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<title>PG&amp;E&rsquo;S GRC</title>
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<p align="center">SECURITIES AND EXCHANGE COMMISSION</p>
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<p align="center"><br />
 </p>
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<p align="center">Washington, D.C.&nbsp; 20549</p>
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<p align="center">FORM 8-K</p>
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<p align="center"><br />
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<p align="center">CURRENT REPORT</p>
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<p align="center">Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934</p>
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<p align="center"><br />
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<p align="center">Date of Report: January 16, 2003</p>
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 Commission<br />
 File<br />
 Number</p>
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<p align="center">Exact Name of<br />
 Registrant<br />
 as specified in<br />
 its charter</p>
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<p align="center"><br />
 State or other<br />
 Jurisdiction of<br />
 Incorporation</p>
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<p align="center"><br />
 IRS Employer<br />
 &nbsp; Identification<br />
 Number</p>
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<p align="center">_____________</p>
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<p align="center">_____________</p>
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<p align="center">_____________</p>
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<p align="center">_____________</p>
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<p align="center">1-12609</p>
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<p align="center">PG&amp;E Corporation</p>
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<p align="center">California</p>
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<p align="center">94-3234914</p>

<p align="center"><br />
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<p align="center">333-66032</p>
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<p align="center">PG&amp;E National Energy Group, Inc.</p>
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<p align="center">Delaware</p>
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<p align="center">94-3316236</p>
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<p align="center">PG&amp;E Corporation<br />
 One Market, Spear Tower, Suite 2400<br />
 San Francisco, California&nbsp;&nbsp;94105</p>
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<p align="center">PG&amp;E National Energy Group, Inc.<br />
 7600 Wisconsin Avenue<br />
 Bethesda, Maryland</p>
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<p>&nbsp;</p>
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<p align="center">(Address of principal executive offices) (Zip
Code)</p>
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<p align="center"><br />
 (415) 267-7000</p>
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<p align="center"><br />
 (301) 280-6800</p>
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<p align="center">(Registrant's telephone number, including area
code)</p>
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<p><br />
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<p>As previously disclosed, PG&amp;E Corporation&rsquo;s
subsidiary, PG&amp;E National Energy Group Inc. (PG&amp;E NEG), is
currently in default under various debt agreements and guaranteed
equity commitments totaling approximately $2.9 billion.&nbsp;
PG&amp;E NEG continues to negotiate with its lenders regarding
certain of these commitments as described below.</p>

<p>Further, consistent with its previously announced strategy to
dispose of certain merchant assets, including its New England
generating assets, through sale, abandonment or other transfer,
PG&amp;E NEG has agreed to sell, or has sold, other assets as
described below.&nbsp; PG&amp;E NEG and its subsidiaries are
continuing their efforts to abandon, sell, or transfer additional
assets, and are reducing their energy trading operations in an
ongoing effort to raise cash and reduce debt, whether through
negotiation with lenders or otherwise.&nbsp; Such asset transfers,
sales, or abandonments will cause substantial charges to earnings
in 2002 and 2003.&nbsp;&nbsp; As previously reported, if the
lenders exercise their default remedies or if the financial
commitments are not restructured, PG&amp;E NEG and certain of its
subsidiaries may be compelled to seek protection under or be forced
into a proceeding under Chapter 11 of the U.S. Bankruptcy
Code.&nbsp;</p>

<p><i>Funding of GenHoldings&rsquo; Generating Projects</i></p>

<p>As previously disclosed, in October 2002, GenHoldings I, LLC
(GenHoldings), a subsidiary of PG&amp;E NEG, defaulted under its
credit agreement by failing to make equity contributions to fund
construction draws for the Athens, Harquahala, and Covert
generating projects.&nbsp;&nbsp; Through December 31, 2002,
GenHoldings has contributed $833 million of equity to the
projects.&nbsp; Although PG&amp;E NEG has guaranteed
GenHoldings&rsquo; obligation to make equity contributions,
PG&amp;E NEG has notified the GenHoldings lenders that it will not
make further equity contributions on behalf of GenHoldings. In
November and December 2002, the lenders executed waivers and
amendments to the credit agreement under which they agreed to
continue to waive until March 31, 2003, the default caused by
GenHoldings&rsquo; failure to make equity contributions.&nbsp; In
addition, certain of these lenders agreed to increase their loan
commitments to an amount sufficient to provide (i) the funds
necessary to complete construction of the Athens, Covert and
Harquahala facilities; and (ii) additional working capital
facilities to enable each project, including Millennium, to timely
pay for its fuel requirements and to provide its own collateral to
support natural gas pipeline capacity reservations and independent
transmission system operator requirements.&nbsp; The November and
December 2002 increased loan commitments are senior to the original
liens and <i>pari passu</i> with each other but are senior to
amounts loaned through and including the October credit extension.
As a result, on November 25, 2002, the funding lenders paid
GenHoldings&rsquo; then pending draw request of approximately $75
million and on December 23, 2002, the funding lenders paid
GenHoldings&rsquo; then pending draw request of approximately $44
million.</p>

<p>In connection with the lenders&rsquo; waiver of various defaults
and additional funding commitments, PG&amp;E NEG has agreed to
cooperate with any reasonable proposal by the lenders regarding
disposition of the equity in or assets of any or all of the
PG&amp;E NEG subsidiaries holding the Athens, Covert, Harquahala
and Millenium projects.&nbsp; The amended credit agreement provides
that an event of default will occur if the Athens, Covert,
Harquahala and Millennium facilities are not transferred to the
lenders or their designees on or before March 31, 2003.&nbsp; Such
a default would trigger lender remedies, including the right to
foreclose on the projects.&nbsp;</p>

<p>Under the waiver, PG&amp;E NEG has re-affirmed its guarantee of
GenHoldings&rsquo; obligation to make equity contributions to these
projects of approximately $355 million.&nbsp; Neither PG&amp;E NEG
nor GenHoldings currently expects to have sufficient funds to make
this payment. The requirement to pay $355 million will remain an
obligation of PG&amp;E NEG that would survive the transfer of the
projects.<b>&nbsp;</b></p>

<p></p>

<p>Further, as a result of GenHoldings&rsquo; failure to make
required payments under the interest rate hedge contracts entered
into by GenHoldings, the counterparties to such interest rate hedge
contracts terminated the contracts during December 2002.&nbsp;
Settlement amounts due by GenHoldings in connection with such
terminated contracts are, in the aggregate, approximately $49.8
million.&nbsp; This amount was included in the previously reported
$192 million loss for interest rate hedges included in Other
Comprehensive Income, net of taxes, on the balance sheet at
September 30, 2002.&nbsp; This amount will be transferred from
Other Comprehensive Income and reflected as a charge to earnings in
the fourth quarter of 2002.</p>

<p>On December 13, 2002, The Shaw Group, Inc. (Shaw) filed
complaints in the United States District Court for the District of
Delaware against PG&amp;E NEG and certain affiliates including the
owners of the Covert and Harquahala projects.&nbsp; Shaw is the
construction contractor for these projects.&nbsp; In its
complaints, Shaw alleges that it has not received adequate
assurances of payment from PG&amp;E NEG or its affiliates, that
PG&amp;E NEG&rsquo;s pre-financing payment guarantees for each of
the Covert and Harquahala projects have been reestablished, and
that PG&amp;E NEG has repudiated its obligations under various
guarantees.&nbsp; Shaw seeks declaratory relief that it is relieved
from its obligations under the construction contracts for Covert
and Harquahala and certain other agreements and that these
contracts have been repudiated by PG&amp;E NEG and its affiliates
entitling Shaw to damages.&nbsp; GenHoldings believes that Shaw is
not entitled to adequate assurances as a matter of law and that, in
any case, the credit arrangements which became effective on
December 23, 2002 by which the lenders agreed to provide funds to
complete construction, are sufficient to provide Shaw adequate
assurances.&nbsp; PG&amp;E NEG believes Shaw&rsquo;s other claims
are entirely without merit and intends to vigorously defend all
claims and pursue any counterclaims it or its affiliates may have
against Shaw.&nbsp; PG&amp;E NEG cannot predict the outcome of this
matter.&nbsp;</p>

<p><i>Funding of Lake Road and La Paloma Generating
Projects</i></p>

<p>As of December 4, 2002, PG&amp;E NEG and certain subsidiaries
entered into various agreements with the respective lenders for
each of the Lake Road and La Paloma generating projects providing
for (i) funding of construction costs required to complete the La
Paloma facility; and (ii) additional working capital facilities to
enable each subsidiary to timely pay for its fuel requirements and
to provide its own collateral to support natural gas pipeline
capacity reservations and independent transmission system operator
requirements, as well as for general working capital
purposes.&nbsp; Lenders extending new credit under these agreements
have received liens on the projects that are senior to the existing
lenders&rsquo; liens.&nbsp; These agreements provide, among other
things, that the failure to transfer right, title and interest in,
to and under the Lake Road and La Paloma projects to the respective
lenders by June 9, 2003 will constitute a default under the
agreements.&nbsp; The failure to transfer the facilities would
entitle the lenders to accelerate the new indebtedness and exercise
other remedies.</p>

<p>In consideration of the lenders&rsquo; waiver of certain
defaults, PG&amp;E NEG had previously agreed to cooperate, and
cause its subsidiaries to cooperate, with any reasonable proposal
regarding disposition of the ownership interests in and/or assets
of the La Paloma project, on terms and conditions satisfactory to
the lenders in their sole discretion.</p>

<p>The La Paloma and Lake Road projects have been financed entirely
with debt.&nbsp; PG&amp;E NEG has guaranteed the repayment of a
portion of the project subsidiary debt in the approximate aggregate
amounts of $374.5 million for La Paloma and $230 million for Lake
Road, which amounts represent the subsidiaries&rsquo; equity
contribution in the projects.&nbsp; The lenders have accelerated
the guaranteed portion of the debt and made a payment demand under
the PG&amp;E NEG guarantee.&nbsp; Neither the PG&amp;E NEG
subsidiaries nor PG&amp;E NEG have sufficient funds to make these
payments.&nbsp; The requirement to make the payments will remain an
obligation of PG&amp;E NEG that would survive the transfer of the
projects.</p>

<p>Further, as a result of the La Paloma and Lake Road
subsidiaries&rsquo; failure to make required payments under the
interest rate hedge contracts entered into by them, the
counterparties to such interest rate hedge contracts have
terminated the contracts. &nbsp; Settlement amounts due from the
Lake Road and La Paloma project subsidiaries in connection with
such terminated contracts are, in the aggregate, approximately $61
million and $78 million, respectively.&nbsp; These amounts were
included in the previously reported $192 million loss for interest
rate hedges included in Other Comprehensive Income, net of taxes,
on the balance sheet at September 30, 2002.&nbsp; These amounts
will be transferred from Other Comprehensive Income and reflected
as a charge to earnings in the fourth quarter of 2002.</p>

<p><i>Termination of Turbine Purchase
Agreements&nbsp;&nbsp;&nbsp;</i></p>

<p>As previously disclosed, PG&amp;E NEG had accrued approximately
$53 million (pre-tax) at October 31, 2002, for future termination
payments required under certain turbine and related equipment
contracts.&nbsp;</p>

<p>On November 21, 2002, Mitsubishi Power Systems, Inc. (MPS)
notified PG&amp;E NEG&rsquo;s subsidiary that it was terminating
the turbine purchase agreement for failure to pay past due amounts
and failure to cash-collateralize PG&amp;E NEG&rsquo;s
guarantee.&nbsp; While PG&amp;E NEG&rsquo;s subsidiary has disputed
that such amounts were due before January and July 2003, and has
asserted that a breach under PG&amp;E NEG&rsquo;s guarantee did not
give rise to a breach of the turbine purchase agreement, neither
PG&amp;E NEG nor PG&amp;E NEG&rsquo;s subsidiary intends to contest
the termination.&nbsp; PG&amp;E NEG&rsquo;s subsidiary does,
however, maintain that the remaining $14 million payable under the
turbine purchase agreement is not due until January 2003 when $4.5
million is due and July 2003 when the remaining $9.5 million is due
and that MPS has no right to accelerate these payments. (PG&amp;E
NEG did not make the January payment pending negotiations with
MPS.)&nbsp; PG&amp;E NEG does not know if MPS will take further
steps in an effort to accelerate these payments. The $14 million
remaining payment has been included in the $53 million accrual at
October 31, 2002.</p>

<p>Also, on November 22, 2002, PG&amp;E NEG&rsquo;s subsidiaries
reached agreement with (i) General Electric Company (GEC) to
terminate its master turbine purchase agreement and its turbine
purchase agreement for the Mantua Creek project and (ii) General
Electric International, Inc. (GEII) to terminate its master long
term service agreement and its long term service agreement for the
Mantua Creek project.&nbsp; In exchange for a partial payment of
the termination fees for the master turbine purchase agreement and
the master long term service agreements in the amount of $11.5
million (which payments were made on November 26, 2002), GEC and
GEII have agreed to reduce the balance of these fees from
approximately $34 million to approximately $22 million and to defer
payment of the reduced fees to December 31, 2004.&nbsp; The $22
million remaining payment has been included in the $53 million
accrual at October 31, 2002.</p>

<p>The cost to terminate the turbine purchase agreement with GEC
for the Mantua Creek project was prepaid.&nbsp; PG&amp;E
NEG&rsquo;s subsidiary that owns the Mantua Creek project prepaid
$79 million and received a $31 million refund upon termination. The
remaining $48 million will be reflected as a loss in the fourth
quarter of 2002.</p>

<p>On December 6, 2002, the lenders under the turbine credit
agreement provided notice that the termination of the GEC master
turbine purchase agreement constitutes an additional default under
the turbine credit agreement.&nbsp; As previously disclosed,
PG&amp;E NEG&rsquo;s November 14, 2002 default under its credit
agreement caused a cross-default under the turbine credit
agreement. Upon a default the lenders are entitled to accelerate
the indebtedness outstanding under the turbine credit agreement
(approximately $205 million at December 31, 2002).&nbsp; PG&amp;E
NEG has guaranteed its subsidiary&rsquo;s obligations under the
turbine credit agreement.</p>

<p>In 2001, PG&amp;E NEG&rsquo;s subsidiary that owns the Mantua
Creek project contracted with Hitachi America, Ltd. (HAL) for steam
turbine generators and heat recovery steam generators for the
Mantua Creek project.&nbsp; On December 24, 2002, these agreements
were terminated.&nbsp; Mantua Creek had previously paid HAL
approximately $55 million under these contracts. The remaining
costs to terminate these contracts relating to the Mantua Creek
project are approximately $11 million and will be reflected as a
loss in the fourth quarter of 2002.</p>

<p><i>Tolling Agreements</i></p>

<p>As previously reported, pg&amp;e NEG&rsquo;s subsidiary,
PG&amp;E Energy Trading - Power, LP (PG&amp;E ET) has provided
notices of default with respect to the performance of the following
parties under tolling agreements entered into with PG&amp;E ET:
Liberty Electric Power, L.P. (Liberty), Calpine Energy Services,
L.P. (Calpine), Southaven Power, LLC (Southaven) and Caledonia
Generating, LLC (Caledonia).&nbsp; In addition, PG&amp;E ET has
provided notice to Calpine that PG&amp;E ET is terminating the
tolling agreement with that party.&nbsp; Each of Calpine, Southaven
and Caledonia have advised pg&amp;e ET that they disagree with
pg&amp;e ET&rsquo;s claim that they are in default under these
agreements.&nbsp; PG&amp;E ET has agreed to forbear from taking
further action with respect to Liberty. <b></b></p>

<p>As previously disclosed, PG&amp;E ET&rsquo;s obligations under
the tolling agreement with Liberty are guaranteed primarily by
PG&amp;E NEG and secondarily by PG&amp;E GTN for an aggregate
amount of up to $150 million.&nbsp; PG&amp;E NEG also has
guaranteed PG&amp;E ET&rsquo;s obligations under the tolling
agreements with Southaven and Caledonia for up to $176 million and
$250 million, respectively.&nbsp; Upon termination of the tolling
agreements, the terminating party is entitled to a termination
payment based on a formula that takes into account a number of
factors, including market conditions such as the price of power and
the price of fuel. To the extent PG&amp;E ET fails to pay a
termination payment for which PG&amp;E ET is determined to be
liable, the counterparty may seek to require PG&amp;E NEG to pay as
guarantor up to the maximum amount of the guarantee.&nbsp; PG&amp;E
NEG is unable to predict whether counterparties will seek to
terminate their tolling agreements.&nbsp; PG&amp;E NEG does not
currently expect to be able to pay the full amount of termination
payments if any become due.&nbsp;&nbsp;</p>

<p><i>Attala Default</i></p>

<p>As previously reported, PG&amp;E NEG has provided a $300 million
guarantee to support the payment obligations of its indirect wholly
owned subsidiary, Attala Energy Company, LLC (Energy LLC), under a
tolling agreement entered into with Attala Generating Company, LLC
(Generating LLC), another indirect wholly owned subsidiary of
PG&amp;E NEG.&nbsp; On May 7, 2002, Generating LLC completed a $340
million sale and leaseback transaction whereby it sold and leased
back its approximately 526 megawatt (MW) generation facility
located in Mississippi to a third party special purpose
entity.&nbsp; The payments under the 25-year term tolling agreement
provide Generating LLC, as lessee, with sufficient cash flowsduring
the term of the tolling agreement to pay rent under the 37-year
lease and certain other operating costs.&nbsp; Energy LLC is unable
to make the payments under the tolling agreement and failed to make
the required payment due on November 22, 2002 to Generating
LLC.&nbsp; Failure to cure this payment default constituted an
event of default under the tolling agreement on November 27,
2002.&nbsp; Further, PG&amp;E NEG's failure to pay maturing
principal under its revolving credit facilities on November 14,
2002 became an event of default under the tolling agreement upon
Energy LLC&rsquo;s failure to replace the PG&amp;E NEG guarantee by
December 16, 2002.&nbsp; On December 31, 2002, the tolling
agreement terminated following notice of termination given by
Generating LLC.&nbsp; The parties are currently calculating the
termination payment, if any, that Energy LLC would owe Generating
LLC.&nbsp; Despite the termination of the tolling agreement, Energy
LLC remains obligated to provide an acceptable guarantee or
collateral to secure its obligations under the tolling agreement
including the payment of any termination payment that may be
determined to be due.&nbsp;&nbsp;</p>

<p>No default has occurred under the lease and Generating LLC
timely made the $22.2 million lease payment due January 2,
2003.&nbsp; However, the lease provides that failure to replace the
tolling agreement with a satisfactory&nbsp;replacement&nbsp;tolling
agreement within 180 days after the first default under the tolling
agreement (which occurred on November 27, 2002) will constitute an
event of default under the lease.&nbsp; After the termination
payment has been determined in accordance with the tolling
agreement and if Energy LLC or PG&amp;E NEG both fail, or have
failed, to provide security as required by the tolling agreement,
the time period would not extend beyond the 60th day after such
failure to provide security.&nbsp; Upon the occurrence of an event
of default under the lease, the lessor would be entitled to
exercise various remedies, including termination of the lease and
foreclosure of the assets securing the
lease.&nbsp;&nbsp;&nbsp;&nbsp;</p>

<p><i>Transfer of North Baja Pipeline</i></p>

<p>On December 11, 2002, PG&amp;E Gas Transmission, Northwest
Corporation (PG&amp;E GTN) completed the purchase from PG&amp;E Gas
Transmission Holdings Corporation of 100 percent of the equity of
North Baja Pipeline, LLC (NBP) effective as of the close of
business on October 31, 2002.&nbsp; NBP owns an interstate gas
pipeline running from Arizona to the U.S.-Mexico border in
California.&nbsp; PG&amp;E GTN paid $63 million in cash and has
acquired the NBP membership interest subject to NBP's existing
indebtedness and remaining construction commitments of $92 million,
which amount includes $75 million previously borrowed from PG&amp;E
GTN.&nbsp; The transaction was funded through PG&amp;E GTN&rsquo;s
available cash on hand and $58 million borrowed under PG&amp;E
GTN's existing credit facility.</p>

<p><i>Sale of Mountain View Wind Facility</i></p>

<p>On December 18, 2002, a subsidiary of PG&amp;E NEG entered into
an agreement to sell its 66.6 MW wind-powered generation facility
near Palm Springs, California, to Centennial Power, Inc. for $102.5
million.&nbsp; Among other conditions, the sale was subject to the
requirements of the Hart-Scott-Rodino Antitrust Improvement Act
which requires parties to certain acquisitions to notify the
Federal Trade Commission and the Antitrust Division of the
Department of Justice and to observe a waiting period to allow the
antitrust agencies to determine whether to conduct an
investigation.&nbsp; On December 30, 2002, the Department of
Justice issued a notice approving early termination of the waiting
period.&nbsp; The sale remains subject to receipt of regulatory
approval from the Federal Energy Regulatory Commission and other
conditions contained in the agreement.</p>

<p></p>

<p>Item 7. Financial Statements, Pro Forma Financial Information,
and Exhibits</p>

<p>Exhibit 99.1 -&nbsp; Fourth Waiver and Amendment dated as of
December 23, 2002, among GenHoldings I, LLC, various lenders
identified as the GenHoldings Lenders, the Administrative Agent,
and acknowledged and agreed to by PG&amp;E National Energy Group,
Inc.</p>

<p>Exhibit 99.2&nbsp; Second Omnibus Restructuring Agreement dated
as of December 4, 2002 among La Paloma Generating Company, LLC, La
Paloma Generating Trust, Ltd., and various other parties, including
PG&amp;E National Energy Group, Inc.</p>

<p>Exhibit 99.3&nbsp; Priority Credit and Reimbursement Agreement
among La Paloma Generating Company, LLC, La Paloma Generating Trust
Ltd., Wilmington Trust Company, in its individual capacity and as
Trustee, Citibank, N.A., as the Priority Working Capital L/C
Issuer, the Several Priority Lenders from time to time parties
hereto, Citibank, N.A., as administrative agent, and</p>

<p>Citibank, N.A., as priority agent, dated as of December 4,
2002</p>

<p>Exhibit 99.4&nbsp; Second Omnibus Restructuring Agreement dated
as of December 4, 2002 among Lake Road Generating Company, LLC,
Lake Road Generating Trust, Ltd., and various other parties,
including PG&amp;E National Energy Group, Inc.</p>

<p>Exhibit 99.5&nbsp; Priority Credit and Reimbursement Agreement
among Lake Road Generating Company, LLC, Lake Road Trust Ltd.,
Wilmington Trust Company, in its individual capacity and as
Trustee, Citibank, N.A., as the Priority L/C Issuer, the Several
Priority Lenders from time to time parties hereto, Citibank, N.A.,
as administrative agent, and Citibank, N.A., as priority agent,
dated as of December 4, 2002</p>

<br clear="all" />


<p><br />
</p>

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<p>SIGNATURE</p>
</td>
</tr>
</table>

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

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<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>PG&amp;E CORPORATION<br />
 </p>
</td>
</tr>

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<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; CHRISTOPHER P. JOHNS</p>
</td>
</tr>

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

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

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

<table border="0" cellspacing="0" cellpadding="0" width="649">
<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;</p>
</td>
<td valign="top">
<p>PG&amp;E NATIONAL ENERGY GROUP, INC.<br />
 </p>
</td>
</tr>

<tr>
<td valign="top">
<p>&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>By:&nbsp; THOMAS E. LEGRO</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;</p>
</td>
<td valign="top">
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
</td>
</tr>

<tr>
<td valign="top">
<p>&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
</td>
<td valign="top">
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THOMAS E. LEGRO</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice President,
Controller and</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Accounting
Officer</p>

<p><br />
 </p>
</td>
</tr>

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

<p>Date:&nbsp; January 16, 2003</p>

<br clear="all" />


<p align="center">EXHIBIT INDEX</p>

<p>Exhibit No.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Description of Document</p>

<p>99.1
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fourth Waiver and Amendment dated as of December 23, 2002, among
GenHoldings I, LLC, various lenders identified as the GenHoldings
Lenders, the Administrative Agent, and acknowledged and agreed to
by PG&amp;E National Energy Group, Inc.</p>

<p>99.2&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Second Omnibus Restructuring Agreement dated as of December 4, 2002
among La Paloma Generating Company, LLC, La Paloma Generating
Trust, Ltd., and various other parties, including PG&amp;E National
Energy Group, Inc.</p>

<p>
99.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Priority Credit and Reimbursement Agreement among La Paloma
Generating Company, LLC, La Paloma Generating Trust Ltd.,
Wilmington Trust Company, in its individual capacity and as
Trustee, Citibank, N.A., as the Priority Working Capital L/C
Issuer, the Several Priority Lenders from time to time parties
hereto, Citibank, N.A., as administrative agent, and Citibank,
N.A., as priority agent, dated as of December 4, 2002</p>

<p>99.4&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Second Omnibus Restructuring Agreement dated as of December 4, 2002
among Lake Road Generating Company, LLC, Lake Road Generating
Trust, Ltd., and various other parties, including PG&amp;E National
Energy Group, Inc.</p>

<p>99.5&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Priority Credit and Reimbursement Agreement among Lake Road
Generating Company, LLC, Lake Road Trust Ltd., Wilmington Trust
Company, in its individual capacity and as Trustee, Citibank, N.A.,
as the Priority L/C Issuer, the Several Priority Lenders from time
to time parties hereto, Citibank, N.A., as administrative agent,
and Citibank, N.A., as priority agent, dated as of December 4,
2002</p>
</div>
</body>
</html>
[{"type": "8-K", "sequence": "1", "filename": "corpandneg8k0116final.htm", "description": "FORM 8-K", "secsgml_size_bytes": 34994}]
[{"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": "03516835"}, "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"}}, {"company-data": {"conformed-name": "PG&E NATIONAL ENERGY GROUP INC", "cik": "0001129989", "assigned-sic": "4911", "irs-number": "943316236", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "333-66032", "film-number": "03516836"}, "business-address": {"street1": "7500 OLD GEORGETOWN RD", "city": "BETHESDA", "state": "MD", "zip": "20814", "phone": "3012806800"}, "mail-address": {"street1": "7500 OLD GEORGETOWN RD", "city": "BETHESDA", "state": "MD", "zip": "20814"}}]
PG&E'S GRC
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: January 16, 2003
Commission
File
Number
Exact Name of
Registrant
as specified in
its charter
State or other
Jurisdiction of
Incorporation
IRS Employer
Identification
Number
_____________
_____________
_____________
_____________
1-12609
PG&E Corporation
California
94-3234914
333-66032
PG&E National Energy Group, Inc.
Delaware
94-3316236
PG&E Corporation
One Market, Spear Tower, Suite 2400
San Francisco, California  94105
PG&E National Energy Group, Inc.
7600 Wisconsin Avenue
Bethesda, Maryland
(Address of principal executive offices) (Zip
Code)
(415) 267-7000
(301) 280-6800
(Registrant's telephone number, including area
code)
As previously disclosed, PG&E Corporation's
subsidiary, PG&E National Energy Group Inc. (PG&E NEG), is
currently in default under various debt agreements and guaranteed
equity commitments totaling approximately $2.9 billion. 
PG&E NEG continues to negotiate with its lenders regarding
certain of these commitments as described below.
Further, consistent with its previously announced strategy to
dispose of certain merchant assets, including its New England
generating assets, through sale, abandonment or other transfer,
PG&E NEG has agreed to sell, or has sold, other assets as
described below.  PG&E NEG and its subsidiaries are
continuing their efforts to abandon, sell, or transfer additional
assets, and are reducing their energy trading operations in an
ongoing effort to raise cash and reduce debt, whether through
negotiation with lenders or otherwise.  Such asset transfers,
sales, or abandonments will cause substantial charges to earnings
in 2002 and 2003.   As previously reported, if the
lenders exercise their default remedies or if the financial
commitments are not restructured, PG&E NEG and certain of its
subsidiaries may be compelled to seek protection under or be forced
into a proceeding under Chapter 11 of the U.S. Bankruptcy
Code.
Funding of GenHoldings' Generating Projects
As previously disclosed, in October 2002, GenHoldings I, LLC
(GenHoldings), a subsidiary of PG&E NEG, defaulted under its
credit agreement by failing to make equity contributions to fund
construction draws for the Athens, Harquahala, and Covert
generating projects.   Through December 31, 2002,
GenHoldings has contributed $833 million of equity to the
projects.  Although PG&E NEG has guaranteed
GenHoldings' obligation to make equity contributions,
PG&E NEG has notified the GenHoldings lenders that it will not
make further equity contributions on behalf of GenHoldings. In
November and December 2002, the lenders executed waivers and
amendments to the credit agreement under which they agreed to
continue to waive until March 31, 2003, the default caused by
GenHoldings' failure to make equity contributions.  In
addition, certain of these lenders agreed to increase their loan
commitments to an amount sufficient to provide (i) the funds
necessary to complete construction of the Athens, Covert and
Harquahala facilities; and (ii) additional working capital
facilities to enable each project, including Millennium, to timely
pay for its fuel requirements and to provide its own collateral to
support natural gas pipeline capacity reservations and independent
transmission system operator requirements.  The November and
December 2002 increased loan commitments are senior to the original
liens and
pari passu
with each other but are senior to
amounts loaned through and including the October credit extension.
As a result, on November 25, 2002, the funding lenders paid
GenHoldings' then pending draw request of approximately $75
million and on December 23, 2002, the funding lenders paid
GenHoldings' then pending draw request of approximately $44
million.
In connection with the lenders' waiver of various defaults
and additional funding commitments, PG&E NEG has agreed to
cooperate with any reasonable proposal by the lenders regarding
disposition of the equity in or assets of any or all of the
PG&E NEG subsidiaries holding the Athens, Covert, Harquahala
and Millenium projects.  The amended credit agreement provides
that an event of default will occur if the Athens, Covert,
Harquahala and Millennium facilities are not transferred to the
lenders or their designees on or before March 31, 2003.  Such
a default would trigger lender remedies, including the right to
foreclose on the projects.
Under the waiver, PG&E NEG has re-affirmed its guarantee of
GenHoldings' obligation to make equity contributions to these
projects of approximately $355 million.  Neither PG&E NEG
nor GenHoldings currently expects to have sufficient funds to make
this payment. The requirement to pay $355 million will remain an
obligation of PG&E NEG that would survive the transfer of the
projects.
Further, as a result of GenHoldings' failure to make
required payments under the interest rate hedge contracts entered
into by GenHoldings, the counterparties to such interest rate hedge
contracts terminated the contracts during December 2002. 
Settlement amounts due by GenHoldings in connection with such
terminated contracts are, in the aggregate, approximately $49.8
million.  This amount was included in the previously reported
$192 million loss for interest rate hedges included in Other
Comprehensive Income, net of taxes, on the balance sheet at
September 30, 2002.  This amount will be transferred from
Other Comprehensive Income and reflected as a charge to earnings in
the fourth quarter of 2002.
On December 13, 2002, The Shaw Group, Inc. (Shaw) filed
complaints in the United States District Court for the District of
Delaware against PG&E NEG and certain affiliates including the
owners of the Covert and Harquahala projects.  Shaw is the
construction contractor for these projects.  In its
complaints, Shaw alleges that it has not received adequate
assurances of payment from PG&E NEG or its affiliates, that
PG&E NEG's pre-financing payment guarantees for each of
the Covert and Harquahala projects have been reestablished, and
that PG&E NEG has repudiated its obligations under various
guarantees.  Shaw seeks declaratory relief that it is relieved
from its obligations under the construction contracts for Covert
and Harquahala and certain other agreements and that these
contracts have been repudiated by PG&E NEG and its affiliates
entitling Shaw to damages.  GenHoldings believes that Shaw is
not entitled to adequate assurances as a matter of law and that, in
any case, the credit arrangements which became effective on
December 23, 2002 by which the lenders agreed to provide funds to
complete construction, are sufficient to provide Shaw adequate
assurances.  PG&E NEG believes Shaw's other claims
are entirely without merit and intends to vigorously defend all
claims and pursue any counterclaims it or its affiliates may have
against Shaw.  PG&E NEG cannot predict the outcome of this
matter.
Funding of Lake Road and La Paloma Generating
Projects
As of December 4, 2002, PG&E NEG and certain subsidiaries
entered into various agreements with the respective lenders for
each of the Lake Road and La Paloma generating projects providing
for (i) funding of construction costs required to complete the La
Paloma facility; and (ii) additional working capital facilities to
enable each subsidiary to timely pay for its fuel requirements and
to provide its own collateral to support natural gas pipeline
capacity reservations and independent transmission system operator
requirements, as well as for general working capital
purposes.  Lenders extending new credit under these agreements
have received liens on the projects that are senior to the existing
lenders' liens.  These agreements provide, among other
things, that the failure to transfer right, title and interest in,
to and under the Lake Road and La Paloma projects to the respective
lenders by June 9, 2003 will constitute a default under the
agreements.  The failure to transfer the facilities would
entitle the lenders to accelerate the new indebtedness and exercise
other remedies.
In consideration of the lenders' waiver of certain
defaults, PG&E NEG had previously agreed to cooperate, and
cause its subsidiaries to cooperate, with any reasonable proposal
regarding disposition of the ownership interests in and/or assets
of the La Paloma project, on terms and conditions satisfactory to
the lenders in their sole discretion.
The La Paloma and Lake Road projects have been financed entirely
with debt.  PG&E NEG has guaranteed the repayment of a
portion of the project subsidiary debt in the approximate aggregate
amounts of $374.5 million for La Paloma and $230 million for Lake
Road, which amounts represent the subsidiaries' equity
contribution in the projects.  The lenders have accelerated
the guaranteed portion of the debt and made a payment demand under
the PG&E NEG guarantee.  Neither the PG&E NEG
subsidiaries nor PG&E NEG have sufficient funds to make these
payments.  The requirement to make the payments will remain an
obligation of PG&E NEG that would survive the transfer of the
projects.
Further, as a result of the La Paloma and Lake Road
subsidiaries' failure to make required payments under the
interest rate hedge contracts entered into by them, the
counterparties to such interest rate hedge contracts have
terminated the contracts.   Settlement amounts due from the
Lake Road and La Paloma project subsidiaries in connection with
such terminated contracts are, in the aggregate, approximately $61
million and $78 million, respectively.  These amounts were
included in the previously reported $192 million loss for interest
rate hedges included in Other Comprehensive Income, net of taxes,
on the balance sheet at September 30, 2002.  These amounts
will be transferred from Other Comprehensive Income and reflected
as a charge to earnings in the fourth quarter of 2002.
Termination of Turbine Purchase
Agreements
As previously disclosed, PG&E NEG had accrued approximately
$53 million (pre-tax) at October 31, 2002, for future termination
payments required under certain turbine and related equipment
contracts.
On November 21, 2002, Mitsubishi Power Systems, Inc. (MPS)
notified PG&E NEG's subsidiary that it was terminating
the turbine purchase agreement for failure to pay past due amounts
and failure to cash-collateralize PG&E NEG's
guarantee.  While PG&E NEG's subsidiary has disputed
that such amounts were due before January and July 2003, and has
asserted that a breach under PG&E NEG's guarantee did not
give rise to a breach of the turbine purchase agreement, neither
PG&E NEG nor PG&E NEG's subsidiary intends to contest
the termination.  PG&E NEG's subsidiary does,
however, maintain that the remaining $14 million payable under the
turbine purchase agreement is not due until January 2003 when $4.5
million is due and July 2003 when the remaining $9.5 million is due
and that MPS has no right to accelerate these payments. (PG&E
NEG did not make the January payment pending negotiations with
MPS.)  PG&E NEG does not know if MPS will take further
steps in an effort to accelerate these payments. The $14 million
remaining payment has been included in the $53 million accrual at
October 31, 2002.
Also, on November 22, 2002, PG&E NEG's subsidiaries
reached agreement with (i) General Electric Company (GEC) to
terminate its master turbine purchase agreement and its turbine
purchase agreement for the Mantua Creek project and (ii) General
Electric International, Inc. (GEII) to terminate its master long
term service agreement and its long term service agreement for the
Mantua Creek project.  In exchange for a partial payment of
the termination fees for the master turbine purchase agreement and
the master long term service agreements in the amount of $11.5
million (which payments were made on November 26, 2002), GEC and
GEII have agreed to reduce the balance of these fees from
approximately $34 million to approximately $22 million and to defer
payment of the reduced fees to December 31, 2004.  The $22
million remaining payment has been included in the $53 million
accrual at October 31, 2002.
The cost to terminate the turbine purchase agreement with GEC
for the Mantua Creek project was prepaid.  PG&E
NEG's subsidiary that owns the Mantua Creek project prepaid
$79 million and received a $31 million refund upon termination. The
remaining $48 million will be reflected as a loss in the fourth
quarter of 2002.
On December 6, 2002, the lenders under the turbine credit
agreement provided notice that the termination of the GEC master
turbine purchase agreement constitutes an additional default under
the turbine credit agreement.  As previously disclosed,
PG&E NEG's November 14, 2002 default under its credit
agreement caused a cross-default under the turbine credit
agreement. Upon a default the lenders are entitled to accelerate
the indebtedness outstanding under the turbine credit agreement
(approximately $205 million at December 31, 2002).  PG&E
NEG has guaranteed its subsidiary's obligations under the
turbine credit agreement.
In 2001, PG&E NEG's subsidiary that owns the Mantua
Creek project contracted with Hitachi America, Ltd. (HAL) for steam
turbine generators and heat recovery steam generators for the
Mantua Creek project.  On December 24, 2002, these agreements
were terminated.  Mantua Creek had previously paid HAL
approximately $55 million under these contracts. The remaining
costs to terminate these contracts relating to the Mantua Creek
project are approximately $11 million and will be reflected as a
loss in the fourth quarter of 2002.
Tolling Agreements
As previously reported, pg&e NEG's subsidiary,
PG&E Energy Trading - Power, LP (PG&E ET) has provided
notices of default with respect to the performance of the following
parties under tolling agreements entered into with PG&E ET:
Liberty Electric Power, L.P. (Liberty), Calpine Energy Services,
L.P. (Calpine), Southaven Power, LLC (Southaven) and Caledonia
Generating, LLC (Caledonia).  In addition, PG&E ET has
provided notice to Calpine that PG&E ET is terminating the
tolling agreement with that party.  Each of Calpine, Southaven
and Caledonia have advised pg&e ET that they disagree with
pg&e ET's claim that they are in default under these
agreements.  PG&E ET has agreed to forbear from taking
further action with respect to Liberty.
As previously disclosed, PG&E ET's obligations under
the tolling agreement with Liberty are guaranteed primarily by
PG&E NEG and secondarily by PG&E GTN for an aggregate
amount of up to $150 million.  PG&E NEG also has
guaranteed PG&E ET's obligations under the tolling
agreements with Southaven and Caledonia for up to $176 million and
$250 million, respectively.  Upon termination of the tolling
agreements, the terminating party is entitled to a termination
payment based on a formula that takes into account a number of
factors, including market conditions such as the price of power and
the price of fuel. To the extent PG&E ET fails to pay a
termination payment for which PG&E ET is determined to be
liable, the counterparty may seek to require PG&E NEG to pay as
guarantor up to the maximum amount of the guarantee.  PG&E
NEG is unable to predict whether counterparties will seek to
terminate their tolling agreements.  PG&E NEG does not
currently expect to be able to pay the full amount of termination
payments if any become due.
Attala Default
As previously reported, PG&E NEG has provided a $300 million
guarantee to support the payment obligations of its indirect wholly
owned subsidiary, Attala Energy Company, LLC (Energy LLC), under a
tolling agreement entered into with Attala Generating Company, LLC
(Generating LLC), another indirect wholly owned subsidiary of
PG&E NEG.  On May 7, 2002, Generating LLC completed a $340
million sale and leaseback transaction whereby it sold and leased
back its approximately 526 megawatt (MW) generation facility
located in Mississippi to a third party special purpose
entity.  The payments under the 25-year term tolling agreement
provide Generating LLC, as lessee, with sufficient cash flowsduring
the term of the tolling agreement to pay rent under the 37-year
lease and certain other operating costs.  Energy LLC is unable
to make the payments under the tolling agreement and failed to make
the required payment due on November 22, 2002 to Generating
LLC.  Failure to cure this payment default constituted an
event of default under the tolling agreement on November 27,
2002.  Further, PG&E NEG's failure to pay maturing
principal under its revolving credit facilities on November 14,
2002 became an event of default under the tolling agreement upon
Energy LLC's failure to replace the PG&E NEG guarantee by
December 16, 2002.  On December 31, 2002, the tolling
agreement terminated following notice of termination given by
Generating LLC.  The parties are currently calculating the
termination payment, if any, that Energy LLC would owe Generating
LLC.  Despite the termination of the tolling agreement, Energy
LLC remains obligated to provide an acceptable guarantee or
collateral to secure its obligations under the tolling agreement
including the payment of any termination payment that may be
determined to be due.
No default has occurred under the lease and Generating LLC
timely made the $22.2 million lease payment due January 2,
2003.  However, the lease provides that failure to replace the
tolling agreement with a satisfactory replacement tolling
agreement within 180 days after the first default under the tolling
agreement (which occurred on November 27, 2002) will constitute an
event of default under the lease.  After the termination
payment has been determined in accordance with the tolling
agreement and if Energy LLC or PG&E NEG both fail, or have
failed, to provide security as required by the tolling agreement,
the time period would not extend beyond the 60th day after such
failure to provide security.  Upon the occurrence of an event
of default under the lease, the lessor would be entitled to
exercise various remedies, including termination of the lease and
foreclosure of the assets securing the
lease.
Transfer of North Baja Pipeline
On December 11, 2002, PG&E Gas Transmission, Northwest
Corporation (PG&E GTN) completed the purchase from PG&E Gas
Transmission Holdings Corporation of 100 percent of the equity of
North Baja Pipeline, LLC (NBP) effective as of the close of
business on October 31, 2002.  NBP owns an interstate gas
pipeline running from Arizona to the U.S.-Mexico border in
California.  PG&E GTN paid $63 million in cash and has
acquired the NBP membership interest subject to NBP's existing
indebtedness and remaining construction commitments of $92 million,
which amount includes $75 million previously borrowed from PG&E
GTN.  The transaction was funded through PG&E GTN's
available cash on hand and $58 million borrowed under PG&E
GTN's existing credit facility.
Sale of Mountain View Wind Facility
On December 18, 2002, a subsidiary of PG&E NEG entered into
an agreement to sell its 66.6 MW wind-powered generation facility
near Palm Springs, California, to Centennial Power, Inc. for $102.5
million.  Among other conditions, the sale was subject to the
requirements of the Hart-Scott-Rodino Antitrust Improvement Act
which requires parties to certain acquisitions to notify the
Federal Trade Commission and the Antitrust Division of the
Department of Justice and to observe a waiting period to allow the
antitrust agencies to determine whether to conduct an
investigation.  On December 30, 2002, the Department of
Justice issued a notice approving early termination of the waiting
period.  The sale remains subject to receipt of regulatory
approval from the Federal Energy Regulatory Commission and other
conditions contained in the agreement.
Item 7. Financial Statements, Pro Forma Financial Information,
and Exhibits
Exhibit 99.1 -  Fourth Waiver and Amendment dated as of
December 23, 2002, among GenHoldings I, LLC, various lenders
identified as the GenHoldings Lenders, the Administrative Agent,
and acknowledged and agreed to by PG&E National Energy Group,
Inc.
Exhibit 99.2  Second Omnibus Restructuring Agreement dated
as of December 4, 2002 among La Paloma Generating Company, LLC, La
Paloma Generating Trust, Ltd., and various other parties, including
PG&E National Energy Group, Inc.
Exhibit 99.3  Priority Credit and Reimbursement Agreement
among La Paloma Generating Company, LLC, La Paloma Generating Trust
Ltd., Wilmington Trust Company, in its individual capacity and as
Trustee, Citibank, N.A., as the Priority Working Capital L/C
Issuer, the Several Priority Lenders from time to time parties
hereto, Citibank, N.A., as administrative agent, and
Citibank, N.A., as priority agent, dated as of December 4,
2002
Exhibit 99.4  Second Omnibus Restructuring Agreement dated
as of December 4, 2002 among Lake Road Generating Company, LLC,
Lake Road Generating Trust, Ltd., and various other parties,
including PG&E National Energy Group, Inc.
Exhibit 99.5  Priority Credit and Reimbursement Agreement
among Lake Road Generating Company, LLC, Lake Road Trust Ltd.,
Wilmington Trust Company, in its individual capacity and as
Trustee, Citibank, N.A., as the Priority L/C Issuer, the Several
Priority Lenders from time to time parties hereto, Citibank, N.A.,
as administrative agent, and Citibank, N.A., as priority agent,
dated as of December 4, 2002
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
and Controller
PG&E NATIONAL ENERGY GROUP, INC.
By:  THOMAS E. LEGRO
THOMAS E. LEGRO
Vice President,
Controller and
Chief Accounting
Officer
Date:  January 16, 2003
EXHIBIT INDEX
Exhibit No.
                 
Description of Document
99.1
               
Fourth Waiver and Amendment dated as of December 23, 2002, among
GenHoldings I, LLC, various lenders identified as the GenHoldings
Lenders, the Administrative Agent, and acknowledged and agreed to
by PG&E National Energy Group, Inc.
99.2 
              
Second Omnibus Restructuring Agreement dated as of December 4, 2002
among La Paloma Generating Company, LLC, La Paloma Generating
Trust, Ltd., and various other parties, including PG&E National
Energy Group, Inc.
99.3                
Priority Credit and Reimbursement Agreement among La Paloma
Generating Company, LLC, La Paloma Generating Trust Ltd.,
Wilmington Trust Company, in its individual capacity and as
Trustee, Citibank, N.A., as the Priority Working Capital L/C
Issuer, the Several Priority Lenders from time to time parties
hereto, Citibank, N.A., as administrative agent, and Citibank,
N.A., as priority agent, dated as of December 4, 2002
99.4 
              
Second Omnibus Restructuring Agreement dated as of December 4, 2002
among Lake Road Generating Company, LLC, Lake Road Generating
Trust, Ltd., and various other parties, including PG&E National
Energy Group, Inc.
99.5 
              
Priority Credit and Reimbursement Agreement among Lake Road
Generating Company, LLC, Lake Road Trust Ltd., Wilmington Trust
Company, in its individual capacity and as Trustee, Citibank, N.A.,
as the Priority L/C Issuer, the Several Priority Lenders from time
to time parties hereto, Citibank, N.A., as administrative agent,
and Citibank, N.A., as priority agent, dated as of December 4,
2002