6 million

Return on equity +/- 0.1% change in earned ROE (ROE)

+/- $10 million

Share count

+/- 1% change in average shares outstanding

-/+ $0.03 per share

Revenues

+/- $7 million change in revenues (pre-tax), including Electric Transmission and +/- $0.01 per California Gas Transmission share

1.

Assumes earning an 11.45% combined CPUC- and FERC-authorized weighted average return on 52% equity portion of capital structure.

These general earnings sensitivities that may affect 2009 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 Table 8.

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Table 11: Cash Flow Sources and Uses Year-to-Date 2008 PG&E Corporation Consolidated (in millions)

Cash and Cash Equivalents, December 31, 2007 Sources of Cash Cash from operations Net proceeds from sale of assets Decrease in restricted cash Net proceeds from issuance of long-term debt Borrowings under credit facilities Borrowings of commercial paper, net Common stock issued

$

345

$

2,749 26 36 2,185 533 6 225 5,760

$ Uses of Cash Capital expenditures Investments in and proceeds from nuclear decommissioning trust, net Repayments under credit facilities Long-term debt repurchased Energy recovery bonds matured Common stock dividends paid Other

Cash and Cash Equivalents, December 31, 2008

$

$

(3,628) (49) (783) (454) (354) (546) (72) (5,886)

$

219

Source: PG&E Corporation’s Consolidated Statement of Cash Flows included in PG&E Corporation and Pacific Gas and Electric Company’s combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 12: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Cash Position Year-to-Date 2008 vs. Year-to-Date 2007 (in millions)

2008 Cash Flow from Operating Activities (YTD December 31) PG&E Corporation Pacific Gas and Electric Company

$ $

Consolidated Cash Balance (at December 31) PG&E Corporation Pacific Gas and Electric Company

$ $

Consolidated Restricted Cash Balance (at December 31) PG&E Corporation Pacific Gas and Electric Company(1)

$ $

1.

2007

Change

(17) $ 2,766 2,749 $

5 $ 2,541 2,546 $

(22) 225 203

167 $ 52 219 $

204 $ 141 345 $

(37) (89) (126)

- $ 1,309 1,309 $

- $ 1,315 1,315 $

(6) (6)

Includes $19 million and $18 million of restricted cash classified as Other Noncurrent Assets – Other in 2008 and 2007, respectively.

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company’s combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 13: PG&E Corporation and Pacific Gas and Electric Company’s Long-Term Debt Year-End 2008 vs. Year-End 2007 (in millions)

Balance at December 31, 2008 2007 PG&E Corporation Convertible subordinated notes, 9.50%, due 2010 Utility Senior notes: 3.60% due 2009 4.20% due 2011 6.25% due 2013 4.80% due 2014 5.625% due 2017 8.25% due 2018 6.05% due 2034 5.80% due 2037 6.35% due 2038 Less: current portion Unamortized discount, net of premium Total senior notes Pollution control bonds: Series 1996 C, E, F, 1997 B, variable rates(1), due 2026(2) Series 1996 A, 5.35%, due 2016 Series 2004 A-D, 4.75%, due 2023 Series 2005 A-G, variable rates, due 2016 and 2026(3) Series 2008 A-D, variable rates(4), due 2016 and 2026(5) Series 2008 F and G, 3.75%(6), due 2018 and 2026 Total pollution control bonds Total Utility long-term debt, net of current portion Total consolidated long-term debt, net of current portion

$

$

280 $

280

600 500 400 1,000 700 800 3,000 700 400 (600) (22) 7,478

600 500 1,000 500 3,000 700 (22) 6,278

614 200 345 309 95 1,563 9,041 9,321 $

614 200 345 454 1,613 7,891 8,171

(1) At

December 31, 2008, interest rates on these bonds and the related loans ranged from 0.75% to 1.20%. series of these bonds is supported by a separate letter of credit which expires on February 24, 2012. Although the stated maturity date is 2026, each series will remain outstanding only if the Utility extends or replaces the letter of credit related to the series or otherwise obtains a consent from the issuer to the continuation of the series without a credit facility. (3) During 2008, the credit rating of the insurer of these bonds was downgraded or put on review for possible downgrade by several credit agencies, resulting in increased interest rates. To reduce interest expense, the Utility repurchased $300 million of the 2005 bonds in March 2008 and the remaining $154 million in April 2008. In September and October 2008, all of these series, except for the Series 2005 E bonds, were refunded through the issuance of the Series 2008 A-D and F and G bonds. See footnotes 4 and 5. (4) At December 31, 2008, interest rates on these bonds and the related loans ranged from 0.57% to 0.85%. (5) Each series of these bonds is supported by a separate direct-pay letter of credit which expires on October 29, 2011. The Utility may choose to provide a substitute letter of credit for any series of these bonds, subject to a rating requirement. (6) These bonds bear interest at 3.75% per year through September 19, 2010, are subject to mandatory tender on September 10, 2010, and may be remarketed in a fixed or variable rate mode. (2) Each

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 14: PG&E Corporation and Pacific Gas and Electric Company Repayment Schedule and Interest Rates Long-Term Debt and Energy Recovery Bonds as of December 31, 2008 (in millions, except interest rates)

2009 Long-term debt: PG&E Corporation Average fixed interest rate Fixed rate obligations Utility Average fixed interest rate Fixed rate obligations $ Variable interest rate as of December 31, 2008 Variable rate obligations Total consolidated long-term debt $

2010

-

$

3.60% 600

$

-

2011

2012

2013

Thereafter

Total

9.50%

-

-

-

-

280

-

-

-

-

3.75%

4.20%

-

6.25%

5.99%

500

-

0.75%

0.92%

-

-

-

-

$

923

7,145

$

9,943

95

$

-

$

400

$

7,145

9.50% $

280

5.71% $

8,740

0.87%

(1)

-

600

$

-

$

309

$

614(2)

375

$

809

$

614

$

400

$

(1)

These bonds, due in 2016-2026, are backed by a direct-pay letter of credit which expires on October 29, 2011. The bonds will be subject to a mandatory redemption unless the letter of credit is extended or replaced or the issuer consents to the continuation of these series without a credit facility. Accordingly, the bonds have been classified for repayment purposes in 2011. (2) The $614 million pollution control bonds, due in 2026, are backed by letters of credit which expire on February 24, 2012. The bonds 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 2012. ENERGY RECOVERY BONDS (3): Utility Average fixed interest rate Energy recovery bonds

2009

$

4.36% 370 $

2010 4.49% 386 $

2011 4.59% 404 $

2012 4.66% 423 $

Total 4.53% 1,583

(3)

These bonds were issued by PG&E Energy Recovery Funding LLC (“PERF”), a wholly owned consolidated subsidiary of Pacific Gas and Electric Company. The proceeds were used by PERF to purchase from Pacific Gas and Electric Company the right, known as "recovery property," to be paid a specified amount from a dedicated rate component. While PERF is a wholly owned subsidiary of Pacific Gas and Electric Company, it is legally separate from Pacific Gas and Electric Company. The assets, including recovery property, of PERF are not available to creditors of PG&E Corporation or Pacific Gas and Electric Company, and recovery property is not legally an asset of PG&E Corporation or Pacific Gas and Electric Company.

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 15: Pacific Gas and Electric Company Docket Numbers of Selected Regulatory Cases

Name

Brief Description

Docket Number

Request for New Generation Offers and Pacific Gas and Electric Company has developed a Potential New Utility-Owned Generation shortlist of participants who responded to the Utility’s request for offers (“RFO”) solicitation for 800 to 1,200 megawatts of dispatchable and operationally flexible new generation resources to be on-line no later than May 2015. The Utility anticipates executing contracts and requesting CPUC approval of the executed contracts in the first half of 2009.

R.06-02013

Energy Efficiency Order Instituting Rulemaking (OIR) Post-2005

CPUC proceeding to establish incentive ratemaking mechanisms applicable to the California investor-owned utilities’ implementation of their 2006-2008 and 2009-2011 energy efficiency program cycles.

R.09-01019 D.07-09043 D.08-01042 D.08-12059 R.06-04010 D.07-10032

Cost of Capital 2008

CPUC proceeding to establish capital structure and cost of capital for the California investor-owned electric utilities. The CPUC issued a final decision on December 20, 2007, maintaining Pacific Gas and Electric Company’s authorized ROE at 11.35% and its common equity ratio at 52%.

A.07-05008 D.07-12049

Three-Year Cost of Capital Mechanism On May 29, 2008, the CPUC adopted a uniform three-year cost of capital mechanism to replace the annual cost of capital proceeding. The Utility’s capital structure, including an equity component of 52%, and its cost of capital, including an 11.35% ROE, is set until 2011 and will only be changed before 2011 if the annual automatic adjustment mechanism established by the CPUC is triggered.

Transmission Owner 10 Rate Case

On October 22, 2008, the FERC approved an all-party settlement in the Utility’s TO rate case that sets an annual wholesale base transmission revenue requirement of $706 million and a retail base transmission revenue requirement of $718 million, effective March 1, 2008.

SmartMeterTM Program Upgrade Application

Pacific Gas and Electric Company has requested CPUC approval to upgrade elements of the SmartMeterTM program and to recover additional capital expenditures related to the proposed upgrade.

D.08-05035

ER07-1213000

A.07-12009

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Catastrophic Event Memorandum Account Application

The CPUC approved a settlement on November 21, 2008 that permits the Utility to collect approximately $15 million through 2010 to recover costs to restore service and repair facilities following the January 2008 winter storm.

A.08-03017 D.08-11045

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Table 15 (continued): Pacific Gas and Electric Company Docket Numbers of Selected Regulatory Cases

Application to Recover Hydroelectric Generation Facility Divestiture Costs

Pacific Gas and Electric Company has requested CPUC authorization to recover approximately $47 million of hydroelectric generation facility divestiture costs.

A.08-04022

Proposed Electric Distribution Reliability Pacific Gas and Electric Company has requested CPUC Program (Cornerstone Improvement authorization to recover $2.3 billion in costs associated Program) with electric distribution reliability capital expenditures and operating and maintenance expense incremental to amounts recovered in the 2007 General Rate Case.

A.08-05023

SmartGrid OIR

R.08-12009

Order Instituting Rulemaking to consider Smart Grid technologies pursuant to federal legislation and the CPUC’s motion to actively guide policy in California's development of a Smart Grid system.

Discussion of these regulatory cases is included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 16: PG&E Corporation Consolidated Statements of Income (Unaudited) (in millions, except per share amounts)

Year ended December 31, 2008 2007 2006 Operating Revenues Electric Natural gas Total operating revenues Operating Expenses Cost of electricity Cost of natural gas Operating and maintenance Depreciation, amortization, and decommissioning Total operating expenses Operating Income Interest income Interest expense Other income (expense), net Income Before Income Taxes Income tax provision Income From Continuing Operations Discontinued Operations NEGT income tax benefit Net Income Weighted Average Common Shares Outstanding, Basic Weighted Average Common Shares Outstanding, Diluted Earnings Per Common Share from Continuing Operations, Basic Net Earnings Per Common Share, Basic Earnings Per Common Share from Continuing Operations, Diluted Net Earnings Per Common Share, Diluted Dividends Declared Per Common Share

$

$

$ $ $ $ $

10,738 $ 3,890 14,628

9,480 $ 3,757 13,237

8,752 3,787 12,539

4,425 2,090 4,201 1,651 12,367 2,261 94 (728) (18) 1,609 425 1,184

3,437 2,035 3,881 1,770 11,123 2,114 164 (762) 29 1,545 539 1,006

2,922 2,097 3,703 1,709 10,431 2,108 188 (738) (13) 1,545 554 991

154 1,338 $ 357 358 3.23 3.64 3.22 3.63 1.56

$ $ $ $ $

1,006 $ 351 353 2.79 2.79 2.78 2.78 1.44

$ $ $ $ $

991 346 349 2.78 2.78 2.76 2.76 1.32

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 17: PG&E Corporation Consolidated Balance Sheets (Unaudited) (in millions)

Balance at December 31, 2008 2007 ASSETS Current Assets Cash and cash equivalents Restricted cash Accounts receivable: Customers (net of allowance for doubtful accounts of $76 million in 2008 and $58 million in 2007) Accrued unbilled revenue Regulatory balancing accounts Inventories: Gas stored underground and fuel oil Materials and supplies Income taxes receivable Prepaid expenses and other Total current assets Property, Plant, and Equipment Electric Gas Construction work in progress Other Total property, plant, and equipment Accumulated depreciation Net property, plant, and equipment Other Noncurrent Assets Regulatory assets Nuclear decommissioning funds Other Total other noncurrent assets TOTAL ASSETS

$

$

219 $ 1,290

345 1,297

1,751 685 1,197

1,599 750 771

232 191 120 718 6,403

205 166 61 255 5,449

27,638 10,155 2,023 17 39,833 (13,572) 26,261

25,599 9,620 1,348 17 36,584 (12,928) 23,656

5,996 1,718 482 8,196 40,860 $

4,459 1,979 1,089 7,527 36,632

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 17 (continued): PG&E Corporation Consolidated Balance Sheets (Unaudited) (in millions, except share amounts)

Balance at December 31, 2008 2007 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term borrowings Long-term debt, classified as current Energy recovery bonds, classified as current Accounts payable: Trade creditors Disputed claims and customer refunds Regulatory balancing accounts Other Interest payable Deferred income taxes Other Total current liabilities Noncurrent Liabilities Long-term debt Energy recovery bonds Regulatory liabilities Pension and other postretirement benefits Asset retirement obligations Income taxes payable Deferred income taxes Deferred tax credits Other Total noncurrent liabilities Commitments and Contingencies Preferred Stock of Subsidiaries 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 361,059,116 common and 1,287,569 restricted shares in 2008 and issued 378,385,151 common and 1,261,125 restricted shares in 2007 Common stock held by subsidiary, at cost, 24,665,500 shares in 2007 Reinvested earnings Accumulated other comprehensive income (loss) Total common shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

$

287 $ 600 370

519 354

1,096 1,580 730 343 802 251 1,567 7,626

1,067 1,629 673 394 697 1,374 6,707

9,321 1,213 3,657 2,088 1,684 35 3,397 94 2,116 23,605

8,171 1,582 4,448 1,579 234 3,053 99 1,954 21,120

252

252

-

-

5,984 3,614 (221) 9,377 40,860 $

6,110 (718) 3,151 10 8,553 36,632

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 18: PG&E Corporation Consolidated Statements of Cash Flows (Unaudited) (in millions)

Year ended December 31, 2008 2007 2006 Cash Flows From Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and decommissioning Allowance for equity funds used during construction Gain on sale of assets Deferred income taxes and tax credits, net Other changes in noncurrent assets and liabilities Effect of changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Income taxes receivable/payable Regulatory balancing accounts, net Other current assets Other current liabilities Other Net cash provided by operating activities Cash Flows From Investing Activities Capital expenditures Net proceeds from sale of assets Decrease in restricted cash Proceeds from nuclear decommissioning trust sales Purchases of nuclear decommissioning trust investments Other Net cash used in investing activities Cash Flows From Financing Activities Borrowings under accounts receivable facility and revolving credit facility Repayments under accounts receivable facility and revolving credit facility Net issuance (repayments) of commercial paper, net of discount of $11 million in 2008, $1 million in 2007 and $2 million in 2006 Proceeds from issuance of long-term debt, net of discount, premium and issuance costs of $19 million in 2008 and $16 million in 2007 Long-term debt repurchased Rate reduction bonds matured Energy recovery bonds matured Common stock issued Common stock repurchased Common stock dividends paid Other Net cash provided by (used in) financing activities Net change in cash and cash equivalents Cash and cash equivalents at January 1 Cash and cash equivalents at December 31 Supplemental disclosures of cash flow information Cash paid (received) for: Interest (net of amounts capitalized) Income taxes, net

$

$

$

1,338

$

1,006

$

991

1,863 (70) (1) 590 (126)

1,959 (64) (1) 55 192

1,803 (47) (11) (285) 151

(87) (59) (140) (59) (394) (221) 120 (5) 2,749

(6) (41) (178) 56 (567) 172 8 (45) 2,546

130 32 17 124 329 (273) (233) (14) 2,714

(3,628) 26 36 1,635 (1,684) (37) (3,652)

(2,769) 21 185 830 (933) (2,666)

(2,402) 17 115 1,087 (1,244) (2,427)

533

850

350

(783)

(900)

(310)

6

(209)

458

2,185 (454) (354) 225 (546) (35) 777 (126) 345 219

1,184 (290) (340) 175 (496) 35 9 (111) 456 345

(290) (316) 131 (114) (456) 3 (544) (257) 713 456

523 (112)

$

$

514 537

$

$

503 736

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Supplemental disclosures of noncash investing and financing activities Common stock dividends declared but not yet paid Capital expenditures financed through accounts payable Stock issued in lieu of dividend Assumption of capital lease obligation Transfer of Gateway Generating Station asset

$

143 348 20 -

$

129 279 5 -

$

117 215 408 69

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 19: PG&E Corporation Consolidated Statements of Shareholders’ Equity (Unaudited) (in millions, except share amounts)

Total Common Accumulated Common Common Stock Other ShareStock Held by Unearned Reinvested Comprehensive holders' Comprehensive Amount Subsidiary Compensation Earnings Income (Loss) Equity Income

Common Stock Shares

Balance at December 31, 2005 368,268,502 $ 5,827 $ Net income Comprehensive income Common stock issued Accelerated share repurchase settlement of stock repurchased in 2005 Common stock warrants exercised Common restricted stock, unearned compensation reversed in accordance with SFAS No. 123R Common restricted stock issued Common restricted stock cancelled Common restricted stock amortization Common stock dividends declared and paid Common stock dividends declared but not yet paid Tax benefit from employee stock plans

(718) $ -

(22) $ -

2,139 $ 991

(8) $ 7,218 991 $

991

$

991

5,399,707

110

-

-

-

-

110

-

(114)

-

-

-

-

(114)

51,890

-

-

-

-

-

-

-

(22)

-

22

-

-

-

566,255

21

-

-

-

-

21

(105,295)

(1)

-

-

-

-

(1)

-

20

-

-

-

-

20

-

-

-

-

(342)

-

(342)

-

-

-

-

(117)

-

(117)

-

35

-

-

-

-

35

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Adoption of SFAS No. 158 (net of income tax benefit of $8 million) Other Balance at December 31, 2006 374,181,059 Net income Employee benefit plan adjustment in accordance with SFAS No. 158 (net of income tax expense of $17 million) Comprehensive income Common stock issued, net 5,465,217 Stock-based compensation amortization Common stock dividends declared and paid Common stock dividends declared but not yet paid Tax benefit from employee stock plans Adoption of FIN 48 Balance at December 31, 2007 379,646,276 Net income Employee benefit plan adjustment in accordance with SFAS No. 158 (net of income tax benefit of $156 million) Comprehensive income Common stock issued, net 7,365,909 Common stock cancelled (24,665,500) Stock-based compensation amortization -

1

-

-

-

(11) -

(11) 1

5,877 -

(718) -

-

2,671 1,006

(19) -

7,811 1,006 $

-

-

-

-

29

29

29 $

1,035

1,338

175

-

-

-

-

175

31

-

-

-

-

31

-

-

-

(379)

-

(379)

-

-

-

(129)

-

(129)

27

-

-

-

-

27

-

-

-

(18)

-

(18)

6,110 -

(718) -

-

3,151 1,338

10 -

8,553 1,338 $

(231)

(231)

-

-

-

-

-

247

-

-

-

-

247

(403)

718

-

(315)

-

-

24

-

-

-

-

24

1,006

- $

(231) 1,107

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Common stock dividends declared and paid Common stock dividends declared but not yet paid Tax benefit from employee stock plans 6 Balance at December 31, 2008 362,346,685 $ 5,984 $

-

-

(417)

-

(417)

-

-

(143)

-

(143)

-

-

-

-

6

- $

- $

3,614 $

(221) $ 9,377

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 20: Pacific Gas and Electric Company Consolidated Statements of Income (Unaudited) (in millions)

Year ended December 31, 2008 2007 2006 Operating Revenues Electric Natural gas Total operating revenues Operating Expenses Cost of electricity Cost of natural gas Operating and maintenance Depreciation, amortization and decommissioning Total operating expenses Operating Income Interest income Interest expense Other income, net Income Before Income Taxes Income tax provision Net Income Preferred stock dividend requirement Income Available for Common Stock

$

$

10,738 $ 3,890 14,628

9,481 $ 3,757 13,238

8,752 3,787 12,539

4,425 2,090 4,197 1,650 12,362 2,266 91 (698) 28 1,687 488 1,199 14 1,185 $

3,437 2,035 3,872 1,769 11,113 2,125 150 (732) 52 1,595 571 1,024 14 1,010 $

2,922 2,097 3,697 1,708 10,424 2,115 175 (710) 7 1,587 602 985 14 971

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 21: Pacific Gas and Electric Company Consolidated Balance Sheets (Unaudited) (in millions)

Balance at December 31, 2008 2007 ASSETS Current Assets Cash and cash equivalents Restricted cash Accounts receivable: Customers (net of allowance for doubtful accounts of $76 million in 2008 and $58 million in 2007) Accrued unbilled revenue Related parties Regulatory balancing accounts Inventories: Gas stored underground and fuel oil Materials and supplies Income taxes receivable Prepaid expenses and other Total current assets Property, Plant, and Equipment Electric Gas Construction work in progress Total property, plant, and equipment Accumulated depreciation Net property, plant, and equipment Other Noncurrent Assets Regulatory assets Nuclear decommissioning funds Related parties receivable Other Total other noncurrent assets TOTAL ASSETS

$

$

52 $ 1,290

141 1,297

1,751 685 2 1,197

1,599 750 6 771

232 191 25 705 6,130

205 166 15 252 5,202

27,638 10,155 2,023 39,816 (13,557) 26,259

25,599 9,620 1,348 36,567 (12,913) 23,654

5,996 1,718 27 407 8,148 40,537 $

4,459 1,979 23 993 7,454 36,310

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 21 (continued): Pacific Gas and Electric Company Consolidated Balance Sheets (Unaudited) (in millions, except share amounts)

Balance at December 31, 2008 2007 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term borrowings Long-term debt, classified as current Energy recovery bonds, classified as current Accounts payable: Trade creditors Disputed claims and customer refunds Related parties Regulatory balancing accounts Other Interest payable Income tax payable Deferred income taxes Other Total current liabilities Noncurrent Liabilities Long-term debt Energy recovery bonds Regulatory liabilities Pension and postretirement benefits Asset retirement obligations Income taxes payable Deferred income taxes Deferred tax credits Other Total noncurrent liabilities Commitments and Contingencies Shareholders' Equity Preferred stock without mandatory redemption provisions: Nonredeemable, 5.00% to 6.00%, outstanding 5,784,825 shares Redeemable, 4.36% to 5.00%, outstanding 4,534,958 shares Common stock, $5 par value, authorized 800,000,000 shares, issued 264,374,809 shares in 2008 and issued 282,916,485 shares in 2007 Common stock held by subsidiary, at cost, 19,481,213 shares in 2007 Additional paid-in capital Reinvested earnings Accumulated other comprehensive income (loss) Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

$

287 $ 600 370

519 354

1,096 1,580 25 730 325 802 53 257 1,371 7,496

1,067 1,629 28 673 370 697 4 1,200 6,541

9,041 1,213 3,657 2,040 1,684 12 3,449 94 2,064 23,254

7,891 1,582 4,448 1,579 103 3,104 99 1,838 20,644

145 113

145 113

1,322 2,331 6,092 (216) 9,787 40,537 $

1,415 (475) 2,220 5,694 13 9,125 36,310

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 22: Pacific Gas and Electric Company Consolidated Statements of Cash Flows (Unaudited) (in millions)

Year ended December 31, 2008 2007 2006 Cash Flows From Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and decommissioning Allowance for equity funds used during construction Gain on sale of assets Deferred income taxes and tax credits, net Other changes in noncurrent assets and liabilities Effect of changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable Income taxes receivable/payable Regulatory balancing accounts, net Other current assets Other current liabilities Other Net cash provided by operating activities Cash Flows From Investing Activities Capital expenditures Net proceeds from sale of assets Decrease in restricted cash Proceeds from nuclear decommissioning trust sales Purchases of nuclear decommissioning trust investments Other Net cash used in investing activities Cash Flows From Financing Activities Borrowings under accounts receivable facility and revolving credit facility Repayments under accounts receivable facility and revolving credit facility Net issuance (repayments) of commercial paper, net of discount of $11 million in 2008, $1 million in 2007 and $2 million in 2006 Proceeds from issuance of long-term debt, net of discount, premium and issuance costs of $19 million in 2008 and $16 million in 2007 Long-term debt repurchased Rate reduction bonds matured Energy recovery bonds matured Preferred stock dividends paid Common stock dividends paid Equity contribution Other Net cash provided by (used in) financing activities Net change in cash and cash equivalents Cash and cash equivalents at January 1 Cash and cash equivalents at December 31 Supplemental disclosures of cash flow information Cash paid (received) for: Interest (net of amounts capitalized) Income taxes, net Supplemental disclosures of noncash investing and financing activities Capital expenditures financed through accounts payable Assumption of capital lease obligation Transfer of Gateway Generating Station asset

$

1,199 $

1,024 $

985

1,838 (70) (1) 593 (25)

1,956 (64) (1) 43 188

1,802 (47) (11) (287) 116

(83) (59) (137) 43 (394) (223) 90 (5) 2,766

(6) (41) (196) 56 (567) 170 24 (45) 2,541

128 34 21 28 329 (273) (235) (13) 2,577

(3,628) 26 36 1,635 (1,684) (25) (3,640)

(2,768) 21 185 830 (933) (2,665)

(2,402) 17 115 1,087 (1,244) 1 (2,426)

533

850

350

(783)

(900)

(310)

6

(209)

458

2,185 (454) (354) (14) (568) 270 (36) 785 (89) 141 52 $

1,184 (290) (340) (14) (509) 400 23 195 71 70 141 $

(290) (316) (14) (460) 38 (544) (393) 463 70

$

496 $ (95)

474 $ 594

476 897

$

348 $ -

279 $ -

215 408 69

$

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Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

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Table 23: Pacific Gas and Electric Company Consolidated Statements of Shareholders’ Equity (Unaudited) (in millions)

Preferred Stock Without Common Accumulated Total Mandatory Additional Stock Other ShareRedemption Common Paid-in Held by Reinvested Comprehensive holders' Comprehensive Provisions Stock Capital Subsidiary Earnings Income (Loss) Equity Income Balance at December 31, 2005 $ Net income Minimum pension liability adjustment (net of income tax expense of $2 million) Comprehensive income Tax benefit from employee stock plans Common stock dividend Preferred stock dividend Adoption of SFAS No. 158 (net of income tax benefit of $7 million) Balance at December 31, 2006 Net income Employee benefit plan adjustment in accordance with SFAS No. 158 (net of income tax expense of $17 million) Comprehensive income Equity contribution Tax benefit from employee stock plans

258 $ 1,398 $ -

-

-

1,776 $ -

-

(475) $ -

-

4,702 $ 985

-

(9) $ 7,650 985 $

3

3

3 $

988

1,024

-

-

46

-

-

-

46

-

-

-

-

(460)

-

(460)

-

-

-

-

(14)

-

(14)

-

-

-

-

-

(10)

(10)

258 -

1,398 -

1,822 -

(475) -

5,213 1,024

(16) -

8,200 1,024 $

-

-

-

-

-

29

29

29 $

-

17

383

-

-

-

400

-

-

15

-

-

-

15

985

1,053

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Common stock dividend Preferred stock dividend Adoption of FIN 48 Balance at December 31, 2007 Net income Employee benefit plan adjustment in accordance with SFAS No. 158 (net of income tax expense of $159 million) Comprehensive income Equity contribution Tax benefit from employee stock plans Common stock dividend Common stock cancelled Preferred stock dividend Balance at December 31, 2008 $

-

-

-

-

(509)

-

(509)

-

-

-

-

(14)

-

(14)

-

-

-

-

(20)

-

(20)

258 -

1,415 -

2,220 -

(475) -

5,694 1,199

13 -

9,125 1,199 $

-

-

-

-

-

(229)

(229)

-

-

-

-

-

-

-

4

266

-

-

-

270

-

-

4

-

-

-

4

-

-

-

-

(568)

-

(568)

-

(97)

(159)

475

(219)

-

-

-

-

-

-

(14)

-

(14)

258 $ 1,322 $

2,331 $

- $

6,092 $

- $

(216) $ 9,787

Source: PG&E Corporation and Pacific Gas and Electric Company’s Consolidated Financial Statements and Notes thereto included in PG&E Corporation and Pacific Gas and Electric Company's combined Annual Report on Form 10-K for the year ended December 31, 2008.

1,199

(229) 970