Fitch Affirms PG&E at 'BBB+'; Comments on Expected Mortgage Lien Discharge

Business Wire, March 8, 2005

NEW YORK -- Fitch Ratings has affirmed both the senior secured and indicative senior unsecured debt ratings of Pacific Gas & Electric Company (PG&E) at 'BBB '. At the same time, Fitch reinstates PG&E's preferred stock rating at 'BBB'. The Rating Outlook for all of PG&E's debt and preferred securities is Stable.

The ratings reflect the utility's manageable postbankruptcy restructuring debt load; relatively stable cash flow; reduced financial leverage at its direct parent, PG&E Corporation (PCG); and PCG's strategic focus on the core utility business. PG&E's senior secured and indicative unsecured ratings are the same, reflecting debt covenants that provide for the release of collateral when the utility's senior unsecured debt rating is changed by both of two other credit rating agencies to a level equal to the initial rating assigned to the restructured senior secured debt of PG&E by that agency. The second required rating change occurred last week, setting the stage for the discharge of collateral at the option of management. To implement the fall-away provision, PG&E management is required to obtain confirmation from both of two other rating agencies that the post fall-away bond ratings will not decline below certain levels, among other things.

Fitch anticipates withdrawing PG&E's senior secured debt ratings should release of the collateral occur. At that juncture, the utility's secured debt would become its unsecured obligations and senior-most debt. Fitch increased Pacific Gas & Electric Company's senior secured and unsecured credit ratings to their current 'BBB ' levels from 'BBB' and 'BBB-', respectively, on Nov. 16, 2004. For further information, see 'Credit Update: Pacific Gas & Electric (Subsidiary of PG&E Corporation),' dated Nov. 19, 2004, available on the Fitch Ratings web site at 'www.fitchratings.com'.