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      Form 8-K Dated August 21, 2006
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>UNITED
      STATES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECURITIES
      AND EXCHANGE COMMISSION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Washington,
      D.C.&#160; 20549</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FORM
      8-K</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
      REPORT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of
      1934</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Date
      of Report: August 21, 2006</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Date
      of
      earliest event reported)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PG&amp;E
      CORPORATION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
      Name of Registrant as specified in Charter)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div align="center">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>California</u></strong></font></div>
            </td>
            <td valign="top" width="27%">
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            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>94-3234914</u></strong></font></div>
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                or other jurisdiction of </font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
                File Number)</font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
                Employer Identification No.)</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>One
      Market, Spear Tower, Suite 2400, San Francisco, California
      94105</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
      of principal executive offices, zip code)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>415-267-7000</u></strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>N/A</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Former
      Name or Former Address, if Changed Since Last Report)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PACIFIC
      GAS AND ELECTRIC COMPANY</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
      Name of Registrant as specified in Charter)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div align="center">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>California</u></strong></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>1-2348</u></strong></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>94-0742640</u></strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                or other jurisdiction of </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">incorporation)</font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
                File Number)</font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
                Employer Identification No.)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>77
      Beale Street, P. O. Box 770000, San Francisco, California
      94177</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
      of principal executive offices, zip code)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>(415)
      973-7000</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Registrant&#8217;s
      Telephone Number, Including Area Code)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>N/A</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Former
      Name or Former Address, if Changed Since Last Report)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font></font>&#168;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Written
      communications pursuant to Rule 425 under the Securities Act (17 CFR
      230.425)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: -36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font></font>&#168;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Soliciting
      Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: -54pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#168;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
      communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
      240.14d-2(b)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: -54pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#168;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
      240.13e-4(c))</font></div><br>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      8.01 - Other Events </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      August
      21, 2006, Pacific Gas and Electric Company (Utility), together with the
      California Public Utilities Commission&#8217;s (CPUC) Division of Ratepayer Advocates,
      various irrigation districts, the Western Manufactured Housing Communities
      Association, the Disability Rights Advocates, the California Farm Bureau
      Federation, Southern California Edison, Southern California Gas Company, San
      Diego Gas and Electric Company, and the Coalition of California Utility
      Employees, filed a motion with the CPUC seeking approval of a settlement
      agreement reached among the parties to resolve all of the issues raised by
      these
      parties and all revenue requirement related issues raised by other parties
      in
      the Utility&#8217;s 2007 General Rate Case (GRC) proceeding pending at the CPUC. In
      the GRC, the Utility&#8217;s requested revenue requirement to become effective January
      1, 2007, was based on the costs the Utility forecast it would incur in 2007
      to
      own, operate, and maintain its electric generating, electric distribution,
      gas
      distribution, and common and general plant, to perform the transactions
      necessary to procure electricity for its bundled-service electric customers
      and
      to procure gas for its residential and small commercial customers, and to
      provide customer services to its electric and gas customers. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 45pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Time
      period</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:&#160;&#160;The
      settlement agreement proposes to set the Utility&#8217;s revenue requirements for a
      four-year period, 2007-2010, rather than for a typical three-year period. Under
      this proposal, the Utility&#8217;s next GRC would be effective January 1,
      2011</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      As
      further discussed below, the settlement agreement includes a provision for
      attrition adjustments to be made to authorized revenues in 2008, 2009 and 2010.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Revenue
      requirements</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
      The
      settlement agreement proposes that the Utility&#8217;s electric and gas service
      revenue requirements effective January 1, 2007, be set at $2.870 billion for
      electric distribution, $1.047 billion for gas distribution and $1.010 billion
      for electric generation operations, for a total of $4.927 billion. This compares
      to the Utility&#8217;s request of $2.991 billion for electric distribution, $1.062
      billion for gas distribution, and $1.056 billion for electric generation, for
      a
      total of $5.109 billion. The revenue requirement amounts set forth in the
      settlement agreement reflect an increase of $222.0 million (or 8.4%) in the
      Utility&#8217;s electric distribution revenues, an increase of $20.5 million (or 2%)
      in gas distribution revenues, and a decrease of $29.8 million (or 2.8%) in
      generation operation revenues, for an overall increase of $212.7 million (or
      4.5%), over the 2006 authorized amounts. This compares to the Utility&#8217;s
      requested increase of $342.8 million (or 12.9%) for electric distribution
      operations, $35.5 million (or 3.5%) for gas distribution operations, and $16.3
      million (or 1.6%) for electric generation operations, for an overall requested
      increase of $394.5 million (or 8.4%), over 2006 authorized amounts. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under
      the
      settlement agreement, the Utility&#8217;s revenue requirements are $181 million less
      than the amount requested. Of this amount, approximately $95 million relates
      to
      depreciation expense, approximately $29 million relates to return and taxes
      associated with rate base, approximately $21 million relates to operating and
      maintenance expenses and customer service expenses, and approximately $36
      million relates to administrative and general expenses, payroll taxes, and
      other
      miscellaneous expenses. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table compares the amounts (in millions of dollars) requested by
      the
      Utility and the amounts proposed in the settlement agreement: </font></div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
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            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
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            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
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            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
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            <td align="left" valign="bottom" width="43%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Customer
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">437.7</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
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            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">431.1</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(6.6</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">6.9</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white thin solid;">&#160;</td>
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          <tr bgcolor="#e2eef6">
            <td align="left" valign="bottom" width="43%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Administrative
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">741.5</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">708.7</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(32.8</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">55.2</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="43%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Payroll
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">138.0</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
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            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">134.6</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
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            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(3.4</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
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            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">17.1</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
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            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white thin solid;">&#160;</td>
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            <td align="left" valign="bottom" width="43%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Depreciation,
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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            <td width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>2,828.9</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>2,705.1</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>(123.8</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>)</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>49.9</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="43%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subtotal</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">5,239.8</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">5,058.8</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(181.0</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">241.3</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#e2eef6">
            <td align="left" valign="bottom" width="43%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less:
                Other Operating Revenue and FERC Allocation</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td width="2%" style="border-bottom: #e2eef6 thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>(131.0</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>)</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>(131.7</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>)</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>(0.9</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #e2eef6 thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>)</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>(28.5</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #e2eef6 thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman"><u>)</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="43%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                CPUC Billed Revenue</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">5,108.8</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,927.0</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(181.8</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">212.7</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white thin solid;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;&#160;
Differences
      in
      totals are due to rounding.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Capital
      Additions</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      settlement agreement provides </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
      2007
      net capital additions of $696.3 million for electric distribution, $207.7
      million for gas distribution, and $195.0 million for generation operations.
      The
      settlement agreement includes 2007 depreciation expenses for electric and gas
      distribution, and electric generation of $596.8 million, $209.4 million, and
      $135.4 million, respectively. The parties agreed that the Utility&#8217;s estimated
      2007 annual average rate base associated with the portions of the utility
      business reviewed in the GRC is $12.6 billion after deducting the weighted
      average nuclear fuel inventory of $221.9 million. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      parties agreed that, beginning January 1, 2007, the carrying costs related
      to
      the nuclear fuel inventory would be recovered through rates as an electricity
      procurement cost at the short-term interest rate instead of being included
      in
      the Utility&#8217;s rate base. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Utility projects that the amount of revenue requirements provided in the
      settlement agreement would enable the Utility to make needed improvements in
      its
      electric and gas distribution system infrastructure and in its existing electric
      generation business as planned over the 2007-2010 time period. In addition
      to
      these GRC-related capital expenditures, the Utility expects to incur capital
      expenditures relating to its advanced metering infrastructure,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      electric
      and gas transmission upgrades, the replacement of steam generators at the Diablo
      Canyon nuclear power plant (Diablo Canyon), the repowering of the Humboldt
      Bay
      fossil-fueled power plant and the acquisition and development of the 530
      megawatt Contra Costa Unit 8 power plant</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Total
      capital expenditures are forecasted to average $2.5 billion annually over the
      2007-2010 time period. The forecasted capital expenditures do not include
      potential additional investments in new generation resources which remain
      subject to CPUC approval. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Attrition
      and Estimated Cost Savings</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
      The
      settlement agreement provides for an attrition adjustment to authorized revenues
      of $125 million in each of 2008 and 2009. In addition, the Utility would receive
      a one-time additional amount of $35 million in 2009 for a planned second
      refueling at Diablo Canyon. The attrition adjustment to authorized revenues
      for
      2010 would be $125 million, less the one-time additional amount of $35 million
      from 2009, for a net increase of $90 million in 2010.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      On a
      comparable basis, the Utility had requested attrition increases of approximately
      $143 million for 2008 and approximately $180 million for 2009, net of estimated
      cost savings of $41 million in 2008 and $97 million in 2009 that the Utility
      estimates would result from the implementation of various initiatives to improve
      the Utility&#8217;s business processes and systems. (The 2009 requested attrition
      increase of approximately $180 million discussed above equals the approximately
      $141 million previously disclosed plus the $41 million reduction provided in
      2008). Due to uncertainty about savings to be realized from these initiatives,
      the Utility had proposed a mechanism to share earnings, or shortfalls in
      earnings, with customers. The settlement agreement does not adopt the Utility&#8217;s
      proposed mechanism. Instead, customers will receive the benefit of cost savings
      in 2008, 2009 and 2010 associated with the attrition adjustments discussed
      above. If the actual cost savings exceed these amounts, such benefits would
      accrue to shareholders. Conversely, if these cost savings are not realized,
      earnings available for shareholders would be reduced. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 45pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Pension
      Contribution</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
      The
      settlement agreement includes a pension-related revenue requirement for 2010
      of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$98.2
      million, which equates to a net contribution of $153.4 million for 2010,
      consistent with the CPUC&#8217;s June 15, 2006 decision authorizing the Utility to
      make annual pension contributions for the years 2007-2009. The Utility would
      continue to recover the revenue requirement for the portion of the pension
      contribution authorized for 2010 that is allocable to the Utility&#8217;s GRC lines of
      business. Recovery of the pension-contribution revenue requirement for non-GRC
      lines of business would be authorized, as appropriate, in other proceedings
      and
      venues. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Performance
      Mechanism</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
      The
      settlement agreement would not alter the current incentive mechanism for
      reliability performance. Under the current mechanism, the Utility can be
      rewarded or penalized by up to $24 million on a pre-tax basis to the extent
      that
      the Utility&#8217;s actual performance exceeds or falls short of pre-set annual
      reliability targets. The Utility had proposed a mechanism that would have
      included rewards or penalties of up to $60 million (pre-tax) to the extent
      that
      performance on a combination of operating targets exceeded or fell short of
      pre-set annual targets.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Schedule</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
      Although the revised GRC schedule </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">provides
      for a final decision by February 2007, the administrative law judge who issued
      the revised schedule invited the Utility to file a motion requesting that any
      revenue requirement change be effective on January 1, 2007, subject to refund.
      The Utility filed this motion on August 11, 2006. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PG&amp;E
      Corporation and the Utility are unable to predict whether the CPUC will approve
      the settlement agreement. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      7.01 - Regulation FD Disclosure </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      information included in Exhibit 99 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.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attached
      to this report are presentation slides to be used by PG&amp;E Corporation&#8217;s
      Investor Relations Department and members of senior management in discussions
      with investors and members of the financial community. These slides describe
      the
      proposed settlement agreement. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
      slides contain forward-looking statements regarding </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">management&#8217;s
      guidance for PG&amp;E Corporation&#8217;s 2006 and 2007 earnings per share from
      operations</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      as well
      as forecasted capital expenditures, rate base growth, and targeted average
      annual growth rate for earnings per share from operations over the 2006-2010
      time period.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      These
      statements are based on </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">current
      expectations and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">various
      assumptions</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      which
      management believes are reasonable</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      including that t</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">he
      settlement agreement reached among parties in the Utility&#8217;s GRC proceeding is
      approved by the CPUC and that the Utility earns its authorized rate of return
      on
      equity of 11.35% on forecasted rate base amounts. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
      statements and assumptions are necessarily subject to various risks and
      uncertainties, the realization or resolution of which are outside of
      management's control. Actual results may differ materially. Factors that could
      cause actual results to differ materially include:</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unanticipated
                changes in operating expenses or capital expenditures, which may
                affect
                the Utility&#8217;s ability to earn its authorized rate of return;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">How
                the Utility manages its responsibility to procure electric capacity
                and
                energy for its customers; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                adequacy and price of natural gas supplies, and the ability of the
                Utility
                to manage and respond to the volatility of the natural gas market
                for its
                customers; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                operation of the Utility&#8217;s Diablo Canyon nuclear power plant, which could
                cause the Utility to incur potentially significant environmental
                costs and
                capital expenditures, and the extent to which the Utility is able
                to
                timely increase its spent nuclear fuel storage capacity at Diablo
                Canyon;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Whether
                the Utility is able to recognize the benefits expected to result
                from its
                efforts to improve customer service through implementation of specific
                initiatives to streamline business processes and deploy new technology;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                outcome of proceedings pending at the Federal Energy Regulatory Commission
                (FERC) and the CPUC, including the Utility&#8217;s 2007 GRC and the Utility&#8217;s
                application for approval of new long-term generation resource commitments;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">How
                the CPUC administers the capital structure, stand-alone dividend,
                and
                first priority conditions of the CPUC&#8217;s decisions permitting the
                establishment of holding companies for the California investor-owned
                electric utilities, and the outcome of the CPUC's new rulemaking
                proceeding concerning the relationship between the California
                investor-owned energy utilities and their holding companies and
                non-regulated affiliates; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                impact of the recently adopted Energy Policy Act of 2005 and future
                legislative or regulatory actions or policies affecting the energy
                industry; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Increased
                municipalization and other forms of bypass in the Utility&#8217;s service
                territory; and </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
                factors discussed in PG&amp;E Corporation's SEC reports.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      9.01 Financial Statements and Exhibits</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibits</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following exhibit is being furnished, and is not deemed to be filed:
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center">
      <table cellpadding="0" cellspacing="0" width="80%">

          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibit
                99</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td align="left" valign="top" width="68%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PG&amp;E
                Corporation investor presentation slides dated August 21,
                2006</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>

      </table>
    </div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SIGNATURE
      </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 hereunto
      duly authorized. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="center">
      <table cellpadding="0" cellspacing="0" width="80%">

          <tr>
            <td align="left" valign="middle" width="43%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="middle" width="3%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="middle" width="43%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="43%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" colspan="3" valign="bottom" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PG&amp;E
                CORPORATION</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="middle" width="43%">&#160;</td>
            <td align="left" colspan="2" valign="middle" width="4%">&#160;</td>
            <td align="left" colspan="2" valign="middle" width="44%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="43%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dated:
                August 21, 2006</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="43%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>/s/
                G. Robert Powell</u></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="43%">&#160;</td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="3%">&#160;</td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="43%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">G.
                ROBERT POWELL</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vice
                President and Controller</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>

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                GAS AND ELECTRIC COMPANY</strong></font></div>
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                ROBERT POWELL</font></div>
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                of Exhibit</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">&#160;</td>
            <td align="left" valign="top" width="6%">&#160;</td>
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                99 </font></div>
            </td>
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            <td align="left" valign="top" width="56%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PG&amp;E
                Corporation investor presentation slides dated August 21,
                2006</font></div>
            </td>
          </tr>

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{"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": "061047597"}, "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"}}
Form 8-K Dated August 21, 2006
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: August 21, 2006
(Date
      of
      earliest event reported)
PG&E
      CORPORATION
(Exact
      Name of Registrant as specified in Charter)
California
1-12609
94-3234914
(State
                or other jurisdiction of
incorporation)
(Commission
                File Number)
(IRS
                Employer Identification No.)
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)
N/A
(Former
      Name or Former Address, if Changed Since Last Report)
PACIFIC
      GAS AND ELECTRIC COMPANY
(Exact
      Name of Registrant as specified in Charter)
California
1-2348
94-0742640
(State
                or other jurisdiction of
incorporation)
(Commission
                File Number)
(IRS
                Employer Identification No.)
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)
N/A
(Former
      Name or Former Address, if Changed Since Last Report)
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):
¨
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))
Item
      8.01 - Other Events
On
      August
      21, 2006, Pacific Gas and Electric Company (Utility), together with the
      California Public Utilities Commission's (CPUC) Division of Ratepayer Advocates,
      various irrigation districts, the Western Manufactured Housing Communities
      Association, the Disability Rights Advocates, the California Farm Bureau
      Federation, Southern California Edison, Southern California Gas Company, San
      Diego Gas and Electric Company, and the Coalition of California Utility
      Employees, filed a motion with the CPUC seeking approval of a settlement
      agreement reached among the parties to resolve all of the issues raised by
      these
      parties and all revenue requirement related issues raised by other parties
      in
      the Utility's 2007 General Rate Case (GRC) proceeding pending at the CPUC. In
      the GRC, the Utility's requested revenue requirement to become effective January
      1, 2007, was based on the costs the Utility forecast it would incur in 2007
      to
      own, operate, and maintain its electric generating, electric distribution,
      gas
      distribution, and common and general plant, to perform the transactions
      necessary to procure electricity for its bundled-service electric customers
      and
      to procure gas for its residential and small commercial customers, and to
      provide customer services to its electric and gas customers.
Time
      period
:  The
      settlement agreement proposes to set the Utility's revenue requirements for a
      four-year period, 2007-2010, rather than for a typical three-year period. Under
      this proposal, the Utility's next GRC would be effective January 1,
      2011
.
As
      further discussed below, the settlement agreement includes a provision for
      attrition adjustments to be made to authorized revenues in 2008, 2009 and 2010.
Revenue
      requirements
:
      The
      settlement agreement proposes that the Utility's electric and gas service
      revenue requirements effective January 1, 2007, be set at $2.870 billion for
      electric distribution, $1.047 billion for gas distribution and $1.010 billion
      for electric generation operations, for a total of $4.927 billion. This compares
      to the Utility's request of $2.991 billion for electric distribution, $1.062
      billion for gas distribution, and $1.056 billion for electric generation, for
      a
      total of $5.109 billion. The revenue requirement amounts set forth in the
      settlement agreement reflect an increase of $222.0 million (or 8.4%) in the
      Utility's electric distribution revenues, an increase of $20.5 million (or 2%)
      in gas distribution revenues, and a decrease of $29.8 million (or 2.8%) in
      generation operation revenues, for an overall increase of $212.7 million (or
      4.5%), over the 2006 authorized amounts. This compares to the Utility's
      requested increase of $342.8 million (or 12.9%) for electric distribution
      operations, $35.5 million (or 3.5%) for gas distribution operations, and $16.3
      million (or 1.6%) for electric generation operations, for an overall requested
      increase of $394.5 million (or 8.4%), over 2006 authorized amounts.
Under
      the
      settlement agreement, the Utility's revenue requirements are $181 million less
      than the amount requested. Of this amount, approximately $95 million relates
      to
      depreciation expense, approximately $29 million relates to return and taxes
      associated with rate base, approximately $21 million relates to operating and
      maintenance expenses and customer service expenses, and approximately $36
      million relates to administrative and general expenses, payroll taxes, and
      other
      miscellaneous expenses.
The
      following table compares the amounts (in millions of dollars) requested by
      the
      Utility and the amounts proposed in the settlement agreement:
2
Amounts
                requested by the Utility
Amounts
                included in the settlement agreement
Difference
                between amounts requested and included in the settlement
                agreement
Amount
                of increase/decrease over 2006 authorized amounts
Operation
                & Maintenance
$
1,093.7
$
1,079.2
$
(14.4
)
$
112.1
Customer
                Services
437.7
431.1
(6.6
)
6.9
Administrative
                & General and Other Adjustments
741.5
708.7
(32.8
)
55.2
Payroll
                Tax, Franchise & Uncollectibles
138.0
134.6
(3.4
)
17.1
Depreciation,
                Return, & Taxes
2,828.9
2,705.1
(123.8
)
49.9
Subtotal
5,239.8
5,058.8
(181.0
)
241.3
Less:
                Other Operating Revenue and FERC Allocation
(131.0
)
(131.7
)
(0.9
)
(28.5
)
Total
                CPUC Billed Revenue
5,108.8
4,927.0
(181.8
)
212.7
Differences
      in
      totals are due to rounding.
Capital
      Additions
:
The
      settlement agreement provides
for
      2007
      net capital additions of $696.3 million for electric distribution, $207.7
      million for gas distribution, and $195.0 million for generation operations.
      The
      settlement agreement includes 2007 depreciation expenses for electric and gas
      distribution, and electric generation of $596.8 million, $209.4 million, and
      $135.4 million, respectively. The parties agreed that the Utility's estimated
      2007 annual average rate base associated with the portions of the utility
      business reviewed in the GRC is $12.6 billion after deducting the weighted
      average nuclear fuel inventory of $221.9 million.
The
      parties agreed that, beginning January 1, 2007, the carrying costs related
      to
      the nuclear fuel inventory would be recovered through rates as an electricity
      procurement cost at the short-term interest rate instead of being included
      in
      the Utility's rate base.
3
The
      Utility projects that the amount of revenue requirements provided in the
      settlement agreement would enable the Utility to make needed improvements in
      its
      electric and gas distribution system infrastructure and in its existing electric
      generation business as planned over the 2007-2010 time period. In addition
      to
      these GRC-related capital expenditures, the Utility expects to incur capital
      expenditures relating to its advanced metering infrastructure,
electric
      and gas transmission upgrades, the replacement of steam generators at the Diablo
      Canyon nuclear power plant (Diablo Canyon), the repowering of the Humboldt
      Bay
      fossil-fueled power plant and the acquisition and development of the 530
      megawatt Contra Costa Unit 8 power plant
.
      Total
      capital expenditures are forecasted to average $2.5 billion annually over the
      2007-2010 time period. The forecasted capital expenditures do not include
      potential additional investments in new generation resources which remain
      subject to CPUC approval.
Attrition
      and Estimated Cost Savings
:
      The
      settlement agreement provides for an attrition adjustment to authorized revenues
      of $125 million in each of 2008 and 2009. In addition, the Utility would receive
      a one-time additional amount of $35 million in 2009 for a planned second
      refueling at Diablo Canyon. The attrition adjustment to authorized revenues
      for
      2010 would be $125 million, less the one-time additional amount of $35 million
      from 2009, for a net increase of $90 million in 2010.
On a
      comparable basis, the Utility had requested attrition increases of approximately
      $143 million for 2008 and approximately $180 million for 2009, net of estimated
      cost savings of $41 million in 2008 and $97 million in 2009 that the Utility
      estimates would result from the implementation of various initiatives to improve
      the Utility's business processes and systems. (The 2009 requested attrition
      increase of approximately $180 million discussed above equals the approximately
      $141 million previously disclosed plus the $41 million reduction provided in
      2008). Due to uncertainty about savings to be realized from these initiatives,
      the Utility had proposed a mechanism to share earnings, or shortfalls in
      earnings, with customers. The settlement agreement does not adopt the Utility's
      proposed mechanism. Instead, customers will receive the benefit of cost savings
      in 2008, 2009 and 2010 associated with the attrition adjustments discussed
      above. If the actual cost savings exceed these amounts, such benefits would
      accrue to shareholders. Conversely, if these cost savings are not realized,
      earnings available for shareholders would be reduced.
Pension
      Contribution
:
      The
      settlement agreement includes a pension-related revenue requirement for 2010
      of
$98.2
      million, which equates to a net contribution of $153.4 million for 2010,
      consistent with the CPUC's June 15, 2006 decision authorizing the Utility to
      make annual pension contributions for the years 2007-2009. The Utility would
      continue to recover the revenue requirement for the portion of the pension
      contribution authorized for 2010 that is allocable to the Utility's GRC lines of
      business. Recovery of the pension-contribution revenue requirement for non-GRC
      lines of business would be authorized, as appropriate, in other proceedings
      and
      venues.
Performance
      Mechanism
:
      The
      settlement agreement would not alter the current incentive mechanism for
      reliability performance. Under the current mechanism, the Utility can be
      rewarded or penalized by up to $24 million on a pre-tax basis to the extent
      that
      the Utility's actual performance exceeds or falls short of pre-set annual
      reliability targets. The Utility had proposed a mechanism that would have
      included rewards or penalties of up to $60 million (pre-tax) to the extent
      that
      performance on a combination of operating targets exceeded or fell short of
      pre-set annual targets.
Schedule
:
      Although the revised GRC schedule
provides
      for a final decision by February 2007, the administrative law judge who issued
      the revised schedule invited the Utility to file a motion requesting that any
      revenue requirement change be effective on January 1, 2007, subject to refund.
      The Utility filed this motion on August 11, 2006.
4
PG&E
      Corporation and the Utility are unable to predict whether the CPUC will approve
      the settlement agreement.
Item
      7.01 - Regulation FD Disclosure
The
      information included in Exhibit 99 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.
Attached
      to this report are presentation slides to be used by PG&E Corporation's
      Investor Relations Department and members of senior management in discussions
      with investors and members of the financial community. These slides describe
      the
      proposed settlement agreement.
These
      slides contain forward-looking statements regarding
management's
      guidance for PG&E Corporation's 2006 and 2007 earnings per share from
      operations
,
      as well
      as forecasted capital expenditures, rate base growth, and targeted average
      annual growth rate for earnings per share from operations over the 2006-2010
      time period.
These
      statements are based on
current
      expectations and
various
      assumptions
which
      management believes are reasonable
,
      including that t
he
      settlement agreement reached among parties in the Utility's GRC proceeding is
      approved by the CPUC and that the Utility earns its authorized rate of return
      on
      equity of 11.35% on forecasted rate base amounts.
These
      statements and assumptions are necessarily subject to various risks and
      uncertainties, the realization or resolution of which are outside of
      management's control. Actual results may differ materially. Factors that could
      cause actual results to differ materially include:
·
Unanticipated
                changes in operating expenses or capital expenditures, which may
                affect
                the Utility's ability to earn its authorized rate of return;
·
How
                the Utility manages its responsibility to procure electric capacity
                and
                energy for its customers;
·
The
                adequacy and price of natural gas supplies, and the ability of the
                Utility
                to manage and respond to the volatility of the natural gas market
                for its
                customers;
·
The
                operation of the Utility's Diablo Canyon nuclear power plant, which could
                cause the Utility to incur potentially significant environmental
                costs and
                capital expenditures, and the extent to which the Utility is able
                to
                timely increase its spent nuclear fuel storage capacity at Diablo
                Canyon;
·
Whether
                the Utility is able to recognize the benefits expected to result
                from its
                efforts to improve customer service through implementation of specific
                initiatives to streamline business processes and deploy new technology;
·
The
                outcome of proceedings pending at the Federal Energy Regulatory Commission
                (FERC) and the CPUC, including the Utility's 2007 GRC and the Utility's
                application for approval of new long-term generation resource commitments;
·
How
                the CPUC administers the capital structure, stand-alone dividend,
                and
                first priority conditions of the CPUC's decisions permitting the
                establishment of holding companies for the California investor-owned
                electric utilities, and the outcome of the CPUC's new rulemaking
                proceeding concerning the relationship between the California
                investor-owned energy utilities and their holding companies and
                non-regulated affiliates;
·
The
                impact of the recently adopted Energy Policy Act of 2005 and future
                legislative or regulatory actions or policies affecting the energy
                industry;
·
Increased
                municipalization and other forms of bypass in the Utility's service
                territory; and
·
Other
                factors discussed in PG&E Corporation's SEC reports.
5
Item
      9.01 Financial Statements and Exhibits
Exhibits
The
      following exhibit is being furnished, and is not deemed to be filed:
Exhibit
                99
PG&E
                Corporation investor presentation slides dated August 21,
                2006
6
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 hereunto
      duly authorized.
PG&E
                CORPORATION
Dated:
                August 21, 2006
By:
/s/
                G. Robert Powell
G.
                ROBERT POWELL
Vice
                President and Controller
PACIFIC
                GAS AND ELECTRIC COMPANY
Dated:
                August 21, 2006
By:
/s/
                G. Robert Powell
G.
                ROBERT POWELL
Vice
                President and Controller
7
EXHIBIT
      INDEX
No.
Description
                of Exhibit
Exhibit
                99
PG&E
                Corporation investor presentation slides dated August 21,
                2006