CONTACT: Dianne Dienstein December 17, 1997 CPUC - 134

415-703-2423 (A. 96-11-020)

CPUC APPROVES PG&E'S SALE OF

MORRO BAY, MOSS LANDING, AND OAKLAND GENERATION PLANTS

The California Public Utilities Commission (CPUC) yesterday approved Pacific Gas & Electric's (PG&E) sale of its Morro Bay, Moss Landing, and Oakland fossil-fuel electric generation plants to affiliates of Duke Energy Power Services, Inc. (Duke EPS).

Sale of the plants is pursuant to the Commission's request for PG&E to divest itself of at least 50 percent of its fossil generating assets in preparation for the establishment of competition in the electric generation services market which is scheduled to start January 1, 1998. Combined generating capacity of the plants represents approximately 45 percent of PG&E's fossil generation capacity.

The Commission, on September 3, authorized PG&E to begin an auction of the plants, and on October 22 ordered PG&E to require as a condition of sale that the successful bidder enter into an operations and maintenance agreement with PG&E, and for the Moss Landing and Oakland power plants, an agreement with the Independent System Operator.

On November 20, PG&E made a filing with the Commission, certifying that it had followed the auction process approved by the Commission, identifying Duke EPS as the buyer of the three plants, providing book values and transaction costs for accounting and ratemaking adjustments necessary to reflect the sales, and requesting Commission approval of the sale.

On November 14, Duke EPS submitted the final, price-only, binding and highest bid of $501 million for the three plants as a package. PG&E's board of directors approved the sale four days later. Neither Duke EPS nor its parent or affiliates owns or controls any other generation assets in California. Because the market value sale was above book value of the plants, $60 million will be credited to PG&E's Transition Cost Balancing Account. This will reduce the amount that PG&E could otherwise collect for uneconomic generation assets over the next several years.

On October 22, the Commission approved a mitigated negative declaration for the plants' sale and a related mitigation, monitoring, and reporting program. Commission approval of the sale is conditioned on PG&E adhering to the requirements of the mitigated negative declaration to avoid or mitigate the reasonably foreseeable adverse environmental effects of the project.