<html>
<head>
</head>
<body link="blue" vlink="purple">
&lt;&gt;

<div>
<table border="0" cellspacing="0" cellpadding="0" width="644">
<tr>
<td colspan="4" valign="top">
<p align="center">SECURITIES AND EXCHANGE COMMISSION</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><br>
</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center">Washington, D.C.&nbsp; 20549</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><br>
<br>
</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top"></td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center">FORM 8-K</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><br>
</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center">CURRENT REPORT</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><br>
</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center">Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><br>
</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center">Date of Report: July 29, 2002</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><br>
</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top"></td>
</tr>

<tr>
<td valign="top">
<p align="center"><br>
 Commission<br>
 File<br>
 Number</p>
</td>
<td valign="top">
<p align="center">Exact Name of<br>
 Registrant<br>
 as specified in<br>
 its charter</p>
</td>
<td valign="top">
<p align="center"><br>
 State or other<br>
 Jurisdiction of<br>
 Incorporation</p>
</td>
<td valign="top">
<p align="center"><br>
 IRS Employer<br>
 &nbsp; Identification<br>
 Number</p>
</td>
</tr>

<tr>
<td valign="top">
<p align="center">_____________</p>
</td>
<td valign="top">
<p align="center">_____________</p>
</td>
<td valign="top">
<p align="center">_____________</p>
</td>
<td valign="top">
<p align="center">_____________</p>
</td>
</tr>

<tr>
<td valign="top">
<p align="center">1-12609</p>

<p align="center">1-2348</p>
</td>
<td valign="top">
<p align="center">PG&amp;E Corporation</p>

<p align="center">Pacific Gas and<br>
 Electric Company</p>
</td>
<td valign="top">
<p align="center">California</p>

<p align="center">California</p>
</td>
<td valign="top">
<p align="center">94-3234914</p>

<p align="center">94-0742640</p>

<p align="center"><br>
</p>
</td>
</tr>

<tr>
<td valign="top"></td>
<td valign="top"></td>
<td valign="top"></td>
<td valign="top"></td>
</tr>

<tr>
<td colspan="2" valign="top">
<p align="center">Pacific Gas and Electric Company<br>
 77 Beale Street, P. O. Box 770000<br>
 San Francisco, California&nbsp;&nbsp;94177</p>
</td>
<td colspan="2" valign="top">
<p align="center">PG&amp;E Corporation<br>
 One Market, Spear Tower, Suite 2400<br>
 San Francisco, California&nbsp;&nbsp;94105</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top"></td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center">(Address of principal executive offices) (Zip
Code)</p>
</td>
</tr>

<tr>
<td valign="top">
<p align="center"><br>
</p>
</td>
<td valign="top"></td>
<td valign="top"></td>
<td valign="top"></td>
</tr>

<tr>
<td colspan="2" valign="top">
<p align="center">Pacific Gas and Electric Company<br>
 (415) 973-7000</p>
</td>
<td colspan="2" valign="top">
<p align="center">PG&amp;E Corporation<br>
 (415) 267-7000</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top"></td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center">(Registrant's telephone number, including area
code)</p>
</td>
</tr>

<tr>
<td valign="top"></td>
<td valign="top"></td>
<td valign="top"></td>
<td valign="top"></td>
</tr>
</table>

<p><br>
</p>

<div align="center">
<hr size="2" width="100%" align="center">
</div>

<p><br>
Item 5. Other Events</p>

<p>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recovery of
Wholesale Power Purchase Costs&nbsp;</p>

<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As previously disclosed, on November 8, 2000, Pacific Gas and
Electric Company (Utility) filed a lawsuit in the U.S. District
Court for the Northern District of California (District Court)
against the California Public Utilities Commission (CPUC)
Commissioners, asking the court to declare that the federally
approved wholesale power costs that the Utility has incurred to
serve its customers are recoverable in retail rates (the Filed Rate
Case). The Utility argues that various CPUC decisions violate
federal preemption law and the &ldquo;filed rate doctrine,&rdquo;
which requires the CPUC to allow the Utility to recover in full its
reasonable procurement costs incurred under lawful rates and
tariffs approved by the Federal Energy Regulatory Commission
(FERC), a federal governmental agency.</p>

<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April 18, 2002, the Utility filed a motion for summary judgment
requesting the court to order the relief sought in the Filed Rate
Case.&nbsp; Also, on April 18, 2002, the CPUC Commissioners and The
Utility Reform Network (TURN), a ratepayer advocacy group which
filed a request to intervene in the Filed Rate Case, filed motions
to dismiss the Utility&rsquo;s claim as well as motions for summary
judgment asking the court to rule against the Utility on its
federal preemption claim as a matter of law.&nbsp; The principal
ground for the CPUC&rsquo;s and TURN&rsquo;s motions is that, by
adopting the retroactive change in the accounting mechanisms for
recovery of transition and power procurement costs in March 2001,
the CPUC has already allowed the Utility to recover its wholesale
procurement costs. (The retroactive accounting change, adopted by
the CPUC in March 2001, appeared to eliminate the Utility&rsquo;s
true under-collected wholesale electricity costs by applying
amounts that were previously applied first to transition cost
recovery to under-collected procurement costs, effectively
transforming under-collected procurement costs to under-collected
transition costs.&nbsp; The Utility requested the U.S. Bankruptcy
Court for the Northern District of California (Bankruptcy Court) to
enjoin the CPUC from enforcing the accounting order but the
Bankruptcy Court denied the Utility&rsquo;s request.&nbsp; The
Utility&rsquo;s appeal of the Bankruptcy Court&rsquo;s order has
been deemed a related case to the Filed Rate Case and has been
transferred to Judge Walker of the District Court. )</p>

<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July 25, 2002, Judge Walker issued an order denying the
CPUC&rsquo;s and TURN&rsquo;s motions to dismiss the Filed Rate
Case complaint, as well as the motions for summary judgment that
had been filed by the CPUC, the Utility, and TURN. (Judge Walker
also granted TURN&rsquo;s request to intervene.)&nbsp; However,
much of the District Court&rsquo;s order is a discussion of the
merits of the Utility&rsquo;s federal preemption claims.&nbsp; The
court rejected every argument advanced by the CPUC and TURN against
the application of the filed rate doctrine, stating: &ldquo;in most
instances today a utility must purchase the power delivered to
consumers pursuant to the rate filed with the appropriate federal
agency.&rdquo;</p>

<p>After concluding that the Utility&rsquo;s federal preemption
claims as pleaded are meritorious, the motions to dismiss were
denied without substantial discussion.&nbsp; The court stated that
despite the unique features of the regulatory context underlying
the Filed Rate Case, and the lack of precedent specifically on
point, &ldquo;the filed rate doctrine applies in this case in much
the same way as it does under a cost-of-service
regime.&rdquo;&nbsp; The rule adopted by the court was stated:
&ldquo;Costs of wholesale energy, incurred pursuant to rate tariffs
filed with FERC, whether these rates are market-based or
cost-based, must be recognized as recoverable costs by state
regulators and may not be trapped by excessively low retail rates
or other limitations imposed at the state level.&rdquo;&nbsp; The
court recognized that under the dual system of utility regulation,
adherence to the filed rate requirement, in conjunction with the
requirement that utilities provide electricity to end users,
prohibits state regulators from trapping the costs prudently
incurred pursuant to FERC-filed tariffs.&nbsp; The court also noted
that &ldquo;allowing a utility to pass through these costs to
consumers-if that is what is required-would not provide a windfall
to the utility, but would merely properly allocate the burden of
responsibility for the expense of providing a mandated service to
the public.&rdquo;</p>

<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The court found, however, that the Utility&rsquo;s preemption
claims could not be decided on summary judgment because two factual
issues remain in dispute: (1) the appropriate period for
considering whether a net under-collection has occurred, and (2)
the determination of which revenue sources, within constitutional
bounds, may be applied against the Utility&rsquo;s operating
costs.&nbsp;</p>

<p>As to the first issue, the court concluded that the reasonable
period for measuring the existence of an under-collection may
involve considering such factual issues as the understanding of the
parties at the beginning of the four-year electric industry
restructuring transition period, the parties&rsquo; reasonable
expectations, the reasonableness of the Utility&rsquo;s use of
surplus revenues during the first years of the transition period,
and the availability of these and other revenues during the
California energy crisis.&nbsp;</p>

<p>Regarding the determination of appropriate revenue sources for
the Utility to apply against operating costs, the court suggested
that the proper standard to be applied is the &ldquo;overall impact
of ratemaking orders.&rdquo;&nbsp; The court will need to consider
factors such as the availability of certain revenues to the Utility
during the relevant period.&nbsp; For example, the revenue from
rate reduction bonds or from sales from the Utility&rsquo;s power
plants may be available to offset the costs of purchased
power.&nbsp; The court stated that if revenue was &ldquo;simply not
available to sustain PG&amp;E&rsquo;s operations, and if this
unavailability was reasonable and not due to financial
mismanagement, the CPUC&rsquo;s reliance upon the existence of that
revenue &lsquo;on the books&rsquo; is insufficient to meet its
obligations under the filed rate doctrine.&rdquo;</p>

<p>A case management conference has been scheduled for August 16,
2002.&nbsp; The court had previously set a trial date in the Filed
Rate Case for March 31, 2003.</p>

<p>Neither PG&amp;E Corporation nor the Utility can predict what
the outcome of the Filed Rate Case litigation will be.</p>

<br clear="all">


<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p>SIGNATURE</p>
</td>
</tr>
</table>

<p>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.</p>

<table border="0" cellspacing="0" cellpadding="0">
<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>PG&amp;E CORPORATION<br>
</p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>By&nbsp; /s/ CHRISTOPHER P. JOHNS</p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CHRISTOPHER P.
JOHNS<br>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Senior Vice President
and Controller<br>
<br>
</p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top"></td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>PACIFIC GAS AND ELECTRIC COMPANY<br>
</p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>By:&nbsp;/s/ DINYAR B. MISTRY</p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>&nbsp;&nbsp; &nbsp; <u>&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
</td>
</tr>

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DINYAR B. MISTRY<br>
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice President and Controller</p>
</td>
</tr>
</table>

<p>Dated:&nbsp; July 29, 2002</p>
</div>
</body>
</html>
[{"type": "8-K", "sequence": "1", "filename": "final729.htm", "description": "FORM 8-K", "secsgml_size_bytes": 16183}]
{"company-data": {"conformed-name": "PG&E CORP", "cik": "0001004980", "assigned-sic": "4931", "irs-number": "943234914", "state-of-incorporation": "CA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-12609", "film-number": "02713427"}, "business-address": {"street1": "ONE MARKET SPEAR TOWER", "street2": "SUITE 2400", "city": "SAN FRANCISCO", "state": "CA", "zip": "94105", "phone": "4152677000"}, "mail-address": {"street1": "ONE MARKET SPEAR TOWER", "street2": "SUITE 2400", "city": "SAN FRANCISCO", "state": "CA", "zip": "94105"}, "former-company": {"former-conformed-name": "PG&E PARENT CO INC", "date-changed": "19951214"}}
<>
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: July 29, 2002
Commission
File
Number
Exact Name of
Registrant
as specified in
its charter
State or other
Jurisdiction of
Incorporation
IRS Employer
Identification
Number
_____________
_____________
_____________
_____________
1-12609
1-2348
PG&E Corporation
Pacific Gas and
Electric Company
California
California
94-3234914
94-0742640
Pacific Gas and Electric Company
77 Beale Street, P. O. Box 770000
San Francisco, California  94177
PG&E Corporation
One Market, Spear Tower, Suite 2400
San Francisco, California  94105
(Address of principal executive offices) (Zip
Code)
Pacific Gas and Electric Company
(415) 973-7000
PG&E Corporation
(415) 267-7000
(Registrant's telephone number, including area
code)
Item 5. Other Events
A.        Recovery of
Wholesale Power Purchase Costs
As previously disclosed, on November 8, 2000, Pacific Gas and
Electric Company (Utility) filed a lawsuit in the U.S. District
Court for the Northern District of California (District Court)
against the California Public Utilities Commission (CPUC)
Commissioners, asking the court to declare that the federally
approved wholesale power costs that the Utility has incurred to
serve its customers are recoverable in retail rates (the Filed Rate
Case). The Utility argues that various CPUC decisions violate
federal preemption law and the "filed rate doctrine,"
which requires the CPUC to allow the Utility to recover in full its
reasonable procurement costs incurred under lawful rates and
tariffs approved by the Federal Energy Regulatory Commission
(FERC), a federal governmental agency.
On April 18, 2002, the Utility filed a motion for summary judgment
requesting the court to order the relief sought in the Filed Rate
Case.  Also, on April 18, 2002, the CPUC Commissioners and The
Utility Reform Network (TURN), a ratepayer advocacy group which
filed a request to intervene in the Filed Rate Case, filed motions
to dismiss the Utility's claim as well as motions for summary
judgment asking the court to rule against the Utility on its
federal preemption claim as a matter of law.  The principal
ground for the CPUC's and TURN's motions is that, by
adopting the retroactive change in the accounting mechanisms for
recovery of transition and power procurement costs in March 2001,
the CPUC has already allowed the Utility to recover its wholesale
procurement costs. (The retroactive accounting change, adopted by
the CPUC in March 2001, appeared to eliminate the Utility's
true under-collected wholesale electricity costs by applying
amounts that were previously applied first to transition cost
recovery to under-collected procurement costs, effectively
transforming under-collected procurement costs to under-collected
transition costs.  The Utility requested the U.S. Bankruptcy
Court for the Northern District of California (Bankruptcy Court) to
enjoin the CPUC from enforcing the accounting order but the
Bankruptcy Court denied the Utility's request.  The
Utility's appeal of the Bankruptcy Court's order has
been deemed a related case to the Filed Rate Case and has been
transferred to Judge Walker of the District Court. )
On July 25, 2002, Judge Walker issued an order denying the
CPUC's and TURN's motions to dismiss the Filed Rate
Case complaint, as well as the motions for summary judgment that
had been filed by the CPUC, the Utility, and TURN. (Judge Walker
also granted TURN's request to intervene.)  However,
much of the District Court's order is a discussion of the
merits of the Utility's federal preemption claims.  The
court rejected every argument advanced by the CPUC and TURN against
the application of the filed rate doctrine, stating: "in most
instances today a utility must purchase the power delivered to
consumers pursuant to the rate filed with the appropriate federal
agency."
After concluding that the Utility's federal preemption
claims as pleaded are meritorious, the motions to dismiss were
denied without substantial discussion.  The court stated that
despite the unique features of the regulatory context underlying
the Filed Rate Case, and the lack of precedent specifically on
point, "the filed rate doctrine applies in this case in much
the same way as it does under a cost-of-service
regime."  The rule adopted by the court was stated:
"Costs of wholesale energy, incurred pursuant to rate tariffs
filed with FERC, whether these rates are market-based or
cost-based, must be recognized as recoverable costs by state
regulators and may not be trapped by excessively low retail rates
or other limitations imposed at the state level."  The
court recognized that under the dual system of utility regulation,
adherence to the filed rate requirement, in conjunction with the
requirement that utilities provide electricity to end users,
prohibits state regulators from trapping the costs prudently
incurred pursuant to FERC-filed tariffs.  The court also noted
that "allowing a utility to pass through these costs to
consumers-if that is what is required-would not provide a windfall
to the utility, but would merely properly allocate the burden of
responsibility for the expense of providing a mandated service to
the public."
The court found, however, that the Utility's preemption
claims could not be decided on summary judgment because two factual
issues remain in dispute: (1) the appropriate period for
considering whether a net under-collection has occurred, and (2)
the determination of which revenue sources, within constitutional
bounds, may be applied against the Utility's operating
costs.
As to the first issue, the court concluded that the reasonable
period for measuring the existence of an under-collection may
involve considering such factual issues as the understanding of the
parties at the beginning of the four-year electric industry
restructuring transition period, the parties' reasonable
expectations, the reasonableness of the Utility's use of
surplus revenues during the first years of the transition period,
and the availability of these and other revenues during the
California energy crisis.
Regarding the determination of appropriate revenue sources for
the Utility to apply against operating costs, the court suggested
that the proper standard to be applied is the "overall impact
of ratemaking orders."  The court will need to consider
factors such as the availability of certain revenues to the Utility
during the relevant period.  For example, the revenue from
rate reduction bonds or from sales from the Utility's power
plants may be available to offset the costs of purchased
power.  The court stated that if revenue was "simply not
available to sustain PG&E's operations, and if this
unavailability was reasonable and not due to financial
mismanagement, the CPUC's reliance upon the existence of that
revenue 'on the books' is insufficient to meet its
obligations under the filed rate doctrine."
A case management conference has been scheduled for August 16,
2002.  The court had previously set a trial date in the Filed
Rate Case for March 31, 2003.
Neither PG&E Corporation nor the Utility can predict what
the outcome of the Filed Rate Case litigation will be.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused this report to be signed on
their behalf by the undersigned thereunto duly authorized.
PG&E CORPORATION
By  /s/ CHRISTOPHER P. JOHNS
CHRISTOPHER P.
JOHNS
Senior Vice President
and Controller
PACIFIC GAS AND ELECTRIC COMPANY
By: /s/ DINYAR B. MISTRY
DINYAR B. MISTRY
Vice President and Controller
Dated:  July 29, 2002