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             California Public Utilities Commission
505 Van Ness Avenue, Room 5301            San Francisco, CA 94102
CONTACT: Dianne Dienstein            November 6, 1996   CPUC - 87
         415-703-2423                               (A.95-10-024)

         CPUC CONDITIONALLY APPROVES PG&E REORGANIZATION

          The California Public Utilities Commission (CPUC) today
conditionally approved Pacific Gas & Electric's (PG&E) plan to
reorganize and become a wholly-owned subsidiary of a holding
company to be formed.  One of the conditions is the outcome of an
audit.
          In analyzing and conditionally approving the
reorganization, the Commission looked at whether a valid business
purpose exists, and whether reorganization can be accomplished
and future operations conducted in ways adequate to protect the
public interest.  The company has 45 days to agree to the
conditions.  If it does not, it loses Commission approval to
proceed with the  reorganization.
          The conditional approval requires PG&E and its
affiliates to, among other things: retain all internal and
external correspondence, provide access by CPUC staff to books
and records, use accounting and other procedures to facilitate
full review by the Commission and to protect against cross-
subsidization of non-utility activities by PG&E customers, make
available officers and employees to testify in Commission
proceedings, submit quarterly and annual financial statements to
the CPUC, provide an annual report of transfer of non-clerical
personnel, report sale or transfer of tangible assets, maintain a
balanced capital structure, and submit annual financial reports,
and reports on pension and benefit plans.
          The Commission's approval of the reorganization is also
conditioned on the outcome of an audit, conducted by the CPUC
Office of Ratepayer Advocates, of all PG&E's significant
                            - more -
utility/affiliate transactions from 1994 to the present, and any
further conditions or modifications which might be necessary as a
result of the audit.  The audit is to be paid for by PG&E
stockholders because the need to perform the audit is directly
related to PG&E's reorganization application.
    PG&E proposes to implement its corporate restructuring using
a reverse triangular merger.  As a result of the transaction,
PG&E would become a wholly-owned subsidiary of the parent
company, holders of PG&E common stock will receive common stock
of the parent company on a share-for-share basis, and the
outstanding shares of the parent company held by PG&E would be
canceled.  PG&E existing holders of preferred stock and debt
would not be affected.
    PG&E wants to reorganize because:
O  it is consistent with, and will facilitate, gas and electric
   industry restructuring, and give the utility flexibility to
   respond to industry changes.

O  it should minimize volatility in earnings in the new
   competitive markets, and enhance financial separation of
   utility activities.

O  the holding company structure will provide greater financial
   flexibility by facilitating use of financing techniques and
   structures most appropriate for non-utility business.

    The utility will remain subject to Commission jurisdiction.
PG&E contends reorganization will not affect its daily
operations, and it expects its gas and electric operations to be
the major source of its parent company earnings for the
foreseeable future.
    PG&E shareholders approved the reorganization at their April
17, 1996 annual meeting.

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