<html>
<head>
<title>Form 8-K DATED MAY 11, 2005</title>
</head>
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<div>
<table border="0" cellspacing="0" cellpadding="0" width="624">
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<p align="center"><b>UNITED STATES</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>SECURITIES AND EXCHANGE COMMISSION</b></p>
</td>
</tr>

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

<tr>
<td colspan="4" valign="top">
<p><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></p>
</td>
</tr>

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

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

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

<tr>
<td colspan="4" valign="top">
<p><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>Date of Report: May 11, 2005</b></p>

<p align="center">
<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>PG&amp;E CORPORATION</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>(Exact Name of Registrant as specified in
Charter)</b></p>
</td>
</tr>

<tr>
<td valign="top">
<p align="center"><b><u>California</u></b></p>
</td>
<td valign="top">
<p align="center"><b><u>1-2609</u></b></p>
</td>
<td colspan="2" valign="top">
<p align="center"><b><u>94-3234914</u></b></p>
</td>
</tr>

<tr>
<td valign="top">
<p align="center">(State or other jurisdiction of
incorporation)</p>
</td>
<td valign="top">
<p align="center"><br />
 (Commission File Number)</p>
</td>
<td colspan="2" valign="top">
<p align="center">(IRS Employer<br />
 Identification No.)</p>
</td>
</tr>

<tr>
<td colspan="3" valign="top">
<p align="center"><b><u>One Market, Spear Tower, Suite 2400, San
Francisco, CA</u></b></p>
</td>
<td valign="top">
<p align="center"><b><u>94105</u></b></p>
</td>
</tr>

<tr>
<td colspan="3" valign="top">
<p align="center">(Address of principal executive offices)</p>
</td>
<td valign="top">
<p align="center">(Zip code)</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b><u>415-267-7000</u></b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>(Registrant&rsquo;s Telephone Number,
Including Area Code)</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b><u>N/A</u></b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>(Former Name or Former Address, if Changed
Since Last Report)</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>PACIFIC GAS AND ELECTRIC COMPANY</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>(Exact Name of Registrant as specified in
Charter)</b></p>
</td>
</tr>

<tr>
<td valign="top">
<p align="center"><b><u>California</u></b></p>
</td>
<td valign="top">
<p align="center"><b><u>1-2348</u></b></p>
</td>
<td colspan="2" valign="top">
<p align="center"><b><u>94-0742640</u></b></p>
</td>
</tr>

<tr>
<td valign="top">
<p align="center">(State or other jurisdiction of
incorporation)</p>
</td>
<td valign="top">
<p align="center"><br />
 (Commission File Number)</p>
</td>
<td colspan="2" valign="top">
<p align="center">(IRS Employer<br />
 Identification No.)</p>
</td>
</tr>

<tr>
<td valign="top">
<p align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top"></td>
<td colspan="2" valign="top"></td>
</tr>

<tr>
<td colspan="3" valign="top">
<p align="center"><b><u>77 Beale Street, P. O. Box 770000, San
Francisco, California</u></b></p>
</td>
<td valign="top">
<p align="center"><b><u>94177</u></b></p>
</td>
</tr>

<tr>
<td colspan="3" valign="top">
<p align="center">(Address of principal executive offices)</p>
</td>
<td valign="top">
<p align="center">(Zip code)</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b><u>(415) 973-7000</u></b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>(Registrant&rsquo;s Telephone Number,
Including Area Code)</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b><u>N/A</u></b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p align="center"><b>(Former Name or Former Address, if Changed
Since Last Report)</b></p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
</tr>

<tr>
<td colspan="4" valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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):</p>
</td>
</tr>
</table>

<p>&nbsp;&nbsp;&nbsp;&nbsp;</p>

<table border="0" cellspacing="0" cellpadding="0" width="624">
<tr>
<td valign="top">
<p>[&nbsp;]</p>
</td>
<td valign="top">
<p>&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)</p>
</td>
</tr>

<tr>
<td valign="top">
<p>[&nbsp;]</p>
</td>
<td valign="top"></td>
<td valign="top">
<p>Soliciting Material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)</p>
</td>
</tr>

<tr>
<td valign="top">
<p>[&nbsp;]</p>
</td>
<td valign="top"></td>
<td valign="top">
<p>Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act<br />
 (17 CFR 240.14d-2(b)</p>
</td>
</tr>

<tr>
<td valign="top">
<p>[&nbsp;]</p>
</td>
<td valign="top"></td>
<td valign="top">
<p>Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act<br />
 (17 CFR 240.13e-4(c))</p>
</td>
</tr>
</table>

<p><b></b></p>

<hr>

<p>Item 8.01 - Other Events</p>

<p><b></b></p>

<p>Pacific Gas and Electric Company&rsquo;s 2006 Cost of Capital
Application</p>

<p><b></b></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May 9, 2005, Pacific Gas and Electric Company (Utility), a
subsidiary of PG&amp;E Corporation, filed a cost of capital
application with the California Public Utilities Commission (CPUC)
to determine the Utility's authorized capital structure and the
authorized rate of return that the Utility may earn on its
electricity and natural gas distribution and electricity generation
rate base for test year 2006.&nbsp; In the cost of capital
proceeding, the CPUC (1) establishes the proportions of common
equity, preferred equity, and debt that will comprise the Utility's
total authorized capital structure for a specific year, and (2)
establishes the rate of return that the Utility is authorized to
earn on the common equity, preferred equity, and debt components of
its capital structure.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Utility has requested an authorized return on equity (ROE) of
11.50% for its gas and electric distribution operations and its
electric generation operations, as compared to the currently
authorized ROE of 11.22%.&nbsp; The Utility has requested a cost of
debt of 6.05% (a slight decrease from the currently authorized
6.10%) and a cost of preferred stock of 5.87% (reduced from the
currently authorized level of 6.42%).&nbsp; The Utility has
requested that the equity component of its authorized capital
structure for 2006 remain at 52.0%, that the long-term debt
component be increased to 46.0%, and that the preferred equity component
be reduced to 2.0%.&nbsp; The recommended capital structure and
associated rate of return for each component would result in an
overall rate of return of 8.88% for 2006, an increase from the
currently authorized rate of return of 8.77%.&nbsp; The following
table compares the currently authorized amounts with the requested
amounts:</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;</p>

<div align="center">
<table border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td valign="bottom"></td>
<td colspan="3" valign="bottom">
<p align="center"><u>2005 Authorized</u></p>
</td>
<td colspan="3" valign="bottom">
<p align="center"><u>2006 Requested</u></p>
</td>
</tr>

<tr>
<td valign="bottom" align="center"></td>
<td valign="bottom" align="center">
<p align="center"><u>Cost</u></p>
</td>
<td valign="bottom" align="center">
<p align="center">Capital<br>
<u>Structure</u></p>

</td>
<td valign="bottom" align="center">
<p align="center">Weighted<u><br>
Cost</u></p>

</td>
<td valign="bottom" align="center">
<p align="center"><u>Cost</u></p>
</td>
<td valign="bottom" align="center">
<p align="center">Capital<br>
<u>Structure</u></p>

</td>
<td valign="bottom" align="center">
<p align="center">Weighted<br>
<u>Cost</u></p>

</td>
</tr>

<tr>
<td valign="bottom">
<p>Long&#8209;term debt.........................................................</p>
</td>
<td valign="bottom">
<p align="right">6.10%</p>
</td>
<td valign="bottom">
<p align="right">45.5%</p>
</td>
<td valign="bottom">
<p align="right">2.78%</p>
</td>
<td valign="bottom">
<p align="right">6.05%</p>
</td>
<td valign="bottom">
<p align="right">46.0%</p>
</td>
<td valign="bottom">
<p align="right">2.78%</p>
</td>
</tr>

<tr>
<td valign="bottom">
<p>Preferred
stock...........................................................</p>
</td>
<td valign="bottom">
<p align="right">6.42%</p>
</td>
<td valign="bottom">
<p align="right">2.5%</p>
</td>
<td valign="bottom">
<p align="right">0.16%</p>
</td>
<td valign="bottom">
<p align="right">5.87%</p>
</td>
<td valign="bottom">
<p align="right">2.0%</p>
</td>
<td valign="bottom">
<p align="right">0.12%</p>
</td>
</tr>

<tr>
<td valign="bottom">
<p>Common
equity...........................................................</p>
</td>
<td valign="bottom">
<p align="right">11.22%</p>
</td>
<td valign="bottom">
<p align="right">52.0%</p>
</td>
<td valign="bottom">
<p align="right">5.83%</p>
</td>
<td valign="bottom">
<p align="right">11.50%</p>
</td>
<td valign="bottom">
<p align="right">52.0%</p>
</td>
<td valign="bottom">
<p align="right">5.98%</p>
</td>
</tr>

<tr>
<td valign="bottom">
<p>Return on rate
base......................................................</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p align="right">8.77%</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p align="right">8.88%</p>
</td>
</tr>
</table>
</div>

<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the December 2003 settlement agreement entered into among the
Utility, PG&amp;E Corporation, and the CPUC to resolve the
Utility&rsquo;s Chapter 11 case, the Utility is entitled to earn a
ROE of at least 11.22% on an authorized 52.0% equity ratio until the
Utility&rsquo;s long-term issuer credit ratings are at least A-
from Standard &amp; Poor&rsquo;s (S&amp;P) or A3 from Moody&rsquo;s
Investors Service (Moody&rsquo;s).&nbsp; The Utility&rsquo;s
corporate credit ratings are currently BBB from S&amp;P and Baa1
from Moody's.&nbsp;</p>

<p align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Utility&rsquo;s proposed cost of capital would cause its cost of
capital revenue requirement for 2006 to increase by approximately
$17.8 million, or 0.2%, over currently authorized revenue
requirements for electric distribution and generation operations
and approximately $4 million, or 0.1%, over currently authorized
revenue requirements for gas distribution operations, based on
currently authorized rate base.&nbsp;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Utility did not include a request for a 2006 rate of return for its
electric network transmission operations in this application to the
CPUC because the Federal Energy Regulatory Commission regulates
electric transmission rates.&nbsp; Also, the Utility did not
include a request for a 2006 rate of return for its gas
transmission and storage operations because the CPUC previously set
revenue requirements for the Utility&rsquo;s gas transmission and
storage assets until 2007 in a separate proceeding.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Utility has proposed that any changes to its electric and gas
revenue requirements resulting from adjustments to its authorized
2006 test year cost of capital be effective January 1, 2006.&nbsp;
The Utility has proposed a procedural schedule for its cost of
capital application that contemplates that hearings would begin
September 12, 2005, and that the assigned administrative law judge
would issue a proposed decision by November 18, 2005, and a final
decision by the end of the year.</p>

<p>PG&amp;E Corporation and the Utility are unable to predict the
outcome of the proceeding.</p>

<br clear="all" />


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

<table border="0" cellspacing="0" cellpadding="0" width="624">
<tr>
<td valign="top">
<p align="center">SIGNATURE</p>
</td>
</tr>

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

<tr>
<td valign="top">
<p>Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused this report to be signed on
their behalf by the undersigned thereunto duly authorized.</p>

<p>&nbsp;</p>
</td>
</tr>
</table>

<p></p>

<p></p>

<table border="0" cellspacing="0" cellpadding="0" width="624">
<tr>
<td valign="top"></td>
<td colspan="2" valign="top">
<p>PG&amp;E CORPORATION</p>
</td>
</tr>

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

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

<tr>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top"></td>
<td valign="top">
<p>Christopher P. Johns<br />
 Senior Vice President, Chief<br />
 Financial Officer and Controller<br />
<br />
 </p>
</td>
</tr>

<tr>
<td valign="top"></td>
<td colspan="2" valign="top">
<p>PACIFIC GAS AND ELECTRIC COMPANY</p>
</td>
</tr>

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

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

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

<p>Dated:&nbsp; May 11, 2005</p>
</div>
</body>
</html>
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Form 8-K DATED MAY 11, 2005
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: May 11, 2005
PG&E CORPORATION
(Exact Name of Registrant as specified in
Charter)
California
1-2609
94-3234914
(State or other jurisdiction of
incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
One Market, Spear Tower, Suite 2400, San
Francisco, CA
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
Pacific Gas and Electric Company's 2006 Cost of Capital
Application
On
May 9, 2005, Pacific Gas and Electric Company (Utility), a
subsidiary of PG&E Corporation, filed a cost of capital
application with the California Public Utilities Commission (CPUC)
to determine the Utility's authorized capital structure and the
authorized rate of return that the Utility may earn on its
electricity and natural gas distribution and electricity generation
rate base for test year 2006.  In the cost of capital
proceeding, the CPUC (1) establishes the proportions of common
equity, preferred equity, and debt that will comprise the Utility's
total authorized capital structure for a specific year, and (2)
establishes the rate of return that the Utility is authorized to
earn on the common equity, preferred equity, and debt components of
its capital structure.
The
Utility has requested an authorized return on equity (ROE) of
11.50% for its gas and electric distribution operations and its
electric generation operations, as compared to the currently
authorized ROE of 11.22%.  The Utility has requested a cost of
debt of 6.05% (a slight decrease from the currently authorized
6.10%) and a cost of preferred stock of 5.87% (reduced from the
currently authorized level of 6.42%).  The Utility has
requested that the equity component of its authorized capital
structure for 2006 remain at 52.0%, that the long-term debt
component be increased to 46.0%, and that the preferred equity component
be reduced to 2.0%.  The recommended capital structure and
associated rate of return for each component would result in an
overall rate of return of 8.88% for 2006, an increase from the
currently authorized rate of return of 8.77%.  The following
table compares the currently authorized amounts with the requested
amounts:
2005 Authorized
2006 Requested
Cost
Capital
Structure
Weighted
Cost
Cost
Capital
Structure
Weighted
Cost
Long‑term debt.........................................................
6.10%
45.5%
2.78%
6.05%
46.0%
2.78%
Preferred
stock...........................................................
6.42%
2.5%
0.16%
5.87%
2.0%
0.12%
Common
equity...........................................................
11.22%
52.0%
5.83%
11.50%
52.0%
5.98%
Return on rate
base......................................................
8.77%
8.88%
Under
the December 2003 settlement agreement entered into among the
Utility, PG&E Corporation, and the CPUC to resolve the
Utility's Chapter 11 case, the Utility is entitled to earn a
ROE of at least 11.22% on an authorized 52.0% equity ratio until the
Utility's long-term issuer credit ratings are at least A-
from Standard & Poor's (S&P) or A3 from Moody's
Investors Service (Moody's).  The Utility's
corporate credit ratings are currently BBB from S&P and Baa1
from Moody's.
The
Utility's proposed cost of capital would cause its cost of
capital revenue requirement for 2006 to increase by approximately
$17.8 million, or 0.2%, over currently authorized revenue
requirements for electric distribution and generation operations
and approximately $4 million, or 0.1%, over currently authorized
revenue requirements for gas distribution operations, based on
currently authorized rate base.
The
Utility did not include a request for a 2006 rate of return for its
electric network transmission operations in this application to the
CPUC because the Federal Energy Regulatory Commission regulates
electric transmission rates.  Also, the Utility did not
include a request for a 2006 rate of return for its gas
transmission and storage operations because the CPUC previously set
revenue requirements for the Utility's gas transmission and
storage assets until 2007 in a separate proceeding.
The
Utility has proposed that any changes to its electric and gas
revenue requirements resulting from adjustments to its authorized
2006 test year cost of capital be effective January 1, 2006. 
The Utility has proposed a procedural schedule for its cost of
capital application that contemplates that hearings would begin
September 12, 2005, and that the assigned administrative law judge
would issue a proposed decision by November 18, 2005, and a final
decision by the end of the year.
PG&E Corporation and the Utility are unable to predict the
outcome of the proceeding.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused this report to be signed on
their behalf by the undersigned thereunto duly authorized.
PG&E CORPORATION
By:
CHRISTOPHER P. JOHNS
Christopher P. Johns
Senior Vice President, Chief
Financial Officer and Controller
PACIFIC GAS AND ELECTRIC COMPANY
By:
DINYAR B. MISTRY
Dinyar B. Mistry
Vice President and Controller
Dated:  May 11, 2005